Tax avoidance transactions

—(1) Any person who reduces their income by the transfer or assignment of any real or personal, movable or immovable, property to any member of the family of that person shall nevertheless be liable to be taxed as if the transfer or assignment had not been made, unless the Director General is satisfied that Tax Administration and Procedure CAP. 51 93 the transfer or assignment was not made for the purpose of avoiding tax. (2) A person shall be liable to be taxed on the income derived from property transferred in trust, or from property substituted there for, as if the transfer had not been made, if a person transfers property in trust and the trust provides that– (a) the corpus of the trust shall revert either to the donor or to the person as the donor may determine at a future date; or (b) during the lifetime of the donor, no disposition or other dealing with the trust property shall be made without the consent, written or otherwise, of the donor. (3) The Director General may disregard any transaction or disposition where he is of the opinion that– (a) any transaction which reduces, or would reduce, the amount of tax payable by any person is artificial or fictitious; or (b) effect has not been given to any disposition; and (c) the persons concerned shall be assessable accordingly. (4) Nothing in this section shall prevent a decision of the Director General made in the exercise of any discretion given to the Director General by this section, from being tested on review, objection or appeal against an assessment. (5) For the purposes of this section, “disposition” includes any trust, grant, covenant, agreement or arrangement. 94 CAP. 51 Tax Administration and Procedure (6) Where it appears to the Director General that with a view to the avoidance or reduction of tax, a company controlled by not more than five persons has not distributed to its shareholders, in such manner as to render the amount distributed liable to taxation in the hands of the shareholders, profits made in any period ending after the 31st December, 1943, which could be distributed without detriment to the company’s existing business, the Director General, by notice to the company, may direct that, for the purposes of assessment to income taxes and surtaxes, the profits for the period specified in the notice be deemed to be the income of the members, and– (a) the amount thereof shall be apportioned among the members in accordance with the respective interests of the members; and (b) taxes shall be assessed and charged on the members in respect of the sum so apportioned as if this distribution had in fact been carried out. (7) Where it appears to the Director General that, with a view to the avoidance or reduction of tax, property has been sold at a price below that which it would ordinarily be expected to fetch in a transaction between an independent buyer and an independent seller, the income, profits, or losses arising from such sale shall be computed by reference to the price which the Director General considers appropriate in all the circumstances of the sale. (8) For the purposes of sub-section (7), the expressions “sold” or “sale” include the expressions grant, hire, lease, assignment, transfer, or other disposition of any right or interest in property. “(9) If the Director General is satisfied that a scheme has been entered into or carried out andTax Administration and Procedure CAP. 51 95 (a) a person has obtained a tax benefit in connection with the scheme in a manner that constitutes a misuse or abuse of the provisions of a tax law; and (b) having regard to the substance of the scheme, it would be concluded that the person, or one of the persons, who entered into or carried out the scheme, did so for the sole or dominant purpose of enabling the person to obtain the tax benefit, the Director General may, in making an assessment, determine the liability of the person who has obtained the tax benefit as if the scheme had not been entered into or carried out, or in such manner as the Director General considers appropriate for the prevention or reduction of the tax benefit. (10) For the purposes of determining a person’s liability under sub-section (9), and for the purposes of ensuring the prevention or reduction of the tax benefit, the Director General may do any of the following– (a) treat a particular event that actually happened as not having happened; (b) treat a particular event that did not actually happen as having happened and, if appropriate, treat the event as– (i) having happened at a particular time; and (ii) having involved particular action by a particular person; (c) treat a particular event that actually happened as96 CAP. 51 Tax Administration and Procedure (i) having happened at a time different from the time it actually happened; or (ii) having involved particular action by a particular person (whether or not the event actually involved any action by that person). (11) For the purposes of sub-sections (9) and (10)“scheme” includes a course of action and an agreement, arrangement, promise, plan, proposal, or undertaking, whether expressed or implied and whether or not legally enforceable; and “tax benefit” includes a reduction or deferral in the liability of a person to pay tax, or an increase in the entitlement of a person to a refund.