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Alternative Market Briefing

South African hedge funds will not be taxed by converting to CISCA before end-September

Thursday, June 11, 2015

Benedicte Gravrand, Opalesque Geneva:

As previously reported on Opalesque, the South African Ministry of Finance declared hedge funds collective investment schemes under the Collective Investment Schemes Control Act (CISCA) as from 1st April, 2015. All existing South African hedge funds now have to register with the Registrar of Collective Investment Schemes (CIS) before the end of September.

According to Investment Data Services Group (Pty) Ltd (IDS), South Africa’s National Treasury has released a draft amendment that provides clarity on the situation for hedge funds converting to CISCA structures.

In short, the fund administration company says, the funds will not be subject to any forms of taxation by converting to a CISCA registered structure.

According to the draft amendment bill, "The regulation of the business of hedge funds has unintended tax consequences. It includes the disposal of assets by the unregulated hedge funds to trading vehicles approved by the Financial Services Board as collective investment schemes."

In order for the regulation to be effective, the draft proposes "transitional relief be allowed by deferring potential capital gains and income tax consequences that may arise on the transfer of assets from unregulated investment structures to persons that will be regulated as CISs." This amend......................

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