First Schedule (Section twenty-six of this Act)
Computation of taxable income derived from pastoral, agricultural or other farming operations
1.In this Schedule—(a)a reference to a year of assessment shall in the case of any taxpayer who has under the provisions of section 66(13A) of this Act been permitted to furnish accounts in respect of the income derived by him from pastoral, agricultural or other farming operations made up to a date other than the last day of the relevant year of assessment, be construed as a reference to the period covered by such accounts; and(b)a reference to the end of a year of assessment includes, where the period assessed ends on a date other than the last day of the year of assessment, a reference to the end of that period.2.Every farmer shall include in his return rendered for income tax purposes the value of all livestock or produce held and not disposed of by him at the beginning and at the end of each year of assessment.3.(1)Subject to the provisions of sub-paragraphs (2) and (3), the value of livestock or produce held and not disposed of at the end of the year of assessment shall be included in income for such year of assessment, and there shall be allowed as a deduction from such income the value of livestock or produce, as determined in accordance with the provisions of paragraph 4, held and not disposed of at the beginning of the year of assessment.(2)For the purposes of subparagraph (1), the value of livestock or produce held and not disposed of at the end of any year of assessment by any person who discontinued farming operations during such year, shall be included in his income for such year and for all subsequent years of assessment so long as such livestock or produce, or any portion thereof, is so held and not disposed of.(3)Any livestock which is the subject of any “sheep lease” or similar agreement concerning livestock, and any produce which is the subject of a similar agreement, shall be deemed to be held and not disposed of by the grantor of such lease or agreement.4.(1)The values of livestock and produce held and not disposed of at the beginning of any year of assessment shall, subject to the provisions of sub-paragraph (2), be deemed to be—(a)in the case of a farmer who was carrying on farming operations on the last day of the year immediately preceding the year of assessment, the sum of—(i)the values of livestock and produce held and not disposed of by him at the end of the year immediately preceding the year of assessment; and(ii)the market value of livestock or produce—(aa)acquired by such farmer during the current year of assessment otherwise than by purchase or natural increase or in the ordinary course of farming operations; or(bb)held by such farmer otherwise than for purposes of pastoral, agricultural or other farming operations, which such farmer during such year of assessment commenced to hold for purposes of pastoral, agricultural or other farming operations; or(b)in the case of any person commencing or recommencing farming operations during the year of assessment, the sum of—(i)the value of any livestock or produce held and not disposed of by him at the end of the day immediately preceding the date of such commencement or recommencement; and(ii)the market value of livestock or produce (other than livestock or produce to which sub-item (i) refers)—(aa)acquired by such person during the year of assessment otherwise than by purchase or natural increase or in the ordinary course of farming operations; or(bb)held by such person otherwise than for purposes of pastoral, agricultural or other farming operations, which such person during such year of assessment commenced to hold for purposes of pastoral, agricultural or other farming operations.(1)The value to be placed upon livestock for the purposes of this Schedule shall, subject to the provisions of paragraph 4(1) as respects livestock held and not disposed of at the end of the year of assessment, be the standard value applicable to the livestock.6.(1)The standard value applicable to any class of livestock shall be—(a)in the case of any farmer (other than a company or the estate of a deceased person) who on or after the first day of July, 1955, and before the first day of July, 1962, rendered returns of income in respect of farming operations, the standard value which in relation to such farmer applied to that class of livestock in accordance with the provisions of paragraph 13 of the Third Schedule to the Income Tax Act, 1941;(b)in the case of any other farmer (other than a company or the estate of a deceased person) or in the case of any farmer (other than a company or the estate of a deceased person) who on or after 1 July 1962 includes that class of livestock in his return of income for the first time, either—(i)such standard value as may be fixed for that class of livestock by regulation made under this Act; or(ii)such other standard value as the farmer may, subject to the provisions of subparagraphs (2) and (3), adopt for that class of livestock when rendering his return of income on or after the said date in respect of farming operations, or when so including in any return of income such a class of livestock for the first time;(c)in the case of any company or estate of a deceased person the return of income of which in respect of farming operations for the first year of assessment of that company or estate ending on or after 1 January 1977 includes that class of livestock, either—(i)such standard value as may be fixed for that class of livestock by regulation made under this Act; or(ii)such other standard value as such company or the executor of such estate, as the case may be, may, subject to the provisions of subparagraphs (2) and (3), adopt for that class of livestock when rendering the said return of income;(d)in the case of any company or estate of a deceased person the return of income of which in respect of farming operations for a year of assessment subsequent to the year of assessment referred to in item (c), includes that class of livestock for the first time, either—(i)such standard value as may be fixed for that class of livestock by regulation made under this Act; or(ii)such other standard value as such company or the executor of such estate, as the case may be, may subject to the provisions of subparagraphs (2) and (3), adopt for that class of livestock when rendering the said return of income.(2)No standard value adopted under subparagraph (1)(b)(ii), (1)(c)(ii) or (1)(d)(ii) in respect of any class of livestock shall be more than twenty per cent higher or lower than the standard value fixed by regulation under this Act in respect of livestock of that class.(3)Any farmer who classifies any kind of his livestock on a basis other than that applied by a regulation referred to in subparagraph (1)(b)(i), (1)(c)(i) or (1)(d)(i), may adopt in respect of any class into which he so classifies that livestock such a standard value as may be approved by the Commissioner with due regard to the values fixed by regulation.7.The exercise of an option under subparagraph (1)(b)(ii), (1)(c)(ii) or (1)(d)(ii) of paragraph 6 shall be binding upon the farmer in respect of all subsequent returns for income tax purposes, and no standard value fixed by any farmer whether under this Act or any previous Income Tax Act may be varied by him in respect of any subsequent year of assessment.8.(1)Where any farmer has during any year of assessment incurred expenditure in respect of the acquisition of livestock, the deduction which may be allowed to him under section 11(a) of this Act in respect of the cost price of such livestock shall be limited to an amount which, together with the value of livestock held and not disposed of by him at the beginning of such year, does not exceed the income received by or accrued to him from farming during such year and the value of livestock held and not disposed of by him at the end of such year.(2)Any amount which has been disallowed under the provisions of subparagraph (1) shall be carried forward and be deemed to be expenditure incurred by the farmer in respect of the acquisition of livestock during the succeeding year of assessment.(3)The provisions of this paragraph shall not apply—(a)in any case where it is shown by the farmer that livestock the cost of which falls to be dealt with under such provisions is no longer held and not disposed of by him; and(b)to so much of any expenditure (including any amount which has been carried forward under the provisions of subparagraph (2)) which falls to be disallowed under subparagraph (1) as, together with the value of livestock held and not disposed of by him at the beginning of the year of assessment, exceeds such amount as is shown by him to be market value of all livestock held and not disposed of by him at the end of such year.9.The value to be placed upon produce included in any return shall be a fair and reasonable value.11.If during any year of assessment livestock or produce—(a)has been applied by the farmer for his private or domestic use or consumption;(b)has, for purposes other than that of the production to the farmer of income from sources within the Republic, been removed by him from the Republic; or(c)(i)has been donated by the farmer;(ii)has been disposed of by the farmer, other than in the ordinary course of his farming operations, for a consideration less than the market value thereof;(iii)where the farmer is a company, has on or after 21 June 1993 been distributed in specie to a holder of a share in such company; or(iv)has been applied by the farmer for any other purpose other than the disposal thereof in the ordinary course of his farming operations and under circumstances other than those contemplated in subparagraph (a) or (b) or item (i), (ii) or (iii) of this subparagraph,there shall be included in the income of such farmer for that year of assessment—(A)where such livestock or produce has been applied in a manner contemplated in subparagraph (a), an amount equal to the cost price to him of such livestock or produce, or where the cost price cannot be readily determined, the market value of such livestock or produce; or(B)where such livestock or produce has been applied, disposed of or distributed in a manner contemplated in subparagraph (b) or (c), an amount equal to the market value of such livestock or produce:Provided that where—(a)any livestock or produce so applied, is used or consumed by the farmer in the ordinary course of his farming operations, the amount included in his income under this paragraph shall for the purposes of this Act be deemed to be expenditure incurred in respect of the acquisition by him of such livestock or produce; or(b)the provisions of subparagraph (c)(ii) are applicable and an amount of consideration as contemplated in such subparagraph has been received by or accrued to the farmer, the amount included in his income in terms of this paragraph shall be reduced by such consideration.12.(1)Subject to the provisions of subparagraphs (2) to (6), inclusive, there shall be allowed as deductions in the determination of the taxable income derived by any farmer the expenditure incurred by him during the year of assessment in respect of—(a)the eradication of noxious plants and alien invasive vegetation;(b)the prevention of soil erosion;(d)dams, irrigation schemes, boreholes and pumping plants;(f)the erection of, or extensions, additions or improvements (other than repairs) to, buildings used in connection with farming operations, other than those used for domestic purposes;(g)the planting of trees, shrubs or perennial plants for the production of grapes or other fruit, nuts, tea, coffee, hops, sugar, vegetable oils or fibres, and the establishment of any area used for the planting of such trees, shrubs or plants;(h)the building of roads and bridges used in connection with farming operations;(i)the carrying of electric power from the main transmission lines to the farm apparatus or under an agreement concluded with the Electricity Supply Commission in terms of which the farmer has undertaken to bear a portion of the cost incurred by the said Commission in connection with the supply of electric power consumed by the farmer wholly or mainly for farming purposes;(1A)For purposes of this Schedule, expenditure incurred in respect of any matter contemplated in subparagraph (1)(a), (b), (d) or (e) to conserve and maintain land owned by the taxpayer shall be deemed to be expenditure incurred in the carrying on of pastoral, agricultural or other farming operations if—(a)conservation and maintenance is carried out in terms of a biodiversity management agreement that has a duration of at least five years; and(b)the agreement contemplated in item (a) is entered into by the taxpayer in terms of section 44 of the National Environmental Management: Biodiversity Act, 2004 (Act No. 10 of 2004); and(c)land utilised by the taxpayer for purposes of carrying on the pastoral, agricultural or other farming operations consists or includes or is in the immediate proximity of the land that is the subject of the agreement contemplated in item (a).(1B)(a)Where any asset in respect of which any deduction has been allowed to a farmer under the provisions of subparagraph (1) or (1A) (whether in the current or any previous year of assessment) and which is or has become a movable asset, is disposed of by the farmer, there shall be included in his income so much of the amounts received by or accrued to or in favour of the farmer in respect of such disposal as does not exceed the expenditure in respect of such asset allowed under subparagraph (1) or the original cost to him of such asset taken into account under subparagraph (1A), as the case may be, less any amounts which in terms of item (c) of this subparagraph are not allowable as deductions under subparagraph (1A) in respect of such asset in respect of the succeeding year or years of assessment referred to in the said item.(b)Where any allowance was granted in respect of such asset under the provisions of section 11(e) of this Act the provisions of section 8(4)(a) of this Act shall not apply in respect of any amount recovered or recouped in respect of such allowance.(1C)For the purposes of this paragraph, where any asset in respect of which any deduction has been allowed to a farmer under the provisions of subparagraph (1) or (1A) (whether in the current or any previous year of assessment) and which is or has become a movable asset, is disposed of by the farmer to any other person by way of donation or for a consideration which is not an adequate consideration or is not readily capable of valuation, a consideration equal in value to the fair value of such asset shall be deemed to have been received by the farmer in respect of his disposal of the asset and to have been paid by such other person in respect of his acquisition of the asset: Provided that the last-mentioned consideration shall not exceed the cost to the farmer of such asset.(1D)If during the current or any previous year of assessment deductions are allowed to the taxpayer in terms of subparagraph (1A) in respect of capital expenditure incurred to conserve or maintain land in terms of an agreement contemplated in that subparagraph and the taxpayer is in breach of that agreement or violates that declaration, an amount equal to the deductions allowed in respect of expenditure incurred within the period of five years preceding the breach of violation must be included in the income of the taxpayer for the current year.(2)No deduction under section 11(e) or (o) of this Act shall be allowed in respect of any machinery, implements, utensils or articles for which a deduction is allowable under subparagraph (1) or (1A) of this paragraph.(3)The amount by which the total expenditure incurred by any farmer during any year of assessment in respect of the matters referred to in items (c) to (i), inclusive, of subparagraph (1) exceeds the taxable income (as calculated before allowing the deduction of such expenditure and before the inclusion as hereinafter provided of the said amount in the farmer’s income) derived by him from farming operations during that year of assessment shall be included in his income from such operations for that year and be carried forward and be deemed for the purposes of subparagraph (1) to be expenditure which has been incurred by him during the next succeeding year of assessment in respect of the matters referred to in the said items.(3A)For the purposes of subparagraph (3) any amount which has been carried forward from the year of assessment ended 30 June 1961 in terms of the proviso to paragraph 17(3) of the Third Schedule to the Income Tax Act, 1941, shall be deemed to be an amount which has been so carried forward in terms of the said subparagraph.(3B)Where an amount (hereinafter referred to as the recoupment) falls to be included in a farmer’s income for any year of assessment under the provisions of subparagraph (1B) and an amount (hereinafter referred to as the qualifying balance) has in terms of subparagraph (3) been carried forward to the year of assessment in question from the preceding year of assessment the recoupment shall to the extent that it does not exceed the qualifying balance be deducted therefrom, and in such case—(a)the recoupment shall, to the extent that it has been deducted from the qualifying balance, not be included in the farmer’s income under subparagraph (1B); and(b)only so much of the qualifying balance as remains after the deduction therefrom of the recoupment shall be taken into account for the purposes of subparagraph (3) as expenditure incurred during the year of assessment in question in respect of the matters mentioned in that subparagraph.(3C)The amount of any expenditure carried forward and deemed to be incurred by a person in the next succeeding year in terms of subparagraph (3) must be reduced by any amount of expenditure in respect of which an election has been made in terms of paragraph 20A(1) of the Eighth Schedule.(4)(a)For the purposes of this paragraph “employees”, in relation to any farmer, means persons employed by that farmer in connection with his or her farming operations, but does not include his or her relatives or, where the farmer is a company, the holders of shares (or the relatives of holders of shares) in that company or in any company which is associated with it by virtue of the holding of shares.(b)For the purposes of item (a) “holders of shares” in relation to any company does not include persons who hold all their shares in that company solely because they are employed by that company and who will, in terms of the articles of association of that company, not be entitled to hold those shares after they cease to be so employed.(6)If in any year of assessment any building in relation to which a deduction has been allowed to any farmer under item (f) of sub-paragraph (1) of this paragraph or item (f) of sub-paragraph (1) of paragraph 17 of the Third Schedule to the Income Tax Act, 1941, whether in the current or in any previous year of assessment, is used for the domestic purposes of any person other than an employee of that farmer, there shall be included in the income of that farmer for the current year of assessment the amount of such deduction less one-tenth of the said amount in respect of each completed period of one year, but not exceeding ten years, during which such building was used by the said farmer in connection with his farming operations other than for the domestic purposes of persons who are not his employees.13.(1)If—(a)any farmer—(i)has in any year of assessment sold livestock on account of drought, stock disease or damage to grazing by fire or plague; and(ii)has within four years after the close of the said year of assessment purchased livestock to replace the livestock so sold; or(b)any farmer—(i)has in any year of assessment (other than a year of assessment in respect of which the normal tax chargeable in the case of such farmer is required to be determined under paragraph 19) sold livestock by reason of his participation in a livestock reduction scheme organised by the Government; and(ii)has within nine years after the close of the said year of assessment purchased livestock to replace the livestock so sold,the cost of the livestock so purchased shall, notwithstanding anything in this Schedule contained, be allowed, at the option of such farmer, as a deduction in the determination of his taxable income for the year of assessment during which the livestock was so sold, provided the claim for such deduction is made within five years after the close of that year of assessment in the case of a farmer referred to in item (a), or within ten years after the close of that year of assessment in the case of a farmer referred to in item (b).(2)The cost of livestock so allowed as a deduction shall not be allowed as a deduction in the year of assessment in which the purchases were made.(3)Every farmer who desires to claim a deduction in terms of subparagraph (1), shall for the year of assessment in which he or she sold livestock on account of conditions of drought or stock disease or by reason of his or her participation in a livestock reduction scheme organised by the Government notify the Commissioner accordingly in such form and within such time as may be prescribed and obtain and retain full particulars in regard to the livestock so sold.(5)The provisions of this paragraph shall not apply to the cost of any livestock purchased to replace livestock sold if the proceeds derived from the sale of such last-mentioned livestock have been dealt with under the provisions of paragraph 13A.(6)The Commissioner may, notwithstanding the provisions of sections 99 and 100 of the Tax Administration Act, raise an assessment for any year of assessment with respect to which a deduction in terms of subparagraph (1) is allowed.(7)Where a deduction in terms of subparagraph (1)(a) or (b) may be claimed in respect of a year of assessment, the period prescribed under section 29(3) of the Tax Administration Act after which records, books of account or documents need not be retained shall be extended to six years or eleven years respectively for such year of assessment.(8)Where a deduction in terms of subparagraph (1)(b) may be claimed in a year of assessment, the period prescribed under section 97(4) of the Tax Administration Act after which a record of assessment may be destroyed shall be extended to eleven years for such year of assessment.13A.(1)If any farmer has on or after 1 March 1982 disposed of any livestock on account of drought, and the whole or any portion of the proceeds of such disposal has as soon as possible, but in any case within three months after the receipt thereof by the farmer, been deposited by him in an account in his name with the Land and Agricultural Bank of South Africa, so much of such proceeds as has been so deposited by him shall, notwithstanding the provisions of section 23(e) of this Act but subject to the provisions of subparagraph (3), be deemed not to be gross income derived by such farmer.(2)Every farmer who desires that the proceeds derived by him or her from the disposal of livestock be dealt with under the provisions of this paragraph shall notify the Commissioner in such form and within such time as may be prescribed by the Commissioner.(3)Any amount, being the whole or any portion of a sum deposited in an account following the disposal of livestock as contemplated in subparagraph (1), shall—(a)if it is withdrawn from such account before the expiration of a period of six months after the last day of the year of assessment in which such disposal took place, be deemed to be gross income derived by the taxpayer from the disposal of livestock on the date of such disposal; or(aA)if it is withdrawn from such account after the expiration of a period of six months but before the expiration of a period of six years after the last day of the year of assessment in which such disposal took place, be deemed to be gross income derived by the taxpayer from the disposal of livestock on the date of such withdrawal; or(b)in the event of the taxpayer’s death or insolvency before the expiration of the said period, be deemed to be gross income so derived on the day before the date of his death or insolvency, as the case may be; or(c)if it is not so withdrawn and the taxpayer does not die or become insolvent before the expiration of such period, be deemed to be gross income so derived on the last day of such period.14.(1)Any amount received by or accrued to a farmer in respect of the disposal of any plantation shall, whether such plantation is disposed of separately or with the land on which it is growing, be deemed not to be a receipt or accrual of a capital nature and shall form part of such farmer’s gross income.(2)Where any plantation is disposed of by a farmer with the land on which it is growing the amount to be included in such farmer’s gross income in terms of sub-paragraph (1) shall—(a)if the amount representing the consideration payable in respect of the disposal of the plantation is agreed to between the parties to the transaction, be the amount so agreed to; or(b)failing such agreement, be such portion of the consideration payable in respect of the disposal of the land and the plantation as represents the consideration payable for the plantation.15.(1)In the determination of the taxable income of any farmer there shall be allowed as a deduction—(a)any expenditure incurred by such farmer during the year of assessment in respect of the establishment and maintenance of plantations;(b)any expenditure incurred by such farmer prior to the first day of July, 1948, in respect of the establishment and maintenance of any plantation or the cost of acquisition of any plantation purchased by such farmer whether before or after the first day of July, 1948: Provided that—(i)any deductions allowed under this item in respect of any plantation shall not in respect of any year of assessment exceed the gross income derived by such farmer in that year from the said plantation;(ii)the aggregate of the deduction allowed in terms of this item or the corresponding provisions of the Income Tax Act, 1941, or by virtue of any other provisions of the last-mentioned Act or the Income Tax Act, 1925 (Act No. 40 of 1925), in respect of plantations shall not exceed the amount of such expenditure or such cost of acquisition.(2)For the purpose of calculating the cost of acquisition of any plantation the provisions of subparagraph (2) of paragraph 14 shall apply mutatis mutandis in the case of any plantation acquired by any farmer with the land on which it is growing.(3)If in any year of assessment the income of any farmer other than a company includes income derived from the disposal of plantations or forest produce and the taxable income derived by him in that year from the disposal of plantations and forest produce (determined as though the income derived by him from that source were his only income) exceeds the annual average taxable income derived by him from that source (as so determined) over the three years of assessment immediately preceding the said year of assessment, the normal tax chargeable in the case of such farmer for the said year of assessment shall, subject to the provisions of section 5 of this Act, be determined in accordance with the provisions of subsection (10) of that section: Provided that—(i)the provisions of this subparagraph shall not apply unless the disposal of plantations or forest produce forms part of the normal farming operations of the farmer concerned;(ii)for the purposes of this subparagraph, where the farmer has in respect of any of the aforesaid years of assessment derived any excess plantation farming profits determined under paragraph 20(3)(g) such excess plantation farming profits shall—(aa)where such excess plantation farming profits have been derived during the first-mentioned year of assessment, be excluded from the farmer’s taxable income derived in that year from the disposal of plantations and forest produce;(bb)where such excess plantation farming profits have been derived during any of the aforesaid three years of assessment, not be taken into account in the determination of the aforesaid average taxable income derived by the farmer over those years;(iii)the Commissioner’s determination as to what portion of a farmer’s taxable income is derived from the disposal of plantations and forest produce shall be final;(iv)nothing in this paragraph contained shall be construed as relieving any farmer from liability for taxation under this Act upon any portion of his taxable income;(v)the provisions of this subparagraph shall not apply if the normal tax chargeable in the case of such farmer in respect of the first-mentioned year of assessment is required to be determined under the provisions of paragraph 19.16.For the purposes of paragraphs 14, 15 and 20—“plantation” means any artificially established tree as ordinarily understood (not being a tree of the nature described in paragraph 12(1)(g)) or any forest of such trees and includes any natural extension of such trees;“forest produce” means trees (other than trees of the nature described in paragraph 12(1)(g)) and anything derived from such trees, including timber, wood, bark, leaves, seeds, gum, resin and sap.17.Where the sugar cane fields of any farmer other than a company have been damaged by fire and the taxable income of such farmer for any year of assessment includes taxable income derived from the disposal of sugar cane as a result of such fire which but for such fire would not have been derived by him in such year, the normal tax chargeable in the case of such farmer in respect of such year shall, subject to the provisions of section 5 of this Act, be determined in accordance with the provisions of subsection (10) of that section, but nothing in this paragraph contained shall be construed as relieving such farmer from liability for taxation under this Act upon any portion of his taxable income: Provided that the provisions of this paragraph shall not apply if the normal tax chargeable in the case of such farmer in respect of the said year of assessment is required to be determined under the provisions of paragraph 19.19.(1)If any taxpayer has made an election as provided in subparagraph (5) which is binding upon him in respect of any period of assessment (hereinafter referred to as the relevant period) during which he or his spouse has carried on farming operations or has derived income from farming operations, and his taxable income derived during the relevant period from farming exceeds his average taxable income from farming as determined in relation to the relevant period in accordance with subparagraph (2), the normal tax chargeable in respect of his taxable income for the relevant period shall, subject to the provisions of section 5 of this Act, be determined in accordance with section 5(10).(2)For the purposes of subparagraph (1) the taxpayer’s average taxable income from farming in relation to the relevant period shall be deemed to be—(a)where the taxpayer or his spouse carried on farming operations before the commencement of the relevant period, such amount as represents the taxpayer’s annual average taxable income (if any) from farming in respect of the periods of assessment—(aa)for which the taxpayer was assessable under this Act and which fall within the period of five years ending on the last day of the relevant period; and(bb)during which such farming operations were carried on or farming income was derived by the taxpayer:Provided that any excess farming profits derived by the taxpayer in any of the said periods of assessment shall not be taken into account in the determination of such annual average taxable income: Provided further that in the case of the estate of an insolvent person any farming operations carried on by such person prior to insolvency, any income derived by him from such operations and any deductions allowable against such income under this Act shall, so far as such estate is concerned, be deemed for the purposes of this item to be respectively operations, income or deductions of such estate, and the annual average taxable income derived by such estate from farming shall be determined accordingly; or(b)where the taxpayer is a person referred to in subparagraph (5)(a) and did not carry on farming operations before the commencement of the relevant period, an amount equal to two-thirds of such taxable income.(3)Where the taxpayer’s assessment for a relevant period has in terms of section 100 of the Tax Administration Act, become final and conclusive, the Commissioner shall not, merely by reason of the fact that the amount determined under subparagraph (2)(a), as the taxpayer’s annual average taxable income from farming in relation to such period is incorrect, be required to make a further assessment upon the taxpayer for such period in terms of section 99 of that Act or to authorize a refund under section 190 of that Act of any tax overpaid in respect of such period, unless it appears that such annual average taxable income from farming should be increased or reduced by at least six hundred rand.(4)In determining under this paragraph any amount of normal tax which is or would be chargeable no regard shall be had to the deductions provided for in section 6 of this Act, and nothing in this paragraph contained shall be construed as relieving any person from liability for taxation under this Act upon any portion of that person’s taxable income.(5)Any person—(a)who is a natural person and whose taxable income for any period of assessment consists of or includes taxable income derived from farming operations carried on by him for his own benefit or by his spouse for such spouse’s own benefit; or(b)who is the executor of the estate of any deceased person or the trustee of the insolvent estate of a natural person and who in his capacity as such has during the period of assessment commencing immediately after the death or insolvency of the said person continued farming operations commenced by such deceased or insolvent person prior to his death or insolvency,may, within three months after the end of such period of assessment or within such further time as the Commissioner may approve and in such form as the Commissioner may prescribe, elect that the normal tax chargeable in respect of his taxable income if item (a) is applicable or the taxable income of such estate if item (b) is applicable, be determined as provided in subparagraph (1), and such election shall be binding upon such natural person or estate, as the case may be, in respect of the said period of assessment and every succeeding period of assessment: Provided that—(i)no election may be made under this subparagraph by any person in respect of any period of assessment referred to in item (a) if during such period such person was married and such person’s income for such period is in terms of section 7(2) of this Act deemed to be income accrued to such person’s spouse;(ii)where an election has been made by such person in respect of any period of assessment referred to in item (a) and such person’s income for any succeeding period of assessment is in terms of section 7(2) of this Act deemed to be income accrued to such person’s spouse, such election shall, with effect from such succeeding period, cease to have any force or effect.20.(1)If a taxpayer (other than a company) who derives income from farming operations makes an election as provided in subparagraph (6) and if—(a)the taxpayer’s income was in whole or in part derived from farming operations carried on on any land acquired—(i)by the State (including the Railways Administration and any provincial administration) or any local authority as defined in section 1 of the Expropriation Act, 1975 (Act No. 63 of 1975); or(ii)by any juristic person or body mentioned in section 3(2) of the said Act, if such juristic person or body acquired the land by expropriation or, where the owner of the land agreed to dispose of it, the Minister referred to in subparagraph (6)(b)(ii) has given a certificate as contemplated therein;(b)in consequence of the acquisition of such land as aforesaid the farming undertaking on such land (hereinafter referred to as the undertaking) has been or is being wound up; and(c)the taxpayer’s income for any year of assessment (being the year of assessment during which the said land was acquired as aforesaid or the first or the second year of assessment succeeding the first-mentioned year of assessment) includes any abnormal farming receipts or accruals referred to in subparagraph (2) which relate to the aforesaid farming operations,the normal tax chargeable (as determined before the deduction of any rebate) in respect of the taxpayer’s taxable income for such year of assessment shall, notwithstanding any other provisions of this Act to the contrary, be determined at an amount equal to the sum of—(i)an amount equal to the taxpayer’s excess farming profits for the year of assessment (as determined in accordance with subparagraph (3)(a)) multiplied by the relevant rate of tax fixed for the year of assessment in terms of section 5(2) in respect of the first rand of taxable income; and(ii)an amount equal to the amount of normal tax (as determined before the deduction of any rebate) which would have been payable by the taxpayer in respect of the year of assessment if his or her taxable income for that year had been an amount equal to the balance of his or her taxable income for that year (as determined in accordance with, subparagraph (4)).(1A)Where the land referred to in subparagraph (1) was acquired as contemplated in item (a) of that subparagraph within the period of twelve months after the owner accepted an offer to purchase the land, it shall be deemed for purposes of that subparagraph that such land was acquired on the date on which the offer was accepted.(2)For the purposes of subparagraph (1)(c), the taxpayer’s abnormal farming receipts or accruals for any year of assessment referred to in subparagraph (1)(c) shall be deemed to be such amounts as consist of—(a)any amounts derived from disposals, in the course of the winding-up of the undertaking, of livestock normally held for the purposes of the undertaking; or(b)any amounts derived from the disposal of any plantation together with the land referred to in subparagraph (1)(a) or from the disposal in the course of the winding-up of the undertaking of any plantation on such land or any forest produce from such plantation.(3)(a)For the purposes of this paragraph the taxpayer’s excess farming profits for any year of assessment referred to in subparagraph (1)(c) shall be deemed to be the sum of the taxpayer’s excess livestock profits (if any) for such year, as determined under item (b), and the taxpayer’s excess plantation farming profits (if any) for such year, as determined under item (g): Provided that the amount of such excess farming profits shall not be determined at an amount exceeding the amount of the taxpayer’s taxable income for such year.(b)The taxpayer’s excess livestock profits for such year shall be so much of the sum of the amounts referred to in subparagraph (2)(a) which have been derived by the taxpayer during such year as does not exceed the taxpayer’s abnormal livestock profits for such year, as determined under item (c).(c)The taxpayer’s abnormal livestock profits for such year shall be the amount by which his livestock profits for such year, as determined under item (d) or (f), exceed his average livestock profits (as determined under item (e) or (f)) for the years of assessment (but not exceeding five years of assessment) which immediately precede the said year and during which the undertaking was carried on.(d)For the purposes of this subparagraph, the taxpayer’s livestock profits for any year of assessment shall be the amount by which the sum of the amounts included in his income from farming for such year in respect of disposals of livestock during such year and the value (as determined under this Schedule) of the livestock held and not disposed of by him at the end of such year exceeds the sum of the amounts allowed to be deducted from such income in respect of livestock acquired by him during such year and the value (as determined under this Schedule) of the livestock held and not disposed of by him at the beginning of such year, and the taxpayer’s livestock loss for such year shall be determined accordingly.(e)The taxpayer’s average livestock profits for the years of assessment referred to in item (c) shall be the sum of his livestock profits for the said years, as determined under item (d) (reduced by any livestock loss as determined under that item in respect of any such years), divided by the number of such years of assessment.(f)If by reason of disposals of livestock otherwise than in the ordinary course of farming or because of any unusual circumstances the taxpayer’s livestock profits or loss for any year of assessment cannot be determined in a satisfactory manner under item (d) or the taxpayer’s average livestock profits for the years of assessment referred to in item (c) cannot be determined in a satisfactory manner under item (e), such livestock profits or loss or such average livestock profits shall be determined by the Commissioner on application by the taxpayer.(g)The taxpayer’s excess plantation farming profits for any year of assessment referred to in item (a) shall be so much of the sum of the amounts referred to in subparagraph (2)(b) which have been derived by the taxpayer during such year, as does not exceed the amount by which the taxpayer’s taxable income (as determined under subparagraph (3) of paragraph 15 before applying paragraph (ii) of the proviso to the said subparagraph) derived during such year from the disposal of plantations and forest produce exceeds the annual average taxable income (as determined under paragraph 15(3)) derived by him from that source over the three years of assessment immediately preceding the said year of assessment.(4)For the purposes of this paragraph, the balance of the taxpayer’s taxable income for a year of assessment referred to in subparagraph (1)(c) shall be deemed to be the amount remaining after deducting the taxpayer’s excess farming profits for that year (as determined under subparagraph (3)(a)) from the full amount of the taxpayer’s taxable income for such year, as determined under this Act.(6)(a)Any taxpayer (other than a company) may elect for the normal tax payable by the taxpayer to be determined under this paragraph.(b)For purposes of such election the following records must be obtained and retained—(i)a certificate by the head of the department of State or the administration concerned in the acquisition by the State or such administration of the land referred to in item (a) of subparagraph (1), or where such land was acquired by a local authority, juristic person or body referred to in the said item, by the chief executive officer of such local authority, juristic person or body, to the effect that the State or such administration, local authority, juristic person or body, as the case may be, has acquired such land; and(ii)where such land was acquired by such juristic person or body, a certificate by a Minister referred to in section 3(1) of the Expropriation Act, 1975, to the effect that the land was acquired by such juristic person or body by expropriation or, where the owner of the land agreed to dispose of it, to the effect that, if the owner had not so agreed, steps would have been taken for the expropriation of the land.Second Schedule (Paragraph (e) of the definition of “gross income” in section one of this Act)
Computation of gross income derived by way of lump sum benefits
1.For the purposes of this Schedule—“lump sum benefit” includes—(a)any amount determined in respect of the commutation of an annuity or portion of an annuity—(ii)provided in consequence of membership or past membership of,a pension fund, pension preservation fund, provident fund, provident preservation fund or retirement annuity fund;(b)any fixed or ascertainable amount (other than an annuity)—(ii)provided in consequence of membership or past membership of,a pension fund, pension preservation fund, provident fund, provident preservation fund or retirement annuity fund; and(c)any amount transferred for the benefit of that person on or after normal retirement age, as defined in the rules of the fund, but before retirement date, less any deductions permitted under the provisions of paragraph 6A,whether in one amount or in instalments, but does not include any amount deemed to be income accrued to a person in terms of section 7(11);“pension fund”, in relation to any person, means—(a)a fund which has in respect of the year of assessment in question or any previous year of assessment been approved by the Commissioner as a pension fund under paragraph (c) of the definition of “pension fund” in section 1 or a corresponding definition in any previous Income Tax Act; or(b)a public sector fund (other than a fund referred to in paragraph (b) of the definition of “provident fund”), the rules of which wholly or mainly provide for annuities on retirement to its members,if during any such year the person was a member of such fund;“provident fund”, in relation to any person, means—(a)a fund which has in respect of the year of assessment in question or any previous year of assessment been approved by the Commissioner as a provident fund as defined in section 1 of this Act or the corresponding provisions of any previous Income Tax Act; or(b)a public sector fund, the rules of which provide for benefits in a lump sum exceeding one-third of the capitalised value of all benefits (including lump sum payments and annuities) to its members on retirement,if during any such year the person was a member of such fund;“public sector fund” means a fund referred to in paragraph (a), (b) or (d) of the definition of “pension fund” or paragraph (a), (b) or (c) of the definition of “provident fund” in section 1(1);“retire”, in relation to a person who is a member of a pension fund, pension preservation fund, provident fund, provident preservation fund or retirement annuity fund, means to become entitled to the annuity or lump sum benefit contemplated in the definition of “retirement date”;“retirement annuity fund” in relation to any person, means a fund which has in respect of the year of assessment in question or any previous year of assessment been approved by the Commissioner as a retirement annuity fund as defined in section 1 of this Act or the corresponding provisions of any previous Income Tax Act, if during any such year the person was a member of such fund.2.(1)Subject to section 9(2)(i) and paragraphs 2A, 2C and 2D, the amount to be included in the gross income of any person for any year of assessment in terms of paragraph (e) of the definition of “gross income” in section 1 shall be—(a)any amount received by or accrued to that person by way of a lump sum benefit derived in consequence of or following upon—(i)his or her retirement or death;(ii)the termination or loss of his or her employment due to—(AA)his or her employer having ceased to carry on or intending to cease carrying on the trade in respect of which he or she was employed or appointed; or(BB)that person having become redundant in consequence of his or her employer having effected a general reduction in personnel or a reduction in personnel of a particular class:Provided that this subitem does not apply to any amount received by or accrued to a person by way of a lump sum benefit where that person’s employer is a company and that person at any time held more than five per cent of the equity shares or members’ interest in that company; or(iii)the commutation of an annuity or portion of an annuity,less any deduction permitted under the provisions of paragraph 5 or 6; and(b)any amount—(iA)assigned in terms of a divorce order granted on or after 13 September 2007 under section 7(8)(a) of the Divorce Act, 1979 (Act No. 70 of 1979), to the extent that the amount so assigned—(aa)constitutes a part of a pension interest, as defined in section 1 of the Divorce Act, 1979 (Act No. 70 of 1979), of a member of a pension fund, pension preservation fund, provident fund, provident preservation fund or retirement annuity fund; and(bb)is due and payable on or after 1 March 2012 to a person who is the former spouse of that member by that pension fund, pension preservation fund, provident fund or provident preservation fund or retirement annuity fund;(iB)that is transferred for the benefit of that person to any pension fund, pension preservation fund, provident fund, provident preservation fund or retirement annuity fund from any pension fund, pension preservation fund, provident fund, provident preservation fund or retirement annuity fund of which that person is or previously was a member; and(ii)other than an amount contemplated in item (a) or subitem (iA) or (iB), received by or accrued to that person by way of a lump sum benefit from or in consequence of membership or past membership of any pension fund, pension preservation fund, provident fund, provident preservation fund or retirement annuity fund,less any deduction permitted under paragraph 6.(2)An amount contemplated in subparagraph (1)(b) shall be deemed to accrue to a person—(a)in the case of an amount contemplated in subparagraph (1)(b)(iA), on the date on which the amount is due and payable as contemplated in subparagraph (1)(b)(iA)(bb); and(b)in the case of an amount contemplated in subparagraph (1)(b)(iB), on the date of its transfer.2A.Where any lump sum benefit is received or accrues from a public sector fund, the amount to be included in the gross income of any person in terms of paragraph (e) of the definition of “gross income” in section 1 shall be deemed to be an amount equal to the amount determined in accordance with the following formula:
in which formula—(a)“A” represents the amount which has to be determined;(b)“B” represents—(i)where the number of completed years of employment of a person who is or was a member of a fund are in terms of the rules of that fund taken into account for the purpose of determining the amount of a benefit payable by the fund, the number of completed years of employment of the member after 1 March 1998, including previous or other periods of service approved as pensionable service in terms of the rules of any fund after 1 March 1998, other than completed years of employment representing—(aa)any benefit of a person who is a member of any public sector fund, which is after 1 March 1998 paid for the benefit of any person into another public sector fund in respect of any previous or other periods of service or membership accounted for prior to 1 March 1998 in terms of the rules of any public sector fund; or(bb)years of pensionable service recognised as such in terms of Rule 10.5 or 10.6 of the Rules of the Government Employees Pension Fund, contained in Schedule 1 to the Government Employees Pension Law, 1996 (Proclamation No. 21 of 1996), to the extent that those years are not taken into account under item (aa); or(ii)where the number of completed years of employment are not taken into account as contemplated in subitem (i), the number of completed years after 1 March 1998 during which the member had, until the date of accrual of any benefit, been a member of any public sector fund or funds;(c)“C” represents—(i)where the number of completed years of employment of a person who is or was a member of a fund are in terms of the rules of that fund taken into account for the purpose of determining the amount of the benefits payable to any person by the fund, the total number of completed years of employment so taken into account; or(ii)where the number of completed years of employment are not taken into account as contemplated in subitem (i), the number of completed years during which the member had, until the date of accrual of any benefit, continuously been a member of any public sector fund or funds; and(d)“D” represents the lump sum benefit payable to the person.2C.Any lump sum benefit, or part thereof, received by or accrued to a person subsequent to the person’s retirement or death, or withdrawal or resignation from any pension fund, pension preservation fund, provident fund, provident preservation fund or retirement annuity fund or the winding up of any such fund, and in consequence of or following upon an event that is prescribed by the Minister by notice in the Gazette and contemplated by the rules of any such fund or the approval of a scheme in terms of section 15B of the Pension Funds Act or paragraph 5.3(1)(b) of the Schedule which amends regulation 30 of the Regulations under the Long-term Insurance Act shall not constitute gross income of that person.2D.Any lump sum benefit, or part thereof, received by or accrued to a person subsequent to the person’s retirement, death, withdrawal or resignation from any pension fund, pension preservation fund, provident fund, provident preservation fund or retirement annuity fund held by or under the control of an administrator, as defined in section 1(1) of the Pension Funds Act, in consequence of an event prescribed by the Minister by notice in the Gazette shall not constitute gross income of that person.3.Any lump sum benefit which becomes recoverable from—(a)a pension fund, pension preservation fund, provident fund, provident preservation fund or retirement annuity fund; or(b)an insurer as defined in section 29A(1) if that lump sum benefit is payable by, or provided in consequence of membership or past membership of, a fund contemplated in subparagraph (a),in consequence of or following upon the death of a person who is or was a member of that fund must, on the date of payment of that lump sum benefit, be deemed to have accrued to that person immediately prior to the death of that person: Provided that—(i)so much of any tax payable as is due to the provisions of this paragraph may be recovered from the person by whom the lump sum benefit in question is received;(ii)where any annuity or portion of an annuity (including a living annuity) which becomes payable on or in consequence of or following upon the death of a person who is or was a member of any such fund has been commuted for a lump sum, such lump sum shall for the purposes of this paragraph be deemed to be a lump sum benefit which has become recoverable in consequence of or following upon the death of such person;(iii)where any such lump sum benefit becomes payable but the dependants or nominees of that person elect an annuity (including a living annuity) that is purchased or provided by that fund, no lump sum benefit shall be deemed to have so accrued to the extent that the lump sum benefit was utilised to purchase or provide the annuity; and(v)where any such lump sum benefit is paid to a pension preservation fund or provident preservation fund as an unclaimed benefit as defined in the Pension Funds Act, no lump sum benefit shall be deemed to have so accrued.3A.Any lump sum benefit which becomes recoverable from—(a)a pension fund, pension preservation fund, provident fund, provident preservation fund or retirement annuity fund; or(b)an insurer as defined in section 29A(1) if that lump sum benefit is payable by or provided in consequence of membership or past membership of a fund contemplated in subparagraph (a),in consequence of or following upon the death of any person other than a person who is or was a member of that fund shall, on the date of payment of that lump sum benefit, be deemed to have accrued to the deceased person immediately prior to the death of that person: Provided that—(i)so much of any tax payable as is due to the provisions of this paragraph may be recovered from the person by whom the lump sum benefit in question is received;(ii)where any annuity or portion of an annuity (including a living annuity) which becomes payable on or in consequence of or following upon the death of a person other than a person who was a memberof any such fund has been commuted for a lump sum, such lump sum shall for the purposes of this paragraph be deemed to be a lump sum benefit which has become recoverable in consequence of or following upon the death of such deceased person;(iii)where any such lump sum benefit becomes payable but the dependants or nominees of that person elect an annuity (including a living annuity) that is purchased or provided by that fund, no lump sum benefit shall be deemed to have so accrued to the extent that the lump sum benefit was utilised to purchase or provide the annuity; and(iv)where any such lump sum benefit is paid to a pension preservation fund or provident preservation fund as an unclaimed benefit as defined in the Pension Funds Act, no lump sum benefit shall be deemed to have so accrued.3B.Any lump sum benefit which becomes recoverable from—(a)a pension fund, pension preservation fund, provident fund, provident preservation fund or retirement annuity fund; or(b)an insurer as defined in section 29A(1) if that lump sum benefit is payable by or provided in consequence of membership or past membership of a fund contemplated in subparagraph (a),in consequence of the termination of a trust shall in pursuance of that termination, on the date of payment of that lump sum benefit, be deemed to have accrued to that trust immediately prior to the date of termination of the trust.4.(1)Notwithstanding the rules of a pension fund, pension preservation fund, provident fund, provident preservation fund or retirement annuity fund, and subject to paragraphs 3 and 3A, any lump sum benefit shall be deemed to have accrued to a person who is a member of such fund on the earliest of the date—(a)on which an election is made in respect of which the benefit becomes recoverable;(b)on which any amount is deducted from the benefit in terms of section 37D(1)(a), (b) or (c) of the Pension Funds Act;(c)on which the benefit is transferred to another pension fund, pension preservation fund, provident fund, provident preservation fund or retirement annuity fund;and shall be assessed to tax in respect of the year of assessment during which such lump sum benefit is deemed to accrue.(2)If upon a member’s withdrawal or resignation from or the winding up of a pension fund, pension preservation fund, provident fund, provident preservation fund or retirement annuity fund on or after the fifteenth day of March, 1961, a policy of insurance is ceded or otherwise made over to or in favour of such member before the date of promulgation of the Income Tax Act, 1964, any lump sum due in respect of such policy upon its maturity or surrender before such date shall be deemed to be a lump sum benefit accruing to such member from a pension fund, pension preservation fund, provident fund, provident preservation fund or retirement annuity fund, as the case may be, on the date of such maturity or surrender, or, if such member dies before such last-mentioned date, on the date of his or her death, and shall be assessed to tax in respect of the year of assessment during which such benefit is deemed to accrue as though it were a lump sum benefit derived by him or her upon his or her withdrawal or resignation from the fund or upon his or her retirement or immediately prior to his or her death, as the case may be: Provided that if after the cession or making over of such policy any premiums are paid thereon by such member, there shall be deducted from such lump sum, in addition to any other deduction to which such member may be entitled in terms of this Schedule, an amount which bears to such lump sum the same ratio as the sum of the premiums paid by him after such cession or making over bears to the sum of all the premiums paid on such policy.(2bis)If a policy of insurance is ceded or otherwise made over to or in favour of a person who is a member of a pension fund, pension preservation fund, provident fund, provident preservation fund or retirement annuity fund by that fund on or after the date of commencement of the Income Tax Act, 1964, the surrender value of such policy shall, provided such person retired or ceased to be a member of such fund on or after the fifteenth day of March, 1961, be deemed for the purposes of this Schedule to be a lump sum benefit accruing to such person from such fund on the date of such cession or making over.(3)If a person who is a member of a provident fund retires from such fund before he or she reaches the age of 55 years on grounds other than ill-health, any lump sum benefits received by or accrued to such person in consequence of or following upon such retirement shall, unless the Commissioner on application by the fund and having regard to the circumstances of the case otherwise directs, be assessed to tax not in accordance with the provisions of paragraph 5 but in accordance with the provisions of paragraph 6 as though it were a lump sum benefit derived by such person in consequence of or following upon such person’s withdrawal or resignation from such fund.Benefits acrruing upon retirement and benefits deemed to have accrued immediately prior to person’s death: deductions
5.(1)The deduction to be allowed for the purposes of paragraph 2(1)(a) is an amount equal to so much of—(a)contributions that did not rank for a deduction against the person’s income in terms of section 11F to any pension fund, pension preservation fund, provident fund, provident preservation fund and retirement annuity fund of which he or she is or previously was a member;(b)any amount transferred for the benefit of the person to any pension fund, pension preservation fund, provident fund, provident preservation fund or retirement annuity fund as a result of an election made in terms of section 37D(4)(b)(ii) of the Pension Funds Act;(c)any amount that is deemed to have accrued to the person as contemplated in paragraph 2(2)(b);(d)any amount, to the extent that that amount was paid or transferred to a pension preservation fund or provident preservation fund as an unclaimed benefit as defined in section 1 of the Pension Funds Act and was subject to tax prior to that transfer or payment; and(e)any other amounts in respect of which the formula in paragraph 2A applies, which have been—(i)paid into a pension fund, pension preservation fund, provident fund, provident preservation fund or retirement annuity fund for the person’s benefit by a public sector fund; and(ii)transferred into a pension fund, pension preservation fund, provident fund, provident preservation fund or retirement annuity fund directly from a fund contemplated in subitem (i) for the person’s benefit,less the amount represented by symbol A when so applying that formula,as has not been exempted in terms of section 10C or has not previously been allowed to the taxpayer as a deduction in terms of this Schedule in determining the amount to be included in that taxpayer’s gross income.(2)The amount determined in terms of subparagraph (1) may not exceed the amount of the lump sum benefit in respect of which it is allowable as a deduction.(3)For the purposes of this paragraph, the surrender value of any policy of insurance ceded or otherwise made over to the person by any pension fund, pension preservation fund, provident fund, provident preservation fund or retirement annuity fund and ceded or otherwise made over by the person to any other such fund, or any amount paid by the person into the latter fund in lieu of or as representing such surrender value or a portion thereof, shall be deemed to be an amount paid into the latter fund by the former fund for the benefit of the person.Withdrawal or resignation: winding up: deductions
6.(1)The deduction to be allowed for the purposes of paragraph 2(1)(a)(ii) or (b) is an amount equal to—(a)in the case of a lump sum benefit contemplated in paragraph 2(1)(b)(iA) and (iB), so much of the benefit as is paid or transferred for the benefit of the person from a—(i)pension fund, pension preservation fund, provident fund or provident preservation fund into any pension fund, pension preservation fund, provident fund, provident preservation fund or retirement annuity fund; or(ii)retirement annuity fund into any retirement annuity fund; and(b)in any other case, so much of the aggregate of—(i)contributions that did not rank for a deduction against the person’s income in terms of section 11F to any pension funds, pension preservation funds, provident funds, provident preservation funds and retirement annuity funds of which he or she is or previously was a member;(ii)any amount transferred for the benefit of the person to any pension fund, pension preservation fund, provident fund, provident preservation fund or retirement annuity fund as a result of an election made as contemplated in section 37D(4)(b)(ii)(cc) of the Pension Funds Act;(iii)any amount that is deemed to have accrued to the person as contemplated in paragraph 2(1)(b)(iB);(iv)any amount, to the extent that that amount was paid or transferred to a pension preservation fund or provident preservation fund as an unclaimed benefit as defined in section 1 of the Pension Funds Act and was subject to tax prior to that transfer or payment; and(v)any other amounts in respect of which the formula in paragraph 2A applies, which have been—(aa)paid into a pension fund, pension preservation fund, provident fund, provident preservation fund or retirement annuity fund for the person’s benefit by a public sector fund; and(bb)transferred into a pension fund, pension preservation fund, provident fund, provident preservation fund or retirement annuity fund directly from a fund contemplated in sub-subitem (aa) for the person’s benefit,less the amount represented by symbol A when applying that formula,as has not been exempted in terms of section 10C or has not previously been allowed to the person as a deduction in terms of this Schedule in determining any amount to be included in that person’s gross income.(2)The amount determined in terms of subparagraph (1) may not exceed the amount of the lump sum benefit in respect of which it is allowable as a deduction.(3)For the purposes of this paragraph, the surrender value of any policy of insurance ceded or otherwise made over to the person by any pension fund, pension preservation fund, provident fund, provident preservation fund or retirement annuity fund and ceded or otherwise made over by the person to any other such fund, or any amount paid by the person into the latter fund in lieu of or as representing such surrender value or a portion thereof, shall be deemed to be an amount paid into the latter fund by the former fund for the benefit of the person.Transfer on or after normal retirement age but before retirement date: deductions
6A.The deduction to be made from a lump sum benefit contemplated in paragraph 2(1)(c) is equal to so much of that lump sum benefit as is transferred for the benefit of a person from a—(a)pension fund into a pension preservation fund, provident preservation fund or a retirement annuity fund;(b)provident fund into a pension preservation fund, provident preservation fund or a retirement annuity fund; or(c)pension preservation or provident preservation fund into another pension preservation or provident preservation fund or a retirement annuity fund.Third Schedule
Laws repealed
| Number and year of Law | Short title | Extent of repeal |
|---|
| Act No. 29 of 1939 | Co-operative Societies Act, 1939 | Subsections (2) and (3) of section ninety-nine |
| Act No. 31 of 1941 | Income Tax Act, 1941 | The whole |
| Act No. 46 of 1941 | Special Taxation Act, 1941 | The whole |
| Act No. 34 of 1942 | Income Tax Act, 1942 | The whole |
| Act No. 26 of 1943 | Income Tax Act, 1943 | The whole |
| Act No. 31 of 1943 | Special Taxation Amendment Act, 1943 | The whole |
| Act No. 47 of 1944 | Income Tax Act, 1944 | The whole |
| Act No. 39 of 1945 | Income Tax Act, 1945 | The whole |
| Act No. 55 of 1946 | Income Tax Act, 1946 | The whole |
| Act No. 52 of 1947 | Income Tax Act, 1947 | The whole |
| Act No. 40 of 1948 | Income Tax Act, 1948 | The whole |
| Act No. 45 of 1949 | Income Tax Act, 1949 | The whole |
| Act No. 35 of 1950 | Income Tax Act, 1950 | The whole |
| Act No. 64 of 1951 | Income Tax Act, 1951 | The whole |
| Act No. 56 of 1952 | Income Tax Act, 1952 | The whole |
| Act No. 34 of 1953 | Income Tax Act, 1953 | The whole, except section two |
| Act No. 55 of 1954 | Income Tax Act, 1954 | The whole |
| Act No. 43 of 1955 | Income Tax Act, 1955 | The whole, except sections fourteen and fifteen |
| Act No. 55 of 1956 | Income Tax Act, 1956 | The whole |
| Act No. 61 of 1957 | Income Tax Act, 1957 | The whole, except section three |
| Act No. 36 of 1958 | Income Tax Act, 1958 | The whole, except sections three and nineteen |
| Act No. 78 of 1959 | Income Tax Act, 1959 | The whole, except section three |
| Act No. 58 of 1960 | Income Tax Act, 1960 | The whole |
| Act No. 80 of 1961 | Income Tax Act, 1961 | The whole, except sections thirty-two and thirty-three |
Fourth Schedule (Section 5 of this Act)
Amounts to be deducted or withheld by employers and provisional payments in respect of normal tax
Part I – Definitions
1.
For the purposes of this Schedule, unless the context otherwise indicates—“employee” means—(a)any person (other than a company) who receives any remuneration or to whom any remuneration accrues;(b)any person who receives any remuneration or to whom any remuneration accrues by reason of any services rendered by such person to or on behalf of a labour broker;(c)any labour broker;(d)any person or class or category of person whom the Minister of Finance by notice in the Gazette declares to be an employee for the purposes of this definition;(e)any personal service provider; or(g)“employees’ tax” means the tax required to be deducted or withheld by an employer in terms of paragraph 2 from remuneration paid or payable to an employee;“employees’ tax certificate” means a certificate required to be issued by an employer in terms of paragraph 13;“employer” means any person (excluding any person not acting as a principal, but including any person acting in a fiduciary capacity or in his capacity as a trustee in an insolvent estate, an executor or an administrator of a benefit fund, pension fund, pension preservation fund, provident fund, provident preservation fund, retirement annuity fund or any other fund) who pays or is liable to pay to any person any amount by way of remuneration, and any person responsible for the payment of any amount by way of remuneration to any person under the provisions of any law or out of public funds (including the funds of any provincial council or any administration or undertaking of the State) or out of funds voted by Parliament or a provincial council;“labour broker” means any natural person who conducts or carries on any business whereby such person for reward provides a client of such business with other persons to render a service or perform work for such client, or procures such other persons for the client, for which services or work such other persons are remunerated by such person;“month” means any of the twelve portions into which any calendar year is divided;“personal service provider” means any company or trust, where any service rendered on behalf of such company or trust to a client of such company or trust is rendered personally by any person who is a connected person in relation to such company or trust, and—(a)such person would be regarded as an employee of such client if such service was rendered by such person directly to such client, other than on behalf of such company or trust; or(b)where those duties must be performed mainly at the premises of the client, such person or such company or trust is subject to the control or supervision of such client as to the manner in which the duties are performed or are to be performed in rendering such service; or(c)where more than 80 per cent of the income of such company or trust during the year of assessment, from services rendered, consists of or is likely to consist of amounts received directly or indirectly from any one client of such company or trust, or any associated institution as defined in the Seventh Schedule to this Act, in relation to such client,except where such company or trust throughout the year of assessment employs three or more full-time employees who are on a full-time basis engaged in the business of such company or trust of rendering any such service, other than any employee who is a holder of a share in the company or settlor or beneficiary of the trust or is a connected person in relation to such person;“provisional tax” means any payment in respect of liability for normal tax required to be made in terms of paragraph 17;“provisional taxpayer” means—(a)any person (other than a company) who derives income by way of—(i)any remuneration from an employer that is not registered in terms of paragraph 15; or(ii)any amount which does not constitute remuneration or an allowance or advance contemplated in section 8(1);(b)any company; and(c)any person who is notified by the Commissioner that he or she is a provisional taxpayer,but shall exclude—(aa)any public benefit organisation as contemplated in paragraph (a) of the definition of “public benefit organisation” in section 30(1) that has been approved by the Commissioner in terms of section 30(3);(bb)any recreational club as contemplated in the definition of “recreational club” in section 30A(1) that has been approved by the Commissioner in terms of section 30A(2);(cc)any body corporate, share block company or association of persons contemplated in section 10(1)(e);(dd)any—(A)person in respect of whose liability for normal tax for the relevant year of assessment payments are required to be made under section 33;(B)natural person who does not derive any income from the carrying on of any business, if—(AA)the taxable income of that person for the relevant year of assessment does not exceed the tax threshold; or(BB)the taxable income of that person for the relevant year of assessment which is derived from interest, dividends, foreign dividends, rental from the letting of fixed property and any remuneration from an employer that is not registered in terms of paragraph 15 does not exceed R30 000;(ee)a small business funding entity; and(ff)a deceased estate;“remuneration” means any amount of income which is paid or is payable to any person by way of any salary, leave pay, wage, overtime pay, bonus, gratuity, commission, fee, emolument, pension, superannuation allowance, retiring allowance or stipend, whether in cash or otherwise and whether or not in respect of services rendered, including—(a)any amount referred to in paragraph (a), (c), (cA), (cB), (d), (e), (eA) or (f) of the definition of “gross income” in section 1of this Act;(b)any amount required to be included in such person’s gross income under paragraph (i) of that definition, excluding an amount described in paragraph 7 of the Seventh Schedule;(bA)any allowance or advance, which must be included in the taxable income of that person in terms of section 8(1)(a)(i), other than—(i)an allowance in respect of which paragraph (c) or (cA) applies; or(ii)an allowance or advance paid or granted to that person in respect of accommodation, meals or other incidental costs while that person is by reason of the duties of his or her office obliged to spend at least one night away from his or her usual place of residence in the Republic: Provided that where—(aa)such an allowance or advance was paid or granted to a person during any month in respect of a night away from his or her usual place of residence; and(bb)that person has not by the last day of the following month either spent the night away from his or her usual place of residence or refunded that allowance or advance to his or her employer,that allowance or advance is deemed not to have been paid or granted to that person during that first-mentioned month in respect of accommodation, meals or other incidental costs, but is deemed to be an amount which has become payable to that person in that following month in respect of services rendered by that person;(c)50 per cent of the amount of any allowance referred to in section 8(1)(d) granted to the holder of a public office contemplated in section 8(1)(e);(cA)80 per cent of the amount of any allowance or advance in respect of transport expenses referred to in section 8(1)(b), other than any such allowance or advance contemplated in section 8(1)(b)(iii) that is based on the actual distance travelled by the recipient: Provided that where the employer is satisfied that at least 80 per cent of the use of the motor vehicle for a year of assessment will be for business purposes, then only 20 per cent of the amount of such allowance or advance must be included;(cB)80 per cent of the amount of the taxable benefit as determined in terms of paragraph 7 of the Seventh Schedule: Provided that where the employer is satisfied that at least 80 per cent of the use of the motor vehicle for a year of assessment will be for business purposes, then only 20 per cent of such amount must be included;(cC)100 per cent of so much of the amount paid or granted as an allowance or advance referred to in section 8(1)(b)(iii) as exceeds the amount determined by applying the rate per kilometre for the simplified method in the notice fixing the rate per kilometre under section 8(1)(b)(ii) and (iii) to the actual distance travelled;(d)any gain determined in terms of section 8B, which must be included in that person’s income under that section;(e)any amount referred to in section 8C which is required to be included in the income of that person;(f)any amount deemed to be income accrued to that person in terms of section 7(11);(g)any amount received by or accrued to that person by way of a dividend contemplated in—(i)paragraph (dd) of the proviso to section 10(1)(k)(i);(ii)paragraph (ii) of the proviso to section 10(1)(k)(i);(iii)paragraph (jj) of the proviso to section 10(1)(k)(i);(iv)paragraph (kk) of the proviso to section 10(1)(k)(i),but not including—(ii)any amount paid or payable in respect of services rendered or to be rendered by any person (other than a person who is not a resident or an employee contemplated in paragraph (b), (c), (d) or (e) of the definition of “employee”) in the course of any trade carried on by him independently of the person by whom such amount is paid or payable and of the person to whom such services have been or are to be rendered: Provided that for the purposes of this paragraph a person shall be deemed not to carry on a trade independently as aforesaid if the services are required to be performed mainly at the premises of the person by whom such amount is paid or payable or of the person to whom such services were or are to be rendered and the person who rendered or will render the services is subject to the control or supervision of any other person as to the manner in which his or her duties are performed or to be performed or as to his or her hours of work: Provided further that a person will be deemed to be carrying on a trade independently as aforesaid if he throughout the year of assessment employs three or more employees who are on a full time basis engaged in the business of such person of rendering any such service, other than any employee who is a connected person in relation to such person;(iii)any pension or additional pension under the Aged Persons Act, 1967 (Act No. 81 of 1967), or the Blind Persons Act, 1968 (Act No. 26 of 1968), any disability grant or additional or supplementary allowance under the Disability Grants Act, 1968 (Act No. 27 of 1968), or any grant or contribution under the provisions of section 89 of the Children’s Act, 1960 (Act No. 33 of 1960);(vi)any amount paid or payable to any employee wholly in reimbursement of expenditure actually incurred by such employee in the course of his employment;(viii)any annuity under an order of divorce or decree of judicial separation or under any agreement of separation;“representative employer” means—(a)in the case of any company, the public officer of that company, or, in the event of such company being placed under business rescue in terms of Chapter 6 of the Companies Act, in liquidation or under judicial management, the business rescue practitioner, liquidator or judicial manager, as the case may be;(b)in the case of any municipality or any body corporate or unincorporated (other than a company or a partnership), any manager, secretary, officer or other person responsible for paying remuneration on behalf of such municipality or body;(c)in the case of a person under legal disability, any guardian, curator, administrator or other person having the management or control of the affairs of the person under legal disability; or(d)in the case of any employer who is not resident in the Republic, any agent of such employer having authority to pay remuneration,who resides in the Republic, but nothing in this definition shall be construed as relieving any person from any liability, responsibility or duty imposed upon him or her by this Schedule; and“tax threshold” in relation to a natural person means the maximum amount of taxable income of that person in respect of a year of assessment which would result in no tax payable when the rates of tax contemplated in section 5 of this Act and the rebates contemplated in section 6 of this Act for that year of assessment are applied to the taxable income of that person;Part II – Employees’ tax
Employers to deduct tax
2.
(1)Every—(a)employer who is a resident; or(b)representative employer in the case of any employer who is not a resident,(whether or not registered as an employer under paragraph 15) who pays or becomes liable to pay any amount by way of remuneration to any employee shall, unless the Commissioner has granted authority to the contrary, deduct or withhold from that amount, or, where that amount constitutes any lump sum contemplated in paragraph 2(1)(b) of the Second Schedule, deduct from the employee’s benefit or minimum individual reserve as contemplated in that paragraph, by way of employees’ tax an amount which shall be determined as provided in paragraph 9, 10 or 11 or section 95 of the Tax Administration Act, whichever is applicable, in respect of the liability for normal tax of that employee, or, if such remuneration is paid or payable to an employee who is married and such remuneration is under the provisions of section 7(2) of this Act deemed to be income of the employee’s spouse, in respect of such liability of that spouse, and shall, subject to the Employment Tax Incentive Act, 2013, pay the amount so deducted or withheld to the Commissioner within seven days after the end of the month during which the amount was deducted or withheld, or in the case of a person who ceases to be an employer before the end of such month, within seven days after the day on which that person ceased to be an employer, or in either case within such further period as the Commissioner may approve.(1A)Notwithstanding the provisions of subparagraph (1), a person shall not be required to deduct or withhold employee’s tax in respect of any year of assessment of a company or trust solely by virtue of paragraph (c) of the definition of “personal service provider” where the company or trust has in respect of such year of assessment provided that person with an affidavit or solemn declaration stating that the relevant paragraph does not apply and that person relied on that affidavit or declaration in good faith.(1B)Notwithstanding the provisions of subparagraph (1), a person shall deduct or withhold employees’ tax in respect of any amount payable in respect of variable remuneration, as defined in section 7B(1), on the date on which the amount is paid to the employee by the employer as contemplated in section 7B(2).(2)Any employer may, at the written request of any employee, deduct or withhold from any amount of remuneration an amount by way of employees’ tax greater than that required to be deducted or withheld in terms of sub-paragraph (1), and shall remit such amount to the Commissioner, and the provisions of this Schedule relating to employees’ tax shall mutatis mutandis apply in respect of such amount.(2A)An employer may deduct the amount of the employment tax incentive for which the employer is eligible in terms of the Employment Tax Incentive Act, 2013, from the amount of the employees’ tax to be paid to the Commissioner by that employer in terms of subparagraph (1), unless section 8 of that Act applies.(2B)Notwithstanding the provisions of subparagraph (1), a person that pays an annuity and is a pension fund, pension preservation fund, provident fund, provident 30 preservation fund, retirement annuity fund or is licensed as an insurer under the Insurance Act shall, when deducting or withholding employees’ tax in respect of any year of assessment, apply the fixed tax rate that the Commissioner directs must be used in determining the amount of employees’ tax to be withheld, where the person to whom that annuity is paid receives an amount of remuneration from more than one employer.(4)The amount required to be deducted or withheld from any remuneration under this Schedule by way of employees’ tax must be calculated on the balance of the remuneration remaining after deducting therefrom—(a)any contribution by the employee concerned to any pension fund or provident fund which the employer is entitled or required to deduct from that remuneration, but limited to the deduction to which the employee is entitled under section 11F having regard to the remuneration and the period in respect of which it is payable;(b)at the option of the employer, any contribution to a retirement annuity fund by the employee in respect of which proof of payment has been furnished to the employer, but limited to the deduction to which the employee is entitled under section 11F having regard to the remuneration and the period in respect of which it is payable;(bA)any contribution made or amount paid by the employer to any retirement annuity fund on behalf of or for the benefit of the employee, but limited to the deduction to which the employee is entitled under section 11F having regard to the remuneration and the period in respect of which it is payable;(f)so much of any donation made by the employer on behalf of the employee—(i)as does not exceed 5 per cent of that remuneration after deducting therefrom the amounts contemplated in items (a), (b) and (bA); and(ii)for which the employer will be issued a receipt as contemplated in section 18A(2)(a):Provided that at any time during the year of assessment the amount of the contribution to be deducted in terms of paragraphs (a), (b) and (bA) must not exceed an amount that bears to the amount stipulated in section 11F(2)(a) the same ratio as the period during which remuneration was paid by an employer to the employee bears to a whole year.(5)(a)The Commissioner shall on application made to him by any person who is a labour broker or who is an employee by reason of the provisions of paragraph (d) of the definition of “employee” in paragraph 1, issue to such person a certificate of exemption if—(i)such person carries on an independent trade and is registered as a provisional taxpayer under the provisions of paragraph 17;(ii)in the case of any such labour broker, he is registered as an employer under the provisions of paragraph 15; and(iii)such person has, subject to any extension granted by the Commissioner, submitted all such returns as are required to be submitted by him under this Act:Provided that the Commissioner shall not issue a certificate of exemption if—(aa)more than 80 per cent of the gross income of such person during the year of assessment consists of, or is likely to consist of, an amount or amounts received from any one client of such person, or any associated institution as defined in the Seventh Schedule to this Act in relation to such client, unless that person is a labour broker who throughout the year of assessment employs three or more full-time employees—(A)who are on a full-time basis engaged in the business of that labour broker of providing persons to or procuring persons for clients of that labour broker; and(B)who are not connected persons in relation to that labour broker;(bb)such labour broker provides to any of its clients the services of any other labour broker; or(cc)such labour broker is contractually obliged to provide a specified employee of such labour broker to render any service to such client.(b)The certificate of exemption referred to in item (a) shall be issued in such form as the Commissioner may decide and shall be valid for such period as the Commissioner may indicate thereon.(c)An employer shall not be required to deduct or withhold employees tax from any remuneration paid or payable by him to any person who produces to the employer a valid certificate of exemption issued by the Commissioner under item (a).(6)Any amount included in gross income in terms of paragraph (eA) of the definition of “gross income” shall for the purposes of this Schedule be deemed to be an amount which an employer pays or becomes liable to pay by way of remuneration to an employee.3.
(1)The liability of any employer to deduct or withhold any amount of employees’ tax in terms of paragraph 2 shall not be reduced or extinguished by reason of the fact that the employer has a right or is otherwise than in terms of any law under an obligation to deduct or withhold any other amount from the employees’ remuneration, and such right or obligation shall notwithstanding anything to the contrary in any other law contained, for all purposes be deemed to have reference only to the amount of the remuneration remaining after the amount of employees’ tax referred to in that paragraph has been deducted or withheld.(2)The provisions of paragraph 2 shall apply in respect of all amounts payable by way of remuneration, notwithstanding the provisions of any law which provide that any such amount shall not be reduced or shall not be subject to attachment.4.
Any amount required to be deducted or withheld in terms of paragraph 2 shall be a debt due to the State and the employer concerned shall save as otherwise provided be absolutely liable for the due payment thereof to the Commissioner.5.
(1)Subject to the provisions of subparagraph (6), if an employer is personally liable for the payment of employees’ tax under Chapter 10 of the Tax Administration Act, the employer shall pay that amount to the Commissioner not later than the date on which payment should have been made if the employees’ tax had in fact been deducted or withheld in terms of paragraph 2.(1A)The liability of the employer as contemplated in paragraph 2 must be deemed to have been discharged if the employer made payment of the outstanding employees’ tax in terms of subparagraph (1).(2)Where the employer has failed to deduct or withhold employees’ tax in terms of paragraph 2 and the failure was not due to an intent to postpone payment of the tax or to evade the employer’s obligations under this Schedule, the Commissioner may, on application in the prescribed form and manner by the employer and if he or she is satisfied that there is a reasonable prospect of ultimately recovering the tax from the employee, absolve the employer from the employer’s liability under sub-paragraph (1) of this paragraph.(3)An employer who has not been absolved from liability as provided in sub-paragraph (2) shall have a right of recovery against the employee in respect of the amount paid by the employer in terms of sub-paragraph (1) in respect of that employee, and such amount may in addition to any other right of recovery be deducted from future remuneration which may become payable by the employer to that employee, in such manner as the Commissioner on application in the prescribed form and manner by the employer decides.(4)Until such time as an employee pays to his employer any amount which is due to the employer in terms of sub-paragraph (3), such employee shall not be entitled to receive from the employer an employees’ tax certificate in respect of that amount.(5)Any amount which an employer is required to pay in terms of sub-paragraph (1) and which the employer does not recover from the employee shall, insofar as the employer only is concerned, for the purposes of section 23(d) be deemed to be a penalty due and payable by that employer.(6)The provisions of sub-paragraph (1) shall not apply in respect of any amount or any portion of any amount of employees’ tax which an employer has failed to deduct or withhold and in respect of which the provisions of sub-paragraph (3) of paragraph 28 apply.6.
(1)If an employer fails to pay any amount of employees’ tax for which the employer is liable within the period allowable for payment thereof in terms of paragraph 2 SARS must, in accordance with Chapter 15 of the Tax Administration Act, impose a penalty equal to ten per cent of such amount.7.
Any agreement between an employer and an employee whereby the employer undertakes not to deduct or withhold employees’ tax shall be void.9.
(1)The Commissioner may from time to time, having regard to the rates of normal tax as fixed by Parliament or foreshadowed by the Minister in his budget statement and to any other factors having a bearing upon the probable liability of taxpayers for normal tax, prescribe—(a)deduction tables applicable to such classes of employees as the Commissioner may determine, taking into account the rebates applicable in terms of section 6; and(b)the manner in which such tables shall be applied,and the amount of employees’ tax to be deducted from any amount of remuneration shall, subject to the provisions of subparagraphs (3) and (4) of this paragraph and paragraphs 10 and 11 and section 95 of the Tax Administration Act, be determined in accordance with such tables or where subparagraph (3) or (4) is applicable, in accordance with that subparagraph.(2)Any tables prescribed by the Commissioner in accordance with sub-paragraph (1) shall come into force on a date prescribed by the Commissioner, and shall remain in force until withdrawn by the Commissioner.(3)(a)The amount to be deducted or withheld in respect of employees’ tax from any lump sum to which paragraph (d) or (e) of the definition of “gross income” in section 1 or section 7A applies, shall be ascertained by the employer from the Commissioner before paying out such lump sum, and the Commissioner’s determination of the amount to be so deducted or withheld shall be final.(4)The amount to be deducted or withheld in respect of any amount contemplated in paragraph (eA) of the definition of “gross income” in section 1 of this Act, shall be ascertained by the employer on inquiry from the Commissioner before the date of transfer or conversion of any amount for the benefit or ultimate benefit of any member as contemplated in such paragraph and the Commissioner’s determination of the amount to be so deducted or withheld shall be final.(6)There must be deducted from the amount to be withheld or deducted by way of employees’ tax as contemplated in paragraph 2 the amount—(a)of the medical scheme fees tax credit that applies in respect of that employee in terms of section 6A; and(b)where the employee is entitled to a rebate under section 6(2)(b), of the additional medical expenses tax credit that applies in respect of that employee in terms of section 6B(3)(a)(i),if—(i)the employer effects payment of the medical scheme fees as contemplated in section 6A(2)(a); or(ii)the employer does not effect payment of the medical scheme fees as contemplated in section 6A(2)(a), at the option of the employer, if proof of payment of those fees has been furnished to the employer.10.
(1)If the Commissioner is satisfied that the circumstances warrant a variation of the basis provided in paragraph 9 for the determination of amounts of employees’ tax to be deducted or withheld from remuneration of employees in the case of any employer, the Commissioner may agree with such employer as to the basis of determination of the said amounts to be applied by that employer, and the amounts to be deducted or withheld by that employer in terms of paragraph 2 shall, subject to the provisions of paragraph 11 and section 95 of the Tax Administration Act, be determined accordingly.(2)Any agreement made in terms of sub-paragraph (1) shall remain in force indefinitely, but the Commissioner or the employer concerned may give notice of termination thereof and upon the expiration of a period of three months from the date of such notice such agreement shall terminate.11.
The Commissioner may, having regard to the circumstances of the case, issue a directive—(a)to an employer authorising that employer—(i)to refrain from deducting or withholding any amount under paragraph 2 by way of employees’ tax from any remuneration due to any employee of that employer; or(ii)to deduct or withhold by way of employees’ tax from any remuneration in terms of paragraph 2, a specified amount or an amount to be determined in accordance with a specified rate or scale,in order to alleviate hardship to that employee due to circumstances outside the control of the employee or to correct any error in regard to the calculation of employees’ tax, or in the case of remuneration constituting commission or where the remuneration is paid or payable to a personal service provider and that directive must be complied with; or11A.
(1)Where by virtue of the provisions of paragraph (b), (d), (e) or (g) of the definition of “remuneration” in paragraph 1, the remuneration of an employee includes—(a)any gain made by the exercise, cession or release of any right to acquire any marketable security as contemplated in section 8A;(b)any gain made from the disposal of any qualifying equity share as contemplated in section 8B; or(c)any amount referred to in section 8C which is required to be included in the income of that employee; or(d)any amount received by or accrued to that employee by way of a dividend contemplated in—(i)paragraph (dd) of the proviso to section 10(1)(k)(i);(ii)paragraph (ii) of the proviso to section 10(1)(k)(i);(iii)paragraph (jj) of the proviso to section 10(1)(k)(i); or(iv)paragraph (kk) of the proviso to section 10(1)(k)(i),the person by whom that right was granted or from whom the equity instrument or qualifying equity share that gave rise to the gain or amount was acquired, as the case may be, is deemed to be a person who pays or is liable to pay to that employee the amount of the gain referred to in paragraph (a) or (b) or the amount referred to in paragraph (c) or (d).(2)Employees’ tax in respect of the amount of remuneration contemplated in subparagraph (1) must, unless the Commissioner has granted authority to the contrary, be deducted or withheld by the person referred to in subparagraph (1) from—(a)any consideration paid or payable by that person to that employee in respect of the cession, or release of that right or the disposal of that qualifying equity share, as the case may be;(b)any cash remuneration paid or payable by that person to that employee after that right has to the knowledge of that person been exercised, ceded or released or that equity instrument has to the knowledge of that person vested or that qualifying equity share has to the knowledge of that person been disposed of; or(c)any amount of a dividend contemplated in subparagraph (1)(d) accrued to that employee:Provided that where that person is an “associated institution”, as defined in paragraph 1 of the Seventh Schedule, in relation to any employer who pays or is liable to pay to that employee any amount by way of remuneration during the year of assessment during which the gain contemplated in subparagraph (1)(a) or (b) or the amount contemplated in subparagraph (1)(c) or (d) arises, and—(i)that person is not resident nor has a representative employer;(ii)that person is unable to deduct or withhold the full amount of employees’ tax during the year of assessment during which the gain or the amount arises, by reason of the fact that the amount to be deducted or withheld from that remuneration by way of employees’ tax exceeds the amount from which the deduction or withholding can be made; or(iii)the amount of the dividend referred to in paragraph (c) consists of an equity instrument referred to in section 8C,that person and that employer must deduct or withhold from the remuneration payable by them to that employee during that year of assessment an aggregate amount equal to the employees’ tax payable in respect of that gain or that amount and shall be jointly and severally liable for that aggregate amount of employees’ tax.(3)The provisions of this Schedule apply in relation to the amount of employees’ tax deducted or withheld under subparagraph (2) as though that amount had been deducted or withheld from the amount of the gain referred to in subparagraph (1)(a) or (b) or the amount referred to in subparagraph (1)(c) or (d).(4)Before deducting or withholding employees’ tax under subparagraph (2) in respect of remuneration contemplated in subparagraph (1)(a), (c) or (d), that person and that employer must ascertain from the Commissioner the amount to be so deducted or withheld.(5)If that person and that employer are, by reason of the fact that the amount to be deducted or withheld by way of employees’ tax exceeds the amount from which the deduction or withholding is to be made, unable to deduct or withhold the full amount of employees’ tax during the year of assessment during which the gain referred to in subparagraph (1)(a) or (b) or the amount referred to in subparagraph (1)(c) or (d) arises, they must immediately notify the Commissioner of the fact.(6)Where an employee has—(a)under any transaction to which neither that person nor that employer is a party made any gain; or(b)disposed of any qualifying equity share as contemplated in subparagraph (1),that employee must immediately inform that person and that employer of the transaction or the disposal and of the amount of that gain.(7)Any employee who, without just cause shown by him or her, fails to comply with the provisions of subparagraph (6) shall be guilty of an offence and liable on conviction to a fine not exceeding R2 000.13. Furnishing and obtaining of employees’ tax certificates
(1)Subject to the provisions of paragraphs 5, 14(5) and 28, every employer who during any period contemplated in subparagraph (1A) deducts or withholds any amount by way of employees’ tax as required by paragraph 2 shall within the time allowed by subparagraph (2) of this paragraph deliver to each employee or former employee to whom remuneration has during the period in question been paid or become due by such employer, an employees’ tax certificate in such form as the Commissioner may prescribe or approve, which shall show the total remuneration of such employee or former employee and the sum of the amounts of employees’ tax deducted or withheld by such employer from such remuneration during the said period, excluding any amount of remuneration or employees’ tax included in any other employees’ tax certificate issued by such employer unless such other certificate has been surrendered to such employer by the employee or former employee and has been cancelled by such employer and dealt with by the employer as provided in subparagraph (10).(1A)The period referred to in subparagraph (1) shall be the period of 12 months ending on the last day of February of any year or, at the option of the employer which may be exercised by him in relation to all his employees or any class of his employees, the period, whether of 12 months or not (to be known as an alternate period), commencing on the day following the last day of the preceding alternate period in relation to the employer and ending on a date falling not more than 14 days (or such greater number of days as the Commissioner having regard to the circumstances of the case may allow) before or after the last day of February of any year.(1B)Where any employer has in relation to any employee exercised an option as contemplated in subparagraph (1A), any remuneration which is paid or becomes payable to the employee by the employer during an alternate period shall for the purposes of this Act be deemed to have been paid or to have become payable to the employee during the year of assessment ended on the last day of February of the calendar year in which such alternate period ended.(2)The employees’ tax certificate referred to in sub-paragraph (1) shall be delivered—(a)if the employer who is required to deliver the certificate has not ceased to be an employer in relation to the employee concerned, within 60 days after the end of the period to which the certificate relates;(b)if the said employer has ceased to be an employer in relation to the employee concerned but has continued to be an employer in relation to other employees, within fourteen days of the date on which he has so ceased; or(c)if the said employer has ceased to be an employer, within 14 days of the date on which the employer has so ceased,or in any particular case within such further period as the Commissioner may approve.(3)For the purposes of sub-paragraph (2) an employer shall, if the Commissioner having regard to the circumstances of the case so directs be deemed not to have ceased to be an employer in relation to any of his casual employees who is likely from time to time to be re-employed by such employer.(4)Notwithstanding the provisions of sub-paragraphs (1) and (2) any employer who has deducted or withheld employees’ tax from the remuneration of any employee shall as and when required by the Commissioner deliver to such employee an employees’ tax certificate in such form as the Commissioner may prescribe or approve, which shall show the total remuneration of such employee or former employee and the sum of the amounts of employees’ tax deducted or withheld by such employer from such remuneration during any period specified by the Commissioner but excluding any amount of remuneration or employees’ tax included in any other employees’ tax certificate issued by such employer unless such other certificate has been surrendered to such employer by the employee or former employee and has been cancelled by such employer and dealt with by him as provided in sub-paragraph (10).(5)It shall be the duty of any employee or former employee who has not received an employees’ tax certificate within the time allowed by sub-paragraph (2) forthwith to apply to the employer for such certificate.(7)It shall be sufficient compliance with the provisions of sub-paragraph (1) or (4) in regard to the delivery of any employee’s tax certificate to any employee or former employee if such certificate is delivered to the employees’ authorized agent or the representative taxpayer in respect of the remuneration shown in such certificate or, where delivery cannot conveniently be effected by personal delivery, if such certificate is sent to the employee or former employee or such agent or representative taxpayer.(8)An employer may at the request of the employee or former employee issue a duplicate employees’ tax certificate but any such duplicate shall be clearly marked as such and shall disclose full details of the original certificate.(9)Unless authorized thereto by the Commissioner no duplicate employees’ tax certificate may be issued by an employer otherwise than as provided in sub-paragraph (8).(10)Any cancelled or spoiled employees’ tax certificate shall not be destroyed by the employer concerned but shall be retained by him until the Commissioner requires it to be surrendered to him.(11)The Commissioner shall control the issue to employers of stocks of unused employees’ tax certificates and may prescribe conditions in regard to the manner in which such unused certificates may be used or as to the surrender of unused stocks of such certificates and every employer shall account to the Commissioner for used, unused, cancelled or spoiled certificates as and when required by the Commissioner.(13)Every person who ceases to be an employer shall, unless the Commissioner otherwise directs, within fourteen days of his ceasing to be an employer surrender to the Commissioner all unused employees’ tax certificates in his possession.(14)If any person fails to surrender any unused employees’ tax certificates as required by sub-paragraph (12) or (13), any officer engaged in carrying out the provisions of this Act who has in relation to such person been authorized thereto by the Commissioner in writing or by telegram may without previous notice, at any time during the day enter any premises whatsoever and on such premises search for and seize such certificates and in carrying out such search, open or cause to be removed and open any article in which he suspects any such certificates to be contained.(15)For the purposes of this Schedule any employees’ tax certificate on which appears the name or any trade name of any employer shall until the contrary is proved be deemed to have been issued by such employer if such certificate is in a form prescribed by the Commissioner for general use and was supplied by the Commissioner to such employer for use by him or is in a form approved by the Commissioner under sub-paragraph (12) for use by such employer.14. Employers to keep records and furnish returns
(1)In addition to the records required in accordance with Part A of Chapter 4 of the Tax Administration Act, every employer shall in respect of each employee maintain a record showing—(a)the amounts of remuneration paid or due by him or her to such employee;(b)the amount of employees’ tax deducted or withheld from the amounts of remuneration contemplated in item (a);(c)the income tax reference number of that employee where that employee is registered as a taxpayer in terms of section 67; and(d)such further information as the Commissioner may prescribe,and such record shall be retained by the employer and shall be available for scrutiny by the Commissioner.(2)Every employer shall when making any payment of employees’ tax submit to the Commissioner a return.(3)Every employer shall—(a)by such date or dates as prescribed by the Commissioner by notice in the Gazette; and(b)if the employer ceases to carry on any business or other undertaking in respect of which the employer has paid or becomes liable to pay remuneration to any employee or otherwise ceases to be an employer, within 14 days after the date on which the employer has so ceased to carry on that business or undertaking or to be an employer, as the case may be,or within such longer time as the Commissioner may approve, render to the Commissioner a return.(5)Unless the Commissioner otherwise directs, no employees’ tax certificate as contemplated in paragraph 13(2)(a) or (c) shall be delivered by the employer until such time as the return contemplated in subparagraph (3) has been rendered to the Commissioner.(6)If an employer fails to render to the Commissioner a complete return referred to in subparagraph (3) within the period prescribed in that subparagraph, the Commissioner may impose on that employer a penalty, which is deemed to be a percentage based penalty imposed under Chapter 15 of the Tax Administration Act, for each month that the employer fails to submit a complete return which, in total, may not exceed 10 per cent of the total amount of employees’ tax deducted or withheld, or which should have been deducted or withheld by the employer from the remuneration of employees for the period described in that subparagraph.(7)If the total amount of employees’ tax deducted or withheld, or which should have been deducted or withheld for the period described in subparagraph (3), is 20 unknown, the Commissioner may estimate the total amount based on information readily available and impose the penalty under subparagraph (6) on the amount so estimated.(8)Where, upon determining the actual employees’ tax of the person in respect of whom the penalty was imposed under subparagraph (7), it appears that the total amount of employees’ tax was incorrectly estimated under subparagraph (7), the penalty must be adjusted in accordance with the correct amount of employees’ tax with effect from the date of the imposition of the penalty under subparagraph (6) read with subparagraph (7).15. Registration of employers
(1)Every person who is an employer shall apply to the Commissioner in accordance with Chapter 3 of the Tax Administration Act for registration: Provided that where no one of such employer’s employees is liable for normal tax, the provisions of this paragraph shall not apply to such employer.(3)Every person who is registered as an employer shall within 14 days after ceasing to be an employer, notify the Commissioner in writing of the fact of the employer having ceased to be an employer.Part III – Provisional tax
17. Payment of provisional tax
(1)Every provisional taxpayer shall in the manner provided in this Part make payments (called provisional tax) to the Commissioner in respect of his liability for normal tax in respect of every year of assessment.(3)Where for the purpose of determining any amount of provisional tax required to be paid by any provisional taxpayer in respect of any year of assessment the liability of such taxpayer for normal tax is required to be estimated in respect of such year, such liability shall be deemed to be the amount of normal tax which, calculated at the relevant rate referred to in subparagraph (4), would be payable by the provisional taxpayer in respect of the amount of taxable income estimated by such taxpayer in terms of paragraph 19(1) during the period prescribed by this Schedule for the payment of the said amount of provisional tax or if the amount so estimated has been increased by the Commissioner in terms of paragraph 19(3), the amount of normal tax which, calculated at the said rate, would be payable by the provisional taxpayer in respect of the amount of taxable income as so increased, or if the Commissioner has estimated the provisional taxpayer’s taxable income in terms of paragraph 19(2), the amount of normal tax which, calculated at the said rate, would be payable by the provisional taxpayer in respect of the amount of taxable income so estimated.(4)For the purposes of any calculation of normal tax under subparagraph (3) the rate at which such tax is to be calculated shall be the relevant rate which on the date of payment of the provisional tax in question is in force in respect of the year of assessment in respect of which such provisional tax is required to be paid under this Schedule, or if at the said date the rate has not been fixed, the relevant rate in respect of that year foreshadowed by the Minister of Finance in his budget statement, or if at that date the rate has not been fixed or so foreshadowed, the relevant rate which is in force in respect of the latest preceding year of assessment in respect of which rates have been fixed by Parliament.(5)The Commissioner may from time to time, having regard to the rates of normal tax as fixed by Parliament or foreshadowed by the Minister in his or her budget statement or to the rebates applicable in terms of section 6(2) of this Act and taking into account any other factors having a bearing upon the probable liability of taxpayers for normal tax, prescribe tables for optional use by provisional taxpayers falling within any category specified by the Commissioner, or by provisional taxpayers generally, for the purpose of estimating the liability of such taxpayers for normal tax, and the Commissioner may prescribe the manner in which such tables shall be applied together with the period for which such tables shall remain in force.(7)The provisions of subparagraphs (3) and (4) shall not apply where the liability of a provisional taxpayer for normal tax is estimated in accordance with any tables prescribed for his use under the provisions of subparagraph (5) and not withdrawn under the provisions of subparagraph (6).19. Estimates of taxable income to be made by provisional taxpayers
(1)(a)Every provisional taxpayer (other than a company) shall, during every period within which provisional tax is or may be payable by that provisional taxpayer as provided in this Part, submit to the Commissioner (unless the Commissioner directs otherwise) a return of an estimate of the total taxable income which will be derived by the taxpayer in respect of the year of assessment in respect of which provisional tax is or may be payable by the taxpayer: Provided that—(i)such estimate will not include any retirement fund lump sum benefit, retirement fund lump sum withdrawal benefit or any severance benefit received by or accrued to or to be received by or accrue to the taxpayer during the relevant year of assessment; and(ii)in respect of the year of assessment in which a person dies, no estimate is required to be made in respect of the period ending on the date of death of that person.(b)Every company which is a provisional taxpayer shall, during every period within which provisional tax is or may be payable by it as provided in this Part submit to the Commissioner (unless the Commissioner directs otherwise) a return of an estimate of the total taxable income which will be derived by the company in respect of the year of assessment in respect of which provisional tax is or may be payable by the company.(c)The amount of any estimate so submitted by a provisional taxpayer (other than a company) during the period referred to in paragraph 21(1)(a), or by a company (as a provisional taxpayer) during the period referred to in paragraph 23(a), shall not be less than the basic amount applicable to the estimate in question, as contemplated in item (d), unless the circumstances of the case justify the submission of an estimate of a lower amount.(d)The basic amount applicable to any estimate submitted by a provisional taxpayer under this paragraph shall, for the purposes of this paragraph, be deemed to be—(i)as respects an estimate submitted by a provisional taxpayer (other than a company) under item (a), the taxpayers’ taxable income, as assessed by the Commissioner, for the latest preceding year of assessment in relation to such estimate, less—(aa)the amount of any taxable capital gain contemplated in section 26A;(bb)the taxable portion of any retirement fund lump sum benefit, retirement fund lump sum withdrawal benefit or severance benefit (other than any amount contemplated in paragraph (eA) of the definition of “gross income” in section 1); and(bbA)any amount (other than a severance benefit) contemplated in paragraph (d) of the definition of “gross income” in section 1,included in the taxpayer’s taxable income for that year of assessment;(ii)as respects an estimate submitted by a company under item (b), the company’s taxable income, as assessed by the Commissioner, for the latest preceding year of assessment in relation to such estimate, less the amount of any taxable capital gain included therein in terms of section 26A:Provided that, if an estimate under item (a) or (b) must be made more than 18 months after the end of the latest preceding year of assessment in relation to such estimate, the basic amount determined in terms of subitems (i) and (ii) shall be increased by an amount equal to eight per cent per annum of that amount, from the end of such year to the end of the year of assessment in respect of which the estimate is made.(e)For the purposes of item (d), the latest preceding year of assessment in relation to any estimate under this paragraph shall be deemed to be the latest of the years of assessment—(i)preceding the year of assessment in respect of which the estimate is made; and(ii)in respect of which a notice of assessment relevant to the estimate has been issued by the Commissioner not less than 14 days before the date on which the estimate is submitted to the Commissioner.(2)If any provisional taxpayer fails to submit any estimate as required by subparagraph (1), the Commissioner may estimate the taxable income which is required to be estimated.(3)The Commissioner may call upon any provisional taxpayer to justify any estimate made by the provisional taxpayer in terms of sub-paragraph (1), or to furnish particulars of the provisional taxpayer’s income and expenditure or any other particulars that may be required, and, if the Commissioner is dissatisfied with the said estimate, he or she may increase the amount thereof to such amount as he or she considers reasonable, which increase of the estimate is not subject to objection and appeal.(5)Any estimate or increase made by the Commissioner under the provisions of sub-paragraph (2) or (3) shall be deemed to take effect in respect of the relevant period within which the provisional taxpayer is required to make any payment of provisional tax in terms of this Part.(6)Subject to subparagraph (2), if an estimate of a provisional taxpayer’s taxable income in respect of any year of assessment is not submitted in terms of subparagraph (1)(a) or (b) by the last day of a period of four months after the last day of the year of assessment, the provisional taxpayer shall, for the purposes of this paragraph and paragraph 20, be deemed to have submitted an estimate of an amount of nil taxable income.20. Penalty for underpayment of provisional tax as a result of underestimation
(1)If in respect of a year of assessment the taxable income of a provisional taxpayer, as determined under this Act, is—(a)more than R1 million and the final or last estimate of taxable income submitted by that provisional taxpayer in terms of paragraph 19(1)(a) or (b) in respect of that year of assessment is less than 80 per cent of the amount of the provisional taxpayer’s taxable income, the Commissioner must impose a penalty, which is deemed to be a percentage based penalty imposed under Chapter 15 of the Tax Administration Act, equal to 20 per cent of the difference between—(i)the amount of normal tax, calculated at the rates applicable in respect of that year of assessment and after taking into account any amount of a rebate deductible in terms of this Act in the determination of normal tax payable, in respect of a taxable income equal to 80 per cent of the provisional taxpayer’s taxable income; and(ii)the amount of employees’ tax and provisional tax in respect of that year of assessment paid by the end of the year of assessment; or(b)R1 million or less and the final or last estimate of taxable income submitted by that provisional taxpayer in terms of paragraph 19(1)(a) or (b) in respect of that year of assessment is less than 90 per cent of the amount of the provisional taxpayer’s taxable income and is also less than the basic amount applicable to that estimate, as contemplated in paragraph 19(1)(d), the Commissioner must impose a penalty, which is deemed to be a percentage based penalty imposed under Chapter 15 of the Tax Administration Act, equal to 20 per cent of the difference between—(i)the lesser of—(aa)the amount of normal tax, calculated at the rates applicable in respect of such year of assessment and after taking into account any amount of a rebate deductible in terms of this Act in the determination of normal tax payable, in respect of a taxable income equal to 90 per cent of the provisional taxpayer’s taxable income; and(bb)the amount of normal tax calculated in respect of a taxable income equal to such basic amount, at the rates applicable in respect of such year of assessment and after taking into account any amount of a rebate deductible in terms of this Act in the determination of normal tax payable; and(ii)the amount of employees’ tax and provisional tax in respect of such year of assessment paid by the end of the year of assessment:Provided that any retirement fund lump sum benefit, retirement fund lump sum withdrawal benefit or severance benefit received by or accrued to or to be received by or accrue to the taxpayer during the relevant year of assessment shall not be taken into account for purposes of this subparagraph.(2)Where the Commissioner is satisfied that the amount of any estimate referred to in subparagraph (1)(b) was seriously calculated with due regard to the factors having a bearing thereon and was not deliberately or negligently understated, or if the Commissioner is partly so satisfied, the Commissioner may in his or her discretion remit the penalty or a part thereof.(2B)Any penalty imposed under subparagraph (1) in respect of a year of assessment must be reduced by any penalty imposed under paragraph 27(1) in respect of payment referred to in paragraph 21(1)(b) or 23(b).(2C)If—(a)a provisional taxpayer is deemed in terms of paragraph 19(6) to have submitted an estimate of an amount of nil taxable income due to a failure to submit an estimate by the last day of a period of four months after the last day of the year of assessment; and(b)the Commissioner is satisfied that the provisional taxpayer’s failure was not due to an intent to evade or postpone the payment of provisional tax or normal tax,the Commissioner may remit the whole or any part of a penalty imposed under subparagraph (1).21. Payment of provisional tax by provisional taxpayers (other than companies)
(1)Subject to the provisions of subparagraph (2), provisional tax shall be paid by every provisional taxpayer (other than a company) in the following manner, namely—(a)within the period of six months reckoned from the commencement of the year of assessment in question, one half of an amount equal to the total estimated liability of such taxpayer (as determined in accordance with paragraph 17) for normal tax in respect of that year, less the total amount of—(i)any employees’ tax deducted by the taxpayer’s employer from the taxpayer’s remuneration during such period; and(ii)any tax proved to be payable to the government of any other country which will qualify as a rebate under section 6quat; and(b)not later than the last day of the year of assessment in question, an amount equal to the total estimated liability of such taxpayer (as finally determined in accordance with paragraph 17) for normal tax in respect of that year, less the total amount of—(i)any employee’s tax deducted by the taxpayer’s employer from the taxpayer’s remuneration during such year and the amount paid in terms of item (a); and(ii)any tax proved to be payable to the government of any other country which will qualify as a rebate under section 6quat.(1A)Subparagraph (1)(a) does not apply where the duration of the year of assessment in question does not exceed a period of six months.(2)If the Commissioner has in terms of section 66(13A) of this Act agreed to accept accounts from any provisional taxpayer in respect of any year of assessment drawn to a date falling after the end of such year, the period referred to in item (a) of subparagraph (1) shall, notwithstanding the provisions of that subparagraph, be reckoned from such date as the Commissioner upon application of the taxpayer and having regard to the circumstances of the case may approve, and in such case the last day of such year of assessment shall for the purposes of item (b) of that subparagraph be deemed to be the day preceding the first anniversary of the said date.23. Provisional tax payments by companies
(1)Provisional tax shall be paid by every company which is a provisional taxpayer in the following manner, namely—(a)within the period ending 6 months after the commencement of the year of assessment in question, one half of an amount equal to the total estimated liability of such company (as determined in accordance with paragraph 17) for normal tax in respect of that year;(b)within the period ending on the last day of that year, an amount equal to the total estimated liability of such company (as so determined) for normal tax in respect of that year less the amount paid in terms of item (a),less, in either case, the total amount of—(i)any employees’ tax deducted by the taxpayer’s employer from the taxpayer’s remuneration during the relevant period; and(ii)any tax proved to be payable to the government of any other country which will qualify as a rebate under section 6quat.(2)Subparagraph (1)(a) does not apply where the duration of the year of assessment in question does not exceed a period of six months.23A. Additional provisional tax payments
(1)Any provisional taxpayer may for the purpose of avoiding or reducing his or her liability for any interest which may become payable by him or her in respect of any year of assessment under Chapter 12 of the Tax Administration Act, elect to make an additional payment of provisional tax in respect of such year.24.
The Commissioner may absolve any provisional taxpayer from making payment of any amount of provisional tax payable in terms of paragraph 21(1)(a) or paragraph 23(a), if the Commissioner is satisfied that the taxable income which may be derived by such taxpayer for the year of assessment in question cannot be estimated on the facts available at the time when payment of the amount in question has to be made.25. Extension of time for payment of provisional tax
(1)If after the end of any period within which provisional tax is payable in terms of this Schedule the Commissioner has under the provisions of subparagraph (3) of paragraph 19 increased the amount of any estimate of taxable income submitted by any provisional taxpayer during such period, any additional provisional tax payable as a result of the Commissioner having made such increase shall, notwithstanding the provisions of paragraphs 21 and 23, be payable within such period as the Commissioner may determine.27. Penalty on late payment of provisional tax
(1)If any provisional taxpayer fails to pay any amount of provisional tax for which he or she is liable within the period allowed for payment thereof in terms of paragraph 21 or 23, or paragraph 25(1), the Commissioner must, under Chapter 15 of the Tax Administration Act, impose a penalty, which is deemed to be a percentage based penalty imposed under Chapter 15 of the Tax Administration Act, equal to ten per cent of the amount not paid.Part IV – General
28. Employees’ tax and provisional tax to be set off against tax liability
(1)There shall be set off against the liability of the taxpayer in respect of any taxes (as defined in subparagraph (8)) due by the taxpayer, the amounts of employees’ tax deducted or withheld by the taxpayer’s employer during any year of assessment for which the taxpayer’s liability for normal tax has been assessed by the Commissioner and the amounts of provisional tax paid by the taxpayer in respect of any such year, and if—(a)the sum of the said amounts of employees’ tax and provisional tax exceeds the amount of the taxpayer’s total liability for the said taxes, the excess amount shall be refunded to the taxpayer; or(b)the taxpayer’s total liability for the aforesaid taxes exceeds the sum of the said amounts of employees’ tax and provisional tax, the amount of the excess shall be payable by the taxpayer to the Commissioner.(2)The burden of proof that any amount of employees’ tax has been deducted or withheld by his employer shall be upon the taxpayer and any employees’ tax certificate shall be prima facie evidence that the amount of employees’ tax reflected therein has been deducted by the employer.(3)If the Commissioner is satisfied that the amount or any portion of the amount of employees’ tax shown in any employees’ tax certificate has not been deducted or withheld by the employer and the amount of employees’ tax shown in such tax certificate has been applied as provided in sub-paragraph (1), the employer and the employee shall be jointly and severally liable to pay to the Commissioner the amount which should not have been so applied and such amount shall be recoverable under this Act as if it were a tax.(4)An employer who has under sub-paragraph (3) paid to the Commissioner an amount which has but should not have been applied under the provisions of sub-paragraph (1), may, if the amount was shown or included in the certificate because of a bona fide error, recover the amount so paid from the employee concerned, and in that case the provisions of sub-paragraph (3) of paragraph 5 shall mutatis mutandis apply.(5)No employees’ tax certificate shall be issued by the employer in respect of any amount recovered by him from the employee in terms of sub-paragraph (4) nor shall any such amount be included in any return rendered in terms of sub-paragraph (3) of paragraph 14.(6)If the Commissioner is satisfied that the employee to whom an employees’ tax certificate refers was directly or indirectly responsible for an incorrect amount being shown on such certificate he may absolve the employer from the liability imposed upon him by sub-paragraph (3), and in that case the employee shall be solely liable under that sub-paragraph.(8)For the purposes of this paragraph, “taxes” means the normal tax levied under this Act.28A.
Payments by way of employees’ tax and provisional tax must, for the purposes of this Act and subject to the provisions of paragraph 28, be regarded as having been made in respect of the taxpayer’s liability for tax whether or not the liability has been ascertained or determined at the date of any payment.29.
No refund of any amount of employees’ tax or provisional tax shall be made to the taxpayer concerned otherwise than as provided in paragraph 28 or in such circumstances as may be determined by the Commissioner in any deduction tables prescribed by him or her under paragraph 9.30. Offences
(1)Any person who wilfully and without just cause—(a)makes or becomes liable to make any payment of remuneration and who fails to deduct or withhold therefrom any amount of employees’ tax or to pay such amount to the Commissioner as and when required by paragraph 2; or(b)uses or applies any amount deducted or withheld by him by way of employees’ tax for purposes other than the payment of such amount to the Commissioner; or(f)fails or neglects to deliver to any employee or former employee any employees’ tax certificate as required by paragraph 13; or(g)fails to comply with any condition prescribed by the Commissioner in terms of sub-paragraph (11) of paragraph 13 in regard to the manner in which employees’ tax certificates may be used or as to the surrender of unused stocks of such certificates, or to account for used, unused or spoiled employees’ tax certificates when required by the Commissioner under that paragraph or on ceasing to be an employer fails to surrender unused employees’ tax certificates in his possession as required by sub-paragraph (13) of that paragraph; or(j)being a registered employer under paragraph 15(1), fails or neglects to notify the Commissioner of having ceased to be an employer as required by paragraph 15(3); or(l)not being an employer and without being duly authorized by any person who is an employer, issues or causes to be issued any document purporting to be an employees’ tax certificate; or(m)fails to submit to the Commissioner any estimate of his taxable income as required under paragraph 19,shall be guilty of an offence and liable on conviction to a fine or to imprisonment for a period not exceeding 12 months.(2)For the purposes of item (b) of sub-paragraph (1) an amount which has been deducted or withheld by any person from remuneration shall until the contrary is proved be deemed to have been used or applied by such person for purposes other than the payment of such amount to the Commissioner if such amount is not paid to the Commissioner within the period allowed for payment under paragraph 2.Sixth Schedule (Part IV of Chapter II)
Determination of turnover tax payable by micro businesses
Part I – Interpretation
1. Definitions
In this Schedule, unless the context indicates otherwise, any meaning ascribed to a word or expression in this Act must bear the meaning so ascribed and—“investment income” means—(i)any income in the form of annuities, dividends, foreign dividends, interest, rental derived in respect of immovable property, royalties, or income of a similar nature; and(ii)any proceeds derived from the disposal of financial instruments;“micro business” means a person that meets the requirements set out in Part II of this Schedule;“professional service” means a service in the field of accounting, actuarial science, architecture, auctioneering, auditing, broadcasting, consulting, draftsmanship, education, engineering, financial service broking, health, information technology, journalism, law, management, real estate broking, research, sport, surveying, translation, valuation or veterinary science;“qualifying turnover” means the total receipts from carrying on business activities, excluding any—(a)amount of a capital nature; and(b)amount exempt from normal tax in terms of section 10(1)(zK) or 12P;“registered micro business” means a micro business that is registered in terms of paragraph 8;“taxable turnover” means the amount determined in terms of paragraph 5 of this Schedule.Part II – Application of schedule
2. Persons that qualify as micro businesses
(1)A person qualifies as a micro business if that person is a—(a)natural person (or the deceased or insolvent estate of a natural person that was a registered micro business at the time of death or insolvency); orwhere the qualifying turnover of that person for the year of assessment does not exceed an amount of R1 million.(2)If a person described in subparagraph (1) carries on a business during the relevant year of assessment for a period which is less than 12 months, the amount described in subparagraph (1) is reduced proportionally taking into account the number of full months that it did not carry on business during that year.3. Persons that do not quality as micro businesses
A person does not qualify as a micro business for a year of assessment where—(a)that person at any time during that year of assessment holds any shares or has any interest in the equity of a company other than a share or interest described in paragraph 4;(b)more than 20 per cent of that person’s total receipts during that year of assessment consists of—(i)where that person is a natural person (or the deceased or insolvent estate of a natural person that was a registered micro business at the time of death or insolvency), income from the rendering of a professional service; and(ii)where that person is a company, investment income and income from the rendering of a professional service;(c)at any time during that year of assessment that person is a “personal service provider” or a “labour broker”, as defined in the Fourth Schedule, other than a labour broker in respect of which a certificate of exemption has been issued in terms of paragraph 2(5) of that Schedule;(e)the total of all amounts received by that person from the disposal of—(i)immovable property used mainly for business purposes; and(ii)any other asset of a capital nature used mainly for business purposes, other than any financial instrument,exceeds R1,5 million over a period of three years comprising the current year of assessment and the immediately preceding two years of assessment, or such shorter period during which that person was a registered micro business;(f)in the case of a company—(i)its year of assessment ends on a date other than the last day of February;(ii)at any time during its year of assessment, any holder of shares in that micro business is a person other than a natural person (or the deceased or insolvent estate of a natural person);(iii)at any time during its year of assessment, any holder of shares in that micro business holds any shares or has any interest in the equity of any other company other than a share or interest described in paragraph 4: Provided that the provisions of this item do not apply to the holding of any shares in or interest in the equity of a company, if the company—(aa)has not during any year of assessment—(A)carried on any trade; and(B)owned assets, the total market value of which exceeds R5 000; or(bb)has taken the steps contemplated in section 41(4) to liquidate, wind up or deregister: Provided further that this paragraph ceases to apply if the company has at any stage withdrawn any step so taken or does anything to invalidate any step so taken, with the result that the company will not be liquidated, wound up or deregistered;(iv)it is a public benefit organisation approved by the Commissioner in terms of section 30;(v)it is a recreational club approved by the Commissioner in terms of section 30A;(vi)it is an association approved by the Commissioner in terms of section 30B; or(vii)it is a small business funding entity approved by the Commissioner in terms of section 30C;(g)in the case of a person that is a partner in a partnership during that year of assessment—(i)any of the partners in that partnership is not a natural person;(ii)that person is a partner in more than one partnership at any time during that year of assessment; or(iii)the qualifying turnover of that partnership for that year of assessment exceeds the amount described in paragraph 2.4. Permissible shares and interests
The disqualification in terms of paragraph 3(a) or 3(f)(iii) does not apply to a share or interest—(a)in a company as described in paragraph (a) of the definition of a “listed company”;(b)in a portfolio in a collective investment scheme as described in paragraph (e) of the definition of a company;(d)in a venture capital company as defined in section 12J;(e)that constitutes less than 5 per cent of the interest in a social or consumer co-operative or a co-operative burial society as defined in section 1 of the Co-operatives Act, 2005 (Act No. 14 of 2005), or any other similar co-operative if all of the income derived from the trade of that co-operative during any year of assessment is solely derived from its members;(f)that constitutes less than 5 per cent of the interest in a primary savings co-operative bank or a primary savings and loans co-operative bank as defined in the Co-operative Banks Act, 2007 (Act No. 40 of 2007), that may provide, participate in or undertake only banking services as described in section 14(2)(a) or (b) of that Act; or(g)in any friendly society as defined in section 1 of the Friendly Societies Act, 1956 (Act No. 25 of 1956).Part III – Taxable turnover
5. Taxable turnover
The taxable turnover of a registered micro business in relation to any year of assessment consists of all amounts not of a capital nature received by that registered micro business during that year of assessment from carrying on business activities in the Republic, including amounts described in paragraph 6 and excluding amounts described in paragraph 7, less any amounts refunded to any person by that registered micro business in respect of goods or services supplied by that registered micro business to that person during that year of assessment or any previous year of assessment.6. Inclusions in taxable turnover
The taxable turnover of a registered micro business includes—(a)50 per cent of all receipts of a capital nature from the disposal of—(i)immovable property mainly used for business purposes, other than trading stock; and(ii)any other asset used mainly for business purposes, other than any financial instrument; and(b)in the case of a company, investment income (other than dividends and foreign dividends).7. Exclusions from taxable turnover
The taxable turnover of a registered micro business does not include—(a)in the case of a natural person, investment income;(b)any amount exempt from normal tax in terms of section 10(1)(zK) or 12P;(c)any amount received by that registered micro business where that amount accrued to it prior to its registration as a micro business and that amount accrued was subject to tax in terms of this Act; and(d)any amount received by that registered micro business from any person by way of a refund in respect of goods or services supplied by that person to that registered micro business.Part IV – Registration
8. Registration
(1)A person that meets the requirements set out in Part II may elect to be registered as a micro business—(a)before the beginning of a year of assessment or such later date during that year of assessment as the Commissioner may prescribe by notice in the Gazette; or(b)in the case of a person that commenced business activities during a year of assessment, within two months from the date of commencement of business activities.(2)A person that elected to be registered in terms of subparagraph (1) must be registered by the Commissioner with effect from the beginning of that year of assessment.(3)A person that is deregistered in terms of paragraph 9 or 10 may not again be registered as a micro business.9. Voluntary deregistration
(1)A registered micro business may elect to be deregistered before the beginning of a year of assessment or such later date during that year of assessment as the Commissioner may prescribe by notice in the Gazette.(2)A registered micro business that elects to be deregistered under subparagraph (1) must be deregistered by the Commissioner with effect from the beginning of that year of assessment.10. Compulsory deregistration
(1)A registered micro business must notify the Commissioner within 21 days from the date on which—(a)the qualifying turnover of that registered micro business for a year of assessment exceeds the amount described in paragraph 2, or there are reasonable grounds for believing that the qualifying turnover will exceed that amount; or(b)that registered micro business is disqualified in terms of paragraph 3.(2)The Commissioner must, subject to subparagraph (3), deregister a registered micro business with effect from the beginning of the month following the month during which the event as described in subparagraph (1)(a) or (1)(b) occurred.(3)If the increase in the qualifying turnover of that person to an amount greater than the amount described in paragraph 2 is of a nominal and temporary nature, the person must apply to the Commissioner for a decision whether the person must remain a registered micro business or not.Part V – Administration
11. Interim payments
(1)A registered micro business must, within six calendar months from the first day of the year of assessment—(a)estimate the taxable turnover for the year of assessment;(b)calculate the amount of tax payable on the estimated taxable turnover; and(c)pay an amount equal to 50 per cent of the amount of tax so calculated.(2)The estimate described in paragraph (1)(a) may not be less than the taxable turnover of the previous year of assessment unless the Commissioner, on application by the taxpayer and having regard to the circumstances, approves a lower estimate.(4)A registered micro business must, by the last day of the year of assessment—(a)estimate the taxable turnover for the year of assessment;(b)calculate the amount of tax payable on the estimated taxable turnover; and(c)pay an amount equal to the amount of tax so calculated less the amount paid in terms of subparagraph (1).(4A)For the purposes of paragraph 2(1) of the Fourth Schedule, section 89bis(2), section 6 of the Skills Development Levies Act, 1999 (Act No. 9 of 1999), and section 8 of the Unemployment Insurance Contributions Act, 2002 (Act No. 4 of 2002), a registered micro business may elect to pay the amounts deducted or withheld in terms of that paragraph or those sections to the Commissioner—(i)with regard to amounts deducted or withheld during the first six calendar months from the first day of the year of assessment, within seven days after the end of such period; and(ii)with regard to amounts deducted or withheld within the next six calendar months following the period in item (i), within seven days after the end of such period.(4B)If a registered micro business has made an election in terms of subparagraph (4A), the election must apply to all amounts deducted or withheld in terms of the applicable provisions referred to in that subparagraph.(5)Where full payment of the amount described in subparagraph (4)(c) is not received by the Commissioner by the last day of the year of assessment, interest at the prescribed rate is payable from the day following the last day of the year of assessment to the earlier of the date on which the shortfall is received and the due date of the assessment for that year of assessment.(6)Where the estimate described in subparagraph 4(a) is less than 80 per cent of the taxable turnover for the year of assessment, a penalty, which is deemed to be a percentage based penalty imposed under Chapter 15 of the Tax Administration Act, equal to 20 per cent of the difference between the tax payable on 80 per cent of the taxable turnover for the year of assessment and the tax payable on that estimate must be charged.(7)Where the Commissioner is satisfied that the estimate described in subparagraph (4)(a) was not deliberately or negligently understated and was seriously made based on the information available, or is partly so satisfied, the Commissioner must waive the penalty charged in terms of subparagraph (6) in full or in part.(8)Where the Commissioner has issued an assessment in respect of the payment required in terms of subparagraph (4), a penalty must not be imposed in terms of subparagraph (6).Part VI – Miscellaneous
13. Amounts received by a connected person may be included in qualifying turnover
The total amount received from carrying on business activities by a connected person in relation to a person described in paragraph 2(1)(a) or (b) must be included in the qualifying turnover of that person for purposes of applying paragraph 2, where—(a)the connected person carries on business activities that should properly be regarded as forming part of the business activities carried on by that person; and(b)the main reason or one of the main reasons for the connected person carrying on business activities in the way that the connected person does is to ensure that the qualifying turnover of that person does not exceed the amount as described in that paragraph.14. Record keeping
Notwithstanding the provisions of Part A of Chapter 4 of the Tax Administration Act, a registered micro business must only retain a record of—(a)amounts received by that registered micro business during a year of assessment;(b)dividends declared by that registered micro business during a year of assessment;(c)each asset of that registered micro business as at the end of a year of assessment with a cost price of more than R10 000; and(d)each liability of that registered micro business as at the end of a year of assessment that exceeded R10 000.Seventh Schedule (Paragraph (i) of the definition of “gross income” in section 1 of this Act)
Benefits or advantages derived by reason of employment or the holding of any office
1. Definitions
For the purposes of this Schedule, unless the context otherwise indicates—“associated institution”, in relation to any single employer, means—(a)where the employer is a company, any other company which is associated with the employer company by reason of the fact that both companies are managed or controlled directly or indirectly by substantially the same persons; or(b)where the employer is not a company, any company which is managed or controlled directly or indirectly by the employer or by any partnership of which the employer is a member; or(c)any fund established solely or mainly for providing benefits for employees or former employees of the employer or for employees or former employees of the employer and any company which is in terms of paragraph (a) or (b) an associated institution in relation to the employer, but excluding any fund established by a trade union or industrial council and any fund established for postgraduate research otherwise than out of moneys provided by the employer or by any associated institution in relation to the employer;“consideration”, as respects any reference in this Schedule to any consideration given by an employee, does not include any consideration in the form of services rendered or to be rendered by the employee;“employee”, in relation to any employer, means a person who is an employee in relation to such employer for the purposes of the Fourth Schedule, excluding any person who prior to 1 March 1992 by reason of superannuation, ill-health or other infirmity retired from the employ of such employer, but including, in relation to any company, any director of such company and any person who was previously employed by, or was a director of, such company if such person is or was the sole holder of shares in or one of the controlling holders of shares in such company and, for the purposes of paragraphs 2(h) and 13, including any person who has retired as aforesaid and who, after the employee’s retirement, is released by the employee’s employer from an obligation which arose before the employee’s retirement to reimburse the employer for an amount paid by the employer on behalf of the employee or to pay any amount which became owing by the employee to the employer before the employee’s retirement;“employer” means any person who is an employer as defined in paragraph 1 of the Fourth Schedule and includes—(a)any company; and(b)for the purpose of paragraph 2 and the determination of the cash equivalent of the value of any taxable benefit granted to any person who derives remuneration as defined in the said paragraph from employment in the public service or any administration or undertaking of the State or who holds office under the Republic, the State;“employment” means any office or employment;“month” means any of the twelve portions into which any calendar year is divided;“taxable benefit” means a taxable benefit contemplated in paragraph 2, whether the grant of such benefit is voluntary or otherwise, but excluding—(a)any benefit the amount or value of which is exempt from normal tax under the provisions of section 10 of this Act;(b)any benefit provided by any benefit fund in respect of medical, dental and similar services, hospital services, nursing services and medicines;(c)any lump sum benefit payable by a benefit fund, pension fund, pension preservation fund, provident fund or provident preservation fund being a benefit referred to in the definition of “benefit fund” in section 1 of this Act or in paragraph (i) of the proviso to paragraph (c) of the definition of “pension fund” in that section or in paragraph (a) of the definition of “provident fund” in that section;(d)any benefit or privilege received by or accrued to a person contemplated in section 9(2)(g) or (h) stationed outside the Republic which is attributable to that person’s services rendered outside the Republic; or(e)any severance benefit.2. Taxable Benefits
For the purposes of this Schedule and of paragraph (i) of the definition of “gross income” in section 1 of this Act, a taxable benefit shall be deemed to have been granted by an employer to his employee in respect of the employee’s employment with the employer, if as a benefit or advantage of or by virtue of such employment or as a reward for services rendered or to be rendered by the employee to the employer—(a)any asset consisting of any goods, commodity, financial instrument or property of any nature (other than money) has been acquired by the employee from the employer or any associated institution in relation to the employer or from any person by arrangement with the employer, either for no consideration or for a consideration given by the employee which is less than the value of such asset, as determined under paragraph 5(2): Provided that the provisions of this subparagraph shall not apply in respect of—(i)any meal, refreshment, voucher, board, fuel, power or water with which the employee has been provided as contemplated in subparagraph (c) or (d);(ii)any marketable security acquired by the exercise by the employee, as contemplated in section 8A, of any right to acquire any marketable security;(iii)any qualifying equity share acquired by an employee as contemplated in section 8B; or(iv)any equity instrument contemplated in section 8C; or(b)the employee has been granted the right to use any asset (other than any residential accommodation or household goods supplied with such accommodation) for his or her private or domestic purposes either free of charge or for a consideration payable by the employee which is less than the value of such use, as determined under paragraph 6 in the case of an asset other than a motor vehicle or under paragraph 7 in the case of a motor vehicle; or(c)the employee has been provided with any meal or refreshment or voucher entitling him to any meal or refreshment (other than any board or meals referred to in item (d)), either free of charge or for a consideration less than the value of such meal, refreshment or voucher, as the case may be, as determined under paragraph 8(2); or(d)the employee has been provided with residential accommodation (whether furnished or unfurnished and with or without board, meals, fuel, power or water) either free of charge or for a rental consideration payable by the employee which is less than the rental value of such accommodation as determined under the applicable provisions of paragraph 9; or(e)any service (other than a service to which the provisions of subparagraph (j) or (k) or paragraph 9(4)(a) apply) has at the expense of the employer been rendered to the employee (whether by the employer or by some other person), where that service has been utilized by the employee for his or her private or domestic purposes and no consideration has been given by the employee to the employer in respect of that service or, if any consideration has been given, the amount thereof is less than the amount of the lowest fare referred to in item (a) of subparagraph (1) of paragraph 10, or the cost referred to in item (b) of that subparagraph, as the case may be; or(f)a debt (other than a debt for purposes of the payment by the employee of any consideration in respect of any qualifying equity share contemplated in section 8B to comply with the minimum requirements of the Companies Act or the payment of any securities transfer tax payable in respect of that share, or a debt in respect of which a subsidy is payable as contemplated in subparagraph (gA)) has been incurred by the employee, whether in favour of the employer or in favour of any other person by arrangement with the employer or any associated institution in relation to the employer, and either—(i)no interest is payable by the employee in respect of such debt; or(ii)interest is payable by the employee in respect thereof at a rate of lower than the official rate of interest; or(g)the employer has paid any subsidy in respect of the amount of interest or capital repayments payable by the employee in terms of any debt; or(gA)the employer has, in respect of any debt owed by the employee to any lender, paid to such lender any subsidy, being an amount which, together with any interest payable by the employee in respect of that debt, exceeds the amount of the interest which, if calculated at the official rate of interest, would have been payable in respect of that debt; or(h)the employer has, whether directly or indirectly, paid any debt owing by the employee to any third person (other than an amount in respect of which item (i) or (j) applies), without requiring the employee to reimburse the employer for the amount paid or the employer has released the employee from an obligation to pay any debt owing by the employee to the employer: Provided that where any debt owing by the employee to the employer has been extinguished by prescription the employer shall be deemed to have released the employee from his or her obligation to pay the amount of such debt if the employer could have recovered the debt owing or caused the running of the prescription to be interrupted, unless the employer’s failure to recover the debt owing or to cause the running of the prescription to be interrupted was not due to any intention of the employer to confer a benefit on the employee; or(i)the employer has during any period directly or indirectly made any contribution or payment to any fund contemplated in paragraph (b) of the definition of “benefit fund” in section 1 for the benefit of any employee or the dependants of any employee; or(j)the employer has, directly or indirectly, incurred any amount (other than a contribution or payment contemplated in item (i)) in respect of any medical, dental and similar services, hospital services, nursing services or medicines provided to the employee or his or her spouse, child, relative or dependant.(k)the employer has made any payment to any insurer under an insurance policy directly or indirectly for the benefit of the employee or his or her spouse, child, dependant or nominee: Provided that this paragraph shall not apply in respect of an insurance policy that relates to an event arising solely out of and in the course of employment of the employee;(l)the employer has made any contribution for the benefit of any employee to any pension fund or provident fund: Provided that this subparagraph shall not apply to the transfer of any surplus as contemplated in section 15E(1)(b), (d) and (e) of the Pension Funds Act; or(m)the employer has made any contribution for the benefit of any employee to any bargaining council established under section 27 of the Labour Relations Act, 1995 (Act No. 66 of 1995), in respect of a scheme or fund as contemplated in section 28(1)(g) of that Act, other than any payment to a pension fund or provident fund as contemplated in subparagraph (l).2A.
For the purposes of paragraph 2, a partner is deemed to be an employee of the partnership.3. Determination of cash equivalent of value of taxable benefit
(1)The cash equivalent of the value of a taxable benefit shall, for the purposes of paragraph (i) of the definition of “gross income” in section 1 of this Act, be determined in accordance with the provisions of this Schedule by the employer by whom the taxable benefit has been granted.(2)The Commissioner may, if no determination is made, or if such determination appears to him or her to be incorrect, re-determine such cash equivalent—(a)and issue the employer with a notice of the assessment in terms of section 96 of the Tax Administration Act for the unpaid amount of employees’ tax that is required to be deducted or withheld from such cash equivalent; or(b)upon the assessment of the liability for normal tax of the employee to whom such taxable benefit has been granted.(3)If the employee concerned is dissatisfied with any determination or proposed determination by his employer of the cash equivalent of the value of any taxable benefit included in the remuneration of the employee for employees tax purposes, the employee or the employer may refer the matter to the Commissioner and the Commissioner may, if it appears to him that the determination or proposed determination should be adjusted, issue a directive to the employer as to the manner in which such determination should be made and the employer shall be obliged to act upon such directive: Provided that nothing in this subparagraph contained shall be construed as preventing the Commissioner from making a re-determination of such cash equivalent under the provisions of subparagraph (2).4. Taxable benefits granted by associated institutions
Where any associated institution in relation to any employer has given any employee of that employer, by reason of the fact that the employee is in the employment of the employer, or as a benefit or advantage of such employment or as a reward for services rendered or to be rendered by the employee to the employer any benefit or advantage which, if such benefit or advantage had been given to the employee directly by the employer in the circumstances contemplated in paragraph 2, would have constituted a taxable benefit, such benefit or advantage shall for the purposes of this Schedule be deemed to be a taxable benefit granted by the employer to the employee and the cash equivalent of the value of such taxable benefit shall be determined accordingly.5. Acquisition of an asset at less than actual value
(1)Where an asset has been acquired by an employee as contemplated in paragraph 2(a), the cash equivalent of the value of the taxable benefit shall be so much of the value of such asset (as determined under subparagraph (2) of this paragraph) as exceeds the value of any consideration given by the employee for such asset.(2)The value to be placed on such asset shall be the market value thereof at the time the asset is acquired by the employee: Provided that where the asset in question is movable property (other than marketable securities or an asset which the employer had the use of prior to acquiring ownership thereof) and was acquired by the employer in order to dispose of it to the employee or the asset in question (other than marketable securities) was held by the employer as trading stock, the value to be placed thereon shall be the cost thereof to the employer or, where such asset was held as trading stock and the market value thereof was less than such cost, such market value: Provided further that where—(a)any asset is presented by an employer to an employee as an award for bravery, such value to be placed thereon shall be reduced by the lesser of the cost to the employer of all such assets so awarded to the employee during the year of assessment and R5 000; or(b)any asset is given by an employer to an employee for long service, such value to be placed thereon shall be reduced by the lesser of the cost to the employer of all such assets so given to the employee during the year of assessment and R5 000: Provided that the aggregate value of an amount reduced under this paragraph together with all amounts determined under paragraphs 6(4)(d) and 10(2)(e) of this Schedule and paragraph (vii) of the proviso to paragraph (c) of the definition of ‘gross income’ in section 1 does not exceed R5 000.(3)No value shall be placed under this paragraph on fuel or lubricants supplied by an employer to his employee for use in a motor vehicle where the value of the private use of such vehicle has been determined under paragraph 7.(3A)No value shall be placed under this paragraph on any immovable property used for residential purposes, and acquired by an employee as contemplated in paragraph 2(a): Provided that this subparagraph must not apply if—(a)the remuneration proxy of the employee exceeds R250 000 in relation to the year of assessment during which the immovable property is so acquired;(b)the market value of the immovable property on the date of that acquisition exceeds R450 000; or(c)the employee is a connected person in relation to the employer.(4)For the purposes of this paragraph, “long service” means an initial unbroken period of service of not less than 15 years or any subsequent unbroken period of service of not less than 10 years.6. Right of use of any asset (other than residential accommodation or any motor vehicle)
(1)Where an employee has been granted the right to use any asset (other than residential accommodation or any motor vehicle) as contemplated in paragraph 2(b), the cash equivalent of the value of the taxable benefit shall be so much of the value of the private or domestic use of such asset (as determined under subparagraph (2) of this paragraph for the period of use) as exceeds any consideration given by the employee for the use of such asset during such period or any amount expended by the employee on the maintenance or repair of such asset.(2)The value to be placed on the private or domestic use of such asset shall be—(a)where the asset is held by the employer as the lessee under a lease or hiring agreement, the amount of the rental payable by the employer in respect of the period during which the employee has the use of the asset; or(b)where the asset is owned by the employer, an amount calculated for the period during which the employee has the use of the asset at the rate of 15 per cent per annum on the lesser of the cost of such asset to the employer or the market value thereof at the date of commencement of the period of use: Provided that where an employee is granted the sole right of the use of the asset for a period extending over the useful life of the asset or over a major portion thereof, the value to be placed on the private or domestic use of the asset shall be the cost thereof to the employer, and in such case the taxable benefit in respect of such use shall be deemed to have accrued to the employee on the date on which he was first granted the right of use of such asset.(3)For employees tax purposes an appropriate portion of the said cash equivalent shall be apportioned to each period during the year of assessment in respect of which any cash remuneration is paid or becomes payable by the employer to the employee.(4)No value shall be placed under this paragraph on the private or domestic use of an asset by an employee, if—(a)such use is incidental to the use of the asset for the purposes of the employer’s business or the asset is provided by the employer as an amenity to be enjoyed by the employee at his place of work or for recreational purposes at that place or a place of recreation provided by the employer for the use of his employees in general: Provided that this item shall not apply in respect of clothing; or(b)the asset consists of any equipment or machine which the employer concerned allows his employees in general to use from time to time for short periods and the value of the private or domestic use of the asset, as determined under subparagraph (2), as does not exceed an amount determined on a basis as set out in a public notice issued by the Commissioner;(bA)the asset consists of telephone or computer equipment which the employee uses mainly for the purposes of the employer’s business;(c)the asset consists of books, literature, recordings or works of art; or(d)such use is granted by an employer to an employee for long service as defined in paragraph 5(4) to the extent that it does not exceed R5 000: Provided that the aggregate value of an amount determined under this paragraph together with amounts determined under paragraph (vii) of the proviso to paragraph (c) of the definition of “gross income” in section 1 and paragraphs 5(2)(b) and 10(2)(e) of the Seventh Schedule does not exceed R5 000.7. Right of use of motor vehicle
(1)For the purposes of this paragraph, “determined value”, in relation to a motor vehicle, means—(a)where such motor vehicle (not being a vehicle in respect of which paragraph (b)(ii) of this definition applies) was acquired by the employer, the retail market value thereof as determined by the Minister by regulation (excluding any finance charge or interest payable by the employer in respect of the employer’s acquisition thereof); or(b)where such motor vehicle—(i)is held by the employer under a lease (other than an “operating lease” as defined in section 23A(1)); or(ii)was held by the employer under a lease (other than an “operating lease” as defined in section 23A(1)) and the ownership thereof was acquired by the employer on the termination of the lease,the retail market value thereof at the time the employer first obtained the right of use of the vehicle or, where at such time such lease was a lease contemplated in paragraph (b) of the definition of “instalment credit agreement” in section 1 of the Value-Added Tax Act, the cash value thereof as contemplated in the definition of “cash value” in the said section; or(c)in any other case, the retail market value, as determined by the Minister by regulation, of such motor vehicle at the time when the employer first obtained the vehicle or right of use thereof or manufactured the vehicle:Provided that—(a)where an employee has been granted the right of use of such motor vehicle as contemplated in subparagraph (2) (other than a motor vehicle acquired under an operating lease as defined in section 23A(1)) and such vehicle, or the right of use thereof, was acquired by the employer not less than 12 months before the date on which the employee was granted such right of use, there shall be deducted from the amount determined under the foregoing provisions of this subparagraph a depreciation allowance calculated according to the reducing balance method at the rate of 15 per cent for each completed period of 12 months from the date on which the employer first obtained such vehicle or the right of use thereof to the date on which the said employee was first granted the right of use thereof; and(b)where such motor vehicle was acquired by the employer from an associated institution in relation to the employer and the employee concerned had, prior to such acquisition, enjoyed the right of use of such motor vehicle, the determined value shall be the determined value as at the date on which the employee was granted the right of use of such motor vehicle for the first time.(2)Where an employee has been granted the right to use any motor vehicle as contemplated in paragraph 2(b), the cash equivalent of the value of the taxable benefit shall be so much of the value of the private use of such vehicle (as determined under this paragraph in respect of the period of use) as exceeds any consideration given by the employee to the employer for the use of such vehicle during such period, other than consideration in respect of the cost of the licence, insurance, maintenance or fuel in respect of such vehicle.(3)(a)Where an employer’s rights and obligations under a lease in respect of a motor vehicle are transferred to his employee the employer shall for the purposes of this Schedule be deemed to have granted the employee the right to use such vehicle for the remainder of the period of the lease.(b)In such case—(i)any rentals becoming payable by the employee under the lease shall be deemed to be a consideration payable by him for the said right; and(ii)the determined value of the vehicle shall be deemed to be an amount determined in accordance with the provisions of subparagraph (1)(b);(4)Subject to subparagraph (10), the value to be placed on the private use of such vehicle shall be determined for each month or part of a month during which the employee was entitled to use the vehicle for private purposes (including travelling between the employee’s place of residence and his or her place of employment or any other travelling done for his or her private or domestic purposes) and the said value shall—(a)as respects each such month—(i)be an amount equal to 3,5 per cent of the determined value of such motor vehicle: Provided that where the motor vehicle is the subject of a maintenance plan at the time the employer acquired the motor vehicle or the right of use thereof, that amount shall be reduced to an amount equal to 3,25 per cent of the determined value of the motor vehicle; or(ii)where such vehicle is acquired by the employer under an “operating lease” as defined in section 23A(1) concluded by parties transacting at arm’s length and that are not connected persons in relation to each other, be—(aa)the actual cost to the employer incurred under that operating lease; and(bb)the cost of fuel in respect of that vehicle; and(b)as respects any such part of a month, be an amount which bears to the appropriate amount determined in accordance with item (a)(i) or (ii) for a month the same ratio as the number of days in such part of a month bears to the number of days in the month in which such part falls.(5)No reduction in the value determined under subparagraph (4) shall be made for the purposes of item (b) of that subparagraph by reason of the fact that the vehicle in question was during any period for any reason temporarily not used by the employee for private purposes.(6)Where more than one motor vehicle is made available by an employer to a particular employee at the same time and each such vehicle was used by the employee during the year of assessment primarily for business purposes, the value to be placed on the private use of all the said vehicles shall be deemed to be the value of the private use of the vehicle having the highest value of private use or such other vehicle as the Commissioner may decide, on application by the taxpayer: Provided that the preceding provisions of this subparagraph shall not apply where the provisions of subparagraph (7) or (8) are applied.(7)Where accurate records of distances travelled for business purposes in such vehicle are kept, upon the assessment of the employee’s liability for normal tax for the year of assessment the value placed on the private use of the vehicle, calculated under subparagraph (4), must be reduced by an amount that bears to that calculated value the same ratio as the number of kilometres travelled for business purposes bears to the total amount of kilometres travelled in such vehicle during that year of assessment.(8)Where accurate records of distances travelled for private purposes in such vehicle (other than a vehicle acquired as contemplated in subparagraph (4)(a)(ii)) are kept and the employee bears—(a)(i)the full cost of the licence for such vehicle, upon the assessment of the employee’s liability for normal tax for the year of assessment the value placed on the private use of such vehicle calculated under subparagraph (4) must be reduced by an amount that bears to the amount of the cost of the licence for such vehicle the same ratio as the number of kilometres travelled for private purposes bears to the total number of kilometres travelled in such vehicle during that year of assessment;(ii)the full cost of the insurance of such vehicle, upon the assessment of the employee’s liability for normal tax for the year of assessment the value placed on the private use of such vehicle calculated under subparagraph (4) must be reduced by an amount that bears to the amount of the cost of the insurance for such vehicle the same ratio as the number of kilometres travelled for private purposes bears to the total number of kilometres travelled in such vehicle during that year of assessment; or(iii)the full cost of the maintenance of such vehicle, upon the assessment of the employee’s liability for normal tax for the year of assessment the value placed on the private use of such vehicle calculated under subparagraph (4) must be reduced by an amount that bears to the amount of the cost of the maintenance for such vehicle the same ratio as the number of kilometres travelled for private purposes bears to the total number of kilometres travelled in such vehicle during that year of assessment;(b)the full cost of fuel for private use of such vehicle, upon the assessment of the employee’s liability for normal tax for the year of assessment the value placed on the private use of the vehicle during that year of assessment calculated under subparagraph (4) must be reduced by an amount determined for the total kilometres travelled for private purposes by applying the rate per kilometre for fuel fixed by the Minister in the Gazette for the purposes of section 8(1)(b)(ii) and (iii).(8A)For the purposes of subparagraphs (7) and (8), if the employee contemplated in those subparagraphs is a “judge” or a “Constitutional Court judge” as defined in section 1 of the Judges’ Remuneration and Conditions of Employment Act, 2001 (Act No. 47 of 2001), the kilometres travelled between the judge’s place of residence and the court over which the judge presides must be deemed to be kilometres travelled for business purposes and not for private purposes.(10)For the purposes of this paragraph the private use by an employee of a motor vehicle shall be deemed to have no value, if—(a)(i)the vehicle is available to and is in fact used by employees of the employer in general;(ii)the private use of the vehicle by the employee concerned is infrequent or is merely incidental to its business use; and(iii)the vehicle is not normally kept at or near the residence of the employee concerned when not in use outside of business hours; or(b)the nature of the employee’s duties are such that he or she is regularly required to use the vehicle for the performance of those duties outside his or her normal hours of work, and he or she is not permitted to use that vehicle for private purposes other than—(i)travelling between his or her place of residence and his or her place of work; or(ii)private use which is infrequent or is merely incidental to its business use.(11)For the purposes of this paragraph, “maintenance plan”, in relation to a motor vehicle, means a contractual obligation undertaken by a provider in the ordinary course of trade with the general public to underwrite the costs of all maintenance of that motor vehicle, other than the costs related to top-up fluids, tyres or abuse of the motor vehicle, for at least a period of not less than three years and a distance travelled by the motor vehicle of not less than 60 000 kilometres from the date that the provider undertakes the contractual obligation: Provided that the contractual obligation may terminate at the earlier of—(a)the end of the period of three years; or(b)the date on which the distance of 60 000 kilometres is travelled by that motor vehicle.8. Meals, refreshments and meal and refreshment vouchers
(1)Where an employee has been provided with any meal, refreshment or voucher as contemplated in paragraph 2(c), the cash equivalent of the taxable benefit shall be so much of the value of such meal, refreshment or voucher (as determined under subparagraph (2) of this paragraph) as exceeds any consideration given by the employee in respect of such meal, refreshment or voucher.(2)The value to be placed on such meal, refreshment or voucher shall be the cost to the employer of such meal, refreshment or voucher.(3)No value shall be placed under this paragraph on—(a)any meal or refreshment supplied by an employer to his employee in any canteen, cafeteria or dining room operated by or on behalf of the employer and patronised wholly or mainly by his employees or on the business premises of the employer;(b)any meal or refreshment supplied by an employer to an employee during business hours or extended working hours or on a special occasion; or(c)any meal or refreshment enjoyed by an employee in the course of providing a meal or refreshment to any person whom the employee is required to entertain on behalf of the employer.9. Residential accommodation
(1)For the purposes of this paragraph—(2)The cash equivalent of the value of the taxable benefit derived from the occupation of residential accommodation as contemplated in paragraph 2(d) shall be the rental value of such accommodation (as determined under subparagraph (3), (3C), (4) or (5) of this paragraph in respect of the year of assessment) less any rental consideration given by the employee for such accommodation in respect of such year, any rental consideration given by him in respect of household goods supplied with such accommodation and any charge made to the employee by the employer in respect of power or fuel provided with the accommodation.(3)Subject to the provisions of subparagraph (3C) and (4), the rental value to be placed on such accommodation for any year of assessment shall be an amount determined in accordance with the formula
in which formula—(i)“A” represents the remuneration proxy as determined in relation to the year of assessment;(ii)“B” represents an abatement equal to an amount of R87 300: Provided that in any case where—(aa)the employer is a private company and the employee or his spouse controls the company or is one of the persons controlling the company, whether control is exercised directly as a shareholder in the company or as a shareholder in any other company; or(bb)the employee, his spouse or minor child has a right of option or pre-emption granted by the employer or by any other person by arrangement with the employer or any associated institution in relation to the employer whereby the employee, his spouse or minor child may become the owner of the accommodation, whether directly or indirectly by virtue of a controlling interest in a company or otherwise,the said abatement shall be reduced to zero;(iii)“C” represents a quantity of 17: Provided that where the accommodation consists of a house, flat or apartment consisting of at least four rooms—(aa)“C” represents a quantity of 18 if—(A)such accommodation is unfurnished and power or fuel is supplied by the employer; or(B)such accommodation is furnished but power or fuel is not supplied; or(bb)“C” represents a quantity of 19 if such accommodation is furnished and power or fuel is supplied by the employer; and(iv)“D” represents the number of months in relation to a year of assessment during which the employee was entitled to occupation of such accommodation.(3B)Where the employee has an interest in the accommodation in question, subparagraph (3) shall apply.(3C)Where the employer or associated institution in relation to the employer supplies accommodation, obtained in terms of a transaction at arm’s length with a person that is not a connected person in relation to that employer or associated institution and the full ownership does not vest in the employer or associated institution, the value to be placed on such accommodation shall be the lower of—(a)the amount determined in accordance with subparagraph (3); and(b)the amount of the expenditure incurred in respect of that accommodation by that employer or associated institution.(4)The rental value to be placed on accommodation occupied temporarily for the purposes of a holiday shall be—(a)where such accommodation is hired by the employer from a person other than an associated institution in relation to the employer, so much of the rental payable and any amounts chargeable in respect of meals, refreshments or any services relating to such accommodation as have been borne by the employer and are connected with the period during which the accommodation was so occupied; or(b)in any other case, an amount calculated at the prevailing rate per day at which such accommodation could normally be let to any person who is not an employee of the employer or of any associated institution in relation to the employer.(5)Where, by reason of the situation, nature or condition of the accommodation or any other factor, the Commissioner is satisfied that the rental value of such accommodation is less than the rental value thereof determined in accordance with the formula contemplated in subparagraph (3) or the rental value determinable under subparagraph (4), he or she may determine such rental value at such lower amount as to him or her appears fair and reasonable.(6)Where any employee has been provided by his employer with residential accommodation consisting of two or more residential units situated at different places which the employee is entitled to occupy from time to time while performing his duties the cash equivalent of the value of the benefit of such units which shall be included in the gross income of the employee shall be the value of the unit with the highest rental value determined under subparagraph (2) over the full period during which the employee was entitled to occupy more than one unit.(7)No rental value shall be placed under this paragraph on any accommodation away from an employee’s usual place of residence in the Republic provided by his employer while such employee is absent from his usual place of residence in the Republic for the purposes of performing the duties of his or her employment: Provided that the preceding provisions of this subparagraph shall not apply in respect of any residential unit referred to in subparagraph (6).(7A)Subject to subparagraph (7B), no rental value shall be placed under this paragraph on any accommodation provided by an employer to an employee away from such employee’s usual place of residence outside the Republic—(a)for a period not exceeding 2 years from the date of arrival of that employee in the Republic, for the purposes of performing the duties of his or her employment; or(b)if that accommodation is provided to that employee during the year of assessment and that employee is physically present in the Republic for a period of less than 90 days in that year.(7B)The provisions of subparagraph (7A)(a) do not apply—(i)if that employee was present in the Republic for a period exceeding 90 days during the year of assessment immediately preceding the date of arrival referred to in subparagraph (7A); or(ii)to the extent that the cash equivalent of the value of the taxable benefit derived from the occupation of the residential accommodation exceeds an amount equal to R25 000 multiplied by the number of months during which subparagraph (7A) applies.(8)For employees’ tax purposes an appropriate portion of the cash equivalent referred to in subparagraph (2) shall be apportioned to each period during the year of assessment in respect of which any cash remuneration is paid or becomes payable by the employer to the employee.(9)Where the employee has been provided with residential accommodation by his employer or any associated institution in relation to the employer and such employee has an interest in the accommodation in question, as contemplated in subparagraph (10), and the accommodation has been let to the employer or to any associated institution in relation to the employer, the said rental shall for the purposes of this Act (excluding this subparagraph) be deemed not to have been received by or to have accrued to the employee or any connected person in relation to the employee.(10)For the purposes of subparagraphs (3B) and (9), an employee shall be deemed to have an interest in accommodation if—(a)such accommodation is owned by the employee or a connected person in relation to such employee;(b)any increase in the value of the accommodation in any manner whatsoever, whether directly or indirectly, accrues for the benefit of the employee or a connected person in relation to such employee; or(c)such employee or a connected person in relation to such employee, has a right to acquire the accommodation from his employer.10. Free or cheap services
(1)The cash equivalent of the value of any taxable benefit derived from the rendering of a service to any employee as contemplated in paragraph 2(e) shall be—(a)in the case of any travel facility granted by any employer who is engaged in the business of conveying passengers for reward by sea or by air to enable any employee or any relative of such employee to travel to any destination outside the Republic for his or her private or domestic purposes, an amount equal to the lowest fare payable by a passenger utilising such facility (had he or she paid the full fare), less the amount of any consideration given by the employee or his or her relative in respect of such facility: Provided that for the purposes hereof a forward journey and a return journey shall be regarded as one journey; or(b)in the case of the rendering of any other service as contemplated in the said paragraph, the cost to the employer in rendering such service or having such service rendered, less the amount of any consideration given by the employee in respect of such service.(2)No value shall be placed under this paragraph on—(a)any travel facility granted by any employer who is engaged in the business of conveying passengers for reward by land, sea or air to enable any employee in his employment or such employee’s spouse or minor child to travel—(i)to any destination in the Republic or to travel overland to any destination outside the Republic; or(ii)to any destination outside the Republic if such travel was undertaken on a flight or voyage made in the ordinary course of the employer’s business and such employee, spouse or minor child was not permitted to make a firm advance reservation of the seat or berth occupied by him or her;(b)any transport service rendered by any employer to his employees in general for the conveyance of such employees from their homes to the place of their employment and vice versa;(bA)any communication service provided to an employee if the service is used mainly for the purposes of the employer’s business;(c)any services rendered by an employer to his employees at their place of work for the better performance of their duties or as a benefit to be enjoyed by them at that place or for recreational purposes at that place or a place of recreation provided by the employer for the use of his employees in general;(d)any travel facility granted by an employer to the spouse or any minor child of an employee if—(i)that employee is for the duration of the term of his or her employment stationed for purposes of the business of that employer at a specific place in the Republic further than 250 kilometers away from his or her usual place of residence in the Republic;(ii)that employee is required to spend more than 183 days during the relevant year of assessment at that specific place for purposes of the business of that employer; and(iii)that facility is granted in respect of travel between that employee’s usual place of residence in the Republic and that specific place where the employee is so stationed; or(e)any services granted by an employer to an employee for long service as defined in paragraph 5(4) to the extent that it does not exceed R5 000: Provided that the aggregate value of an amount determined under this paragraph together with all amounts determined under paragraph (vii) of the proviso to paragraph (c) of the definition of “gross income” in section 1 and paragraphs 5(2)(b) and 6(4)(d) of the Seventh Schedule does not exceed R5 000.10A.
(1)Where—(a)any employee has been granted the right to occupy residential accommodation owned by his employer or by any associated institution in relation to his employer;(b)the employee, his spouse or minor child is in terms of an agreement entered into with such employer or associated institution, entitled or obliged to acquire such residential accommodation at a future date at a price stated in such agreement; and(c)the employee is required to pay in respect of his occupation of such residential accommodation a rental which is calculated wholly or partly as a percentage of the price referred to in item (b),it shall be deemed for the purposes of this Schedule that the employer or, where the residential accommodation is owned by such associated institution, the associated institution, has granted to the employee a loan equal to the price referred to in item (b) and that interest is payable on such loan at a rate equal to the percentage referred to in item (c).(2)The provisions of paragraph 2(d) shall not apply to any residential accommodation with which an employee has been provided in the circumstances contemplated in subparagraph (1), and the provisions of paragraph 2(a) shall not apply where any such residential accommodation is acquired by the employee in terms of an agreement referred to in item (b) of that subparagraph at a price which is not lower than the market value of such residential accommodation on the date such agreement is concluded.11. Benefits in respect of interest on debt
(1)The cash equivalent of the value of the taxable benefit derived in consequence of the debt owed by an employee in the circumstances contemplated in paragraph 2(f) shall be the amount of interest that would have been payable on the amount owing in respect of the debt in respect of the year of assessment if the employee had been obliged to pay interest on such amount during such year at the official rate of interest, less the amount of interest (if any) actually incurred by the employee in respect of the debt in respect of such year.(2)For the purposes of this Act—(a)a portion of the said cash equivalent shall be deemed to have accrued to the employee—(i)where interest in respect of the debt in question becomes payable by the employee at regular intervals, on each date during the year of assessment on which interest becomes so payable for a portion of such year;(ii)where interest in respect of the debt in question becomes payable by the employee at irregular intervals or where interest on the loan is not payable by him or her, on the last day of each period during the year of assessment in respect of which any cash remuneration becomes payable by the employer to the employee; and(b)the said portion shall be determined by calculating interest at the official rate of interest for the portion of the year referred to in subparagraph (2)(a)(i) or the period referred to in subparagraph (2)(a)(ii), as the case may be, and deducting therefrom so much of the amount of interest (if any) payable by him or her on the debt as relates to the said portion of a year or the said period, as the case may be: Provided that where the official rate of interest has been altered with effect from any date, any cash equivalent which is under item (a) deemed to have accrued to the employee on any date falling before the date on which such interest rate was so altered shall be determined as though such rate of interest had not been so altered.(3)A different method of calculation of the said cash equivalent or portions thereof may be employed if the Commissioner decides, on application by the taxpayer, that such method achieves substantially the same result as the methods provided in subparagraphs (1) and (2).(4)No value shall be placed under this paragraph on the taxable benefit derived in consequence of—(a)a debt owed by any employee to his or her employer if such debt or the aggregate of such debts does not exceed the sum of R3 000 at any relevant time; or(b)the debt owed to any employer by an employee incurred for the purpose of enabling that employee to further his or her own studies;(c)a debt owed to his or her employer in consequence of a loan by that employer to that employee as does not exceed the amount of R450 000 if—(i)the debt was assumed for the purposes of acquiring immovable property used for residential purposes by the employee;(ii)the market value of the immovable property acquired does not exceed R250 000 in relation to the year of assessment during which the property is acquired;(iii)the remuneration proxy of the employee does not exceed R250 000 in relation to the year of assessment during which the loan is granted; and(iv)the employee is not a connected person in relation to the employer.(5)Where any amount, being the cash equivalent as determined under the provisions of this paragraph, of the value of a taxable benefit derived by any taxpayer in consequence of a debt owed by him or her, has been included in such taxpayer’s taxable income in any year of assessment, such amount shall for the purposes of section 11(a) of this Act be deemed to be interest actually incurred by him or her in that year of assessment in respect of the said debt where such amount, had it been actually incurred as interest, would have been incurred by the taxpayer in the production of his or her income.12. Subsidies in respect of debt
The cash equivalent of the value of the taxable benefit consisting of any subsidy in respect of the amounts of interest or capital repayments referred to in paragraph 2(g) or any subsidy contemplated in paragraph 2(gA) shall be the amount of such subsidy.12A. Contribution to benefit fund
(1)The cash equivalent of the value of the taxable benefit contemplated in paragraph 2(i) is the amount of any contribution or payment made by the employer in respect of a year of assessment, directly or indirectly, to any medical scheme registered under the Medical Schemes Act or to any fund which is registered under any similar provision contained in the laws of any other country where the medical scheme is registered, for the benefit of any employee or dependants, as defined in that Act, of that employee.(2)Where any contribution or payment made by an employer contemplated in subparagraph (1) is made in such a manner that an appropriate portion thereof cannot be attributed to the relevant employee or his or her dependants, the amount of that contribution or payment in relation to that employee and his or her dependants is deemed, for purposes of subparagraph (1), to be an amount equal to the total contribution or payment by the employer to the fund during the relevant period for the benefit of all employees and their dependants divided by the number of employees in respect of whom the contribution or payment is made.(3)If the apportionment of the contribution or payment amongst all employees in accordance with subparagraph (2) does not reasonably represent a fair apportionment of that contribution or payment amongst the employees, the Commissioner may, on application by the taxpayer, decide that the apportionment be made in such other manner as is fair and reasonable.(5)No value shall be placed in terms of this paragraph on the taxable benefit derived from an employer by—(a)a person who by reason of superannuation, ill-health or other infirmity retired from the employ of such employer; or(b)the dependants of a person after such person’s death, if such person was in the employ of such employer on the date of death; or(c)the dependants of a person after such person’s death, if such person retired from the employ of such employer by reason of superannuation, ill-health or other infirmity;12B. Incurral of costs relating to medical services
(1)The cash equivalent of the value of the taxable benefit contemplated in paragraph 2(j) is the amount incurred by the employer during any month, directly or indirectly, in respect of any medical, dental and similar services, hospital services, nursing services or medicines in respect of that employee, his or her spouse, child or other relative or dependants.(2)Where the payment of any amount contemplated in subparagraph (1) is made in such a manner that an appropriate portion thereof cannot be attributed to the relevant employee and his or her spouse, children, relatives and dependants, the amount of that payment in relation to that employee and his or her spouse, children, relatives and dependants is, for purposes of subparagraph (1), deemed to be an amount equal to the total amount incurred by the employer during the relevant period in respect of all medical, dental and similar services, hospital services, nursing services or medicines for the benefit of all employees and their spouses, children, relatives and dependants divided by the number of employees who are entitled to make use of those services.(3)No value must be placed in terms of this paragraph on any taxable benefit—(a)resulting from the provision of medical treatment listed in any category of the prescribed minimum benefits determined by the Minister of Health in terms of section 67(1)(g) of the Medical Schemes Act which is provided to the employee or his or her spouse or children in terms of a scheme or programme of that employer—(i)which constitutes the carrying on of the business of a medical scheme if that scheme or programme has been approved by the Registrar of Medical Schemes as being exempt from complying with the requirements of medical schemes in terms of that Act; or(ii)which does not constitute the carrying on of the business of a medical scheme, if that employee and his or her spouse and children—(aa)are not beneficiaries of a medical scheme registered under the Medical Schemes Act; or(bb)are beneficiaries of such a medical scheme, and the total cost of that treatment is recovered from that medical scheme;(aA)where the services are rendered or the medicines are supplied for purposes of complying with any law of the Republic;(b)derived from an employer by—(i)a person who by reason of superannuation, ill-health or other infirmity retired from the employ of that employer;(ii)the dependants of a person after that person’s death, if that person was in the employ of that employer on the date of death;(iii)the dependants of a person after that person’s death, if that person retired from the employ of that employer by reason of superannuation, ill-health or other infirmity; or(iv)a person who during the relevant year of assessment is entitled to a rebate under section 6(2)(b); or(c)where the services are rendered by the employer to its employees in general at their place of work for the better performance of their duties.12C. Benefits in respect of insurance policies
(1)The cash equivalent of the value of a taxable benefit deemed to have been granted as contemplated in paragraph 2(k) is the amount of any expenditure incurred by an employer during a year of assessment in respect of any premiums payable under a policy of insurance directly or indirectly for the benefit of an employee or his or her spouse, child, dependant or nominee.(3)Where an appropriate portion of any expenditure contemplated in subparagraph (1) cannot be attributed to the employee for whose benefit the premium is paid, the amount of that expenditure in relation to that employee is deemed, for the purposes of subparagraph (1), to be an amount equal to the total expenditure incurred by the employer during that year of assessment for the benefit of all employees divided by the number of employees in respect of whom the expenditure is incurred.12D. Valuation of contributions made by employers to certain retirement funds
(1)For the purposes of this paragraph—“benefit” in relation to an employee that is a member of a pension fund, provident fund or retirement annuity fund, means any amount payable to that member or a dependant or nominee of that member by that fund in terms of the rules of the fund;“contribution certificate” means the certificate contemplated in subparagraph (4);“defined benefit component” means a benefit or part of a benefit receivable from a pension fund, provident fund or retirement annuity fund by a member of that fund or a dependant or nominee of that member other than a defined contribution component or underpin component of a fund;“defined contribution component” means a benefit or part of a benefit receivable from a pension fund, provident fund or retirement annuity fund—(a)where the interest of each member in the fund in respect of that benefit has a value equal to the value of—(i)the contributions paid by the member and by the employer in terms of the rules of the fund that determine the rates of both their contributions at a fixed rate;(ii)less such expenses as the board of that fund determines should be deducted from the contributions paid;(iii)plus any amount credited to the member’s individual account upon—(A)the commencement of the member’s membership of the fund;(B)the conversion of the component of the fund to which the member belongs from a defined benefit component to a defined contribution component; or(C)the amalgamation of that fund with any other fund, if any, other than amounts taken into account in terms of subparagraph (iv);(iv)plus any other amounts lawfully permitted, credited to or debited from the member’s individual account, if any,as increased or decreased by fund return; or(b)which consists of a risk benefit provided by the fund directly or indirectly for the benefit of a member of the fund if the risk benefit is provided by means of a policy of insurance or a risk benefit policy;“fund member category” in relation to members of a pension fund, provident fund or retirement annuity fund, means any group of members in respect of whom, in terms of the rules of the fund—(a)the employers of those members and those members must respectively make a contribution to that fund in an amount in respect of retirement funding income at the same fixed rate; and(b)the determination of the value of the benefits of the members referred to in paragraph (a) and the determination of the entitlement of those members to those benefits are made according to the same method;“fund member category factor” means the fund member category factor contemplated in subparagraph (5)(a);“fund return”, in relation to—(a)the assets of a fund, means any income (received or accrued) and capital gains and losses (realised or unrealised) earned on the assets of the fund, net of expenses and tax charges, associated with the acquisition, holding or disposal of assets; or(b)any portion of the assets of a fund if the assets are separately identifiable, means any income (received or accrued) and capital gains and losses (realised or unrealised) earned on those assets, net of expenses and tax charges associated with the acquisition, holding or disposal of assets; or(c)the assets of a fund, to the extent that those assets consist of long-term policies which are “fund member policies” as defined in Part 5 of the Regulations under the Long-term Insurance Act means the “growth rate” (as defined in those Regulations) applicable to those policies, as determined in accordance with those Regulations;“member” means in relation to a pension, provident or retirement annuity fund, any member or former member of that fund but does not include any member or former member or person who has received all the benefits which may be due to them from the fund and whose membership has thereafter been terminated in accordance with rules of the fund;“retirement-funding income” means—(a)in relation to any employee or the holder of an office (including a member of a body of persons whether or not established by or in terms of any law) who in respect of his or her employment derives any income constituting remuneration as defined in paragraph 1 of the Fourth Schedule and who is a member of or, as an employee, contributes to a pension fund or provident fund established for the benefit of employees of the employer from whom such income is derived, the income that is taken into account in the determination of the contributions made by the employer or the pension fund or provident fund for the benefit of the employee to such pension fund or provident fund in terms of the rules of the fund; or(b)in relation to a partner in a partnership (other than a partner contemplated in paragraph (a)) that part of the partner’s income from the partnership in the form of the partner’s share of profits as is taken into account in the determination of the contributions made by the partnership for the benefit of the partner to a pension fund or provident fund in terms of the rules of the fund: Provided that for the purposes of this definition a partner in a partnership must be deemed to be an employee of the partnership and a partnership must be deemed to be the employer of the partners in that partnership;“risk benefit” means a benefit payable by the fund in respect of the death or permanent disablement of a member to that member or to a dependant or nominee of that member;“risk benefit policy” means a policy under which the risk benefit provided by the fund directly or indirectly for the benefit of a member of the fund is provided by means other than a policy of insurance;“underpin component” means a benefit receivable from a pension fund, provident fund or retirement annuity fund the value of which benefit, in terms of the rules of the fund, is the greater of the amount of a defined contribution component or a defined benefit component other than a risk benefit.(2)The cash equivalent of the value of the taxable benefit contemplated in paragraph 2(l), where the benefits payable to members in respect of a fund member category of a pension, provident or retirement annuity fund consists solely of defined contribution components, is the value of the amount contributed by the employer for the benefit of an employee who is a member of that fund.(3)Where the taxable benefits payable to members in respect of a fund member category of a pension, provident or retirement annuity fund consists of components other than only defined contribution components, the cash equivalent of the value of the taxable benefit contemplated in paragraph 2(l) is an amount that must be determined in accordance with the formulaX = (A × B) — Cin which formula—(a)“X” represents the amount to be determined;(b)“A” represents the fund member category factor in respect of the fund member category of which the employee is a member;(c)“B” represents the amount of the retirement funding income of the employee;(d)“C” represents the sum of the amounts contributed by the employee to the fund in terms of the rules of the fund, excluding any additional voluntary contributions contributed to the fund by the employee, and buyback, in respect of that year of assessment.(4)The board of a fund must provide to the employer of the employees who are members of a fund a contribution certificate in respect of the benefit contemplated in subparagraph (3)—(a)no later than one month before the commencement of the year of assessment in respect of which the contribution certificate is issued: Provided that the board of the fund must not provide a contribution certificate in respect of any year of assessment in respect of which those benefits remain unaltered subsequent to the issue of that contribution certificate;(b)where the rules of the fund are amended and those amendments or for any reason affect the value of or entitlement to any benefit payable to a member of that fund or a dependant or nominee of that member, the contribution certificate must be supplied to the employer no later than one month after the day on which those amendments become effective;(c)where an error occurred in calculating the fund member category factor contemplated in subparagraph (5)(a), a corrected contribution certificate must be supplied to the employer and that corrected certificate will have effect from the first day of the month following the month during which that corrected certificate was received; or(d)where the fund member category factor changed during the year of assessment, the contribution certificate must be supplied to the employer no later than one month after the day on which those changes become effective.(5)The Minister must make regulations prescribing—(a)the manner in which a fund must determine all fund member category factors; and(b)the information that the contribution certificate contemplated in subparagraph (4) must contain.(6)No value must be placed in terms of this paragraph on the taxable benefit derived from any contribution made by an employer to a fund—(a)for the benefit of a member of that fund who has retired from that fund; or(b)in respect of the dependants or nominees of a deceased member of that fund.12E. Contribution to bargaining council
(1)The cash equivalent of the value of the taxable benefit contemplated in paragraph 2(m) is the amount of any contribution or payment made by the employer in respect of a year of assessment, directly or indirectly, to any bargaining council that is established in terms of section 27 of the Labour Relations Act, 1995 (Act No. 66 of 1995), in respect of a scheme or fund as contemplated in section 28(1)(g) of that Act.(2)Where an appropriate portion of any expenditure contemplated in subparagraph (1) cannot be attributed to the employee for whose benefit the amount is paid, the amount of that expenditure in relation to that employee is deemed, for the purposes of subparagraph (1), to be an amount equal to the total expenditure incurred by the employer during that year of assessment for the benefit of all employees divided by the number of employees in respect of whom the expenditure is incurred.13. Payment of employee’s debt or release of employee from obligation to pay a debt
(1)The cash equivalent of the value of the taxable benefit derived by reason of the payment of any amount by an employer in the circumstances contemplated in paragraph 2(h) shall be an amount equal to such amount and the cash equivalent of the benefit to an employee by reason of his release from the obligation to pay an amount owing, as contemplated in the said paragraph, shall be an amount equal to the amount that was owing.(2)No value shall be placed under this paragraph on the value of any taxable benefit derived by reason of the fact that an employer has paid—(b)subscriptions due by his or her employee to a professional body, if membership of such body is a condition of the employee’s employment; or(bA)insurance premiums indemnifying an employee solely against claims arising from negligent acts or omissions on the part of the employee in rendering services to the employer;(c)any portion of the value of a benefit which is payable by a former member of a non-statutory force or service as defined in the Government Employees Pension Law, 1996 (Proclamation No. 21 of 1996), to the Government Employees’ Pension Fund as contemplated in Rule 10(6)(d) or (e) of the Rules of the Government Employees Pension Fund contained in Schedule 1 to that Proclamation.(3)Where—(a)in consideration for the grant by any employer (hereinafter referred to as the former employer) to an employee of any bursary, study loan or similar assistance, the employee assumed an obligation to render services to the former employer for an agreed period;(b)in consequence of the employee having terminated his services with the former employer before the expiry of the said period and having taken up employment with another employer (hereinafter referred to as the present employer), the employee thereupon became liable to pay an amount to the former employer;(c)such amount was paid to the former employer on the employee’s behalf by the present employer; and(d)the employee has in consideration for such payment by the present employer assumed an obligation to render services to the present employer for a period which is not shorter than the unexpired portion of the period during which he had been obliged to render services to the former employer,no value shall be placed under this paragraph on the value of any taxable benefit derived by reason of the payment referred to in item (c).16. Benefits granted to relatives of employees and others
(1)For the purposes of this Schedule and of paragraph (i) of the definition of “gross income” in section 1 of this Act, an employee shall be deemed to have been granted a taxable benefit in respect of his employment with an employer if as a benefit or advantage of or by virtue of the employee’s employment with the employer or as a reward for services rendered or to be rendered by the employee—(a)the employer has granted a benefit or advantage (whether directly or indirectly) to a relative of the employee, other than a benefit or advantage in respect of which paragraph 10(2)(d) applies; or(b)anything is done by the employer under any agreement, transaction or arrangement so as to confer any benefit or advantage upon any person other than the employee (whether directly or indirectly),and such benefit or advantage, if it had been granted directly by the employer to the employee, would have constituted a taxable benefit contemplated in paragraph 2.(2)The provisions of this Schedule shall apply in relation to the taxable benefit so deemed to have been granted as though the taxable benefit had in fact been granted to the employee.17. Certificates by employers
(1)Every employer shall, within 30 days after the end of any year or period of assessment during which an employee of that employer has enjoyed any taxable benefit granted by the employer, or, in any particular case, within such further period as the Commissioner may approve, deliver to such employee a certificate which shall show the nature of such taxable benefit and the full cash equivalent of the value thereof during such year or period.(2)The provisions of subparagraph (1) shall also apply in respect of any taxable benefit referred to in paragraph 4 or 16.(3)Such employer shall within the said period of 30 days or the said further period, deliver to the Commissioner a copy of such certificate.(6)The preceding provisions of this paragraph shall not apply where the cash equivalent of such taxable benefit constituted remuneration in the hands of the employee concerned from which employees tax was deducted or withheld by the employer and such cash equivalent has been included in an employees tax certificate delivered to the employee in terms of paragraph 13 of the Fourth Schedule, except to the extent that such cash equivalent was understated in such certificate.18. Annual statements by employers
(1)Every employer shall on the return referred to in paragraph 14 of the Fourth Schedule declare that all taxable benefits enjoyed by employees of such employer during the period in respect of which such return was furnished, are declared on the employees’ tax certificates delivered to such employees or on any other return as may be required by the Commissioner.(2)Every such return shall, in the case of a company, be certified as correct by a director of such company.20. Amendments to this Schedule
(1)The Minister of Finance may by notice in the Gazette amend—(b)the provisions of paragraph 5(2) so as to vary the amount specified therein;(c)the provisions of paragraph 7(4) so as to substitute a different scale for the scale specified therein and so as to vary the amounts specified in the proviso thereto;(d)the provisions of paragraph 7(7) so as to vary the distance in kilometres specified therein;(e)the provisions of paragraph 9(3) so as to vary the amount and quantities specified therein;(h)the provisions of paragraph 10(1)(a) so as to vary the amount specified therein;(i)the provisions of paragraph 10(2) so as to vary the amount specified therein; and(j)the provisions of paragraph 11(4)(a) so as to vary the amount specified therein.(2)Any amendment made in terms of subparagraph (1) which is in force immediately before the date of promulgation of the Act of Parliament fixing rates of normal tax for the said year of assessment shall, unless Parliament otherwise provides, lapse on that date, and in such case it shall as from that date cease to have the force of law.Eighth Schedule (Section 26A of this Act)
Determination of taxable capital gains and asessed capital losses
Part I – General
1. Definitions
In this Schedule, unless the context indicates otherwise, any meaning ascribed to any word or expression in section 1 of this Act must bear the meaning so ascribed, and—“asset” includes—(a)property of whatever nature, whether movable or immovable, corporeal or incorporeal, excluding any currency, but including any coin made mainly from gold or platinum; and(b)a right or interest of whatever nature to or in such property;“base cost” means the amount to be determined in terms of Part V;“boat” means any vessel used or capable of being used in, under or on the sea or internal waters, whether—(a)self-propelled or not; or(b)equipped with an inboard or outboard motor;“capital gain” means the amount to be determined in terms of paragraph 3;“capital loss” means the amount to be determined in terms of paragraph 4;“disposal” means an event, act, forbearance or operation of law envisaged in paragraph 11 or an event, act, forbearance or operation of law which is in terms of this Act treated as the disposal of an asset, and “dispose” must be construed accordingly;“individual policyholder fund” means a fund contemplated in section 29A(4)(b);“insurer” means an insurer as defined in section 29A(1);“market value” means market value as contemplated in paragraph 31;“net capital gain” means the amount to be determined in terms of paragraph 8;“personal-use asset” means an asset contemplated in paragraph 53;“pre-valuation date asset” means an asset acquired prior to valuation date by a person and which has not been disposed of by that person before valuation date;“primary residence” means a primary residence contemplated in paragraph 44;“proceeds” means the amount to be determined in terms of Part VI;“recognised exchange” means—(a)an exchange licensed under the Financial Markets Act; or(c)an exchange in a country other than the Republic which is similar to an exchange contemplated in paragraph (a) and which has been recognised by the Minister for purposes of this Schedule by notice in the Gazette;“residence” means a residence contemplated in paragraph 44;“ruling price” means—(a)in the case of a financial instrument listed on a recognised exchange in the Republic, the last sale price of that financial instrument at close of business of the exchange, unless there is a higher bid or a lower offer on that day subsequent to the last sale in which case the price of that higher bid or lower offer will prevail; or(b)in the case of a financial instrument listed on a recognised exchange outside the Republic, the ruling price of that financial instrument as determined in item (a) and if the ruling price is not determined in this manner by that exchange, the last price quoted in respect of that financial instrument at close of business of that exchange;“special trust” means a trust contemplated in paragraph (a) of the definition of “special trust” in section 1;“valuation date” means—(a)in the case of any person who after 1 October 2001 ceases to be an exempt person for purposes of paragraph 63, the date on which that person so ceases to be an exempt person; or(b)in any other case, 1 October 2001;“value shifting arrangement” means an arrangement by which a person retains an interest in a company, trust or partnership, but following a change in the rights or entitlements of the interests in that company, trust or partnership (other than as a result of a disposal at market value as determined before the application of paragraph 38), the market value of the interest of that person decreases and—(a)the value of the interest of a connected person in relation to that person held directly or indirectly in that company, trust or partnership increases; or(b)a connected person in relation to that person acquires a direct or indirect interest in that company, trust or partnership.2. Application
(1)Subject to paragraph 97, this Schedule applies to the disposal on or after valuation date of—(a)any asset of a resident; and(b)the following assets of a person who is not a resident, namely—(i)immovable property situated in the Republic held by that person or any interest or right of whatever nature of that person to or in immovable property situated in the Republic including rights to variable or fixed payments as consideration for the working of, or the right to work mineral deposits, sources and other natural resources; or(ii)any asset effectively connected with a permanent establishment of that person in the Republic.(2)For purposes of subparagraph (1)(b)(i), an interest in immovable property situated in the Republic includes any equity shares held by a person in a company or ownership or the right to ownership of a person in any other entity or a vested interest of a person in any assets of any trust, if—(a)80 per cent or more of the market value of those equity shares, ownership or right to ownership or vested interest, as the case may be, at the time of disposal thereof is attributable directly or indirectly to immovable property situated in the Republic or any interest or right of whatever nature to or in immovable property situated in the Republic including rights to variable or fixed payments as consideration for the working of, or the right to work mineral deposits, sources and other natural resources in the Republic; and(b)in the case of a company or other entity, that person (whether alone or together with any connected person in relation to that person), directly or indirectly, holds at least 20 per cent of the equity shares in that company or ownership or right to ownership of that other entity.Part II – Taxable capital gains and assessed capital losses
3. Capital gain
A person’s capital gain for a year of assessment, in respect of the disposal of an asset—(a)during that year, is equal to the amount by which the proceeds received or accrued in respect of that disposal exceed the base cost of that asset;(b)in a previous year of assessment, other than a disposal contemplated in subparagraph (c), is equal to—(i)so much of any amount received by or accrued to that person during the current year of assessment, as constitutes part of the proceeds of that disposal which has not been taken into account—(aa)during any year in determining the capital gain or capital loss in respect of that disposal; or(bb)in the redetermination of the capital gain or capital loss in terms of paragraph 25(2); or(ii)so much of the base cost of that asset that has been taken into account in determining the capital gain or capital loss in respect of that disposal as has been recovered or recouped during the current year of assessment, otherwise than by way of any reduction of any debt owed by that person, and which has not been taken into account in the redetermination of the capital gain or capital loss in terms of paragraph 25(2); or(iii)the sum of—(aa)any capital gain redetermined in terms of paragraph 25(2) in the current year of assessment in respect of that disposal; and(bb)any capital loss (if any) determined in respect of that disposal in terms of paragraph 25 for the last year of assessment during which that paragraph applied in respect of that disposal; or(c)in a previous year of assessment that has been reacquired as contemplated in paragraph 20(4), is equal to any capital loss determined in respect of that disposal.4. Capital loss
A person’s capital loss for a year of assessment in respect of the disposal of an asset—(a)during that year, is equal to the amount by which the base cost of that asset exceeds the proceeds received or accrued in respect of that disposal;(b)in a previous year of assessment, other than a disposal contemplated in subparagraph (c), is equal to—(i)so much of the proceeds received or accrued in respect of the disposal of that asset that have been taken into account during any year in determining the capital gain or capital loss in respect of that disposal—(aa)as that person is no longer entitled to as a result of the cancellation, termination or variation of any agreement, or due to the prescription or waiver of a claim or a release from an obligation or any other event during the current year of assessment;(bb)as has become irrecoverable during the current year of assessment; or(cc)as has been repaid or has become repayable during the current year of assessment,and which have not been taken into account in the redetermination of the capital gain or capital loss in terms of paragraph 25(2);(ii)so much of any expenditure incurred during the current year of assessment in respect of that asset, which is allowable in terms of paragraph 20 and that has not been taken into account—(aa)during any year in determining the capital gain or capital loss in respect of that disposal; or(bb)in the redetermination of the capital gain or capital loss in terms of paragraph 25(2); or(iii)the sum of—(aa)any capital loss redetermined in terms of paragraph 25(2) in the current year of assessment in respect of that disposal; and(bb)any capital gain (if any) determined in respect of that disposal in terms of paragraph 25 for the last year of assessment during which that paragraph applied in respect of that disposal; or(c)in a previous year of assessment that has been reacquired as contemplated in paragraph 20(4), is equal to any capital gain determined in respect of that disposal.5. Annual exclusion
(1)Subject to subparagraph (2), the annual exclusion of a natural person and a special trust in respect of a year of assessment is R40 000.(2)Where a person dies during the year of assessment, that person’s annual exclusion for that year is R300 000.(3)(a)The Minister may announce in the national annual budget contemplated in section 27(1) of the Public Finance Management Act that, with effect from a date or dates mentioned in that announcement, the annual exclusion of the person mentioned in subparagraph (1) or (2) will be altered to the extent mentioned in the announcement.(b)If the Minister makes an announcement of an alteration contemplated in item (a), that alteration comes into effect on the date or dates determined by the Minister in that announcement and continues to apply for a period of 12 months from that date or those dates subject to Parliament passing legislation giving effect to that announcement within that period of 12 months.6. Aggregate capital gain
A person’s aggregate capital gain for a year of assessment is the amount by which the sum of that person’s capital gains for that year and any other capital gains which are required to be taken into account in the determination of that person’s aggregate capital gain or aggregate capital loss for that year, exceeds the sum of—(a)that person’s capital losses for that year; and(b)in the case of a natural person or a special trust, that person’s or special trust’s annual exclusion for that year.7. Aggregate capital loss
A person’s aggregate capital loss for a year of assessment is the amount by which the sum of a person’s capital losses for the year exceeds the sum of—(a)that person’s capital gains for that year and any other capital gains which are required to be taken into account in the determination of that person’s aggregate capital gain or aggregate capital loss for that year; and(b)in the case of a natural person or a special trust, that person’s or special trust’s annual exclusion for that year.8. Net capital gain
A person’s net capital gain for the year of assessment is the sum of—(a)the amount by which that person’s aggregate capital gain for that year exceeds that person’s assessed capital loss for the previous year of assessment; and(b)where paragraph 64B(3) becomes applicable during that year of assessment, the amount of the capital gain which was disregarded in terms of paragraph 64B(1) or (2) during that year or any previous year, as contemplated in paragraph 64B(3).9. Assessed capital loss
A person’s assessed capital loss for a year of assessment, where that person has—(a)an aggregate capital gain for that year, is the amount by which that person’s assessed capital loss for the previous year of assessment exceeds the amount of that person’s aggregate capital gain for that year;(b)an aggregate capital loss for that year, is the sum of that person’s aggregate capital loss for that year and that person’s assessed capital loss for the previous year; or(c)neither an aggregate capital gain nor an aggregate capital loss for that year, is the amount of that person’s assessed capital loss for the previous year.10. Taxable capital gain
(1)A person’s taxable capital gain for the year of assessment is—(a)in the case of a natural person or a special trust as defined in section 1 of the Act, 40 per cent;(b)in the case of an insurer, in respect of its—(i)individual policyholder fund, 40 per cent;(ii)untaxed policyholder fund, 0 per cent;(iii)company policyholder fund, 80 per cent; and(iv)risk policy fund, 80 per cent; or(c)in any other case, 80 per cent,of that person’s net capital gain for that year of assessment.(2)(a)The Minister may announce in the national annual budget contemplated in section 27(1) of the Public Finance Management Act that, with effect from a date or dates mentioned in that announcement, the percentage used in determining a person’s taxable capital gain for the year of assessment under subparagraph (1) will be altered to the extent mentioned in the announcement.(b)If the Minister makes an announcement of an alteration contemplated in item (a), that alteration comes into effect on the date or dates determined by the Minister in that announcement and continues to apply for a period of 12 months from that date or those dates subject to Parliament passing legislation giving effect to that announcement within that period of 12 months.Part III – Disposal and acquisition of assets
11. Disposals
(1)Subject to subparagraph (2), a disposal is any event, act, forbearance or operation of law which results in the creation, variation, transfer or extinction of an asset, and includes—(a)the sale, donation, expropriation, conversion, grant, cession, exchange or any other alienation or transfer of ownership of an asset;(b)the forfeiture, termination, redemption, cancellation, surrender, discharge, relinquishment, release, waiver, renunciation, expiry or abandonment of an asset;(c)the scrapping, loss, or destruction of an asset;(d)the vesting of an interest in an asset of a trust in a beneficiary;(e)the distribution of an asset by a company to a holder of shares;(f)the granting, renewal, extension or exercise of an option; or(g)the decrease in value of a person’s interest in a company, trust or partnership as a result of a value shifting arrangement.(2)There is no disposal of an asset—(a)by a person who transfers the asset as security for a debt or by a creditor who transfers that asset back to that person upon release of the security;(b)by a company in respect of—(i)the issue, cancellation or extinction of a share in the company; or(ii)the granting of an option to acquire a share in or certificate acknowledging or creating a debt owed by that company;(c)by a portfolio of a collective investment scheme in respect of the issue of a participatory interest in that portfolio, or by a portfolio in respect of the granting of an option to acquire a participatory interest in that portfolio;(d)by a person in respect of the issue of any debt by or to that person;(g)by a person where a disposal is made to correct an error in the registration in the deeds registry of immovable property in that person’s name;(h)by a lender to a borrower or by a borrower to a lender where any security or bond has been lent by a lender to a borrower in terms of a securities lending arrangement; or(i)by a person where that asset vests in the Master of the High Court or in a trustee, in consequence of the sequestration of the estate of the spouse of that person, as contemplated in section 21 of the Insolvency Act, 1936 (Act No. 24 of 1936), and where that asset is subsequently released by the Master or that trustee as contemplated in that section;(k)by a person on the cession or release of a right to acquire a marketable security in whole or in part for a consideration which consists of or includes another right to acquire a marketable security in the circumstances contemplated in section 8A(5);(l)by a person of shares held in a company where that company—(i)subdivides or consolidates those shares;(ii)converts shares of par value to no par value or of no par value to par value; or(iii)converts shares in terms of section 40A or 40B,solely in substitution of the shares held by that person, and—(aa)the proportionate participation rights and interests of that person in that company remain unaltered; and(bb)no other consideration whatsoever passes directly or indirectly in consequence of that subdivision, consolidation or conversion;(m)by a person where that person exchanges a qualifying equity share for another qualifying equity share as contemplated in section 8B(2);(n)by a transferor to a transferee or by a transferee to a transferor where any share or bond has been transferred in terms of a collateral arrangement;(o)by a person that—(i)disposed of an asset to another person in terms of an agreement; and(ii)reacquired that asset from that other person by reason of the cancellation or termination, during the year of assessment during which that asset was so disposed of, of that agreement and the restoration of both persons to the position they were in prior to entering into that agreement.12. Events treated as disposals and acquisitions
(1)Where an event described in subparagraph (2) occurs, a person must, subject to paragraph 24, be treated for the purposes of this Schedule as having disposed of an asset described in subparagraph (2) for an amount received or accrued equal to the market value of the asset at the time of the event and to have immediately reacquired the asset at an expenditure equal to that market value, which expenditure must be treated as an amount of expenditure actually incurred for the purposes of paragraph 20(1)(a).(2)Subparagraph (1) applies, in the case of—(a)a person—(i)that commences to be a resident; or(ii)that is a foreign company that commences to be a controlled foreign company,in respect of all assets of that person other than—(aa)assets in the Republic listed in paragraph 2(1)(b)(i) and (ii);(bb)any right to acquire any marketable security contemplated in section 8A;(b)an asset of a person that is not a resident, which asset—(i)becomes an asset of that person’s permanent establishment in the Republic otherwise than by way of acquisition; or(ii)ceases to be an asset of that person’s permanent establishment in the Republic otherwise than by way of a disposal contemplated in paragraph 11;(c)assets that are held by a person otherwise than as trading stock, when they commence to be held by that person as trading stock;(d)an asset which ceases to be held by a person as a personal-use asset otherwise than by way of a disposal contemplated in paragraph 11;(e)an asset which is held by a person otherwise than as a personal-use asset, when that asset commences to be held by that person as a personal-use asset; or(f)an asset transferred by an insurer contemplated in section 29A from one fund contemplated in section 29A(4) to any other such fund.(3)Where assets that are held by a person as trading stock cease to be held by that person as trading stock, otherwise than by way of a disposal contemplated in paragraph 11, that person will be treated as having disposed of those assets for a consideration equal to the amount included in that person’s income in terms of section 22(8) and to have immediately reacquired those assets for a cost equal to that amount, which cost must be treated as an amount of expenditure actually incurred for the purposes of paragraph 20(1)(a).(4)In the event of a person ceasing to be a controlled foreign company as a result of becoming a resident that person must, subject to paragraph 24, be treated for the purposes of this Schedule as having—(a)disposed of each of that person’s assets, other than—(i)assets in the Republic listed in paragraph 2(1)(b)(i) and (ii); and(ii)assets held by that person if any amount received or accrued from the disposal of those assets would have been taken into account for purposes of determining the net income as contemplated in section 9D of that person; and(b)immediately reacquired each of those assets at an expenditure equal to the market value of those assets immediately before the disposal, which expenditure must be treated as an amount of expenditure actually incurred for the purposes of paragraph 20(1)(a).12A. Concession or compromise in respect of a debt
(1)For the purposes of this paragraph—“allowance asset” ;“capital asset” ;“concession or compromise” means any arrangement in terms of which—(a)a debt is—(i)cancelled or waived; or(ii)extinguished by—(aa)redemption of the claim in respect of that debt by the person owing that debt or by any person that is a connected person in relation to that person; or(bb)merger by reason of the acquisition, by the person owing that debt, of the claim in respect of that debt,otherwise than as the result or by reason of the implementation of an arrangement described in paragraph (b);(b)a debt owed by a company to a person is settled, directly or indirectly—(i)by being converted to or exchanged for shares in that company; or(ii)by applying the proceeds from shares issued by that company;“debt” means any amount that is owed by a person in respect of—(a)expenditure incurred by that person; or(b)a loan, advance or credit that was used, directly or indirectly, to fund any expenditure incurred by that person,but does not include a tax debt as defined in section 1 of the Tax Administration Act;“debt benefit”, in respect of a debt owed by a person to another person, means—(a)in the case of an arrangement described in paragraph (a)(i) of the definition of “concession or compromise”, the amount cancelled or waived;(b)in the case of the extinction of that debt by means of an arrangement described in paragraph (a)(ii) of the definition of “concession or compromise”, the amount by which the face value of the claim in respect of that debt held by the person to whom the debt is owed prior to the entering into of that arrangement exceeds the expenditure incurred in respect of—(i)the redemption of that debt; or(ii)the acquisition of the claim in respect of that debt;(c)in the case of the settling of that debt by means of an arrangement described in paragraph (b) of the definition of “concession or compromise”, where the person who acquired shares in a company in terms of that arrangement held no effective interest in the shares of that company prior to the entering into of that arrangement, the amount by which the face value of the claim held in respect of that debt prior to the entering into of that arrangement exceeds the market value of the shares acquired by reason or as a result of the implementation of that arrangement; or(d)in the case of the settling of that debt by means of an arrangement described in paragraph (b) of the definition of “concession or compromise”, where the person who acquired shares in a company in terms of that arrangement held an effective interest in the shares of that company prior to the entering into of that arrangement, the amount by which the face value of the claim held in respect of that debt prior to the entering into of that arrangement exceeds the amount by which the market value of the effective interest held by that person in the shares of that company immediately after the implementation of that arrangement exceeds, solely as a result of the implementation of that arrangement, the market value of the effective interest held by that person in the shares of that company immediately prior to the entering into of that arrangement;“group of companies” means a group of companies as defined in section 41; and“market value”, in relation to shares acquired or held by reason or as a result of implementing a concession or compromise in respect of a debt, means the market value of those shares immediately after the implementation of that concession or compromise.(2)Subject to subparagraph (6), this paragraph applies where—(a)a debt benefit in respect of a debt owed by a person arises in respect of a year of assessment by reason or as a result of a concession or compromise in respect of that debt during that year of assessment; and(b)the amount of that debt is owed by that person in respect of, or was used by that person to fund, directly or indirectly, any expenditure, other than expenditure in respect of trading stock in respect of which a deduction or allowance was granted in terms of this Act.(3)Where—(a)a debt benefit arises in respect of a debt owed by a person as contemplated in subparagraph (2); and(b)the amount of that debt is owed in respect of or was used as contemplated in item (b) of that subparagraph to fund expenditure incurred in respect of an asset that was not disposed of by that person in a year of assessment prior to that in which that debt benefit arises,the amount of expenditure so incurred in respect of that asset must, for the purposes of paragraph 20, be reduced by the debt benefit in respect of that debt.(4)Where—(a)a debt benefit arises in respect of a debt owed by a person as contemplated in subparagraph (2); and(b)the amount of that debt is owed in respect of or was used as contemplated in item (b) of that subparagraph to fund expenditure incurred in respect of an asset that was disposed of in a year of assessment prior to that in which that debt benefit arises, that person must if the amount determined in respect of that disposal as—differs from the amount that would have been determined, whether as a capital gain or as a capital loss, in respect of that disposal had that debt benefit been taken into account in the year of the disposal of that asset, treat that absolute difference as a capital gain to be taken into account in respect of the year of assessment in which the debt benefit arises: Provided that in taking that debt benefit into account in respect of the year of disposal of that asset that person must take into account the extent to which the expenditure in respect of that asset has been reduced by any other debt benefit taken into account, in terms of this subparagraph, in respect of that disposal.(5)Where subparagraph (3) or (4) applies in respect of a debt that was used to fund expenditure in respect of a pre-valuation date asset of a person, for the purposes of determining the date of acquisition of that asset and the expenditure incurred in respect of that asset, that person must be treated as having—(a)disposed of that asset at a time immediately before that debt benefit arose as contemplated in subparagraph (3)(a) or (4)(a), as the case may be, for an amount equal to the market value of that asset at that time; and(b)immediately reacquired that asset at that time at an expenditure equal to that market value—(i)less any capital gain, and(ii)increased by any capital loss,that would have been determined had the asset been disposed of at market value at that time, which expenditure must be treated as an amount of expenditure actually incurred at that time for the purposes of paragraph 20(1)(a).(6)This paragraph must not apply to a debt benefit in respect of any debt owed by a person—(a)that is an heir or legatee of a deceased estate, to the extent that—(i)the debt is owed to that deceased estate;(ii)the debt is reduced by the deceased estate; and(iii)the amount by which the debt is reduced by the deceased estate forms part of the property of the deceased estate for the purposes of the Estate Duty Act;(b)to the extent that the debt is reduced by way of—in respect of which donations tax is payable;(c)to an employer of that person, to the extent that the debt is reduced in the circumstances contemplated in paragraph 2(h) of the Seventh Schedule;(d)to another person where the person that owes that debt is a company, if—(i)that company owes that debt to a company that forms part of the same group of companies as that company; and(ii)that company has not carried on any trade,during the year of assessment during which that debt benefit arises and the immediately preceding year of assessment: Provided that this subitem must not apply in respect of any debt—(aa)incurred, directly or indirectly, by that company to fund expenditure incurred in respect of any asset that was subsequently disposed of by that company by way of an asset-for-share, intra-group or amalgamation transaction or a liquidation distribution in respect of which the provisions of section 42, 44, 45 or 47, as the case may be, applied; or(bb)incurred or assumed by that company in order to settle, take over, refinance or renew, directly or indirectly, any debt incurred by—(A)any other company that forms part of the same group of companies; or(B)any company that is a controlled foreign company in relation to any company that forms part of the same group of companies;(e)that is a company, where—(i)that debt is reduced in the course, or in anticipation, of the liquidation, winding up, deregistration or final termination of the existence of that company; and(ii)the person to whom the debt is owed is a connected person in relation to that company,to the extent that debt benefit in respect of that debt does not, at the time that the debt benefit arises, exceed the amount of expenditure contemplated in paragraph 20 incurred in respect of that debt by the connected person: Provided that this subitem must not apply—(a)if—(i)the debt was reduced as part of any transaction, operation or scheme entered into to avoid any tax imposed by this Act; and(ii)that company became a connected person in relation to the person to whom the debt is owed after the debt (or any debt issued in substitution of that debt) arose; or(b)if that company—(i)has not, within 36 months of the date on which the debt is reduced or such further period as the Commissioner may allow, taken the steps contemplated in section 41(4) to liquidate, wind up, deregister or finally terminate its existence;(ii)has at any stage withdrawn any step taken to liquidate, wind up, deregister or finally terminate its corporate existence; or(iii)does anything to invalidate any step contemplated in subparagraph (i), with the result that the company is or will not be liquidated, wound up, deregistered or finally terminate its existence;(f)to another person where the person that owes that debt is a company that—(i)owes that debt to a company that forms part of the same group of companies as that company; and(ii)reduces or settles that debt, directly or indirectly, by means of shares issued by that company:Provided that this subitem must not apply in respect of any debt that was incurred or assumed by that company in order to settle, take over, refinance or renew, directly or indirectly, any debt incurred by another company which—(aa)did not form part of that same group of companies at the time that that other company incurred that debt; or(bb)does not form part of that same group of companies at the time that company reduces or settles that debt, directly or indirectly, by means of shares issued by that company; or(g)to the extent that the debt so owed—(i)is settled by means of an arrangement described in paragraph (b) of the definition of “concession or compromise”; and(ii)does not consist of or represent an amount owed by that person in respect of any interest as defined in section 24J incurred by that person during any year of assessment.(7)Any tax which becomes payable as a result of the application of paragraph (b) of the proviso to subparagraph (6)(e) must be recovered from the company and the connected person contemplated in that subparagraph who must be jointly and severally liable for that tax.13. Time of disposal
(1)The time of disposal of an asset by means of—(a)a change of ownership effected or to be effected from one person to another because of an event, act, forbearance or by operation of law is, in the case of—(i)an agreement subject to a suspensive condition, the date on which the condition is satisfied;(ii)any agreement which is not subject to a suspensive condition, the date on which the agreement is concluded;(iiA)the distribution of an asset of a trust by a trustee to a beneficiary to the extent that the beneficiary has a vested interest in the asset, the date on which the interest vests;(iiB)the granting by a trust to a beneficiary of an equity instrument contemplated in section 8C, the time that equity instrument vests in that beneficiary as contemplated in that section;(iii)a donation of an asset, the date of compliance with all legal requirements for a valid donation;(iv)the expropriation of an asset, the date on which the person receives the full compensation agreed to or finally determined by a competent tribunal or court;(v)the conversion of an asset, the date on which that asset is converted;(vi)the granting, renewal or extension of an option, the date on which the option is granted, renewed or extended;(vii)the exercise of an option, the date on which the option is exercised;(viii)the termination of an option granted by a company to a person to acquire a share, participatory interest or debenture of that company, the date on which that option terminates; or(ix)any other case, the date of change of ownership;(b)the extinction of an asset including by way of forfeiture, termination, redemption, cancellation, surrender, discharge, relinquishment, release, waiver, renunciation, expiry or abandonment, the date of the extinction of the asset;(c)the scrapping, loss or destruction of an asset is the date—(i)when the full compensation in respect of that scrapping, loss or destruction is received; or(ii)if no compensation is payable, the later of the date when the scrapping, loss or destruction is discovered or the date on which it is established that no compensation will be payable;(e)the distribution of an asset by a company to a holder of shares, is the date on which that asset is so distributed as contemplated in paragraph 75;(f)the decrease of a person’s interest in a company, trust or partnership as a result of a value shifting arrangement, is the date on which the value of that person’s interest decreases; or(g)the happening of an event contemplated in—(i)paragraph 12(2)(a), (b), (c), (d) or (e), 12(3) or 12(4), is the date immediately before the day that the event occurs; or(ii)paragraph 12(2)(f), is the date that that event occurs.(2)A person to whom an asset is disposed of is treated as having acquired that asset at the time of disposal of that asset as contemplated in subparagraph (1).14. Disposal by spouse married in community of property
For the purposes of this Schedule, in the case of spouses married in community of property, where any asset is disposed of by one of the spouses and that asset—(a)falls within the joint estate of the spouses, that disposal is treated as having been made in equal shares by each spouse; and(b)was excluded from the joint estate of the spouses, that disposal is treated as having been made solely by the spouse making the disposal.Part IV – Limitation of losses
15. Personal-use aircraft, boats and certain rights and interests
A capital loss in respect of the following assets of a person must be disregarded in determining the aggregate capital gain or aggregate capital loss of a person, to the extent that the assets are used for purposes other than the carrying on of a trade:(a)An aircraft with an empty mass exceeding 450 kg;(b)a boat exceeding ten metres in length;(c)any fiduciary, usufructuary or other similar interest, the value of which decreases over time;(d)any lease of immovable property;(e)any—(i)time-sharing interest as defined in section 1 of the Property Time-sharing Control Act, 1983 (Act No. 75 of 1983); or(ii)share in a share block company, as defined in section 1 of the Share Blocks Control Act,with a fixed life, the value of which decreases over time; or(f)any right or interest of whatever nature to or in an asset contemplated in items (a), (b), (c), (d) or (e).16. Intangible assets acquired prior to valuation date
(1)A person must, in determining the aggregate capital gain or aggregate capital loss of that person, disregard any capital loss determined in respect of the disposal of an intangible asset acquired prior to valuation date—(a)from a connected person in relation to that person; or(b)which was associated with a business taken over by that person or any connected person in relation to that person.(2)For the purposes of subparagraph (1), “intangible asset” means—(b)any patent as defined in the Patents Act or any design as defined in the Designs Act or any trade mark as defined in the Trade Marks Act or any copyright as defined in the Copyright Act or any rights recognised under the Plant Breeders’ Rights Act, 1976 (Act No. 15 of 1976), or any model, pattern, plan, formula or process or any other property or right of a similar nature;(c)any intellectual property right or property or right of a similar nature in respect of which a proprietary interest may be established in terms of the common law of the Republic of South Africa; or(d)any other intangible property except any financial instrument.17. Forfeited deposits
(1)Where—(a)a person has made a deposit for the purpose of acquiring an asset which is not intended for use wholly and exclusively for business purposes; and(b)that deposit has been forfeited,the capital loss determined in respect of that forfeiture must be disregarded when determining that person’s aggregate capital gain or aggregate capital loss.(2)Subparagraph (1) does not apply in respect of—(a)a coin made mainly from gold or platinum, of which the market value is mainly attributable to the material from which it is minted or cast;(b)immovable property, other than immovable property intended to be the primary residence of that person;(c)a financial instrument; or(d)any right or interest in any asset contemplated in items (a), (b) or (c).18. Disposal of options
(1)Where a person who is entitled to exercise an option—(a)to acquire an asset not intended for use wholly and exclusively for business purposes; or(b)to dispose of an asset not used wholly and exclusively for business purposes,has abandoned that option, allowed that option to expire, or in any other manner disposed of that option other than by way of the exercise thereof, any capital loss of that person determined in respect of that expiry shall be disregarded.(2)Subparagraph (1) does not apply in respect of an option to acquire or dispose of—(a)a coin made mainly from gold or platinum, of which the market value is mainly attributable to the material from which it is minted or cast;(b)immovable property, other than immovable property—(i)in the case of subparagraph (1)(a), which is intended to be the primary residence of the person entitled to exercise the option; or(ii)in the case of subparagraph (1)(b), is the primary residence of the person entitled to exercise the option;(c)a financial instrument; or(d)any right or interest in those assets contemplated in items (a), (b) and (c).19. Losses on the disposal of certain shares
(1)Subject to paragraph 43A, where a person disposes of a share in a company—(a)as a result of the acquisition by the company from that person of that share or as part of the liquidation, winding-up or deregistration of that company, that person must disregard so much of any capital loss resulting from the disposal as does not exceed any exempt dividends; or(b)in circumstances other than those contemplated in item (a), that person must disregard so much of any capital loss resulting from the disposal (other than a disposal deemed to have taken place in terms of section 29B) as does not exceed any extraordinary exempt dividends.received by or accrued to that person in respect of that share within a period of 18 months prior to or as part of the disposal.(3)For the purposes of this paragraph—(a)the period of 18 months does not include any days during which the person disposing of a share—(i)has an option to sell, is under a contractual obligation to sell, or has made (and not closed) a short sale of, substantially similar financial instruments;(ii)is the grantor of an option to buy substantially similar financial instruments; or(iii)has otherwise diminished risk of loss with respect to that share by holding one or more contrary positions with respect to substantially similar financial instruments;(b)“exempt dividend” means any dividend or foreign dividend to the extent that the dividend or foreign dividend is—(i)not subject to any tax under Part VIII of Chapter II; and(ii)exempt from normal tax in terms of section 10(1)(k)(i) or section 10B(2)(a), (b) or (e);(c)“extraordinary exempt dividends” means so much of the amount of the aggregate of any exempt dividends received or accrued within the period of 18 months contemplated in subparagraph (1)—(i)as exceeds 15 per cent of the proceeds received or accrued from the disposal contemplated in that subparagraph; and(ii)as has not been taken into account as an extraordinary dividend in terms of paragraph 43A(2).Part V – Base cost
20. Base cost of asset
(1)Despite section 23(b) and (f), but subject to paragraphs 24, 25 and 32 and subparagraphs (2) and (3), the base cost of an asset acquired by a person is the sum of—(a)the expenditure actually incurred in respect of the cost of acquisition or creation of that asset;(b)the expenditure actually incurred in respect of the valuation of the asset for the purpose of determining a capital gain or capital loss in respect of the asset;(c)the following amounts actually incurred as expenditure directly related to the acquisition or disposal of that asset namely—(i)the remuneration of a surveyor, valuer, auctioneer, accountant, broker, agent, consultant or legal advisor, for services rendered;(iii)stamp duty, transfer duty, tax payable in terms of the Securities Transfer Tax Act, 2007 (Act No. 25 of 2007), or similar duty or tax;(iv)advertising costs to find a seller or to find a buyer;(v)the cost of moving that asset from one location to another;(vi)the cost of installation of that asset, including the cost of foundations and supporting structures;(vii)despite section 23(d), in the case of a disposal of an asset by a person by way of a donation as contemplated in paragraph 38, so much of any donations tax payable by that person in respect of that donation, as determined in accordance with paragraph 22;(viii)despite section 23(d), if that person acquired that asset by way of a donation and the donations tax levied in respect of that donation was paid by that person, so much of the donations tax which bears to the full amount of the donations tax so payable the same ratio as the capital gain of the donor determined in respect of that donation, bears to the market value of that asset on the date of that donation; and(ix)if that asset was acquired or disposed of by the exercise of an option (other than the exercise of an option contemplated in item (f)), the expenditure actually incurred in respect of the acquisition of the option;(d)the expenditure actually incurred for purposes of establishing, maintaining or defending a legal title to or right in that asset;(e)the expenditure actually incurred in effecting an improvement to or enhancement of the value of that asset;(f)if that asset was acquired or disposed of by the exercise on or after valuation date of an option acquired prior to the valuation date, the valuation date value of that option, which value must be treated as expenditure actually incurred in respect of that asset on valuation date for the purposes of this Part;(g)one-third of the interest as contemplated in section 24J excluding any interest contemplated in section 24O on money borrowed to finance the expenditure contemplated in items (a) or (e) in respect of a share listed on a recognised exchange or a participatory interest in a portfolio of a collective investment scheme (including money borrowed to refinance those borrowings);(h)in the case of—(i)a marketable security or an equity instrument, the acquisition or vesting, as the case may be, of which resulted in the determination of any gain or loss to be included in or deducted from any person’s income in terms of section 8A or 8C, the market value of that marketable security or equity instrument or amount received or accrued from the disposal thereof, as the case may be, that was taken into account in determining the amount of that gain or loss (including where the gain and loss so determined was nil);(ii)any other asset—(aa)so much of an amount that has been included in that person’s income in terms of section 8(5), as having been applied towards the reduction of the purchase price of that asset;(bb)where an amount has been included in any person’s gross income in terms of paragraph (i) of the definition of “gross income” in section 1, the value placed on the asset under the Seventh Schedule for purposes of determining the amount so included in that person’s gross income;(cc)where an amount has been included in that person’s gross income in terms of paragraph (h) of the definition of “gross income” in section 1 in respect of that asset, so much of that amount so included as exceeds the amount of any allowance granted to that person in terms of section 11(h); or(dd)where an amount has been included in that person’s gross income in terms of paragraph (c) of the definition of “gross income” in section 1, the value placed on the asset for the purposes of determining the amount so included in that person’s gross income;(iii)(aa)a right in a controlled foreign company held directly by a resident, an amount equal to the proportional amount of the net income (without having regard to the percentage adjustments contemplated in paragraph 10) of that company and of any other controlled foreign company in which that controlled foreign company and that resident directly or indirectly have an interest, which was included in the income of that resident in terms of section 9D during any year of assessment, reduced by the amount of any foreign dividend distributed by that company to that resident during any year of assessment which was exempt from tax in terms of section 10B(2)(a) or (c); or(bb)a right in a controlled foreign company held directly by another controlled foreign company, an amount equal to the proportional amount of the net income (without having regard to the percentage adjustments contemplated in paragraph 10) of that first-mentioned controlled foreign company and of any other controlled foreign company in which both the first- and second-mentioned controlled foreign companies directly or indirectly have an interest, which during any year of assessment would have been included in the income of that second-mentioned controlled foreign company in terms of section 9D had it been a resident, reduced by the amount of any foreign dividend distributed by that first-mentioned controlled foreign company to the second-mentioned controlled foreign company if that dividend would have been exempt from tax in terms of section 10B(2)(a) or (c) had that second-mentioned controlled foreign company been a resident;(iv)a value shifting arrangement, an amount determined in accordance with paragraph 23;(v)an asset which was acquired by a resident by way of inheritance from the deceased estate of a person who at the time of his or her death was not resident—(aa)the market value of that asset immediately before the death of that deceased person; and(bb)any expenditure contemplated in this paragraph incurred by the executor of that deceased estate in respect of that asset in the process of liquidation or distribution of that deceased estate:Provided that this subitem does not apply in respect of any asset so acquired which constituted an asset of that deceased person as contemplated in paragraph 2(1)(b);(vi)an asset which was acquired on or after the valuation date by a person from a person who at the time of that acquisition was not a resident by means of a donation or for a consideration not measurable in money or where the person acquiring the asset is a connected person in relation to the person that is not a resident, for a consideration which does not reflect an arm’s length price, the market value of that asset on the date of its acquisition:Provided that where subitem (i), (ii)(bb) or (dd) applies, that person must for purposes of this paragraph disregard any expenditure actually incurred by that person in respect of that asset prior to the date on which—(a)the market value or value placed on the asset under the Seventh Schedule, as the case may be, is determined; or(b)the asset was disposed of, where the amount received or accrued from the disposal is taken into account in determining the gain or loss in terms of section 8C,which must for the purposes of this Part be treated as expenditure incurred in respect of that asset.(2)The expenditure incurred by a person in respect of an asset does not include any of the following amounts—(a)borrowing costs, including any interest as contemplated in section 24J, raising fees, bond registration costs or bond cancellation costs;(b)expenditure on repairs, maintenance, protection, insurance, rates and taxes, or similar expenditure; and(c)the valuation date value of any option or right to acquire any marketable security contemplated in section 8A(1),other than borrowing costs and expenditure contemplated in subparagraph (1)(g).(3)The expenditure contemplated in subparagraph (1)(a) to (g), incurred by a person in respect of an asset must be reduced by any amount which—(a)(i)is or was allowable or is deemed to have been allowed as a deduction in determining the taxable income of that person ; and(ii)is not included in the taxable income of that person in terms of section 9C(5),before the inclusion of any taxable capital gain; or(b)has for any reason been reduced or recovered or become recoverable from or has been paid by any other person (whether prior to or after the incurral of the expense to which it relates), to the extent that such amount is not—(i)taken into account as a recoupment in terms of section 8(4)(a) or paragraph (j) of the definition of “gross income”;(iii)applied to reduce an amount of expenditure incurred in respect of—(aa)trading stock as contemplated in section 19(3); or(bb)any other asset as contemplated in paragraph 12A(3); or(c)is exempt from tax in terms of section 10(1)(yA) and is granted or paid for purposes of the acquisition of that asset.(4)A person who—(a)disposed of an asset to another person in terms of an agreement; and(b)reacquired that asset from that other person by reason of the cancellation or termination of that agreement and the restoration of both persons to the position they were in prior to entering into that agreement,must be treated as having acquired that asset for an amount equal to—(i)the base cost of that asset prior to that disposal; and(ii)so much of any expenditure incurred in respect of that asset by that other person that has been recovered from that person as would have constituted expenditure contemplated in subparagraph (1)(e) had it been incurred by that person.20A. Provisions relating to farming development expenditure
(1)Despite the provisions of paragraph 20(3)(a), where a person carrying on pastoral, agricultural or other farming operations as contemplated in section 26, incurred expenditure in respect of the matters referred to in items (c) to (i) of paragraph 12(1) of the First Schedule (referred to in this paragraph as “capital development expenditure”) and that person—(a)ceased to carry on such pastoral, agricultural or other farming operations during any year of assessment; and(b)at any time thereafter disposes of immovable property on which those operations were carried on,that person may elect that the amount of the capital development expenditure, or part thereof, which is carried forward and deemed in terms of paragraph 12(3) of the First Schedule to be expenditure which has been incurred in the next succeeding year of assessment for purposes of paragraph 12(1) of the First Schedule (as reduced in terms of paragraph 12(3B) of the First Schedule, if applicable), must be treated as expenditure incurred in respect of that immovable property for the purposes of this Part.(2)The amount of the capital development expenditure in respect of which the election may be made in terms of subparagraph (1) may not exceed the proceeds from the disposal of that immovable property contemplated in subparagraph (1), reduced by—(a)in the case of a pre-valuation date asset, any other amount allowable in terms of paragraph 25; or(b)in any other case, any amount allowable in terms of paragraph 20.(3)Where a person adopts or determines the market value of immovable property on which pastoral, agricultural or other farming operations were carried on as the valuation date value of that asset in terms of paragraph 29(4), only capital development expenditure incurred by that person on or after 1 October 2001 must be taken into account for the purpose of calculating the amount in respect of which an election can be made in terms of subparagraph (1).21. Limitation of expenditure
(1)Where, but for the provisions of this subparagraph, an amount qualifies or has qualified as an allowable expenditure or may otherwise be taken into account in determining a capital gain or capital loss under more than one provision of this Schedule, that amount or portion thereof, shall not be allowed as expenditure or be taken into account more than once in determining that capital gain or capital loss.(2)No expenditure shall be allowed under paragraph 20(1)(a) or (e) where any amount of that expenditure is allowable under any other provision of this Schedule, despite that that other provision imposes any limitation on the amount of the expenditure.22. Amount of donations tax to be included in base cost
The amount of the donations tax payable by a person in respect of the disposal of an asset which may be taken into account in terms of paragraph 20(1)(c)(vii) must be determined in accordance with the formula—
where—(a)“Y” represents the amount to be determined;(b)“M” represents the market value of the asset donated in respect of which the donations tax is payable;(c)“A” represents all amounts allowed to be taken into account in determining the base cost of the asset in terms of this Part (other than paragraph 20(1)(c)(vii)); and(d)“D” represents the total amount of donations tax so payable:Provided that where the amount included in “A” is greater than the amount included in “M”, the amount of donations tax to be taken into account in terms of paragraph 20(1)(c)(vii) shall be nil.23. Base cost in respect of value shifting arrangement
In the case of a disposal by way of a value shifting arrangement—(a)the base cost of a person’s interest to which paragraph 11(1)(g) applies, is determined in accordance with the formula—
where—(i)“Y” represents the amount to be determined;(ii)“A” is the market value of that person’s interests immediately prior to the disposal;(iii)“B” is the person’s base cost of the interests calculated immediately prior to the disposal; and(iv)“C” is the market value of that person’s interests immediately after the disposal;(b)the base cost of a person—(i)whose interests increased in value as a result of a value shifting arrangement contemplated in subparagraph (a) is increased by that proportion of the proceeds on disposal contemplated in paragraph 35(2) in respect of the value shifting arrangement which resulted in the increase in market value of that person’s interest; or(ii)who acquires a direct or indirect interest in the company, trust or partnership, is that proportion of the proceeds of disposal contemplated in paragraph 35(2) in respect of the value shifting arrangement which resulted in the acquisition of that interest.24. Base cost of asset of a person who becomes a resident on or after valuation date
(1)The base cost of an asset, other than an asset situated in the Republic listed in paragraph 2(1)(b)(i) and (ii) or an asset held by a person if any amount received or accrued from the disposal of the asset would be taken into account for purposes of determining the net income as contemplated in section 9D of that person, acquired by a person before the date on which that person became a resident is the sum of the value of that asset determined in terms of subparagraphs (2) or (3) and the expenditure allowable in terms of paragraph 20 incurred on or after that date in respect of that asset.(2)Where an asset contemplated in paragraph 12(2) or (4) has been disposed of by a person on or after the date on which that person commenced to be a resident and the proceeds from that disposal and the expenditure allowable in terms of paragraph 20 incurred prior to that date (determined without regard to paragraph 12(2) or (4)) in respect of that asset are each lower than the market value of that asset as contemplated in paragraph 12(2) or (4), that person must be treated as having acquired that asset at a cost equal to the higher of—(a)the expenditure allowable in terms of paragraph 20 incurred in respect of that asset prior to that date; or(b)those proceeds less the expenditure allowable in terms of paragraph 20 incurred on or after that date in respect of that asset.(3)Where an asset contemplated in paragraph 12(2) or (4) has been disposed of by a person on or after the date on which that person commenced to be a resident and the proceeds from the disposal of that asset and the market value of that asset as contemplated in paragraph 12(2) or (4) are each lower than the expenditure allowable in terms of paragraph 20 incurred prior to that date (determined without regard to paragraph 12(2) or (4)) in respect of that asset, that person must be treated as having acquired that asset at a cost equal to the higher of—(b)those proceeds less the expenditure allowable in terms of paragraph 20 incurred on or after that date in respect of that asset.(4)The provisions of this paragraph do not apply in respect of any asset of a person who became a resident before 1 October 2001.25. Determination of base cost of pre-valuation date assets
(1)The base cost of a pre-valuation date asset (other than an identical asset in respect of which paragraph 32(3A) has been applied), is the sum of the valuation date value of that asset, as determined in terms of paragraph 26, 27 or 28 and the expenditure allowable in terms of paragraph 20 incurred on or after the valuation date in respect of that asset.(2)If a person has determined the base cost as contemplated in subparagraph (1) of a pre-valuation date asset which was disposed of during any prior year of assessment and in the current year of assessment—(a)any amount of proceeds is received or accrued in respect of that disposal which has not been taken into account in any prior year in determining the capital gain or capital loss in respect of that disposal;(b)any amount of proceeds which was taken into account in determining the capital gain or capital loss in respect of that disposal has become irrecoverable, or has become repayable or that person is no longer entitled to those proceeds as a result of the cancellation, termination or variation of any agreement or due to the prescription or waiver of a claim or a release from an obligation or any other event during the current year;(c)any amount of expenditure is incurred which forms part of the base cost of that asset which has not been taken into account in any prior year in determining the capital gain or loss in respect of that disposal; or(d)any amount of base cost of that asset that has been taken into account in any prior year in determining the capital gain or capital loss in respect of that disposal, has been recovered or recouped,that person must redetermine the base cost of that asset in terms of subparagraph (1) and the capital gain or capital loss from the disposal of that asset, having regard to the full amount of the proceeds and base cost so redetermined.(3)The amount of capital gain or capital loss redetermined in the current year of assessment in terms of subparagraph (2), must be taken into account in determining any capital gain or capital loss from that disposal in that current year, as contemplated in paragraph 3(b)(iii) or 4(b)(iii).26. Valuation date value where proceeds exceed expenditure or where expenditure in respect of an asset cannot be determined
(1)Where the proceeds from the disposal of a pre-valuation date asset (other than an asset contemplated in paragraph 28 or in respect of which paragraph 32(3A) has been applied) exceed the expenditure allowable in terms of paragraph 20 incurred before, on and after the valuation date in respect of that asset, the person who disposed of that asset must, subject to subparagraph (3), adopt any of the following as the valuation date value of that asset—(a)the market value of the asset on the valuation date as contemplated in paragraph 29;(b)20 per cent of the proceeds from disposal of the asset, after deducting from those proceeds an amount equal to the expenditure allowable in terms of paragraph 20 incurred on or after the valuation date; or(c)the time-apportionment base cost of the asset as contemplated in paragraph 30.(2)Where the expenditure incurred before valuation date in respect of a pre-valuation date asset cannot be determined by the person who disposed of that asset or the Commissioner, that person must adopt any of the following as the valuation date value of that asset—(a)the market value of the asset on the valuation date as contemplated in paragraph 29; or(b)20 per cent of the proceeds from disposal of the asset, after deducting from those proceeds an amount equal to the expenditure allowable in terms of paragraph 20 incurred on or after the valuation date.(3)Where a person has adopted the market value as the valuation date value of an asset, as contemplated in subparagraph (1)(a), and the proceeds from the disposal of that asset do not exceed that market value, that person must substitute as the valuation date value of that asset, those proceeds less the expenditure allowable in terms of paragraph 20 incurred on or after the valuation date in respect of that asset.27. Valuation date value where proceeds do not exceed expenditure
(1)Subject to subparagraph (2), where the proceeds from the disposal of a pre-valuation date asset do not exceed the expenditure allowable in terms of paragraph 20 incurred before, on and after the valuation date in respect of that asset, the valuation date value of that asset must be determined in terms of this paragraph.(2)This paragraph does not apply in respect of any asset contemplated in paragraph 28 or in respect of which paragraph 32(3A) has been applied.(3)Where a person has determined the market value of an asset on the valuation date, as contemplated in paragraph 29, or the market value of an asset has been published in terms of that paragraph, and—(a)the expenditure allowable in terms of paragraph 20 incurred before the valuation date in respect of that asset—(i)is equal to or exceeds the proceeds from the disposal of that asset; and(ii)exceeds the market value of that asset on valuation date,the valuation date value of that asset must be the higher of—(aa)that market value; or(bb)those proceeds less the expenditure allowable in terms of paragraph 20 incurred on or after the valuation date in respect of that asset; or(b)the provisions of item (a) do not apply, the valuation date value of that asset must be the lower of—(ii)the time-apportionment base cost of that asset as contemplated in paragraph 30.(4)Where the provisions of subparagraph (3) do not apply, the valuation date value of that asset, contemplated in subparagraph (1), is the time-apportionment base cost of that asset, as contemplated in paragraph 30.28. Valuation date value of an instrument
(1)Despite paragraph 29, the valuation date value of an instrument as defined in section 24J must be—(a)the adjusted initial amount as determined in terms of that section on valuation date; or(b)the price which could have been obtained upon a sale of that instrument between a willing buyer and a willing seller dealing at arm’s length in an open market—(i)in the case of an instrument which is listed on a recognised exchange, on the last trading day before valuation date; or(ii)in any other case, on valuation date.(2)Where a person has adopted the adjusted initial amount as the valuation date value of an instrument (other than an instrument listed on a recognised exchange), as contemplated in subparagraph (1)(a), and the proceeds from the disposal of that instrument are less than that adjusted initial amount, the valuation date value of that instrument must be the time-apportionment base cost of that instrument, as contemplated in paragraph 30.29. Market value on valuation date
(1)The market value on the valuation date of—(a)a financial instrument listed on a recognised exchange and for which a price was quoted on that exchange both before and after the valuation date is, subject to subparagraphs (2) and (2A), in the case of a financial instrument listed on an exchange—(i)in the Republic, the price published by the Commissioner in the Gazette, which is the aggregate value of all transactions in that financial instrument as traded on that recognised exchange during the five business days preceding the valuation date, divided by the total quantity of that financial instrument traded during the same period; and(ii)outside the Republic and which is not listed on any exchange in the Republic, the ruling price in respect of that financial instrument on that recognised exchange on the last business day before valuation date;(b)an asset which is not listed on a recognised exchange and which constitutes a right of a unit holder or holder of a participatory interest, as the case may be, in—(i)any company contemplated in paragraph (e)(i) of the definition of “company” in section 1 of the Act, or any unit portfolio comprised in any unit trust scheme in property shares carried on in the Republic, the price published by the Commissioner in the Gazette, which is the average of the price at which a unit could be sold to the management company of the scheme for the last five trading days before valuation date; or(ii)any arrangement or scheme contemplated in paragraph (e)(ii) of the definition of “company”, the last price published before the valuation date at which a participatory interest could be sold to the management company of the scheme or where there is not a management company the price which could have been obtained upon a sale of the asset between a willing buyer and a willing seller dealing at arm’s length in an open market on valuation date;(c)any other asset, the market value determined in terms of paragraph 31 on valuation date.(2)Where—(a)a person holds a controlling interest in a company the shares of which are listed on a recognised exchange, and that entire controlling interest is disposed of to another person (who is not a connected person in relation to that person), who acquires that entire controlling interest; and(b)the price per share for which that controlling interest has been so disposed of deviates from the ruling price in respect of that share on the date prior to the announcement of the transaction,the valuation date market value of that share so disposed of, as determined in terms of subparagraph (1)(a), must be increased or decreased, as the case may be, by an amount which bears to that market value the same ratio as the amount of the deviation bears to that ruling price.(2A)Where—(i)a financial instrument listed on an exchange in the Republic was not traded during the last five business days preceding valuation date;(ii)a financial instrument listed on an exchange in the Republic is suspended for any period during September 2001; or(iii)the market value of a financial instrument determined in terms of subparagraph (1)(a)(i), exceeds the average of the ruling price of that financial instrument, determined for the first 14 business days of the month of September 2001, by five per cent or more,the Commissioner must, after consultation with the recognised exchange and the Financial Services Board, determine the market value of that financial instrument having regard to the value of the financial instrument, circumstances surrounding the suspension of that financial instrument or reasons for the increase in the value of that financial instrument.(3)For the purposes of this paragraph “controlling interest” in a company means an interest in more than 35 per cent of the equity shares in that company.(4)For the purposes of paragraphs 26(1)(a) and 27(3), a person may only adopt or determine the market value as the valuation date value of that asset if—(a)in the case where the valuation date is 1 October 2001—(i)that person has valued that asset on or before 30 September 2004;(ii)the price of that asset has been published by the Commissioner in terms of this paragraph in the Gazette; or(iii)that person has acquired that asset from that person’s spouse as contemplated in section 9HB and the transferor spouse had adopted or determined a market value in terms of this paragraph, and for this purpose the transferee spouse must be treated as having adopted or determined that same market value; or(b)in the case where the valuation date is after 1 October 2001—(i)that person has valued that asset within two years after valuation date; or(ii)that asset is one contemplated in paragraph 31(1)(a) or (c)(i) and the market value of that asset on valuation date is determined in terms of one of those paragraphs.(5)Despite subparagraph (4), where a person has valued an asset and—(a)the market value of that asset exceeds R10 million;(b)that asset is an intangible asset (excluding financial instruments) and the market value thereof exceeds R1 million; or(c)that asset is an unlisted share in a company and the market value of all the shares held by that person in that company exceeds R10 million,that person may only adopt the market value as the valuation date value of that asset if that person has furnished proof of that valuation to the Commissioner in the form as the Commissioner may prescribe, with the first return submitted by that person after the date or period contemplated in subparagraph (4).(6)Where a person disposes of—(a)an asset contemplated in subparagraph (5)(a), (b) or (c) which has been valued before proof of valuation is submitted as contemplated in that subparagraph; or(b)any other asset which has been valued,that person must retain proof of that valuation.(7)The Commissioner may, notwithstanding any proof of valuation submitted by a person to the Commissioner as contemplated in subparagraph (5) or (6)—(a)request any such further information or documents relating to that valuation; or(b)where the Commissioner is not satisfied with any value at which an asset has been valued, the Commissioner may adjust the value accordingly.(8)Where the valuation date of a person is after 1 October 2001 the provisions of subparagraphs (1)(a), (1)(b)(i), (2), (2A), (3), (5) and (6)(a) do not apply.30. Time-apportionment base cost
(1)Subject to subparagraph (3), the time-apportionment base cost of a pre-valuation date asset is determined in accordance with the formula—
where—(a)“Y” represents the amount to be determined;(b)“B” represents the amount of expenditure incurred prior to the valuation date in respect of that asset that is allowable before, on or after the valuation date in terms of paragraph 20;(c)“P” represents the proceeds as determined in terms of paragraph 35, in respect of the disposal of that asset, or where subparagraph (2) applies, the amount of proceeds attributable to the expenditure in “B” as determined in accordance with subparagraph (2);(d)“N” represents the number of years determined from the date that the asset was acquired to the day before valuation date, which number of years may not exceed 20 in the case where the expenditure allowable in terms of paragraph 20 in respect of that asset was incurred in more than one year of assessment prior to the valuation date;(e)“T” represents the number of years determined from valuation date until the date the asset was disposed of after valuation date:Provided that for purposes of items (d) and (e) a part of a year must be treated as a full year.(2)Where a portion of the expenditure allowable in terms of paragraph 20 in respect of a pre-valuation date asset was incurred on or after the valuation date, the proceeds to be used in the determination of the time apportionment base cost of the asset must be determined in accordance with the formula—
where—(a)“P” represents the proceeds attributable to B;(b)“R” represents the total amount of proceeds as determined in terms of paragraph 35 in consequence of the disposal of the pre-valuation date asset;(c)“A” represents the amount of expenditure allowable in terms of paragraph 20 in respect of the asset that is incurred on or after valuation date;(d)“B” represents the amount of expenditure incurred prior to the valuation date in respect of that asset that is allowable before, on or after the valuation date in terms of paragraph 20;(3)A person must determine the time-apportionment base cost of a pre-valuation date asset in terms of subparagraph (4) where—(a)that person has incurred expenditure contemplated in paragraph 20(1)(a), (c) or (e) on or after the valuation date;(b)any part of the expenditure contemplated in paragraph 20(1)(a), (c) or (e) incurred before, on or after the valuation date is or was allowable as a deduction in determining the taxable income of that person before the inclusion of any taxable capital gain; and(c)the proceeds in respect of the disposal of that asset exceed the expenditure allowable in terms of paragraph 20 incurred before, on and after the valuation date in respect of that asset.(4)The time-apportionment base cost of a pre-valuation date asset referred to in subparagraph (3) is determined in accordance with the formulae—
and
where—(a)“Y” represents the time apportionment base cost of the asset;(b)“P1” represents the proceeds attributable to the expenditure in B1;(c)“A1” represents the sum of the expenditure allowable in terms of paragraph 20 in respect of the asset that is incurred on or after valuation date, and any amount of that expenditure that has been recovered or recouped as contemplated in paragraph 35(3)(a);(d)“B1” represents the sum of the expenditure allowable in terms of paragraph 20 in respect of the asset that is incurred before valuation date, and any amount of that expenditure that has been recovered or recouped as contemplated in paragraph 35(3)(a);(e)“B”, “N” and “T” bear the same meanings ascribed to those symbols in subparagraph (1); and(f)“R1” represents the sum of the proceeds and any amount contemplated in paragraph 35(3)(a) in respect of that asset.(5)For purposes of this paragraph—(a)any selling expenses incurred on or after the valuation date must be deducted from the following amounts—(i)in the case where subparagraph (2) or (3) applies, the amounts represented by the symbols “R” and “R1”, respectively; and(ii)in any other case, the amount represented by the symbol “P”;(b)except for subparagraph (3)(c) any reference to expenditure allowable in terms of paragraph 20 must exclude selling expenses; and(c)“selling expenses” means expenditure—(i)contemplated in paragraph 20(1)(c)(i) to (iv) incurred directly for the purposes of disposing of that asset; and(ii)which would, but for the provisions of item (b), have constituted expenditure allowable in terms of paragraph 20.31. Market value
(1)The market value of an asset on a specified date is in the case of—(a)an asset which is a financial instrument listed on a recognised exchange and for which a price was quoted on that exchange, the ruling price in respect of that financial instrument on that recognised exchange at close of business on the last business day before that date;(b)an asset which is a long-term insurance policy, being a policy as defined in section 1 of the Long-term Insurance Act the greater of—(i)the amount which would be payable to the policyholder upon the surrender of that policy on that day; or(ii)the amount which according to the insurer is the fair market value of that policy should it run its remaining policy term as determined on that day;(c)an asset which is not listed on a recognised exchange which constitutes a right of a holder of a participatory interest in—(i)any portfolio of a collective investment scheme in securities, or any portfolio of a collective investment scheme in property, carried on in the Republic, the price at which a participatory interest can be sold to the management company of the scheme on that date; or(ii)any arrangement or scheme contemplated in paragraph (e)(ii) of the definition of “company”, the price at which a participatory interest can be sold to the management company of the scheme on that date or where there is not a management company the price which could have been obtained upon a sale of the asset between a willing buyer and a willing seller dealing at arm’s length in an open market on that date;(d)a fiduciary, usufructuary or other similar interest in any asset, an amount determined by capitalising at 12 per cent the annual value of the right of enjoyment of the asset subject to that fiduciary, usufructuary or other like interest, as determined in terms of subparagraph (2), over the expectation of life of the person to whom that interest was granted, or if that right of enjoyment is to be held for a lesser period than the life of that person, over that lesser period;(e)any asset which is subject to a fiduciary, usufructuary or other similar interest in favour of any person, the amount by which the market value of the full ownership of that asset exceeds the value of that fiduciary, usufructuary or other like interest determined in accordance with item (d);(f)any asset which constitutes immovable property on which a bona fide farming undertaking is being carried on, subject to subparagraph (4), either—(i)the value of that property determined as contemplated in paragraph (b) of the definition of “fair market value” in section 1 of the Estate Duty Act; or(ii)the price contemplated in item (g);(g)any other asset, the price which could have been obtained upon a sale of the asset between a willing buyer and a willing seller dealing at arm’s length in an open market.(2)For purposes of subparagraph (1)(d)—(a)the annual value of the right of enjoyment of any asset which is subject to any fiduciary, usufructuary or other like interest, means an amount equal to 12 per cent of the market value of the full ownership of the asset: Provided that where the asset which is subject to that interest cannot reasonably be expected to produce an annual yield equal to 12 per cent on that value of the asset, the Commissioner must decide, on application by the taxpayer, such sum as reasonably represents the annual yield, and the sum so fixed must for the purposes of subparagraph (1)(d) be treated as being the annual value of the right of enjoyment of that asset; and(b)the expectation of life of a person to whom an interest was granted—(i)in the case of a natural person, must be determined in accordance with the provisions applicable in determining the expectation of life of a person for estate duty purposes, as contemplated in the regulations issued in terms of section 29 of the Estate Duty Act; and(ii)in the case of a person other than a natural person, is a period of fifty years.(3)The market value of any shares of a person in a company not listed on a recognised exchange must be determined at a value equal to the price which could have been obtained upon a sale of the share between a willing buyer and a willing seller dealing at arm’s length in an open market subject to the following—(a)no regard shall be had to any provision—(i)restricting the transferability of the shares therein, and it shall be assumed that those shares were freely transferable; or(ii)whereby or whereunder the value of the shares is to be determined;(b)if upon the winding-up of the company that person would have been entitled to share in the assets of the company to an extent that is not in proportion to that person’s holding of shares, the value of the shares held by that holder of shares must not be less than the amount to which that holder of shares would have been so entitled if the company had been in the course of winding-up and the said amount had been determined as at valuation date.(4)The value contemplated in subparagraph (1)(f)(i) may only be used on the death of a person or when the immovable property is disposed of by way of donation or non-arm’s length transaction, if—(a)that value was used for the purposes of paragraph 26 or 27; or(b)the person acquired the immovable property by way of donation or inheritance or non-arm’s length transaction at that value.32. Base cost of identical assets
(1)This paragraph applies to assets which form part of a holding of identical assets.(2)For the purposes of this paragraph “identical assets” means a group of similar assets which—(a)if any one of them were disposed of, would realise the same amount regardless of which of them was so disposed of; and(b)are not able to be individually distinguished apart from any identifying numbers which they may bear.(3)Subject to subparagraphs (3A) and (3B), the base cost of identical assets must be determined by using one of the following methods—(a)specific identification; or(b)the first in first out method.(3A)The weighted average method of determining base cost of assets, as contemplated in subparagraph (4), may be used for identical assets that do not constitute assets contemplated in subparagraph (3B) and which—(a)from the date of acquisition to the date of disposal constituted assets contemplated in paragraph 31(1)(a), other than instruments contemplated in item (d);(b)constitute participatory interests—(i)contemplated in paragraph 31(1)(c), where the prices of these participatory interests or shares are regularly published in a national or international newspaper;(ii)in any portfolio comprised in any collective investment scheme managed or carried on by a company registered as a manager under section 42 of the Collective Investment Schemes Control Act for purposes of Parts IV and V of that Act; or(iii)in any arrangement or scheme contemplated in paragraph (e)(ii) of the definition of “company” in section 1 of the Act, which is approved in terms of section 65 of the Collective Investment Schemes Control Act by the Registrar as defined in section 1 of the latter Act;(c)constitute coins made mainly from gold or platinum, where the prices of these coins are regularly published in a national or international newspaper; or(d)from the date of acquisition to the date of disposal constituted instruments as defined in section 24J that were listed on a recognised exchange and for which a price was quoted on that exchange,and where a person uses the weighted average method for any identical asset contemplated in item (a), (b), (c) or (d), that method must be used for all identical assets, contemplated in that item, held by that person.(3B)The weighted average method of determining base cost of assets, as contemplated in subparagraph (4), must be used for identical assets that are, in terms of section 29A, allocated to all the policyholder funds of an insurer as defined in that section: Provided that this subparagraph must not apply to any asset—(a)that constitutes—(ii)an interest rate agreement as defined in section 24K(1);(iii)a contractual right or obligation the value of which is determined directly or indirectly with reference to—(aa)an instrument contemplated in subparagraph (i);(bb)an interest rate agreement contemplated in subparagraph (ii); or(cc)any specified rate of interest;(v)a policy of reinsurance; or(b)held by an insurer if that insurer is a Category III Financial Services Provider as defined in section 29B(1) and that asset is held by that insurer in its capacity as a Category III Financial Services Provider.(4)In applying the weighted average method of determining base cost—(a)the weighted average base cost, on valuation date, of identical assets acquired and not disposed of before valuation date is equal to the valuation date value of those identical assets, as contemplated in paragraph 28, or the market value of those identical assets, as contemplated in paragraph 29, divided by the number of those identical assets; and(b)the weighted average base cost, thereafter, of identical assets must be calculated by—(i)adding expenditure allowable in terms of paragraph 20 in respect of identical assets to the base cost of identical assets acquired and not disposed of before that expenditure was incurred; and(ii)dividing that amount by the number of identical assets acquired and not disposed of after that expenditure was incurred.(6)Once a person has adopted one of the methods specified in this paragraph in respect of a class of identical assets contemplated in subparagraph (3A), that method must be used until all those identical assets have been disposed of.33. Part-disposals
(1)Subject to subparagraphs (2), (3), (4) and (5) where part of an asset is disposed of—(a)the proportion of the expenditure attributable to the part disposed of is an amount which bears to the expenditure allowable in terms of paragraph 20 in respect of the entire asset the same proportion as the market value of the part disposed of bears to the market value of the entire asset immediately prior to that disposal; and(b)the market value on valuation date attributable to the part disposed of is an amount which bears to the market value adopted or determined in terms of paragraph 29(4) in respect of the entire asset the same proportion as the market value of the part disposed of bears to the market value of the entire asset immediately prior to that disposal.(2)Subject to subparagraph (4), where a part of the expenditure allowable in terms of paragraph 20 or the market value adopted or determined in terms of paragraph 29(4) in respect of an asset can be directly attributed to the part of the asset that is disposed of or retained then the apportionment contemplated in subparagraph (1) does not apply in respect of that part of that expenditure or market value as the case may be.(3)For the purposes of subparagraph (1) and (2) there is no part-disposal of an asset by a person in respect of—(a)the granting of an option by that person in respect of an asset;(b)the granting, variation or cession of a right of use or occupation of that asset by that person in respect of which no proceeds are received by or accrue to that person;(c)the improvement or enhancement of immovable property which that person leases from a lessor; or(d)the replacement of part of that asset in repairing that asset.(4)Where proceeds are received by or accrue to a person in respect of the granting, variation or cession of a right of use or occupation of an asset by that person, the portion of the expenditure allowable in terms of paragraph 20 or market value adopted or determined in terms of paragraph 29(4) attributable to the part of the asset in respect of which those proceeds were received or accrued is an amount which bears to that expenditure or market value as the case may be of the entire asset the same proportion as those proceeds bear to the market value of the entire asset immediately prior to that disposal.(5)Where a person has adopted the 20 percent of proceeds method contemplated in paragraph 26(1)(b) in determining the valuation date value of a part of an asset that has been disposed of, that person must adopt that method in determining the valuation date value of any remaining part of that asset.34. Debt substitution
Where a person reduces or discharges a debt owed by that person to a creditor by disposing of an asset to that creditor, that asset must be treated as having been acquired by the creditor at a cost equal to the market value of that asset at the time of that disposal, which cost must be treated as an amount of expenditure actually incurred for the purposes of paragraph 20(1)(a).Part VI – Proceeds
35. Proceeds from disposal
(1)Subject to subparagraphs (2), (3), and (4), the proceeds from the disposal of an asset by a person are equal to the amount received by or accrued to, or which is treated as having been received by, or accrued to or in favour of, that person in respect of that disposal, and includes—(a)the amount by which any debt owed by that person has been reduced or discharged; and(b)any amount received by or accrued to a lessee from the lessor of property for improvements effected to that property.(2)The amount of the proceeds from a disposal by way of a value shifting arrangement is determined as the market value of the person’s interests to which subparagraph 11(1)(g) applies immediately prior to the disposal less the market value of the person’s interests immediately after the disposal, which amount shall be treated as having been received or accrued to that person.(3)The proceeds from the disposal, during a year of assessment, of an asset by a person, as contemplated in subparagraph (1) must be reduced by—(a)any amount of the proceeds that must be or was included in the gross income of that person or that must be or was taken into account when determining the taxable income of that person before the inclusion of any taxable capital gain;(b)any amount of the proceeds that has during that year of assessment been repaid or has become repayable to the person to whom that asset was disposed of; or(c)any reduction, as the result of the cancellation, termination or variation of an agreement, other than any cancellation or termination of an agreement that results in the asset being reacquired by the person that disposed of it, or any reduction due to the prescription or waiver of a claim or release from an obligation or any other event during that year, of an accrued amount forming part of the proceeds of that disposal.(4)Where during any year of assessment a person has become entitled to any amount which is payable on a date or dates falling after the last day of that year, that amount must be treated as having accrued to that person during that year.35A. Disposal of certain debt claims
(1)This paragraph applies where—(a)a person has disposed of an asset during any year of assessment, all the proceeds of which will not accrue to that person in that year;(b)that person subsequently disposes of any right to claim payment in respect of that disposal; and(c)that claim includes any amount which has not yet accrued to that person at the time of the disposal of that claim.(2)So much of any consideration received by or accrued to a person from the disposal of a claim contemplated in subparagraph (1)(b) as is attributable to any amount which has not yet accrued to that person as contemplated in subparagraph (1)(c), must be treated as an amount of consideration which accrues to that person in respect of the disposal of the asset contemplated in subparagraph (1)(a).(3)So much of any capital gain or capital loss determined in respect of the disposal by the person of the right to claim payment as contemplated in subparagraph (1)(b), as is attributable to any amount which has not yet accrued to that person, must be disregarded.36. Disposal of partnership asset
The proceeds from the disposal of a partner’s interest in an asset of the partnership must be treated as having accrued to that partner at the time of that disposal.37. Assets of trust and company
(1)Where—(a)an asset contemplated in paragraph 15 which is not used for purposes of carrying on a trade or an asset which, if owned by a natural person, would be a personal-use asset as contemplated in paragraph 53, is owned by a trust or a company any interest in which or any shares of which are held directly or indirectly by a natural person;(b)there is a decrease in the market value of that asset while held by that trust or company after that person acquired an interest in that trust or company; and(c)any interest in that trust or that company is thereafter disposed of by a person,that person must be treated as having disposed of that interest for proceeds equal to the market value of that interest, determined on the date of disposal, as if the market value of that asset had not decreased.(2)Subparagraph (1) does not apply where more than 50 per cent of the assets of the trust or company consist of assets used wholly and exclusively for trading purposes.38. Disposal by way of donation, consideration not measurable in money and transactions between connected persons not at an arm’s length price
(1)Subject to subparagraph (2) and section 9HB, where a person disposed of an asset by means of a donation or for a consideration not measurable in money or to a person who is a connected person immediately prior to or immediately after that disposal in relation to that person for a consideration which does not reflect an arm’s length price—(a)the person who disposed of that asset must be treated as having disposed of that asset for an amount received or accrued equal to the market value of that asset as at the date of that disposal; and(b)the person who acquired that asset must be treated as having acquired that asset at a cost equal to that market value, which cost must be treated as an amount of expenditure actually incurred for the purposes of paragraph 20(1)(a).(2)Subparagraph (1) does not apply in respect of the disposal of—(b)an asset in the circumstances contemplated in section 10(1)(nE);(c)a qualifying equity share contemplated in section 8B by an employer, associated institution or any other person by arrangement with the employer, as contemplated in paragraph 1 of the Seventh Schedule, to an employee; or(f)any land from the date on which that land becomes declared land as defined in section 37D(1).39. Capital losses determined in respect of disposals to certain connected persons
(1)A person must, when determining the aggregate capital gain or aggregate capital loss of that person, disregard any capital loss determined in respect of the disposal of an asset to any person—(a)who was a connected person in relation to that person immediately before that disposal; or(b)which is immediately after the disposal—(i)a member of the same group of companies as that person; or(ii)a trust with a beneficiary which is a member of the same group of companies as that person.(2)A person’s capital loss which is disregarded in terms of subparagraph (1) may be deducted from that person’s capital gains determined in respect of disposals of assets during that year or subsequent years to the same person to whom the disposal giving rise to that capital loss was made, if at the time of those subsequent disposals, that person is still a connected person in relation to that person.(3)For the purposes of subparagraph (1), a connected person in relation to—(a)a natural person does not include a relative of that person other than a parent, child, stepchild, brother, sister, grandchild or grandparent of that person; or(b)a fund of an insurer contemplated in section 29A does not include another such fund of that insurer in respect of the disposal of an asset by such fund to another such fund.(4)Subparagraph (1) does not apply in respect of the disposal by a trust of any right, marketable security or equity instrument contemplated in section 8A or 8C to a beneficiary of that trust, if—(a)that right, marketable security or equity instrument is disposed of to that beneficiary—(i)by virtue of that beneficiary’s employment with an employer, directorship of a company or services rendered or to be rendered by that beneficiary as an employee to an employer; or(ii)as a result of the exercise, cession, release, conversion or exchange by that beneficiary of the right, marketable security or equity instrument contemplated in subitem (i); and(b)that trust is an associated institution as contemplated in paragraph 1 of the Seventh Schedule in relation to that employer or company.(5)For the purposes of subparagraph (1), where a company redeems its shares, the holder of those shares must be treated as having disposed of them to that company.39A. Disposal of asset for unaccrued amounts of proceeds
(1)Where a person during any year of assessment disposes of an asset and all the proceeds from the disposal of that asset will not accrue to that person during that year, that person must, when determining the aggregate capital gain or aggregate capital loss for that year or any subsequent year of assessment, disregard any capital loss determined in respect of that disposal.(2)A person’s capital loss which is disregarded during any year of assessment in terms of subparagraph (1) which has not otherwise been allowed as a deduction may be deducted from that person’s capital gains determined in any subsequent year in respect of the disposal of the asset contemplated in subparagraph (1).(3)If during any year of assessment a person shows that no further proceeds will accrue to that person from the disposal contemplated in subparagraph (1), so much of the capital loss contemplated in that subparagraph as has not been deducted from any subsequent capital gains as contemplated in subparagraph (2), may be taken into account in determining that person’s aggregate capital gain or aggregate capital loss for that year of assessment.40. Disposal to and from deceased estate
(1)A person who dies before 1 March 2016 must be treated as having disposed of his or her assets, other than—(a)assets transferred to the surviving spouse of that deceased person as contemplated in section 9HB(2)(a);(c)a long-term insurance policy of the deceased which if the proceeds of the policy had been received by or accrued to the deceased, the capital gain or capital loss determined in respect of that disposal would be disregarded in terms of paragraph 55; or(d)an interest in a pension, pension preservation, provident, provident preservation or retirement annuity fund in the Republic or a fund, arrangement or instrument situated outside the Republic which provides benefits similar to a pension, pension preservation, provident, provident preservation or retirement annuity fund which if the proceeds thereof had been received by or accrued to the deceased, the capital gain or capital loss determined in respect of the disposal of the interest would have been disregarded in terms of paragraph 54,for an amount received or accrued equal to the market value of those assets at the date of that person’s death.(1A)If any asset of a deceased person is treated as having been disposed of as contemplated in subparagraph (1) and is transferred directly to—(a)the estate of the deceased person, the estate must be treated as having acquired that asset at a cost equal to the market value of that asset as at the date of death of that deceased person; or(b)an heir or legatee of the person, the heir or legatee must be treated as having acquired that asset at a cost equal to the market value of that asset as at the date of death of that deceased person,which cost must be treated as an amount of expenditure actually incurred for the purposes of paragraph 20(1)(a).(2)Where an asset is disposed of by a deceased estate to an heir or legatee (other than the surviving spouse of the deceased person as contemplated in section 9HB(2)(a))—(a)the deceased estate must be treated as having disposed of that asset for proceeds equal to the base cost of the deceased estate in respect of that asset; and(b)the heir or legatee must be treated as having acquired that asset at a cost equal to the base cost of the deceased estate in respect of that asset, which cost must be treated as an amount of expenditure actually incurred for the purposes of paragraph 20(1)(a).(3)For the purposes of this Schedule, the disposal of an asset by the deceased estate of a natural person shall be treated in the same manner as if that asset had been disposed of by that natural person.41. Tax payable by heir of a deceased estate
(1)Where a person dies before 1 March 2016 and—(a)the tax determined in terms of this Act, which relates to the taxable capital gain of a deceased person, exceeds 50 per cent of the net value of the estate determined for purposes of the Estate Duty Act, before taking into account the amount of that tax so determined; and(b)the executor of the estate is required to dispose of any asset of the estate for purposes of paying the amount of that tax,any heir or legatee of the estate, who would have been entitled to that asset contemplated in item (b), had there been no liability for tax, may elect that that asset be distributed to that heir or legatee upon the condition that the amount of tax which exceeds 50 per cent of that net value be paid by him or her within a period of three years after the date that the executor obtained permission to distribute the assets of the estate, as contemplated in section 35(12) of the Administration of Estates Act, 1965 (Act No. 66 of 1965).(2)Any amount of tax payable by an heir as contemplated in subparagraph (1), becomes a debt due to the state and must be treated as an amount of tax chargeable in terms of this Act which is due by that person.42. Short-term disposals and acquisitions of identical financial instruments
(1)Where a capital loss is determined in respect of the disposal by a person of a financial instrument, other than a disposal contemplated in section 29B, and within a period beginning 45 days before the date of disposal and ending 45 days after that date, that person or a connected person in relation to that person, subject to subparagraph (3), acquires or has entered into a contract to acquire a financial instrument of the same kind and of the same or equivalent quality—(a)the person who disposed of the financial instrument must be treated as having disposed thereof for proceeds equal to the base cost thereof; and(b)the person who acquired the financial instrument of the same kind and of the same or equivalent quality must be treated as having acquired that financial instrument at a cost equal to the total of—(i)any amount allowable in terms of paragraph 20; and(ii)the amount of any capital loss which would have arisen in the hands of the person who disposed of the asset, were it not for the operation of item (a),which cost must be treated as an amount of expenditure actually incurred for the purposes of paragraph 20(1)(a).(2)For the purposes of subparagraph (1), there must not be taken into account in determining the period of 91 days any days in which the person disposing of the financial instrument—(a)has an option to sell, is under a contractual obligation to sell or has made (and not closed) a short sale of a financial instrument of the same kind and of the same or equivalent quality;(b)is the grantor of an option to buy a financial instrument of the same kind and of the same or equivalent quality; or(c)has otherwise diminished risk of loss in respect of that financial instrument by holding one or more contrary positions with respect to a financial instrument of the same kind and of the same or equivalent quality.(3)For the purposes of this paragraph, a connected person in relation to—(a)a natural person does not include a relative of that person other than a parent, child, stepchild, brother, sister, grandchild or grandparent of that person; or(b)a fund of an insurer contemplated in section 29A does not include another such fund of that insurer in respect of the disposal of an asset by such fund to another such fund.(4)This paragraph must not apply to any asset—(a)in respect of which the weighted average method of determining base cost of assets, as contemplated in paragraph 32(4), is used; and(b)if that asset is, in terms of section 29A, allocated to any policyholder fund of an insurer as defined in that section.43. Assets disposed of or acquired in foreign currency
(1)Where, during any year of assessment, a person that is a natural person or a trust that is not carrying on a trade disposes of an asset for proceeds in a foreign currency after having incurred expenditure in respect of that asset in the same currency, that person must determine the capital gain or capital loss on the disposal in that currency and that capital gain or capital loss must be translated to the local currency by applying the average exchange rate for the year of assessment in which that asset was disposed of or by applying the spot rate on the date of disposal of that asset.(1A)Where, during any year of assessment, a person disposes of an asset (other than a disposal contemplated in subparagraph (1)) for proceeds in a foreign currency or after having incurred expenditure in respect of that asset in a foreign currency, that person must, for the purposes of determining the capital gain or capital loss on the disposal of that asset, translate—(a)the proceeds into the local currency at the average exchange rate for the year of assessment in which that asset was disposed of or at the spot rate on the date of disposal of that asset; and(b)the expenditure incurred in respect of that asset into the local currency at the average exchange rate for the year of assessment during which that expenditure was incurred or at the spot rate on the date on which that expenditure was incurred: Provided that the amount of any capital gain or capital loss determined under this subparagraph in respect of an exchange item contemplated in section 24I must be taken into account in terms of this paragraph only to the extent to which it exceeds the amounts determined in respect of that exchange item under section 24I.(5)Where a person is treated as having derived an amount of proceeds from the disposal of any asset and the expenditure incurred to acquire that asset is determined in any foreign currency—(a)the amount of those proceeds must be treated as being denominated in the currency of the expenditure incurred to acquire that asset; and(b)the expenditure incurred by a person acquiring that asset must for purposes of sections 9HA and 25 and paragraphs 12, 38 and 40 be treated as being denominated in that currency.(6)Where a person has adopted the market value as the valuation date value of any asset contemplated in this paragraph, that market value must be determined in the currency of the expenditure incurred to acquire that asset and for purposes of the application of subparagraph (1A) be translated to the local currency by applying the spot rate on valuation date.(7)For the purposes of this paragraph—“foreign currency” means currency other than local currency; and“local currency” means—(a)in relation to a permanent establishment of a person, the functional currency of that permanent establishment (other than the currency of any country in the common monetary area);(b)in relation to a headquarter company, in respect of amounts which are not attributable to a permanent establishment outside the Republic, the functional currency of that headquarter company;(c)in relation to a domestic treasury management company, in respect of amounts which are not attributable to a permanent establishment outside the Republic, the functional currency of that domestic treasury management company;(d)in relation to an international shipping company defined in section 12Q, in respect of amounts which are not attributable to a permanent establishment outside the Republic, the functional currency of that international shipping company; or(e)in any other case, the currency of the Republic.43A. Dividends treated as proceeds on disposal of certain shares
(1)For purposes of this paragraph—“deferral transaction” means a transaction in respect of which the provisions of Part III of Chapter II were applied;“exempt dividend” means any dividend or foreign dividend to the extent that the dividend or foreign dividend is—(a)not subject to any tax under Part VIII of Chapter II; and“extraordinary dividend”, in relation to—(a)a preference share, means so much of the amount of any dividend received or accrued in respect of that share as exceeds the amount that would have accrued in respect of that share had it been determined with reference to the consideration for which that share was issued by applying an interest rate of 15 per cent per annum for the period in respect of which that dividend was received or accrued;(b)any other share, means so much of the amount of any dividend received or accrued—(i)within a period of 18 months prior to the disposal of that share; or(ii)in respect, by reason or in consequence of that disposal,as exceeds 15 per cent of the higher of the market value of that share as at the beginning of the period of 18 months and as at the date of disposal of that share:Provided that a dividend in specie that was distributed in terms of a deferral transaction must not be taken into account to the extent to which that distribution was made in terms of an unbundling transaction as defined in section 46(1)(a) or a liquidation distribution as defined in section 47(1)(a);“preference share” means a preference share as defined in section 8EA(1); and“qualifying interest” means an interest held by a company in another company, whether alone or together with any connected persons in relation to that company, that constitutes—(a)if that other company is not a listed company, at least—(i)50 per cent of the equity shares or voting rights in that other company; or(ii)20 per cent of the equity shares or voting rights in that other company if no other person (whether alone or together with any connected person in relation to that person) holds the majority of the equity shares or voting rights in that other company; or(b)if that other company is a listed company, at least 10 per cent of the equity shares or voting rights in that other company.(2)Subject to subparagraph (3), where a company holds shares in another company and disposes of any of those shares in terms of a transaction that is not a deferral transaction and that company held a qualifying interest in that other company at any time during the period of 18 months prior to that disposal, the amount of any exempt dividend received by or that accrued to that company in respect of the shares disposed of must—(a)to the extent that the exempt dividend constitutes an extraordinary dividend; and(b)if that company immediately before that disposal held the shares disposed of as a capital asset (as defined in section 41),be taken into account as part of the proceeds from the disposal of those shares or, if those shares are treated as having been disposed of in terms of subparagraph (4), as a capital gain in respect of those shares, in the year of assessment in which those shares are disposed of or are treated as having been disposed of or, where that dividend is received or accrues after that year of assessment, the year of assessment in which that dividend is received or accrues: Provided that where a company disposes of shares that are treated as having been disposed of previously by that company in terms of subparagraph (4), the amount of any extraordinary dividend in respect of those shares must be included in the proceeds from that disposal only to the extent to which it has not previously been taken into account in respect of those shares in terms of this subparagraph.(3)Where a company holds shares in another company and disposes of any of those shares in terms of a transaction that is not a deferral transaction within a period of 18 months after having acquired those shares in terms of a deferral transaction, other than an unbundling transaction and—(a)within a period of 18 months prior to the disposal of those shares by that company an exempt dividend in respect of those shares accrued to or was received by a person that—(i)disposed of those shares in terms of a deferral transaction; and(ii)was a connected person in relation to that company at any time within that period or immediately after that disposal,that dividend must for purposes of this paragraph be treated as a dividend that accrued to or was received by that company in respect of those shares within the period during which that company held those shares; and(b)if that company acquired those shares (hereinafter referred to as “new shares”) in terms of that deferral transaction in return for or by virtue of the holding, by that company, of other shares (hereinafter referred to as “old shares”) that were disposed of in terms of that deferral transaction and an exempt dividend in respect of the old shares, other than a dividend consisting of new shares, accrued to or was received by that company within a period of 18 months prior to the disposal of the new shares, that dividend must for purposes of this paragraph be treated as an amount that accrued to or was received by that company as an exempt dividend in respect of the new shares.(4)Where a company holds equity shares in another company (hereinafter referred to as the “target company”) and—(a)the target company issues shares (hereinafter referred to as the “new shares”) to a person other than that company; and(b)the effective interest of that company in the equity shares of the target company is reduced by reason of the new shares issued by the target company,that company must for purposes of this paragraph be treated as having disposed, immediately after the new shares were issued, of a percentage of those equity shares that is equal to the percentage by which the effective interest of that company in the equity shares of the target company has been reduced by reason of the new shares issued by the target company: Provided that any new shares that are convertible to equity shares must for purposes of this subparagraph be treated as equity shares.43B. Base cost of assets of controlled foreign companies
Where the functional currency of a controlled foreign company—(a)was the currency of a country which—(i)abandoned its currency; and(ii)had an official rate of inflation of 100 per cent or more for the foreign tax year preceding the abandonment of the currency; and(b)the controlled foreign company adopted a new functional currency as a consequence of the abandonment contemplated in subparagraph (a)(i),the controlled foreign company must, for the purposes of determining the base cost of an asset of the controlled foreign company, be deemed to have acquired the asset in that new currency—(A)on the first day of the foreign tax year of the controlled foreign company in which; and(B)for an amount equal to the market value of the asset on the date on which,the new currency was adopted by the controlled foreign company.Part VII – Primary residence exclusion
44. Definitions
In this Part, unless the context otherwise indicates—“an interest” means—(a)any real or statutory right; or(b)a share owned directly in a share block company as defined in the Share Blocks Control Act or a share or interest in a similar entity which is not a resident; or(c)a right of use or occupation,but excluding—(i)a right under a mortgage bond; or(ii)a right or interest of whatever nature in a trust or an asset of a trust, other than a right of a lessee who is not a connected person in relation to that trust;“primary residence” means a residence—(a)in which a natural person or a special trust holds an interest; and(b)which that person or a beneficiary of that special trust or a spouse of that person or beneficiary—(i)ordinarily resides or resided in as his or her main residence; and(ii)uses or used mainly for domestic purposes;“residence” means any structure, including a boat, caravan or mobile home, which is used as a place of residence by a natural person, together with any appurtenance belonging thereto and enjoyed therewith.45. General principle
(1)Subject to subparagraphs (2), (3) and (4), a natural person or a special trust must, when determining an aggregate capital gain or aggregate capital loss, disregard—(a)so much of a capital gain or capital loss determined in respect of the disposal of the primary residence of that person or that special trust as does not exceed R2 million; or(b)a capital gain determined in respect of the disposal of the primary residence of that person or that special trust if the proceeds from the disposal of that primary residence do not exceed R2 million.(1A)(a)The Minister may announce in the national annual budget contemplated in section 27(1) of the Public Finance Management Act, that, with effect from a date or dates mentioned in that announcement, the amount of the capital gain or capital loss determined in terms of subparagraph (1)(a) or the amount of the capital gain determined in terms of subparagraph (1)(b) will be altered to the extent mentioned in the announcement.(b)If the Minister makes an announcement of an alteration contemplated in paragraph (a), that alteration comes into effect on the date or dates determined by the Minister in that announcement and continues to apply for a period of 12 months from that date or those dates subject to Parliament passing legislation giving effect to that announcement within that period of 12 months.(2)Where more than one natural person or special trust jointly holds an interest in a primary residence at the same time, the amount to be disregarded in terms of subparagraph (1) must be apportioned in relation to each interest so held.(3)Subject to paragraph 48, only one residence may be a primary residence of a person or a special trust for any period during which that person or special trust held an interest in more than one residence.(4)Subparagraph (1)(b) does not apply where a natural person or a special trust disposes of an interest in a residence which is or was a primary residence, and that person or a beneficiary of that special trust or a spouse of that person or beneficiary—(a)was not ordinarily resident in that residence throughout the period commencing on or after the valuation date during which that person or special trust held that interest; or(b)used that residence or a part thereof for the purposes of carrying on a trade for any portion of the period commencing on or after the valuation date during which that person or special trust held that interest.46. Size of residential property qualifying for exclusion
Where a primary residence and the land on which it is situated is disposed of by a person, the provisions of paragraph 45 apply in respect of so much of that land, including unconsolidated adjacent land, as—(a)does not exceed two hectares;(b)is used mainly for domestic or private purposes together with that residence; and(c)is disposed of at the same time and to the same person as that residence.47. Apportionment in respect of periods where not ordinarily resident
Subject to paragraph 48, where—(a)a natural person or special trust disposes of an interest in a residence which is or was a primary residence; and(b)that person or a beneficiary of that special trust or a spouse of that person or beneficiary, was not ordinarily resident in that residence throughout the period on or after the valuation date during which that person or special trust held that interest,then paragraph 45(1)(a) must apply only in respect of the portion of the capital gain or capital loss on disposal of the primary residence that is attributable to any period on or after the valuation date during which that person, beneficiary or spouse was so ordinarily resident.48. Disposal and acquisition of primary residence
A natural person or a beneficiary of a special trust or a spouse of that person or beneficiary must for purposes of paragraph 47 be treated as having been ordinarily resident in a residence for a continuous period (not exceeding two years), if that natural person, beneficiary or spouse did not reside in that residence during that period for any of the following reasons—(a)at the time the residence was the primary residence of that natural person or special trust it had been offered for sale and vacated due to the acquisition or intended acquisition of a new primary residence;(b)that residence was being erected on land acquired for that purpose in order to be used as the primary residence of that natural person or special trust;(c)the residence had been accidentally rendered uninhabitable; or(d)the death of that natural person, beneficiary or spouse.49. Non-residential use
Subject to paragraph 50—(a)where a natural person or special trust—(i)disposes of an interest in a primary residence; or(ii)disposes of an interest in a residence that was a primary residence for a part of the period on or after the valuation date during which that person or special trust held that interest; and(b)where that natural person, a beneficiary of that special trust or a spouse of that natural person or beneficiary used the residence referred to in subparagraph (a) or a part thereof for the purposes of carrying on a trade for any portion of the period on or after the valuation date during which that person or special trust held that interest,then paragraph 45(1)(a) must apply only in respect of the portion of the capital gain or capital loss on disposal of the primary residence that is attributable to any period on or after the valuation date during which that person, beneficiary or spouse used that residence for domestic purposes as well as to the part of that residence used by that person, spouse or beneficiary mainly for purposes other than the carrying on of a trade.50. Rental periods
A natural person or a beneficiary of a special trust or a spouse of that person or beneficiary must for purposes of paragraph 49 be treated as having used a residence for domestic purposes during any continuous period of absence therefrom (not exceeding five years) while that residence was being let, if—(a)that person or beneficiary or spouse resided in that residence as a primary residence for a continuous period of at least one year prior to and after any such period;(b)no other residence was treated as the primary residence of that person or beneficiary of a special trust during any such period; and(c)that person or beneficiary or spouse was—(i)temporarily absent from the Republic; or(ii)employed or engaged in carrying on business in the Republic at a location further than 250 kilometers from that residence.51. Transfer of residence from company or trust
(1)Where an interest in a residence has been transferred from a company or a trust to a natural person as contemplated in subparagraph (2)—(a)that company or trust must be deemed to have disposed of that interest for an amount equal to the base cost of that interest on the date of transfer thereof;(b)that company or trust and that natural person must, for purposes of determining any capital gain or capital loss in respect of the transfer of that interest, be deemed to be one and the same person with respect to—(i)the date of acquisition of that interest by that company or trust and the amount and date of incurral by that company or trust of any expenditure in respect of that interest allowable in terms of paragraph 20; and(ii)any valuation of that interest effected by that company or trust as contemplated in paragraph 29(4);(c)no allowance or deduction allowed to that company or trust in respect of that interest must be recovered or recouped by that company or trust or be included in the income of that company or trust in the year in which the transfer takes place; and(d)that company or trust and that natural person must be deemed to be one and the same person for purposes of determining the amount of any allowance or deduction that is to be recovered or recouped by or included in the income of that natural person in respect of that interest.(2)Subparagraph (1) applies where—(a)that natural person acquires that interest from the company or trust no later than 30 September 2010;(b)that natural person—(i)alone or together with his or her spouse directly held all the share capital or members’ interest in that company from 11 February 2009 to the date of registration in the deeds registry of that residence in the name of that natural person or his or her spouse or in their names jointly; or(ii)disposed of that residence to that trust by way of donation, settlement or other disposition or financed all the expenditure, as contemplated in paragraph 20, actually incurred by the trust to acquire and to improve the residence; and(c)that natural person alone or together with his or her spouse personally and ordinarily resided in that residence and used it mainly for domestic purposes as his or her or their ordinary residence from 11 February 2009 to the date of the registration contemplated in item (b)(i):Provided that this paragraph applies only in respect of the portion of the property contemplated in paragraph 46.51A. Disposal of residence by company or trust and liquidation, winding up, deregistration or termination of company or trust
(1)Subject to subparagraph (6), this paragraph applies where a company or trust disposes of an interest in a residence and—(a)the disposal takes place on or before 31 December 2012;(b)the residence to which that interest relates is mainly used for domestic purposes during the period commencing on 11 February 2009 and ending on the date of the disposal contemplated in item (a) by one or more natural persons who are connected persons in relation to the company or trust at the time of that disposal; and(d)within a period of six months commencing on the date of the disposal contemplated in item (a)—(i)in the case of a company making the disposal, that company has taken steps to liquidate, wind up or deregister as contemplated in section 41(4); or(ii)in the case of a trust making the disposal, steps have been taken to terminate the trust.(2)Where a company or a trust makes a disposal of an interest in a residence as contemplated in subparagraph (1), that company or trust must be deemed to have made that disposal for an amount equal to the base cost of that interest as at the date of that disposal.(3)Where—(a)an interest in a residence has been acquired by a person as a result of a disposal by a company of that interest to that person as contemplated in subparagraph (1);(b)that person (together with all other persons holding shares in that company) acquired all the shares in the company subsequent to the date of acquisition by the company of that interest; and(c)90 per cent or more of the market value of the assets held by the company during the period commencing on 11 February 2009 and ending on the date of the disposal contemplated in subparagraph (1)(a) is attributable to that interest,that person must—(i)disregard the disposal of all shares held by that person in that company for purposes of determining his or her taxable income, assessed loss, aggregate capital gain or aggregate capital loss if that disposal is made in anticipation of or in the course of the liquidation, winding up or deregistration of that company; and(ii)be deemed to have acquired that interest at a cost equal to the base cost of the shares contemplated in subitem (i) as at the date of the acquisition by the person of those shares plus the cost of any improvements effected in respect of that interest subsequent to that date of acquisition.(4)Where an interest in a residence has been acquired by a person as a result of a disposal by a company of that interest to that person as contemplated in subparagraph (1) and where subparagraph (3) does not apply—(a)that person must disregard the disposal of any share in that company for purposes of determining his or her taxable income, assessed loss, aggregate capital gain or aggregate capital loss if that disposal is made in anticipation of or in the course of the liquidation, winding up or deregistration of that company; and(b)that person and that company must be deemed to be one and the same person with respect to—(i)the date of acquisition of that interest by that company;(ii)the amount and date of incurral by that company of any expenditure in respect of that interest allowable in terms of paragraph 20; and(iii)any valuation of that interest effected by that company as contemplated in paragraph 29(4).(5)Where an interest in a residence has been acquired by a person as a result of a disposal by a trust of that interest to that person as contemplated in subparagraph (1), that person and that trust must for purposes of determining any capital gain or capital loss in respect of the disposal by that person of that interest so acquired be deemed to be one and the same person with respect to—(a)the date of acquisition of that interest by that trust;(b)the amount and date of incurral by that trust of any expenditure in respect of that interest allowable in terms of paragraph 20; and(c)any valuation of that interest effected by that trust as contemplated in paragraph 29(4).(6)This paragraph does not apply to any disposal made to a person unless—(a)within a period of six months commencing on the date of that disposal—(i)where that person is a company, that company has taken steps to liquidate, wind up or deregister as contemplated in section 41(4); or(ii)where that person is a trust, steps have been taken to terminate the trust.(b)one or more natural persons contemplated in subparagraph (1)(b) acquire the residence contemplated in that subparagraph on or before 31 December 2012.Part VIII – Other exclusions
52. General principle
Capital gains and capital losses must be disregarded in the circumstances and to the extent set out in this Part when determining the aggregate capital gain or aggregate capital loss of a person.53. Personal-use assets
(1)A natural person or a special trust must disregard a capital gain or capital loss determined in respect of the disposal of a personal-use asset as contemplated in subparagraph (2).(2)A personal-use asset is an asset of a natural person or a special trust that is used mainly for purposes other than the carrying on of a trade.(3)Personal use assets do not include—(a)a coin made mainly from gold or platinum of which the market value is mainly attributable to the material from which it is minted or cast;(c)an aircraft, the empty mass of which exceeds 450 kilograms;(d)a boat exceeding ten metres in length;(e)a financial instrument;(f)any fiduciary, usufructuary or other like interest, the value of which decreases over time;(g)any contract in terms of which a person, in return for payment of a premium, is entitled to policy benefits upon the happening of a certain event and includes a reinsurance policy in respect of such a contract, but excludes any short-term policy contemplated in the Short-term Insurance Act;(h)any short-term policy contemplated in the Short-term Insurance Act to the extent that it relates to any asset which is not a personal-use asset; and(i)a right or interest of whatever nature to or in an asset envisaged in items (a) to (h).(4)For the purposes of subparagraph (2), an asset of a natural person or a special trust to whom an allowance is or was paid or payable in respect of the use of that asset for business purposes, must be treated as being used mainly for purposes other than the carrying on of a trade.54. Retirement benefits
A person must disregard any capital gain or capital loss determined in respect of a disposal that resulted in that person receiving—(a)a lump sum benefit as defined in the Second Schedule; or(b)a lump sum benefit paid from a fund, arrangement or instrument situated outside the Republic which provides similar benefits under similar conditions to a pension, pension preservation, provident, provident preservation or retirement annuity fund approved in terms of this Act.55. Long-term assurance
(1)A person must disregard any capital gain or capital loss determined in respect of a disposal that resulted in the receipt by or accrual to that person of an amount—(a)in respect of a policy, where that person—(i)is the original beneficial owner or one of the original beneficial owners of the policy;(ii)is the spouse, nominee, dependant as contemplated in the Pension Funds Act or deceased estate of the original beneficial owner of the relevant policy and no amount was paid or is payable or will become payable, whether directly or indirectly, in respect of any cession of that policy from the beneficial owner of that policy to that spouse, nominee or dependant; or(iii)is the former spouse of the original beneficial owner and that policy was ceded to that spouse in consequence of a divorce order or, in the case of a union contemplated in paragraph (b) or (c) of the definition of “spouse” in section 1 of this Act, an agreement of division of assets which has been made an order of court;(b)in respect of any policy, where that person is or was an employee or director whose life was insured in terms of that policy and any premiums paid by that person’s employer were deducted in terms of section 11(w);(c)in respect of a policy that was taken out to insure against the death, disability or illness of that person by any other person who was a partner of that person, or held any shares or similar interest in a company in which that person held any share or similar interest, for the purpose of enabling that other person to acquire, upon the death, disability or illness of that person, the whole or part of—(i)that person’s interest in the partnership concerned; or(ii)that person’s share or similar interest in that company and any claim by that person against that company,and no premium on the policy was paid or borne by that person while that other person was the beneficial owner of the policy;(d)in respect of a policy originally taken out on the life of a person, where that policy is provided to that person or dependant by or in consequence of that person’s membership of a pension fund, pension preservation fund, provident fund, provident preservation fund or retirement annuity fund;(e)in respect of a risk policy with no cash value or surrender value; or(f)if the amount received or accrued constitutes an amount contemplated in section 10(1)(gG) or (gH).(2)For the purposes of subparagraph (1), “policy” means a policy as defined in section 29A with an insurer.56. Disposal by creditor of debt owed by connected person
(1)Where a creditor disposes of a debt owed by a debtor, who is a connected person in relation to that creditor, that creditor must disregard any capital loss determined in consequence of that disposal.(2)Despite paragraph 39, subparagraph (1) does not apply in respect of any capital loss determined in consequence of the disposal by a creditor of a debt owed by a debtor, to the extent that the amount of that debt so disposed of represents—(a)an amount—(i)which is applied to reduce the expenditure in respect of an asset of the debtor in terms of section 19(3) or paragraph 12A(3); or(ii)which must be taken into account by the debtor as a capital gain in terms of paragraph 12A(4);(b)an amount which the creditor proves must be or was included in the gross income of any acquirer of that debt;(c)an amount that must be or was included in the gross income or income of the debtor or taken into account in the determination of the balance of assessed loss of the debtor in terms of section 20(1)(a); or(d)a capital gain which the creditor proves must be or was included in the determination of the aggregate capital gain or aggregate capital loss of any acquirer of the debt.57. Disposal of small business assets
(1)For purposes of this paragraph—“active business asset” means—(a)an asset which constitutes immovable property, to the extent that it is used for business purposes; or(b)an asset (other than immovable property) used or held wholly and exclusively for business purposes,but excludes—(i)a financial instrument; and(ii)an asset held in the course of carrying on a business mainly to derive any income in the form of an annuity, rental income, a foreign exchange gain or royalty or any income of a similar nature;“small business” means a business of which the market value of all its assets, as at the date of the disposal of the asset or interest contemplated in subparagraph (2), does not exceed R10 million.(2)Subject to subparagraphs (3), (4) and (5), a natural person must, when determining an aggregate capital gain or aggregate capital loss, disregard a capital gain determined in respect of the disposal of—(a)an active business asset of a small business owned by that natural person as a sole proprietor; or(b)an interest in each of the active business assets of a business, which qualifies as a small business, owned by a partnership, upon that natural person’s withdrawal from that partnership to the extent of his or her interest in that partnership; or(c)an entire direct interest in a company (which consists of at least 10 per cent of the equity of that company), to the extent that the interest relates to active business assets of the business, which qualifies as a small business, of that company,if that person at the time of that disposal held for his or her own benefit that active business asset, interest in the partnership, or interest in the company (as the case may be) for a continuous period of at least five years prior to that disposal and was substantially involved in the operations of the business of that small business during that period, and—(i)has attained the age of 55 years; or(ii)the disposal is in consequence of ill-health, other infirmity, superannuation or death.(3)The sum of the amounts to be disregarded by a natural person as contemplated in subparagraph (2) may not exceed R1,8 million during that natural person’s lifetime.(4)A natural person must realise all capital gains qualifying in terms of subparagraph (2) within a period of 24 months commencing on the date of the first disposal contemplated in subparagraph (2).(5)Where a natural person operates more than one small business either by way of a sole proprietorship, a partnership interest or a direct interest in the equity of a company consisting of at least 10 per cent, then he or she may subject to subparagraphs (4) and (6), include every such small business in the determination of the amount to be disregarded in terms of subparagraph (2).(6)The provisions of this paragraph do not apply where a person owns more than one business either by way of a sole proprietorship, a partnership interest or a direct interest in the equity of a company consisting of at least 10 per cent, and the total market value of all assets in respect of all those businesses exceeds R10 million.(7)(a)The Minister may announce in the national annual budget contemplated in section 27(1) of the Public Finance Management Act, that, with effect from a date or dates mentioned in that announcement, the market value of all assets referred to in the definition of “small business” in subparagraph (1), the sum of the amounts referred to in subparagraph (3) or the total market value of all assets referred to in subparagraph (6) will be altered to the extent mentioned in the announcement.(b)If the Minister makes an announcement of an alteration contemplated in paragraph (a), that alteration comes into effect on the date or dates determined by the Minister in that announcement and continues to apply for a period of 12 months from that date or those dates subject to Parliament passing legislation giving effect to that announcement within that period of 12 months.57A. Disposal of micro business assets
A registered micro business as defined in terms of the Sixth Schedule must disregard any capital gain or capital loss in respect of the disposal by that business of any asset used mainly for business purposes.58. Exercise of an option
Where, as a result of the exercise by a person of an option, that person acquires or disposes of an asset in respect of which that option was granted, that person must disregard any capital gain or capital loss determined in respect of the exercise of that option.59. Compensation for personal injury, illness or defamation
A natural person or a special trust must disregard a capital gain or a capital loss determined in respect of a disposal that resulted in that person or that special trust, as the case may be, receiving compensation for personal injury, illness or defamation of that person or a beneficiary of that special trust.60. Gambling, games and competitions
(1)A person must disregard a capital gain or capital loss determined in respect of a disposal relating to any form of gambling, game or competition.(2)Notwithstanding subparagraph (1), a capital gain may not be disregarded—(a)by any person other than a natural person; or(b)by any natural person, unless that form of gambling, game or competition is authorised by, and conducted in terms of, the laws of the Republic.61. Portfolios of collective investment schemes other than portfolios of collective investment schemes in property
(1)A holder of a participatory interest in a portfolio of a collective investment scheme, other than a portfolio of a collective investment scheme in property, must determine a capital gain or capital loss in respect of the participatory interest only upon the disposal of that participatory interest.(2)The capital gain or capital loss to be determined in terms of subparagraph (1) must be determined with reference to the proceeds from the disposal of that participatory interest and its base cost.(3)Any capital gain or capital loss in respect of a disposal by a portfolio of a collective investment scheme, other than a portfolio of a collective investment scheme in property, must be disregarded.62. Donations and bequests to public benefit organisations and exempt persons
A person must disregard a capital gain or capital loss determined in respect of the donation or bequest of an asset by that person to—(a)the government of the Republic in the national, provincial or local sphere, as contemplated in section 10(1)(a);(b)a public benefit organisation contemplated in paragraph (a) of the definition of “public benefit organisation” in section 30(1) that has been approved by the Commissioner in terms of section 30(3);(c)a person contemplated in section 10(1)(cA) or (d)(iv);(d)a person referred to in section 10(1)(cE) or (e); or(e)a recreational club which is a company, society or other organisation as contemplated in the definition of “recreational club” in section 30A(1) that has been approved by the Commissioner in terms of section 30A.63. Exempt persons
A person must disregard any capital gain or capital loss in respect of the disposal of an asset where any amount constituting gross income of whatever nature would be exempt from tax in terms of section 10 were it to be received by or to accrue to that person.63A. Public benefit organisations
A public benefit organisation approved by the Commissioner in terms of section 30(3) must disregard any capital gain or capital loss determined in respect of the disposal of an asset if—(a)that public benefit organisation did not use that asset on or after valuation date in carrying on any business undertaking or trading activity; or(b)substantially the whole of the use of that asset by that public benefit organisation on and after valuation date was directed at—(i)a purpose other than carrying on a business undertaking or trading activity; or(ii)carrying on a business undertaking or trading activity contemplated in section 10(1)(cN)(ii)(aa), (bb) or (cc).63B. Small business funding entities
(1)A small business funding entity approved by the Commissioner in terms of section 30C must disregard any capital gain or capital loss determined in respect of the disposal of an asset if—(a)that small business funding entity did not use that asset in carrying on any business undertaking or trading activity; or(b)substantially the whole of the use of that asset by that small business funding entity was directed at—(i)a purpose other than carrying on a business undertaking or trading activity; or(ii)carrying on a business undertaking or trading activity contemplated in section 10(1)(cQ)(ii)(aa), (bb) or (cc).64. Asset used to produce exempt income
A person must disregard any capital gain or capital loss in respect of the disposal of an asset which is used by that person solely to produce amounts which are exempt from normal tax in terms of—(a)section 10, other than receipts and accruals contemplated in paragraphs (cN), (cO), (i) and (k) of subsection (1) thereof; or64A. Awards in terms of the Restitution of Land Rights Act
A person must disregard any capital gain or capital loss in respect of the disposal that resulted in that person receiving—(a)restitution of a right to land, an award or compensation in terms of the Restitution of Land Rights Act, 1994 (Act No. 22 of 1994); or(b)land or right to land by virtue of the measures as contemplated in Chapter 6 of the National Development Plan: Vision 2030 of 11 November 2011 released by the National Planning Commission, Presidency of the Republic of South Africa.64B. Disposal of equity shares in foreign companies
(1)Subject to subparagraph (4), a person other than a headquarter company must disregard any capital gain or capital loss determined in respect of the disposal of any equity share in any foreign company (other than an interest contemplated in paragraph 2(2)), if—(a)that person (whether alone or together with any other person forming part of the same group of companies as that person) immediately before that disposal—(i)held an interest of at least 10 per cent of the equity shares and voting rights in that foreign company; and(ii)held the interest contemplated in subitem (i) for a period of at least 18 months prior to that disposal, unless—(aa)that person is a company;(bb)that interest was acquired by that person from any other company that forms part of the same group of companies as that person; and(cc)that person and that other company in aggregate held that interest for more than 18 months; and(b)that interest is disposed of to any person that is not a resident (other than a controlled foreign company or any person that is a connected person in relation to the person disposing of that interest) for an amount that is equal to or exceeds the market value of the interest.(2)Subject to subparagraph (4), a headquarter company must disregard any capital gain or capital loss determined in respect of the disposal of any equity share in any foreign company (other than an interest contemplated in paragraph 2(2)) if that headquarter company (whether alone or together with any other person forming part of the same group of companies as that headquarter company) immediately before that disposal held at least 10 per cent of the equity shares and voting rights in that foreign company.(3)Paragraph 8(b) applies in respect of any capital gain determined in respect of any disposal of any equity share in any foreign company on or before 31 December 2012 by a person which is or was disregarded in terms of subparagraphs (1) and (4) in any year of assessment, if—(a)the foreign company prior to that disposal was a controlled foreign company in relation to that person or in relation to any other company in the same group of companies as that person;(b)the equity share in that foreign company was disposed of to a connected person in relation to that person either before or after that disposal;(c)that person—(i)disposed of that equity share for no consideration or for consideration which does not reflect an arm’s length price, other than a distribution contemplated in subitem (ii);(ii)disposed of that equity share by means of a distribution made unless—(aa)that distribution was made to a company that forms part of the same group of companies as that person; or(bb)the full amount of that distribution was included in the income of a holder of shares in that foreign company or would, but for the provisions of section 10B(2)(a) or (b), have been so included; or(iii)disposed of any consideration where that consideration was received or accrued from the disposal of that equity share (or any amount received in exchange therefor) in terms of any transaction, operation or scheme of which the disposal of the equity share forms part—(aa)for no consideration or for consideration which does not reflect an arm’s length price (other than a distribution contemplated in subsubitem (bb)); or(bb)by means of a distribution by a company, unless the full amount of that distribution was included in the income of a holder of shares in that company or would, but for the provisions of section 10B(2)(a) or (b), have been so included; and(d)that foreign company ceased, in terms of any transaction, operation or scheme of which the disposal of the equity share forms part, to be a controlled foreign company in relation to that person or other company in the same group of companies as that person (having regard solely to any rights contemplated in paragraph (a) of the definition of “participation rights” in section 9D).(4)A person must disregard any capital gain determined in respect of any foreign return of capital received by or accrued to that person from a “foreign company” as defined in section 9D (other than an interest contemplated in paragraph 2(2)) where that person (whether alone or together with any other person forming part of the same group of companies as that person) holds at least 10 per cent of the total equity shares and voting rights in that company.(5)The provisions of this paragraph do not apply in respect of any capital gain or capital loss determined in respect of—(a)the disposal of any equity share in any portfolio contemplated in paragraph (e) of the definition of “company” in section 1; and(b)any distribution contemplated in subparagraph (4) by any portfolio contemplated in item (a).(6)This paragraph must not apply in respect of any capital gain or capital loss determined in respect of the disposal of any share in a controlled foreign company to the extent that the value of the assets of that controlled foreign company is attributable to assets directly or indirectly located, issued or registered in the Republic.64C. Disposal of restricted equity instruments
A person must disregard any capital gain or capital loss determined in respect of the disposal of any restricted equity instrument as contemplated in section 8C(4)(a), (5)(a) or (c).64D. Land donated in terms of land reform measures
A person must disregard any capital gain or capital loss in respect of the disposal by way of a donation of land or right to land by virtue of the measures as contemplated in Chapter 6 of the National Development Plan: Vision 2030 of 11 November 2011 released by the National Planning Commission, Presidency of the Republic of South Africa.64E. Disposal by trust in terms of share incentive scheme
Where a capital gain is determined in respect of the disposal of an asset by a trust and a trust beneficiary has a vested right to an amount derived from that capital gain, that trust must disregard so much of that capital gain as is equal to that amount if that amount must in terms of section 8C be—(a)included in the income of that trust beneficiary as an amount received or accrued in respect of a restricted equity instrument; or(b)taken into account in determining the gain or loss in the hands of that trust beneficiary in respect of the vesting of a restricted equity instrument.Part IX – Roll-overs
65. Involuntary disposal
(1)A person may elect that this paragraph applies in respect of the disposal of an asset (other than a financial instrument), where—(a)that asset is disposed of by way of operation of law, theft or destruction;(b)proceeds accrue to that person by way of compensation in respect of that disposal;(c)those proceeds are equal to or exceed the base cost of that asset;(d)(i)an amount at least equal to the receipts and accruals from that disposal has been or will be expended to acquire one or more asset (hereinafter referred to as the “replacement asset or assets”);(ii)all the replacement assets constitute assets contemplated in section 9(2)(j) or (k);(iii)the contracts for the acquisition of the replacement asset or assets have all been or will be concluded within 12 months after the date of the disposal of that asset; and(iv)the replacement asset or assets will all be brought into use within three years of the disposal of that asset:Provided that the Commissioner may, on application by the taxpayer, decide to extend the period within which the contract must be concluded or asset brought into use by no more than six months if all reasonable steps were taken to conclude those contracts or bring those assets into use; and(e)that asset is not deemed to have been disposed of and to have been reacquired by that person.(2)Where a person has elected in terms of subparagraph (1) that this paragraph must apply in respect of the disposal of an asset, any capital gain determined in respect of that disposal must, subject to subparagraphs (4), (5) and (6) be disregarded when determining that person’s aggregate capital gain or aggregate capital loss.(3)Where a person acquires more than one replacement asset as contemplated in subparagraph (1), that person must, in applying subparagraphs (4) and (5), apportion the capital gain derived from the disposal of that asset to each replacement asset in the same ratio as the receipts and accruals from that disposal respectively expended in acquiring each of those replacement assets bear to the total amount of those receipts and accruals expended in acquiring all those replacement assets.(4)Where a replacement asset contemplated in subparagraph (1) constitutes a depreciable asset, the person must treat as a capital gain for a year of assessment, so much of the disregarded capital gain contemplated in subparagraph (3), as bears to the total amount of that disregarded gain apportioned to that replacement asset as contemplated in subparagraph (3) the same ratio as the amount of any deduction or allowance allowed in that year in respect of the replacement asset bears to the total amount of the deduction or allowance (determined with reference to the cost or value of that asset at the time of acquisition thereof) which is allowable for all years of assessment in respect of that replacement asset.(5)Where a person during any year of assessment disposes of a replacement asset and any portion of the disregarded capital gain which is apportioned to that asset, has not otherwise been treated as a capital gain in terms of this paragraph, that person must treat that portion of disregarded capital gain as a capital gain from the disposal of that replacement asset in that year of assessment.(6)Where a person fails to conclude a contract or fails to bring any replacement asset into use within the period prescribed in subparagraph (1)(d)(iii) or (iv), subparagraph (2) shall not apply and that person must—(a)treat the capital gain contemplated in subparagraph (2) as a capital gain on the date on which the relevant period ends;(b)determine interest at the prescribed rate on that capital gain from the date of that disposal to the date contemplated in item (a); and(c)treat that interest as a capital gain on the date contemplated in item (a) when determining that person’s aggregate capital gain or aggregate capital loss.(7)Where a replacement asset or assets constitute personal use assets, the provisions of this paragraph shall not apply.65B. Disposal by recreational club
(1)A recreational club approved in terms of section 30A may elect that this paragraph applies in respect of the disposal of an asset the whole of which was used mainly for purposes of providing social and recreational facilities and amenities for members of that club, where—(a)proceeds accrue to that club in respect of that disposal;(b)those proceeds are equal to or exceed the base cost of that asset;(c)(i)an amount at least equal to the receipts and accruals from that disposal has been or will be expended to acquire one or more replacement assets all of which will be used mainly for such purposes;(ii)the contracts for the acquisition of the replacement asset or assets have all been or will be concluded within 12 months after the date of the disposal of that asset; and(iii)the replacement asset or assets will all be brought into use within three years of the disposal of that asset:Provided that the Commissioner may extend the period within which the contract must be concluded or asset brought into use by no more than six months if all reasonable steps were taken to conclude those contracts or bring those assets into use; and(d)that asset is not deemed to have been disposed of and to have been reacquired by that club.(2)Where a club has elected in terms of subparagraph (1) that this paragraph must apply in respect of the disposal of an asset, any capital gain determined in respect of that disposal must, subject to subparagraphs (3), (4) and (5) be disregarded when determining that club’s aggregate capital gain or aggregate capital loss.(3)Where a club acquires more than one replacement asset as contemplated in subparagraph (1), that club must, in applying subparagraphs (4) and (5), apportion the capital gain derived from the disposal of that asset to each replacement asset in the same ratio as the receipts and accruals from that disposal respectively expended in acquiring each of those replacement assets bear to the total amount of those receipts and accruals expended in acquiring all those replacement assets.(4)Where a club during any year of assessment disposes of a replacement asset and any portion of the disregarded capital gain which is apportioned to that asset, has not otherwise been treated as a capital gain in terms of this paragraph, that club must treat that portion of disregarded capital gain as a capital gain from the disposal of that replacement asset in that year of assessment.(5)Where a club fails to conclude a contract or fails to bring any replacement asset into use within the period prescribed in subparagraph (1)(c)(ii) and (iii), that club must—(a)treat the capital gain contemplated in subparagraph (2) as a capital gain on the date on which the relevant period ends;(b)determine interest at the prescribed rate on that capital gain from the date of that disposal to the date contemplated in item (a); and(c)treat that interest as a capital gain on the date contemplated in item (a) when determining that club’s aggregate capital gain or aggregate capital loss.66. Reinvestment in replacement assets
(1)A person may elect that this paragraph applies in respect of the disposal of an asset, where—(a)that asset qualified for a deduction or allowance in terms of section 11(e),11D(2), 12B, 12C, 12DA, 12E, 14, 14bis or 37B;(b)the proceeds received or accrued from that disposal are equal to or exceed the base cost of that asset;(c)an amount at least equal to the receipts and accruals from that disposal has been or will be expended to acquire one or more assets (hereinafter referred to as the “replacement asset or assets”), all of which will qualify for a capital deduction or allowance in terms of section 11(e),11D(2), 12B, 12C, 12DA, 12E or 37B;(d)all the replacement assets constitute assets contemplated in section 9(2)(j) or (k);(e)the contracts for the acquisition of a replacement asset or assets are or will be concluded within 12 months after the asset contemplated in item (a) is disposed of and are all brought into use within three years after that disposal: Provided that the Commissioner may, on application by the taxpayer, decide to extend the period by which the contracts must be concluded or assets brought into use by no more than six months if all reasonable steps were taken to conclude those contracts or bring those assets into use; and(f)that asset is not deemed to have been disposed of and to have been reacquired by that person.(2)Where a person has elected in terms of subparagraph (1) that this paragraph must apply in respect of the disposal of an asset, any capital gain determined in respect of that disposal must, subject to subparagraphs (4), (5), (6) and (7), be disregarded when determining that person’s aggregate capital gain or aggregate capital loss.(3)Where a person acquires more than one replacement asset as contemplated in subparagraph (1), that person must, in applying subparagraphs (4), (5) and (6), apportion the capital gain derived from the disposal of that asset to each replacement asset in the same ratio as the receipts and accruals from that disposal respectively expended in acquiring each of those replacement assets bear to the total amount of those receipts and accruals expended in acquiring all those replacement assets.(4)A person must treat as a capital gain for a year of assessment so much of the disregarded capital gain contemplated in subparagraph (2), as bears to the total amount of that disregarded capital gain apportioned to that replacement asset as contemplated in subparagraph (3) the same ratio as the amount of any deduction or allowance allowed in that year in terms of section 11(e),11D(2), 12B, 12C, 12DA, 12E or 37B in respect of the replacement asset bears to the total amount of the deduction or allowance in terms of that section (determined with reference to the cost of value of that asset at the time of acquisition thereof) which is allowable for all years of assessment in respect of that replacement asset.(5)Where a person during any year of assessment disposes of a replacement asset and any portion of the disregarded capital gain which is apportioned to that asset as contemplated in subparagraph (3), has not been treated as a capital gain in terms of subparagraph (4) or (6), that person must treat that portion of disregarded capital gain as a capital gain from the disposal of that replacement asset in that year of assessment.(6)Where during any year of assessment a person ceases to use a replacement asset for the purposes of that person’s trade and any portion of the disregarded capital gain which is apportioned to that asset as contemplated in subparagraph (3), has not been treated as a capital gain in terms of subparagraph (4) or (5), that person must treat that portion of disregarded capital gain as a capital gain for that year of assessment.(7)Where a person fails to conclude a contract or to bring any replacement asset into use within the period prescribed in subparagraph (1)(e), subparagraph (2) shall not apply and that person must—(a)treat the capital gain contemplated in subparagraph (2) as a capital gain on the date that the relevant period ends;(b)determine interest at the prescribed rate on that capital gain from the date of that disposal to the date contemplated in item (a); and(c)treat that interest as a capital gain on the date contemplated in item (a) when determining that person’s aggregate capital gain or aggregate capital loss.67B. Disposal of immovable property by share block company
(1)For the purposes of this paragraph—“share” means a share as defined in section 1 of the Share Blocks Control Act;“Share Blocks Control Act” means the Share Blocks Control Act, 1980 (Act No. 59 of 1980).(2)This paragraph applies where a person who holds a right of use of a part of the immovable property of a share block company, which right is conferred by reason of the ownership of a share by that person in that share block company, acquires ownership of that part of immovable property from that share block company as part of any transaction in terms of which a disposal of that part of immovable property is made by that share block company.(3)Where a person who owns a share in a share block company acquires ownership of immovable property as part of any transaction in terms of which a disposal is made by that share block company as contemplated in subparagraph (2)—(a)the share block company must disregard any capital gain or capital loss determined in respect of that disposal; and(b)that person must—(i)disregard any capital gain or capital loss determined in respect of any disposal of that share as a result of that disposal; and(ii)be treated as having—(aa)acquired that immovable property for an amount equal to the expenditure contemplated in paragraph 20 incurred by the person in acquiring that share;(bb)incurred the expenditure contemplated in subsubitem (aa) on the same date that the expenditure was incurred by the person in acquiring that share;(cc)effected improvements to that immovable property for an amount equal to the expenditure contemplated in paragraph 20 incurred by that person in effecting improvements to the part of the immovable property of the share block company in respect of which the person had a right of use as a result of the ownership of that share;(dd)incurred the expenditure contemplated in subsubitem (cc) on the same date that the expenditure was incurred by the person in effecting the improvements to the part of the immovable property of the share block company in respect of which the person had a right of use as a result of the ownership of that share;(ee)acquired that immovable property on the date that the share was acquired by the person; and(ff)used that immovable property in the same manner as the person used the immovable property in respect of which the person had a right of use as a result of the ownership of that share; and(c)any valuation of that share which was done by that person within the period prescribed by paragraph 29(4) must be deemed to have been done by that person in respect of that immovable property.67C. Mineral rights conversions and renewals
Notwithstanding paragraph 11, there is no disposal where—(a)any old order right or OP26 right as defined in Schedule II of the Mineral and Petroleum Resources Development Act wholly or partially continues in force or is wholly or partially converted into a new right pursuant to the same Schedule; or(b)any prospecting right, mining right, exploration right, production right, mining permit, retention permit or reconnaissance permit as defined in section 1 of the Mineral and Petroleum Resources Development Act is wholly or partially renewed in terms of that Act,and the continued, converted or renewed right or permit will be treated as one and the same asset as the right or permit before continuation, conversion or renewal for purposes of this Act.67D. Communications licence conversions
(1)Where existing licences referred to in Chapter 15 of the Electronic Communications Act, 2005 (Act No. 36 of 2005), are converted to new licences in terms of section 93 of that Act, a licensee of an existing licence or licences is deemed to have disposed of the existing—(a)licence for an amount equal to the base cost of the licence; or(b)licences for an amount equal to the aggregate of the base cost of the licences,on the date of the conversion.(2)The licensee of a new licence contemplated in subparagraph (1)—(a)is deemed to have acquired the new licence—(i)in the case where an existing licence is converted to a new licence, at a cost, recognised as such for the purposes of paragraph 20, equal to the expenditure incurred in respect of the existing licence;(ii)in the case where two or more existing licences are converted to a new licence, at a cost, recognised as such for the purposes of paragraph 20, equal to the aggregate of the expenditure incurred in respect of the existing licences; and(iii)in the case where an existing licence is converted to two or more new licences, at a cost, recognised as such for the purposes of paragraph 20, that bears to the expenditure incurred in respect of the existing licence the same ratio as the value of that new licence bears to the aggregate value of the new licences,which cost must be treated as expenditure actually incurred by the licensee in respect of the new licence or licences for the purposes of paragraph 20; and(b)is deemed to have incurred the cost contemplated in item (a) on the day immediately after the conversion.Part X – Attribution of capital gains
68. Attribution of capital gain to spouse
(1)Where a person’s capital gain or a capital gain that has vested in or is treated as having vested in that person during the year of assessment in which it arose can be attributed wholly or partly to—(a)any donation, settlement or other disposition; or(b)any transaction, operation or scheme,made, entered into or carried out by that person’s spouse mainly for purposes of reducing, postponing or avoiding that spouse’s liability for any tax, duty or levy which would otherwise have become payable under any Act administered by the Commissioner, so much of the gain as can be so attributed must be disregarded when determining that person’s aggregate capital gain or aggregate capital loss and taken into account when determining the aggregate capital gain or aggregate capital loss of that person’s spouse.(2)Where a person’s capital gain is derived from—(a)any trade carried on by that person in partnership or association with that person’s spouse or which is in any way connected with any trade carried on by that spouse; or(b)that person’s spouse or any partnership or private company at a time when that spouse was a member of that partnership or the sole, main or one of the principal holders of shares in that company,so much of that gain as exceeds the amount to which that person would reasonably be entitled having regard to the nature of the relevant trade, the extent of that person’s participation therein, the services rendered by that person or any other relevant factor, must be disregarded when determining that person’s aggregate capital gain or aggregate capital loss and taken into account when determining the aggregate capital gain or aggregate capital loss of that person’s spouse.69. Attribution of capital gain to parent of minor child
Where a minor child’s capital gain or a capital gain that has vested in or is treated as having vested in or that has been used for the benefit of that child during the year of assessment in which it arose can be attributed wholly or partly to any donation, settlement or other disposition—(a)made by a parent of that child; or(b)made by another person in return for any donation, settlement or other disposition or some other consideration made or given by a parent of that child in favour directly or indirectly of that person or his or her family,so much of that gain as can be so attributed must be disregarded when determining that child’s aggregate capital gain or aggregate capital loss and must be taken into account in determining the aggregate capital gain or aggregate capital loss of that parent.70. Attribution of capital gain subject to conditional vesting
Where—(a)a person has made a donation, settlement or other disposition that is subject to a stipulation or condition imposed by that person or anyone else in terms of which a capital gain or a portion of any capital gain attributable to that donation, settlement or other disposition shall not vest in the beneficiaries of that donation, settlement or other disposition or some of those beneficiaries until the happening of some fixed or contingent event;(b)a capital gain that is attributable to that donation, settlement or other disposition has arisen during a year of assessment throughout which the person who made that donation, settlement or other disposition has been a resident; and(c)that capital gain or a portion thereof has not vested during that year in any beneficiary who is a resident,that capital gain or that portion thereof must be taken into account in determining the aggregate capital gain or aggregate capital loss of the person who made that donation, settlement or other disposition and disregarded when determining the aggregate capital gain or aggregate capital loss of any other person.71. Attribution of capital gain subject to revocable vesting
Where—(a)a deed of donation, settlement or other disposition confers a right upon a beneficiary thereof who is a resident to receive a capital gain attributable to that donation, settlement or other disposition or any portion of that gain;(b)that right may be revoked or conferred upon another by the person who conferred it; and(c)a capital gain attributable to that donation, settlement or other disposition or a portion of that gain has in terms of that right vested in that beneficiary during a year of assessment throughout which the person who conferred that right has been a resident and has retained the power to revoke that right,that capital gain or that portion thereof must be disregarded when determining the aggregate capital gain or aggregate capital loss of that beneficiary and be taken into account when determining the aggregate capital gain or aggregate capital loss of the person retaining the power of revocation.72. Attribution of capital gain and other amounts vesting in person that is not a resident
(1)This paragraph applies where—(a)a resident has made a donation, settlement or other disposition to any person (other than an entity which is not resident and which is similar to a public benefit organisation contemplated in section 30);(b)a capital gain (including any amount that would have constituted a capital gain had that person been a resident) attributable to that donation, settlement or other disposition has arisen during a year of assessment and has during that year vested in or is treated as having vested in any person who is not a resident (other than a controlled foreign company, in relation to that resident); and(c)an amount consisting of or derived, directly or indirectly, from—(ii)the amount that would have constituted a capital gain,has during that year vested in or is treated as having vested in any person who is not a resident (other than a controlled foreign company, in relation to that resident).(2)In determining, for purposes of subparagraph (1), whether an amount would have constituted a capital gain had a person been a resident, the provisions of paragraph 64B(1) and (4) must be disregarded in respect of an amount derived by that person, directly or indirectly, from the disposal of an equity share in a foreign company if—(a)more than 50 per cent of the total participation rights, as defined in section 9D(1), or of the voting rights in that company are directly or indirectly held or are exercisable, as the case may be, by that person whether alone or together with any one or more persons that are connected persons in relation to that person; and(b)the resident who made the donation, settlement or other disposition or any person that is a connected person in relation to that resident is a connected person in relation to the person who is not a resident; and(c)to the extent to which that amount is not included in the income of or attributed as a capital gain to—(i)the resident who made that donation, settlement or other disposition; or(ii)a resident who is a connected person in relation to the resident referred to in subitem (i).(3)An amount that is equal to so much of the amount described in item (c) of subparagraph (1) that has vested in or is treated as having vested in the person who is not a resident as consists of or is derived, directly or indirectly, from—(a)the capital gain must be disregarded when determining the aggregate capital gain or aggregate capital loss of that person; and(b)the capital gain or the amount that would have constituted a capital gain must be taken into account as a capital gain when determining the aggregate capital gain or aggregate capital loss of the resident who made the donation, settlement or other disposition described in subparagraph (1).73. Attribution of income and capital gain
(1)Where both an amount of income and a capital gain are derived by reason of or are attributable to a donation, settlement or other disposition, the total amount of that income and gain—(a)that is deemed in terms of section 7 to be that of a person other than the one to whom it accrues or by whom it is received or for whose benefit it is expended or accumulated; and(b)that is attributed in terms of this Part to a person other than the one in whom it vests,shall not exceed the amount of the benefit derived from that donation, settlement or other disposition.(2)For purposes of this paragraph, the benefit derived from a donation, settlement or other disposition means the amount by which the person to whom that donation, settlement or other disposition was made, has benefited from the fact that it was made for no or an inadequate consideration, including consideration in the form of interest.Part XI – Company distributions
74. Definitions
For the purposes of this Part, unless the context otherwise dictates—“date of distribution”, in relation to any distribution, means—(a)to the extent that the distribution does not consist of a distribution of an asset in specie—(i)where the company that makes the distribution is a listed company, the date on which the distribution is paid; or(ii)where the company that makes the distribution is not a listed company, the earlier of the date on which the distribution is paid or becomes due and payable; or(b)to the extent that the distribution consists of a distribution of an asset in specie, the earlier of the date on which the distribution is paid or becomes due and payable.75. Distributions in specie by company
(1)Where a company makes a distribution of an asset in specie to a person holding a share in that company—(a)that company must be treated as having disposed of that asset to that person on the date of distribution for an amount received or accrued equal to the market value of that asset on that date; and(b)that person must be treated as having acquired that asset on the date of distribution and for expenditure equal to the market value of that asset on that date, which expenditure must be treated as an amount of expenditure actually incurred for the purposes of paragraph 20(1)(a).76. Returns of capital and foreign returns of capital by way of distributions of cash or assets in specie
(1)Subject to subparagraph (2), where a return of capital or foreign return of capital by way of a distribution of cash or an asset in specie (other than a distribution of a share in terms of an unbundling transaction contemplated in section 46(1)) is received by or accrues to a holder of a share in respect of that share, that holder must where the date of distribution of that cash or asset occurs—(a)before valuation date, reduce the expenditure contemplated in paragraph 20 actually incurred before valuation date in respect of that share by the amount of that cash or the market value of that asset;(b)on or after valuation date but before 1 October 2007 and that share is disposed of by the holder of that share on or before 31 March 2012, treat the amount of that cash or the market value of that asset as proceeds when that share is disposed of;(c)on or after 1 October 2007 but before 1 April 2012, treat the amount of that cash or the market value of that asset as proceeds when that share is partly disposed of in terms of paragraph 76A.(2)Where a holder of shares uses the weighted average method in respect of shares that are identical assets as contemplated in paragraph 32(3A)(a) and a return of capital or foreign return of capital by way of a distribution of cash or an asset in specie (other than a distribution of a share in terms of an unbundling transaction contemplated in section 46(1)) is received by or accrues to that holder of shares in respect of those shares on or after valuation date but before 1 October 2007, the weighted average base cost of those shares must be determined by—(a)deducting the amount of that cash or the market value of that asset from the base cost of those shares held when that return of capital or foreign return of capital was received or accrued; and(b)dividing the result by the number of those shares held when that return of capital or foreign return of capital was received or accrued.(4)Every—(a)company that makes a distribution to any other person; and(b)person that pays a distribution to any other person on behalf of a company,on or after 1 April 2012 must, by the time of the distribution or payment, notify that other person in writing of the extent to which the distribution or payment constitutes a return of capital.76A. Part-disposal of shares
(1)Where—(a)a return of capital or foreign return of capital by way of a distribution of cash or an asset in specie (other than a share distributed in terms of an unbundling transaction contemplated in section 46(1)) is received by or accrues to a shareholder in respect of a share; and(b)that return of capital or foreign return of capital is received by or accrues to that shareholder on or after 1 October 2007 and before 1 April 2012,that shareholder must be deemed to have disposed of part of that share on the date that the return of capital or foreign return of capital is received by or accrues to the shareholder.(1A)Subject to paragraph 76(2), where—(a)a return of capital or foreign return of capital by way of a distribution of cash or an asset in specie (other than a share distributed in terms of an unbundling transaction contemplated in section 46(1)) is received by or accrues to a shareholder in respect of a share;(b)that return of capital or foreign return of capital is received by or accrues to that shareholder on or after valuation date but before 1 October 2007; and(c)that share is not disposed of before 1 April 2012,that return of capital or foreign return of capital must be treated as having been distributed on 1 April 2012.(2)If paragraph 76(2) applies and the base cost of those shares is a negative amount at the end of 31 March 2012—(a)that shareholder must be treated as having a capital gain on 31 March 2012 equal to that negative amount; and(b)the base cost of those shares at the end of 31 March 2012 must be treated as nil.(3)For purposes of paragraph 33(1) the market value of the part disposed of under this paragraph must be treated as being equal to the amount of the cash or the market value of the asset received or accrued by way of a return of capital or foreign return of capital.76B. Reduction in base cost of shares as result of distributions
(1)Where—(a)a return of capital or foreign return of capital by way of a distribution of cash or an asset in specie is received by or accrues to a holder of a share in respect of that share;(b)that return of capital or foreign return of capital is received by or accrues to the holder of that share on or after 1 April 2012 and prior to the disposal of that share; and(c)that share constitutes a pre-valuation date asset in relation to the holder of that share,for purposes of determining the date of acquisition of that share and the expenditure in respect of the cost of acquisition of that share, the holder of that share must be treated as—(i)having disposed of that share at a time immediately before the return of capital or foreign return of capital is received or accrues for an amount equal to the market value of the share at that time; and(ii)having immediately reacquired that share at that time at an expenditure equal to that market value—(aa)less any capital gain that would have been determined had the share been disposed of at market value at that time; and(bb)increased by any capital loss that would have been determined had the share been disposed of at market value at that time,which expenditure must be treated as an amount of expenditure actually incurred for the purposes of paragraph 20(1)(a): Provided that the market value of a share listed on a recognised exchange and for which a price was quoted on that exchange is equal to the sum of—(i)the ruling price of that share at the close of business on the last business day before the accrual of the return of capital or foreign return of capital; and(ii)the amount of the return of capital or foreign return of capital.(2)Where—(a)a return of capital or foreign return of capital by way of a distribution of cash or an asset in specie is received by or accrues to a holder of a share in respect of that share; and(b)that return of capital or foreign return of capital is received by or accrues to the holder of that share on or after 1 April 2012 and prior to the disposal of that share,the holder of that share must reduce the expenditure in respect of the share by the amount of that cash or the market value of that asset on the date that the asset or that cash is received by or accrues to the holder of that share.(3)Where the amount of a return of capital or foreign return of capital contemplated in subparagraph (2) exceeds the expenditure in respect of the share in respect of which that return of capital or foreign return of capital is received or accrues, the amount of the excess must be treated as a capital gain in determining the aggregate capital gain or aggregate capital loss of the holder of that share for the year of assessment in which that return of capital or foreign return of capital is received by or accrues to the holder of that share.77. Distributions in liquidation or deregistration received by holders of shares
(1)A holder of shares in a company that is being wound up, liquidated or deregistered must be treated as having disposed of all the shares held by that holder in that company at the earlier of—(a)the date of dissolution or deregistration; or(b)in the case of a liquidation or winding-up, the date when the liquidator declares in writing that no reasonable grounds exist to believe that the holder of shares in the company (or holders of shares holding the same class of shares) will receive any further distributions in the course of the liquidation or winding-up of that company.(2)Where—(a)a return of capital or foreign return of capital by way of a distribution of cash or assets in specie is received by or accrues to a holder of shares contemplated in subparagraph (1) in respect of a share that is treated as having been disposed of in terms of that subparagraph; and(b)that return of capital or foreign return of capital is received by or accrues to that holder after the date contemplated in subparagraph (1)(a) or (b),the return of capital or foreign return of capital must be treated as a capital gain in determining that holder’s aggregate capital gain or aggregate capital loss for that year of assessment.Part XII – Trusts, trust beneficiaries and insolvent estates
80. Capital gain attributed to beneficiary
(1)Subject to paragraphs 68, 69 and 71, where a trust vests an asset in a beneficiary of that trust (other than any person contemplated in paragraph 62(a) to (e) or a person who acquires that asset as an equity instrument as contemplated in section 8C(1)) who is a resident, and determines a capital gain in respect of that disposal or, if that trust is not a resident, would have determined a capital gain in respect of that disposal had it been a resident—(a)that capital gain must be disregarded for the purpose of calculating the aggregate capital gain or aggregate capital loss of the trust; and(b)that capital gain or the amount that would have been determined as a capital gain must be taken into account as a capital gain for the purpose of calculating the aggregate capital gain or aggregate capital loss of the beneficiary to whom that asset was so disposed of.(2)Subject to paragraphs 64E, 68, 69 and 71, where a trust determines a capital gain in respect of the disposal of an asset in a year of assessment during which a beneficiary of that trust (other than any person contemplated in paragraph 62(a) to (e)) who is a resident has a vested right or acquires a vested right (including a right created by the exercise of a discretion) to an amount derived from that capital gain but not to the asset disposed of, an amount that is equal to so much of the amount to which that beneficiary of that trust is entitled in terms of that right—(a)must be disregarded for the purpose of calculating the aggregate capital gain or aggregate capital loss of the trust; and(b)must be taken into account as a capital gain for the purpose of calculating the aggregate capital gain or aggregate capital loss of that beneficiary.(2A)(a)Subject to paragraphs 64E, 68, 69 and 71, this subparagraph applies where—(i)a beneficiary who is a resident (other than any person contemplated in paragraph 62(a) to (e)) derives an amount through vesting during a year of assessment from a trust that is not a resident; and(ii)that amount was derived directly or indirectly from that trust or another trust which is not a resident in respect of the disposal of an asset during the same year of assessment and that amount would have constituted a capital gain had the trust that disposed of the asset been a resident.(b)Where item (a) applies, the amount derived by the beneficiary must be taken into account as a capital gain for the purpose of calculating that beneficiary’s aggregate capital gain or aggregate capital loss for that year of assessment.(3)Where during any year of assessment any resident acquires a vested right to any amount representing capital of any trust which is not a resident, and—(a)that capital consists of or is derived, directly or indirectly, from an amount—(i)determined as a capital gain of that trust; or(ii)which would have been determined as a capital gain of that trust had that trust been a resident,in any previous year of assessment during which that resident had a contingent right to that capital; and(b)that capital gain or the amount that would have been determined as a capital gain has not been subject to tax in the Republic in terms of the provisions of this Act,that amount must be taken into account as a capital gain when determining the aggregate capital gain or aggregate capital loss of that resident in respect of the year of assessment in which that resident acquired that vested right.(4)In determining, for purposes of subparagraph (1), (2) or (3), whether an amount would have constituted a capital gain had the trust been a resident, the provisions of paragraph 64B(1) and (4) must be disregarded in respect of an amount derived by that trust, directly or indirectly, from the disposal or in respect of an equity share in a foreign company if—(a)more than 50 per cent of the total participation rights, as defined in section 9D(1), or of the voting rights in that company are directly or indirectly held or are exercisable, as the case may be, by that trust whether alone or together with any one or more persons that are connected persons in relation to that trust; and(b)to the extent to which that amount is not derived from an amount that must be included in the income of or attributed to—(i)the resident to whom an amount is attributed in terms of subparagraph (1), (2) or (3); or(ii)a resident who is a connected person in relation to the resident referred to in subitem (i).81. Base cost of interest in discretionary trust
Despite paragraph 38(1)(b), a person’s interest in a discretionary trust must be treated as having a base cost of nil.82. Death of beneficiary of special trust
Where a beneficiary of a special trust dies, that trust must continue to be treated as a special trust for the purposes of this Schedule until the earlier of the disposal of all assets held by that trust or two years after the date of death of that beneficiary.83. Insolvent estate of person
(1)For the purposes of this Schedule, the disposal of an asset by the insolvent estate of a person shall be treated in the same manner as if that asset had been disposed of by that person.(2)No person whose estate has been voluntarily or compulsorily sequestrated may carry forward any assessed capital loss incurred prior to the date of sequestration.Part XIV – Miscellaneous
97. Transactions during transitional period
(1)For purposes of this paragraph “transitional period” means the period from 23 February 2000 until and including the day before the valuation date.(2)Subject to subparagraph (3), where a person—(a)acquired an asset during the transitional period by means of a non-arm’s length transaction, that person shall for purposes of paragraph 30 be treated as having acquired that asset—(i)at the time when the person who disposed of that asset acquired that asset; and(ii)at a cost equal to the base cost of that asset in the hands of the person who disposed of it; or(b)acquired an asset during the transitional period directly or indirectly from a person who was a connected person in relation to that person at—(i)the time of that acquisition; or(ii)any time during the period from the date of that acquisition up to a subsequent disposal of that asset by that person within three years of that acquisition,that person shall for purposes of paragraph 30 be treated as having acquired that asset—(aa)at the time when that connected person acquired that asset, or is treated as having acquired that asset in terms of this paragraph; and(bb)at a cost equal to the base cost of that asset in the hands of that connected person, or an amount which is treated as the base cost of that asset in the hands of that connected person in terms of this paragraph; or(c)reacquired an asset within a period of ninety days after its disposal during the transitional period—(i)by means of a non-arm’s length transaction; or(ii)directly or indirectly to a connected person in relation to that person,that person shall for the purposes of paragraph 30 be treated as having reacquired that asset—(aa)at the time when that person originally acquired that asset prior to that disposal; and(bb)at a cost equal to the base cost of that asset at the time of that disposal; or(d)acquired an asset within a period of ninety days after the disposal, during the transitional period, of a substantially similar asset that was disposed of—(i)by means of a non-arm’s length transaction; or(ii)directly or indirectly to a connected person in relation to that person,in order to replace the asset so disposed of, that person shall for the purposes of paragraph 30 be treated as having acquired that asset—(aa)at the time when that person acquired the substantially similar asset; and(bb)at a cost equal to the base cost of that substantially similar asset at the time of that disposal.(3)The provisions of this paragraph do not apply to any disposal of an asset by a fund contemplated in section 29A(4) to any other such fund in terms of section 29A(6) or (7).Ninth Schedule (Section 30)
Public benefit activities
Part I
1. Welfare and humanitarian
(a)The care or counseling of, or the provision of education programmes relating to, abandoned, abused, neglected, orphaned or homeless children.(b)The care or counseling of poor and needy persons where more than 90 per cent of those persons to whom the care or counseling are provided are over the age of 60.(c)The care or counseling of, or the provision of education programmes relating to, physically or mentally abused and traumatized persons.(d)The provision of disaster relief.(e)The rescue or care of persons in distress.(f)The provision of poverty relief.(g)Rehabilitative care or counseling or education of prisoners, former prisoners and convicted offenders and persons awaiting trial.(h)The rehabilitation, care or counseling of persons addicted to a dependence-forming substance or the provision of preventative and education programmes regarding addiction to dependence-forming substances.(i)Conflict resolution, the promotion of reconciliation, mutual respect and tolerance between the various peoples of South Africa.(j)The promotion or advocacy of human rights and democracy.(k)The protection of the safety of the general public.(l)The promotion or protection of family stability.(m)The provision of legal services for poor and needy persons.(n)The provision of facilities for the protection and care of children under school-going age of poor and needy parents.(o)The promotion or protection of the rights and interests of, and the care of, asylum seekers and refugees.(p)Community development for poor and needy persons and anti-poverty initiatives, including—(i)the promotion of community-based projects relating to self-help, empowerment, capacity building, skills development or anti-poverty;(ii)the provision of training, support or assistance to community-based projects contemplated in item (i); or(iii)the provision of training, support or assistance to emerging micro enterprises to improve capacity to start and manage businesses, which may include the granting of loans on such conditions as may be prescribed by the Minister by way of regulation.(q)The promotion of access to media and a free press.2. Health care
(a)The provision of health care services to poor and needy persons.(b)The care or counseling of terminally ill persons or persons with a severe physical or mental disability, and the counseling of their families in this regard.(c)The prevention of HIV infection, the provision of preventative and education programmes relating to HIV/AIDS.(d)The care, counseling or treatment of persons afflicted with HIV/AIDS, including the care or counseling of their families and dependants in this regard.(e)The provision of blood transfusion, organ donor or similar services.(f)The provision of primary health care education, sex education or family planning.3. Land and housing
(a)The development, construction, upgrading, conversion or procurement of housing units for the benefit of persons whose monthly household income is equal to or less than R15 000 or any greater amount determined by the Minister of Finance by notice in the Gazette after consultation with the Minister of Housing.(b)The development, servicing, upgrading or procurement of stands, or the provision of building materials, for purposes of the activities contemplated in subparagraph (a).(c)The provision of residential care for retired persons, where—(i)more than 90 per cent of the persons to whom the residential care is provided are over the age of 60 and nursing services are provided by the organisation carrying on such activity; and(ii)residential care for retired persons who are poor and needy is actively provided by that organisation without full recovery of cost.(d)Building and equipping of—(i)clinics or crèches; or(ii)community centres, sport facilities or other facilities of a similar nature,for the benefit of the poor and needy.(e)The promotion, facilitation and support of access to land and use of land, housing and infrastructural development for promoting official land reform programmes.(f)Granting of loans for purposes of subparagraph (a) or (b), and the provision of security or guarantees in respect of such loans, subject to such conditions as may be prescribed by the Minister by way of regulation.(g)The protection, enforcement or improvement of the rights of poor and needy tenants, labour tenants or occupiers, to use or occupy land or housing.(h)The provision of training, support or assistance to emerging farmers in order to improve capacity to start and manage agricultural operations.4. Education and development
(a)The provision of education by a “school” as defined in the South African Schools Act, 1996, (Act No. 84 of 1996).(b)The provision of “higher education” by a “higher education institution” as defined in terms of the Higher Education Act, 1997, (Act No. 101 of 1997).(c)“Adult education and training”, as defined in the Adult Education and Training Act, 2000, (Act No. 52 of 2000), including literacy and numeracy education.(d)“Continuing education and training” provided by a “private college” as defined in the Continuing Education and Training Colleges Act, 2006 (Act No. 16 of 2006), which is registered in terms of that Act.(e)Training for unemployed persons with the purpose of enabling them to obtain employment.(f)The training or education of persons with a severe physical or mental disability.(g)The provision of bridging courses to enable educationally disadvantaged persons to enter a higher education institution as envisaged in subparagraph (b).(h)The provision of educare or early childhood development services for pre-school children.(i)Training of persons employed in the national, provincial and local spheres of government, for purposes of capacity building in those spheres of government.(j)The provision of school buildings or equipment for public schools and educational institutions engaged in public benefit activities contemplated in subparagraphs (a) to (h).(k)Career guidance and counseling services provided to persons attending any school or higher education institution as envisaged in subparagraphs (a) and (b).(l)The provision of hostel accommodation to students of a public benefit organisation contemplated in section 30 or an institution, board or body contemplated in section 10(1)(cA)(i), carrying on activities envisaged in subparagraphs (a) to (g).(m)Programmes addressing needs in education provision, learning, teaching, training, curriculum support, governance, whole school development, safety and security at schools, pre-schools or educational institutions as envisaged in subparagraphs (a) to (h).(n)Educational enrichment, academic support, supplementary tuition or outreach programmes for the poor and needy.(o)The provision of scholarships, bursaries, awards and loans for study, research and teaching on such conditions as may be prescribed by the Minister by way of regulation in the Gazette.(p)The provision or promotion of educational programmes with respect to financial services and products, carried on under the auspices of a public entity listed under Schedule 3A of the Public Finance Management Act.(q)The provision, to the general public, of education and training programmes and courses that are administered and accredited by entities contemplated in paragraph (r);(r)The administration, provision and publication of qualification and certification services by industry organisations recognised by an industry specific organisation and its qualifications accredited by the Quality Council for Trades and Occupations established in 2010 in terms of the Skills Development Act, 1998 (Act No. 97 of 1998).5. Religion, belief or philosophy
(a)The promotion or practice of religion which encompasses acts of worship, witness, teaching and community service based on a belief in a deity.(b)The promotion and/or practice of a belief.(c)The promotion of, or engaging in, philosophical activities.6. Cultural
(a)The advancement, promotion or preservation of the arts, culture or customs.(b)The promotion, establishment, protection, preservation or maintenance of areas, collections or buildings of historical or cultural interest, national monuments, national heritage sites, museums, including art galleries, archives and libraries.(c)The provision of youth leadership or development programmes.7. Conservation, environment and animal welfare
(a)Engaging in the conservation, rehabilitation or protection of the natural environment, including flora, fauna or the biosphere.(b)The care of animals, including the rehabilitation, or prevention of the ill-treatment of animals.(c)The promotion of, and education and training programmes relating to, environmental awareness, greening, clean-up or sustainable development projects.(d)The establishment and management of a transfrontier area, involving two or more countries, which—(i)is or will fall under a unified or coordinated system of management without compromising national sovereignty; and(ii)has been established with the explicit purpose of supporting the conservation of biological diversity, job creation, free movement of animals and tourists across the international boundaries within the peace park, and the building of peace and understanding between the nations concerned.8. Research and consumer rights
(a)Research including agricultural, economic, educational, industrial, medical, political, social, scientific and technological research.(b)The protection and promotion of consumer rights and the improvement of control and quality with regard to products or services.9. Sport
The administration, development, co-ordination or promotion of sport or recreation in which the participants take part on a non-professional basis as a pastime.10. Providing of funds, assets or other resources
The provision of—(a)funds, assets, services or other resources by way of donation;(b)assets or other resources by way of sale for a consideration not exceeding the direct cost to the organisation providing the assets or resources;(c)funds by way of loan at no charge; or(d)assets by way of lease for an annual consideration not exceeding the direct cost to the organisation providing the asset divided by the total useful life of the asset,to any—(i)public benefit organisation which has been approved in terms of section 30;(ii)institution, board or body contemplated in section 10(1)(cA)(i), which conducts one or more public benefit activities in this part (other than this paragraph);(iii)association of persons carrying on one or more public benefit activity contemplated in this part (other than this paragraph), in the Republic; or(iv)department of state or administration in the national or provincial or local sphere of government of the Republic, contemplated in section 10(1)(a).11. General
(a)The provision of support services to, or promotion of the common interests of public benefit organisations contemplated in section 30 or institutions, boards or bodies contemplated in section 10(1)(cA)(i), which conduct one or more public benefit activities contemplated in this part.(b)The bid to host or hosting of any international event approved by the Minister for purposes of this paragraph, having regard to—(i)the foreign participation in that event; and(ii)the economic impact that event may have on the country as a whole.(c)The promotion, monitoring or reporting of development assistance for the poor and needy.(d)The provision of funds to an organisation—(i)which is incorporated, formed or established in any country other than the Republic;(ii)which is exempt from tax on income in that other country;(iii)the sole or principal object of which is the carrying on of one or more activities that would qualify as public benefit activities listed in Part I of this Schedule if carried on in the Republic; and(iv)that carries on each of its activities—(aa)in a non-profit manner;(bb)with altruistic or philanthropic intent;(cc)in a manner which does not directly or indirectly promote the economic self-interest of any fiduciary or employee of the organisation other than by way of reasonable remuneration; and(dd)for the benefit of, or is widely accessible to the general public of that country including any sector thereof (other than small and exclusive groups).Part II
1. Welfare and humanitarian
(a)The care or counseling of, or the provision of education programmes relating to, abandoned, abused, neglected, orphaned or homeless children.(b)The care or counseling of poor and needy persons where more than 90 per cent of those persons to whom the care or counseling are provided are over the age of 60.(c)The care or counseling of, or the provision of education programmes relating to, physically or mentally abused and traumatised persons.(d)The provision of disaster relief.(e)The rescue or care of persons in distress.(f)The provision of poverty relief.(g)Rehabilitative care or counseling or education of prisoners, former prisoners and convicted offenders and persons awaiting trial.(h)The rehabilitation, care or counseling of persons addicted to a dependence-forming substance or the provision of preventative and education programmes regarding addiction to dependence-forming substances.(i)Conflict resolution, the promotion of reconciliation, mutual respect and tolerance between the various peoples of South Africa.(j)The promotion or advocacy of human rights and democracy.(k)The protection of the safety of the general public.(l)The promotion or protection of family stability.(m)The provision of legal services for poor and needy persons.(n)The provision of facilities for the protection and care of children under school-going age of poor and needy parents.(o)The promotion or protection of the rights and interests of, and the care of, asylum seekers and refugees.(p)Community development for poor and needy persons and anti-poverty initiatives, including—(i)the promotion of community-based projects relating to self-help, empowerment, capacity building, skills development or anti-poverty;(ii)the provision of training, support or assistance to community-based projects contemplated in item (i); or(iii)the provision of training, support or assistance to emerging micro enterprises to improve capacity to start and manage businesses, which may include the granting of loans on such conditions as may be prescribed by the Minister by way of regulation.(q)The promotion of access to media and a free press.2. Health care
(a)The provision of health care services to poor and needy persons.(b)The care or counseling of terminally ill persons or persons with a severe physical or mental disability, and the counseling of their families in this regard.(c)The prevention of HIV infection, the provision of preventative and education programmes relating to HIV/AIDS.(d)The care, counseling or treatment of persons afflicted with HIV/AIDS, including the care or counseling of their families and dependants in this regard.(e)The provision of blood transfusion, organ donor or similar services.(f)The provision of primary health care education, sex education or family planning.3. Education and development
(a)The provision of education by a “school” as defined in the South African Schools Act, 1996, (Act No. 84 of 1996).(b)The provision of “higher education” by a “higher education institution” as defined in terms of the Higher Education Act, 1997, (Act No. 101 of 1997).(c)“Adult education and training”, as defined in the Adult Education and Training Act, 2000 (Act No. 52 of 2000), including literacy and numeracy education.(d)“Continuing education and training” provided by a “private college” as defined in the Continuing Education and Training Colleges Act, 2006 (Act No. 16 of 2006), which is registered in terms of that Act.(e)Training for unemployed persons with the purpose of enabling them to obtain employment.(f)The training or education of persons with a severe physical or mental disability.(g)The provision of bridging courses to enable educationally disadvantaged persons to enter a higher education institution as envisaged in subparagraph (b).(h)The provision of educare or early childhood development services for pre-school children.(i)The provision of school buildings or equipment for public schools and educational institutions engaged in public benefit activities contemplated in subparagraphs (a) to (h).(j)Programmes addressing needs in education provision, learning, teaching, training, curriculum support, governance, whole school development, safety and security at schools, pre-schools or educational institutions as envisaged in subparagraphs (a) to (h).(k)Educational enrichment, academic support, supplementary tuition or outreach programmes for the poor and needy.(l)Training of persons employed in the national, provincial and local spheres of government, for purposes of capacity building in those spheres of government.(m)Career guidance and counseling services provided to persons attending any school or higher education institution as envisaged in subparagraphs (a) and (b).(n)The provision of hostel accommodation to students of a public benefit organisation contemplated in section 30 or an institution, board or body contemplated in section 10(1)(cA)(i), carrying on activities envisaged in subparagraphs (a) to (g).(o)The provision of scholarships, bursaries, awards and loans for study, research and teaching on such conditions as may be prescribed by the Minister by way of regulation in the Gazette.(p)The provision or promotion of educational programmes with respect to financial services and products, carried on under the auspices of a public entity listed under Schedule 3A of the Public Finance Management Act.4. Conservation, environment and animal welfare
(a)Engaging in the conservation, rehabilitation or protection of the natural environment, including flora, fauna or the biosphere.(b)The care of animals, including the rehabilitation or prevention of the ill-treatment of animals.(c)The promotion of, and education and training programmes relating to, environmental awareness, greening, clean-up or sustainable development projects.(d)The establishment and management of a transfrontier area, involving two or more countries, which—(i)is or will fall under a unified or coordinated system of management without compromising national sovereignty; and(ii)has been established with the explicit purpose of supporting the conservation of biological diversity, job creation, free movement of animals and tourists across the international boundaries of the peace park, and the building of peace and understanding between the nations concerned.5. Land and housing
(a)The development, construction, upgrading, conversion or procurement of housing units for the benefit of persons whose monthly household income is equal to or less than R15 000 or any greater amount determined by the Minister of Finance by notice in the Gazette after consultation with the Minister of Housing.(b)The development, servicing, upgrading or procurement of stands, or the provision of building materials, for purposes of the activities contemplated in subparagraph (a).(c)Building and equipping of clinics or crèches for the benefit of the poor and needy.(d)The protection, enforcement or improvement of the rights of poor and needy tenants, labour tenants or occupiers, to use or occupy land or housing.(e)The promotion, facilitation and support of access to land and use of land, housing and infrastructural development for promoting official land reform programmes.Tenth Schedule
Oil and gas activities
1. Definitions
For the purposes of this Schedule, unless the context otherwise indicates—“exploration” means the acquisition, processing and analysis of geological and geophysical data or the undertaking of activities in verifying the presence or absence of hydrocarbons (up to and including the appraisal phase) conducted for the purpose of determining whether a reservoir is economically feasible to develop;“gas” means any subsoil combustible gas, consisting primarily of hydrocarbons, other than hydrocarbons converted from bituminous shales or other stratified deposits of solid hydrocarbons;“oil” means any subsoil combustible liquid consisting primarily of hydrocarbons, other than hydrocarbons converted from bituminous shales or other stratified deposits of solid hydrocarbons;“oil and gas company” means any company that—(i)holds any oil and gas right; or(ii)engages in exploration or post-exploration in terms of any oil and gas right;“oil and gas income” means the receipts and accruals derived by an oil and gas company from—(a)exploration in terms of any oil and gas right;(b)post-exploration in respect of any oil and gas right; or(c)the leasing or disposal of any oil and gas right;“oil and gas right” means—(a)any reconnaissance permit, technical co-operation permit, exploration right, or production right as defined in section 1 of the Mineral and Petroleum Resources Development Act or any interest therein;(b)any exploration right acquired by virtue of a conversion contemplated in item 4 of Schedule II to the Mineral and Petroleum Resources Development Act or any interest therein; or(c)any production right acquired by virtue of a conversion contemplated in item 5 of Schedule II to the Mineral and Petroleum Resources Development Act or any interest therein;“post-exploration” means any activity carried out after the completion of the appraisal phase, including—(a)the separation of oil and gas condensates;(b)the drying of gas; and(c)the removal of non-hydrocarbon constituents,to the extent that these processes are preliminary to refining;2. Rate
The rate of tax on taxable income attributable to oil and gas income of any oil and gas company must not exceed 28 cents on each rand of taxable income.3. Withholding taxes
(1)The rate of dividends tax contemplated in section 64E that is paid by an oil and gas company on the amount of any dividend derived from oil and gas income must not exceed zero per cent of the amount of that dividend.(2)Notwithstanding Part IVB of Chapter II, the rate of withholding tax on interest contemplated in that Part may not exceed zero per cent of the amount of any interest that is paid by an oil and gas company in respect of loans applied to fund expenditure contemplated in paragraph 5(2).4. Foreign currency gains or losses
(1)Currency gains or losses of an oil and gas company during any year of assessment (regardless of whether those gains or losses are realised or unrealised) must be determined solely with reference to—(a)the functional currency of that company; and(b)the translation method used by that company for purposes of financial reporting.(2)Any amount received by or accrued to, or expenditure incurred by, an oil and gas company during any year of assessment in any currency other than that of the Republic must be—(a)determined in the functional currency of that company; and(b)translated to the currency of the Republic by applying the average exchange rate for that year.5. Deductions from income derived from oil and gas activities
(1)For purposes of determining the taxable income of an oil and gas company during any year of assessment, there must be allowed as deductions from the oil and gas income of that company all expenditure and losses actually incurred (other than any expenditure or loss actually incurred in respect of the acquisition of any oil and gas right, except as allowed in paragraph 7(3)) in that year in respect of exploration or post-exploration.(2)In addition to any other deductions (as contemplated in subparagraph (1) other than any expenditure or loss actually incurred in respect of the acquisition of any oil and gas right) allowable in terms of this paragraph, for purposes of determining the taxable income of an oil and gas company during any year of assessment, there must be allowed as deductions from the oil and gas income of that company derived in that year of assessment—(a)100 per cent of all expenditure of a capital nature actually incurred in that year of assessment in respect of exploration in terms of an oil and gas right; and(b)50 per cent of all expenditure of a capital nature actually incurred in that year of assessment in respect of post-exploration in respect of an oil and gas right.(2A)For the purposes of determining the taxable income of an oil and gas company during the first year of assessment of that oil and gas company commencing on or after 2 November 2006, there will be brought forward and allowed as a deduction from the oil and gas income of that oil and gas company the amount determined in terms of section 36(7E) in respect of the immediately preceding year of assessment.(3)For purposes of determining the taxable income of an oil and gas company during any year of assessment, any assessed losses (as defined in section 20) in respect of exploration or production may only be set off against—(a)the oil and gas income of that company; and(b)income from the refining of gas derived in respect of any oil and gas right held by that company,to the extent that those assessed losses do not exceed that income.(4)To the extent that any assessed losses remain after the set-off contemplated in subparagraph (3), an amount equal to 10 per cent of those remaining assessed losses may be set off against any other income derived by that company.(5)To the extent that any assessed loss remains after the set-offs contemplated in subparagraphs (3) and (4), those losses may be carried forward to the succeeding year of assessment of that oil and gas company.6. Exploration and post-exploration expenses
If a company holds an oil and gas right contemplated in paragraph (a) or (b) of the definition of “oil and gas right” during any year of assessment—(a)that company is deemed to be carrying on a trade in respect of that oil and gas right; and(b)expenditure and losses incurred by that company in respect of that oil and gas right are deemed to be incurred in the production of income of that company.7. Disposal of oil and gas right
(1)If an oil and gas company disposes of any oil and gas right to another company, that oil and gas company and that other company may (instead of any other provision of this Act) agree in writing that rollover treatment as contemplated in subparagraph (2) or participation treatment as contemplated in subparagraph (3) applies in respect of that right.(2)If an oil and gas company disposes of any oil and gas right to another company pursuant to an agreement that rollover treatment as contemplated in subparagraph (1) applies, and the market value of that oil and gas right is equal to or exceeds—(a)in the case that right is held as a capital asset, the base cost of that right on the date of that disposal; or(b)in the case that right is held as trading stock, the amount taken into account in respect of that right in terms of section 11(a) or 22(1) or (2),that company is deemed to have disposed of that right for an amount equal to the amount contemplated in items (a) or (b), as the case may be, and that other company is deemed to have acquired that right—(i)where that right is so disposed of as a capital asset, for a cost equal to any expenditure in respect of that right incurred by that company that is allowable in terms of paragraph 20 of the Eighth Schedule and to have incurred such cost at the date of incurral by that company of such expenditure, which cost must, where that right is acquired as—(A)a capital asset, be treated as an expenditure actually incurred by that company in respect of that right for the purposes of paragraph 20 of the Eighth Schedule; or(B)trading stock, be treated as the amount to be taken into account by that company in respect of that right for the purposes of section 11(a) or 22(1) or (2); or(ii)where that right is so disposed of as trading stock and that right is acquired as trading stock, for a cost equal to the amount referred to in item (b), which cost must be treated as the amount to be taken into account by that company in respect of that right for purposes of section 11(a) or 22(1) or (2).(3)(a)If an oil and gas company disposes of any oil and gas right to another company pursuant to an agreement that participation treatment as contemplated in subparagraph (1) applies and—(i)that right is held as a capital asset; and(ii)the market value of that right exceeds the base cost of that right on the date of that disposal,any gain derived by that company in respect of the amount contemplated in subitem (ii) is deemed to be an amount of gross income and that other company that acquired that right may deduct from its oil and gas income as contemplated in paragraph 5(1) (but not including 5(2)) an amount equal to the amount deemed to be gross income of the company that disposed of that right.(b)If an oil and gas company disposes of any oil and gas right to another company pursuant to an agreement that participation treatment as contemplated in subparagraph (1) applies and—(i)that right is held as trading stock; and(ii)the market value of that right exceeds the amount taken into account in respect of that right in terms of section 11(a) or 22,that other company that acquired that right may deduct from its oil and gas income as contemplated in paragraph 5(1) (but not including 5(2)) an amount equal to the amount deemed to be gross income of the company that disposed of that right less the applicable deduction allowable as contemplated in section 11(a) or 22, as the case may be, in respect of that right.8. Fiscal stability
(1)(a)The Minister may enter into a binding agreement with any oil and gas company in respect of an oil and gas right held by that company, and that agreement so entered into must guarantee that the provisions of this Schedule (as at the date on which the agreement was concluded) apply in respect of that right as long as the right is held by the oil and gas company.(b)Notwithstanding subparagraph (a), the Minister may enter into a binding agreement with any company in anticipation of an oil and gas right to be acquired by that company, and that agreement must guarantee that the provisions of this Schedule (as at the date on which the oil and gas right is granted) apply in respect of that right as long as that right is held by the oil and gas company: Provided that this binding agreement has no force and effect if the oil and gas right is not granted within one year after the agreement is concluded.(c)If an oil and gas company jointly holds with another oil and gas company an exploration right, as defined in section 1 of the Mineral and Petroleum Resources Development Act, and any one of those oil and gas companies has concluded an agreement as contemplated in subparagraph (1) in respect of that right, all of the fiscal stability rights in terms of that agreement relating to that exploration right apply in respect of both of those companies.(2)(a)In the case of a disposal of an exploration right, as defined in section 1 of the Mineral and Petroleum Resources Development Act, an oil and gas company that has concluded an agreement as contemplated in subparagraph (1) in respect of that right may, as part of that disposal, assign all of its fiscal stability rights in terms of that agreement relating to the exploration right disposed of to any other oil and gas company.(b)In the case of a disposal of a production right, as defined in section 1 of the Mineral and Petroleum Resources Development Act, an oil and gas company that has concluded an agreement as contemplated in subparagraph (1) in respect of that right disposed of may, as part of that disposal, assign all its fiscal stability rights in terms of that agreement relating to the production right disposed of to another company if that other company is a company within the same group of companies as the oil and gas company transferring the fiscal stability right at the time the agreement is concluded.(3)If an oil and gas company holding a participating interest in an oil and gas right has concluded an agreement contemplated in subparagraph (1), the terms and conditions of that agreement will apply to all participating interests subsequently held by that company in that oil and gas right.(4)An oil and gas company that has concluded an agreement contemplated in subparagraph (1) in respect of an oil and gas right may at any time unilaterally terminate the agreement in respect of that oil and gas right so held with effect from the commencement of the year of assessment immediately following the notification date of the termination.(5)The portion of taxable income and profits of an oil and gas company derived from all the oil and gas rights governed by the version of the Schedule applicable to an oil and gas right covered by a binding agreement referred to in subparagraph (1), must be determined in terms of that version of the Schedule.(6)If the State fails to comply with the terms of the agreement contemplated in subparagraph (1) and that failure has a material adverse economic impact on the taxation of income or profits of the oil and gas company that is party to that agreement, that oil and gas company is entitled to compensation for the loss of market value caused by that failure (and interest at the prescribed rate calculated on the compensation from the date of non-compliance) or to an alternative remedy that otherwise eliminates the full impact of that failure.(7)For purposes of this paragraph—(a)an “oil and gas right” means any—(i)exploration right or production right as defined in section 1 of the Mineral and Petroleum Resources Development Act or any right or interest therein;(ii)exploration right acquired by virtue of a conversion contemplated in item 4 of Schedule II to the Mineral and Petroleum Resources Development Act or any interest therein; or(iii)production right acquired by virtue of a conversion contemplated in item 5 of Schedule II to the Mineral and Petroleum Resources Development Act or any interest therein; and(b)an exploration right, a renewal of that exploration right and an initial production right converted from any exploration right or renewal thereof held by a company will all be deemed to be one and the same oil and gas right in the hands of that company to the extent that those rights relate to the same geographical area.Eleventh Schedule (Section 12P)
Government grants exempt from normal tax
1.Agro-Processing Support Scheme received or accrued from the Department of Trade, Industry and Competition;2.Aquaculture Development and Enhancement Programme received or accrued from the Department of Trade, Industry and Competition;3.Automotive Production and Development Programme received or accrued from the International Trade Administration Commission of South Africa;4.Automotive Investment Scheme received or accrued from the Department of Trade, Industry and Competition;5.Black Business Supplier Development Programme received or accrued from the Department of Small Business Development;6.Black Industrialists Scheme received or accrued from the Department of Trade, Industry and Competition;7.Business Process Services received or accrued from the Department of Trade, Industry and Competition;8.Business Viability Programme received or accrued from the Department of Small Business Development;9.Capital Projects Feasibility Programme received or accrued from the Department of Trade, Industry and Competition;10.Capital Restructuring Grant received or accrued from the Department of Human Settlements;11.Clothing and Textiles Competitiveness Programme received or accrued from the Industrial Development Corporation;12.Cluster Development Programme received or accrued from the Department of Trade, Industry and Competition;13.Comprehensive Agricultural Support Programme received or accrued from the Department of Agriculture;14.Co-operative Incentive Scheme received or accrued from the Department of Small Business Development;15.Critical Infrastructure Programme received or accrued from the Department of Trade, Industry and Competition;16.Eastern Cape Jobs Stimulus Fund received or accrued from the Department of Economic Development, Environmental Affairs and Tourism of the Eastern Cape;17.Enterprise Incubation Programme received or accrued from the Department of Small Business Development;18.Enterprise Investment Programme received or accrued from the Department of Trade, Industry and Competition;19.Equity Fund received or accrued from the Department of Science and Technology;20.Export Marketing and Investment Assistance received or accrued from the Department of Trade, Industry and Competition;21.Film Production Incentive received or accrued from the Department of Trade, Industry and Competition;22.Food Fortification Grant received or accrued from the Department of Health;23.Green Technology Incentive Programme received or accrued from the Department of Tourism;24.Idea Development Fund received or accrued from the Department of Science and Technology;25.Incubation Support Programme received or accrued from the Department of Trade, Industry and Competition;26.Industrial Development Zone Programme received or accrued from the Department of Trade, Industry and Competition;27.Industry Matching Fund received or accrued from the Department of Science and Technology;28.Integrated National Electrification Programme Grant: Non-grid electrification service providers received or accrued from the Department of Energy;29.Integrated National Electrification Programme: Electricity connection to households received or accrued from the Department of Energy;30.Interest Make-Up Programme received or accrued from the Department of Trade, Industry and Competition;31.Jobs Fund received or accrued from the National Treasury;32.Manufacturing Competitiveness Enhancement Programme received or accrued from the Department of Trade, Industry and Competition;33.Sector Specific Assistance Scheme received or accrued from the Department of Trade, Industry and Competition;34.Shared Economic Infrastructure Facility received or accrued from the Department of Small Business Development;35.Small Enterprise Manufacturing Support Programme received or accrued from the Department of Small Business Development;36.Small, Medium Enterprise Development Programme received or accrued from the Department of Trade, Industry and Competition;37.Small/Medium Manufacturing Development Programme received or accrued from the Department of Trade, Industry and Competition;38.South African Research Chairs Initiative received or accrued from the Department of Science and Technology;39.Strategic Partnership Programme received or accrued from the Department of Trade, Industry and Competition;40.Support Programme for Industrial Innovation received or accrued from the Department of Trade, Industry and Competition;41.Taxi Recapitalisation Programme received or accrued from the Department of Transport;42.Technology Development Fund received or accrued from the Department of Science and Technology;43.Technology and Human Resources for Industry Programme received or accrued from the Department of Trade, Industry and Competition;44.The Blended Finance Facility received or accrued from the Department of Small Business Development;45.The COVID-19 Emergency Fund received or accrued from the Department of Small Business Development;46.The Small Business and Innovation Fund received or accrued from the Department of Small Business Development;47.Township and Rural Entrepreneurship Programme (TREP) received or accrued from the Department of Small Business Development;48.Transfers to the South African National Taxi Council received or accrued from the Department of Transport;49.Transfers to the University of Pretoria, University of KwaZulu-Natal and University of Stellenbosch received or accrued from the Department of Transport;50.Youth Technology Innovation Fund received or accrued from the Department of Science and Technology.
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