Income Tax Act, 1962

Act 58 of 1962

This is the version of this Act as it was from 31 March 2023 to 31 October 2023. Read the latest available version.

Income Tax Act, 1962

Citation

Act 58 of 1962

Date

Language

English

Type

Act

Publication

Download PDF (26.2 MB)

Collections

Subject areas
- Finance and Money

Income Tax Act, 1962

Act 58 of 1962

Published in Government Gazette 250 on 29 May 1962
Assented to on 25 May 1962
Commenced on 1 July 1962
[This is the version of this document as it was from 31 March 2023 to 31 October 2023.]

[Amended by Rates and Monetary Amounts and Amendment of Revenue Laws Act, 2018 (Act 21 of 2018) on 17 January 2019]
[Amended by Tax Administration Laws Amendment Act, 2018 (Act 22 of 2018) on 17 January 2019]
[Amended by Taxation Laws Amendment Act, 2018 (Act 23 of 2018) on 17 January 2019]
[Amended by Taxation Laws Amendment Act, 2022 (Act 20 of 2022) on 17 January 2019]
[Amended by Rates and Monetary Amounts and Amendment of Revenue Laws Act, 2019 (Act 32 of 2019) on 15 January 2020]
[Amended by Tax Administration Laws Amendment Act, 2019 (Act 33 of 2019) on 15 January 2020]
[Amended by Taxation Laws Amendment Act, 2019 (Act 34 of 2019) on 15 January 2020]
[Amended by Rates and Monetary Amounts and Amendment of Revenue Laws Act, 2020 (Act 22 of 2020) on 20 January 2021]
[Amended by Taxation Laws Amendment Act, 2020 (Act 23 of 2020) on 20 January 2021]
[Amended by Tax Administration Laws Amendment Act, 2020 (Act 24 of 2020) on 20 January 2021]
[Amended by Taxation Laws Amendment Act, 2019 (Act 34 of 2019) on 1 March 2021]
[Amended by Taxation Laws Amendment Act, 2022 (Act 20 of 2022) on 1 March 2021]
[Amended by Taxation Laws Amendment Act, 2023 (Act 17 of 2023) on 1 March 2021]
[Amended by Taxation Laws Amendment Act, 2023 (Act 17 of 2023) on 1 April 2021]
[Amended by Taxation Laws Amendment Act, 2022 (Act 20 of 2022) on 1 January 2022]
[Amended by Rates and Monetary Amounts and Amendment of Revenue Laws Act, 2021 (Act 19 of 2021) on 19 January 2022]
[Amended by Taxation Laws Amendment Act, 2021 (Act 20 of 2021) on 19 January 2022]
[Amended by Tax Administration Laws Amendment Act, 2021 (Act 21 of 2021) on 19 January 2022]
[Amended by Rates and Monetary Amounts and Amendment of Revenue Laws Act, 2022 (Act 19 of 2022) on 1 March 2022]
[Amended by Taxation Laws Amendment Act, 2023 (Act 17 of 2023) on 1 March 2022]
[Amended by Taxation Laws Amendment Act, 2022 (Act 20 of 2022) on 29 July 2022]
[Amended by Taxation Laws Amendment Act, 2019 (Act 34 of 2019) on 1 January 2023]
[Amended by Taxation Laws Amendment Act, 2021 (Act 20 of 2021) on 1 January 2023]
[Amended by Taxation Laws Amendment Act, 2022 (Act 20 of 2022) on 1 January 2023]
[Amended by Taxation Laws Amendment Act, 2023 (Act 17 of 2023) on 1 January 2023]
[Amended by Taxation Laws Amendment Act, 2024 (Act 42 of 2024) on 1 January 2023]
[Amended by Taxation Laws Amendment Act, 2019 (Act 34 of 2019) on 5 January 2023]
[Amended by Tax Administration Laws Amendment Act, 2022 (Act 16 of 2022) on 5 January 2023]
[Amended by Taxation Laws Amendment Act, 2022 (Act 20 of 2022) on 5 January 2023]
[Amended by Taxation Laws Amendment Act, 2022 (Act 20 of 2022) on 1 March 2023]
[Amended by Taxation Laws Amendment Act, 2023 (Act 17 of 2023) on 1 March 2023]
[Amended by Rates and Monetary Amounts and Amendment of Revenue Laws Act, 2023 (Act 19 of 2023) on 1 March 2023]
[Amended by Taxation Laws Amendment Act, 2024 (Act 42 of 2024) on 1 March 2023]
[Amended by Taxation Laws Amendment Act, 2021 (Act 20 of 2021) on 31 March 2023]
[Amended by Taxation Laws Amendment Act, 2022 (Act 20 of 2022) on 31 March 2023]
[Amended by Taxation Laws Amendment Act, 2023 (Act 17 of 2023) on 31 March 2023]

ACTTo consolidate the law relating to the taxation of incomes and donations, to provide for the recovery of taxes on persons, to provide for the deduction by employers of amounts from the remuneration of employees in respect of certain tax liabilities of employees, and to provide for the making of provisional tax payments and for the payment into the National Revenue Fund of portions of the normal tax and interest and other charges in respect of such taxes, and to provide for related matters.

Preliminary

1. Interpretation

(1)In this Act, unless the context otherwise indicates—“agent” includes any partnership or company or any other body of persons corporate or unincorporate acting as an agent;“aggregate capital gain” means an amount determined in terms of paragraph 6 of the Eighth Schedule;“aggregate capital loss” means an amount determined in terms of paragraph 7 of the Eighth Schedule;“assessed capital loss” means an amount determined in terms of paragraph 9 of the Eighth Schedule;“assessment” has the meaning assigned under section 1 of the Tax Administration Act, and includes a determination by the Commissioner—(c)of any loss ranking for set-off;(d)of any assessed capital loss determined in terms of paragraph 9 of the Eighth Schedule; or(e)of any amounts to be taken into account in the determination of tax payable on income in future years;“average exchange rate” in relation to a year of assessment means the average determined by using the closing spot rates at the end of daily or monthly intervals during that year of assessment which must be consistently applied within that year of assessment;“Banks Act” means the Banks Act, 1990 (Act No. 94 of 1990);“beneficiary” in relation to a trust means a person who has a vested or contingent interest in all or a portion of the receipts or accruals or the assets of that trust;“benefit fund” means—(a)any friendly society registered under the Friendly Societies Act, 1956 (Act No. 25 of 1956), or any fund established before 13 June 1986 which is not so registered solely because of the provisions of section 2(2)(a) of that Act; or(b)any medical scheme registered under the provisions of the Medical Schemes Act;“bonus debentures or securities” means debentures or securities issued by a company, whether by way of a bonus award or otherwise, in such manner that the company’s reserves or unappropriated profits are in whole or in part applied in paying up such debentures or securities;“capital gain” means an amount determined in terms of paragraph 3 of the Eighth Schedule;“capital loss” means an amount determined in terms of paragraph 4 of the Eighth Schedule;“child”, in relation to any person, includes any person adopted by him or her—(a)under the law of the Republic; or(b)under the law of any country other than the Republic, provided the adopted person is under such law accorded the status of a legitimate child of the adoptive parent and the adoption was made at a time when the adoptive parent was ordinarily resident in such country;“close corporation” means a close corporation within the meaning of the Close Corporations Act, 1984 (Act No. 69 of 1984);“collateral arrangement” means a collateral arrangement as defined in section 1 of the Securities Transfer Tax Act, 2007 (Act No. 25 of 2007);“Collective Investment Schemes Control Act” means the Collective Investment Schemes Control Act, 2002 (Act No. 45 of 2002);“Commissioner” means the Commissioner for the South African Revenue Service appointed in terms of section 6 of the South African Revenue Service Act, 1997 (Act No. 34 of 1997), or the Acting Commissioner designated in terms of section 7 of that Act;“Companies Act” means the Companies Act, 2008 (Act No. 71 of 2008);“company” includes—(a)any association, corporation or company (other than a close corporation) incorporated or deemed to be incorporated by or under any law in force or previously in force in the Republic or in any part thereof, or any body corporate formed or established or deemed to be formed or established by or under any such law; or(b)any association, corporation or company incorporated under the law of any country other than the Republic or any body corporate formed or established under such law; or(c)any co-operative; or(d)any association (not being an association referred to in paragraph (a) or (f)) formed in the Republic to serve a specified purpose, beneficial to the public or a section of the public; or(e)any—(ii)portfolio comprised in any investment scheme carried on outside the Republic that is comparable to a portfolio of a collective investment scheme in participation bonds or a portfolio of a collective investment scheme in securities in pursuance of any arrangement in terms of which members of the public (as defined in section 1 of the Collective Investment Schemes Control Act) are invited or permitted to contribute to and hold participatory interests in that portfolio through shares, units or any other form of participatory interest; or(iii)portfolio of a collective investment scheme in property that qualifies as a REIT as defined in the listing requirements of an exchange, as defined in section 1 of the Financial Markets Act and licensed under section 9 of that Act, where those listing requirements have been approved in consultation with the Director-General of the National Treasury and published by the appropriate authority, as contemplated in section 1 of the Financial Markets Act, in terms of section 11 of that Act or by the Financial Sector Conduct Authority; or[subparagraph (iii) substituted by section 1(1)(a) of Act 23 of 2018; effective date 17 January 2019, and by section 4(1)(a) of Act 20 of 2021; effective date 19 January 2022, date of promulgation of that Act](f)a close corporation,but does not include a foreign partnership;“connected person” means—(a)in relation to a natural person—(i)any relative; and(ii)any trust (other than a portfolio of a collective investment scheme) of which such natural person or such relative is a beneficiary;(b)in relation to a trust (other than a portfolio of a collective investment scheme)—(i)any beneficiary of such trust; and(ii)any connected person in relation to such beneficiary;(bA)in relation to a connected person in relation to a trust (other than a portfolio of a collective investment scheme), any other person who is a connected person in relation to such trust;(c)in relation to a member of any partnership or foreign partnership—(i)any other member; and(ii)any connected person in relation to any member of such partnership or foreign partnership;(d)in relation to a company—(i)any other company that would be part of the same group of companies as that company if the expression “at least 70 per cent of the equity shares in” in paragraphs (a) and (b) of the definition of “group of companies” in this section were replaced by the expression “more than 50 per cent of the equity shares or voting rights in”;(iv)any person, other than a company as defined in section 1 of the Companies Act that alone or together with any connected person in relation to that person, holds, directly or indirectly, at least 20 per cent of—(aa)the equity shares in the company; or(bb)the voting rights in the company;[words preceding item (aa) substituted by section 4(1)(b) of Act 20 of 2021; effective date 19 January 2022, date of promulgation of that Act](v)any other company if at least 20 per cent of the equity shares or voting rights in the company are held by that other company, and no holder of shares holds the majority voting rights in the company;(vA)any other company if such other company is managed or controlled by—(aa)any person who or which is a connected person in relation to such company; or(bb)any person who or which is a connected person in relation to a person contemplated in item (aa); and(vi)where such company is a close corporation—(aa)any member;(bb)any relative of such member or any trust (other than a portfolio of a collective investment scheme) which is a connected person in relation to such member; and[item (bb) substituted by section 3(1)(f) of Act 25 of 2015, as retroactively substituted by section 103(1)(a) of Act 23 of 2018; effective date 8 January 2016, date of promulgation of the first Act](cc)any other close corporation or company which is a connected person in relation to—(i)any member contemplated in item (aa); or(ii)the relative or trust contemplated in item (bb); and(e)in relation to any person who is a connected person in relation to any other person in terms of the foregoing provisions of this definition, such other person:Provided that for the purposes of this definition, a company includes a portfolio of a collective investment scheme;“contributed tax capital”, in relation to a class of shares in a company, means—(a)in relation to a class of shares issued by a company, in the case of a foreign company that becomes a resident on or after 1 January 2011, an amount equal to the sum of—(i)the market value of all the shares in that company of that class immediately before the date on which that company becomes a resident;(ii)the consideration received by or accrued to that company for the issue of shares of that class on or after the date on which that company becomes a resident; and(iii)if the shares of that class include or consist of shares that were converted from another class of shares of that company to that class of shares—(aa)any consideration received by or accrued to that company in respect of that conversion; and(bb)the amount contemplated in subparagraph (cc) that was determined in respect of shares of the other class of shares that were so converted,reduced by so much of that amount as—(aa)the company has transferred on or after the date on which the company becomes a resident for the benefit of any person holding a share in that company of that class in respect of that share;(bb)has by the date of the transfer been determined by the directors of the company or by some other person or body of persons with comparable authority to be an amount so transferred; and(cc)in the case of a convertible class of shares some of the shares of which have been converted to another class of shares, so much of the amount contemplated in this paragraph in respect of that convertible class of shares immediately prior to that conversion as bears to that amount the same ratio as the number of shares so converted bears to the total number of that convertible class of shares prior to that conversion; or(b)in relation to a class of shares issued by a company, in the case of any other company, an amount equal to the sum of—(i)the stated capital or share capital and share premium of that company immediately before 1 January 2011 in relation to shares in that company of that class issued by that company before that date, less so much of that stated capital or share capital and share premium as would have constituted a dividend, as defined before that date, had that stated capital or share capital and share premium been distributed by that company immediately before that date;(ii)the consideration received by or accrued to that company for the issue of shares of that class on or after 1 January 2011; and(iii)if the shares of that class include or consist of shares that were converted from another class of shares of that company to that class of shares—(aa)any consideration received by or accrued to that company in respect of that conversion; and(bb)the amount contemplated in subparagraph (cc) that was determined in respect of shares of the other class of shares that were so converted,reduced by so much of that amount as—(aa)the company has transferred on or after 1 January 2011 for the benefit of any person holding a share in that company of that class in respect of that share;(bb)has by the date of the transfer been determined by the directors of the company or by some other person or body of persons with comparable authority to be an amount so transferred; and(cc)in the case of a convertible class of shares some of the shares of which have been converted to another class of shares, so much of the amount contemplated in this paragraph in respect of that convertible class of shares immediately prior to that conversion as bears to that amount the same ratio as the number of shares so converted bears to the total number of that convertible class of shares prior to that conversion:Provided that the amount transferred by a company as contemplated in paragraph (a) or (b) for the benefit of a person holding shares of any class of shares of that company must not exceed an amount that bears to the total of the amount of contributed tax capital attributable to that class of shares immediately before the transfer the same ratio as the number of shares of that class held by that person bears to the total number of shares of that class:Provided further that an amount transferred by a company as contemplated in paragraph (a) or (b) must comprise a transfer of contributed tax capital only where—(i)the shares in a class of shares, in respect of which—(aa)a distribution is made; or(bb)consideration for the acquisition, cancellation or redemption is paid or payable by that company,are each transferred an equal amount of contributed tax capital in respect of that class of shares; and(ii)the amount of that transfer per share does not exceed the total amount of contributed tax capital in respect of that class of shares divided by the total number of issued shares within that class of shares;[further proviso to the definition of “contributed tax capital” added by section 4(1)(c) of Act 20 of 2021, as retroactively substituted by section 41(1) of Act 20 of 2022; effective date 1 January 2023]“controlled foreign company” means a controlled foreign company as defined in section 9D;[definition of “controlled foreign company” inserted by section 2(1)(b) of Act 23 of 2020; effective date 20 January 2021, date of promulgation of that Act]“controlled group company” means a controlled group company contemplated in the definition of “group of companies”;“controlling group company” means a controlling group company contemplated in the definition of “group of companies”;“controlled foreign company” [definition of “controlled foreign company” deleted by section 2(1)(a) of Act 23 of 2020; effective date 20 January 2021, date of promulgation of that Act]“co-operative” means any association of persons registered in terms of section 27 of the Co-operatives Act, 1981 (Act No. 91 of 1981) or section 7 of the Co-operatives Act, 2005 (Act No. 14 of 2005);“Copyright Act” means the Copyright Act, 1978 (Act No. 98 of 1978);“date of sequestration” means—(a)the date of voluntary surrender of an estate, if accepted by the Court; or(b)the date of provisional sequestration of an estate, if a final order of sequestration is granted by the Court;“depreciable asset” means an asset as defined in paragraph 1 of the Eighth Schedule (other than any trading stock and any debt), in respect of which a deduction or allowance determined wholly or partly with reference to the cost or value of that asset is allowable in terms of this Act for purposes other than the determination of any capital gain or capital loss;“Designs Act” means the Designs Act, 1993 (Act No. 195 of 1993);“director”, in relation to a close corporation, means any person who in respect of such close corporation holds any office or performs any functions similar to the office or functions of a director of a company other than a close corporation;“dividend” means any amount, other than a dividend consisting of a distribution of an asset in specie declared and paid as contemplated in section 31(3), transferred or applied by a company that is a resident for the benefit or on behalf of any person in respect of any share in that company, whether that amount is transferred or applied—(a)by way of a distribution made by; or(b)as consideration for the acquisition of any share in,[words preceding paragraph (a) substituted by section 1(1)(b) of Act 23 of 2018; effective date 1 January 2019, applicable in respect of years of assessment commencing on or after that date]that company, but does not include any amount so transferred or applied to the extent that the amount so transferred or applied—(i)results in a reduction of contributed tax capital of the company;(ii)constitutes shares in the company;(iii)constitutes an acquisition by the company of its own securities by way of a general repurchase of securities as contemplated in subparagraph (b) of paragraph 5.67(B) of section 5 of the JSE Limited Listings Requirements, where that acquisition complies with any applicable requirements prescribed by paragraphs 5.68 and 5.72 to 5.81 of section 5 of the JSE Limited Listings Requirements or a general repurchase of securities as contemplated in the listings requirements of any other exchange, licensed under the Financial Markets Act, that are substantially the same as the requirements prescribed by the JSE Limited Listings Requirements, where that acquisition complies with the applicable requirements of that exchange;[paragraph (iii) substituted by section 2(1)(a) of Act 34 of 2019, effective date 15 January 2020, date of promulgation of that Act]“domestic treasury management company” means a company—(a)that is incorporated or deemed to be incorporated—(i)by or under any law in force in the Republic and is not subject to exchange control restrictions by virtue of being registered with the financial surveillance department of the South African Reserve Bank; or(ii)by or under the law of any country other than the Republic and is not subject to exchange control restrictions by virtue of being registered before 1 January 2019 with the financial surveillance department of the South African Reserve Bank; and(b)that has its place of effective management in the Republic;[definition of “domestic treasury management company” substituted by section 2(1)(b) of Act 34 of 2019; effective date 15 January 2020, date of promulgation of that Act]“equity share” means any share in a company, excluding any share that, neither as respects dividends nor as respects returns of capital, carries any right to participate beyond a specified amount in a distribution;“Estate Duty Act” means the Estate Duty Act, 1955 (Act No. 45 of 1955);“executor” means any person to whom letters of administration have been granted by a Master or an Assistant Master of the High Court appointed under the Administration of Estates Act, 1965 (Act No. 66 of 1965), in respect of the estate of a deceased person under any law relating to the administration of estates, and includes a person acting or authorized to act under letters of administration granted outside the Republic but signed and sealed by such a Master or Assistant Master for use within the Republic and, in any case where the estate is not required to be administered under the supervision of such a Master or Assistant Master, the person administering the estate;“financial instrument” includes—(a)a loan, advance, debt, bond, debenture, bill, share, promissory note, banker’s acceptance, negotiable certificate of deposit, deposit with a financial institution, a participatory interest in a portfolio of a collective investment scheme, or a similar instrument;(b)any repurchase or resale agreement, forward purchase arrangement, forward sale arrangement, futures contract, option contract or swap contract;(c)any other contractual right or obligation the value of which is determined directly or indirectly with reference to—(i)a debt security or equity;(ii)any commodity as quoted on an exchange; or(iii)a rate index or a specified index;(d)any interest-bearing arrangement;(e)any financial arrangement based on or determined with reference to the time value of money or cash flow or the exchange or transfer of an asset; and(f)any crypto asset;[paragraph (f) added by section 1(1)(c) of Act 23 of 2018; effective date 17 January 2019, and substituted by section 2(1)(c) of Act 23 of 2020; effective date 20 January 2021, date of promulgation of that Act]“Financial Markets Act” means the Financial Markets Act, 2012 (Act No. 19 of 2012);“Financial Sector Conduct Authority” means the Financial Sector Conduct Authority as defined in section 1 of the Financial Sector Regulation Act;[definition of “Financial Sector Conduct Authority” inserted by section 1(1)(d) of Act 23 of 2018; effective date 1 April 2018]“Financial Sector Regulation Act” means the Financial Sector Regulation Act, 2017 (Act No. 9 of 2017);[definition of “Financial Sector Regulation Act” inserted by section 1(1)(g) of Act 23 of 2018; effective date 1 April 2018]“Financial Services Board” [definition of “Financial Services Board” deleted by section 1(1)(e) of Act 23 of 2018; effective date 1 April 2018]“Financial Services Board Act” [definition of “Financial Services Board Act” deleted by section 1(1)(e) of Act 23 of 2018; effective date 1 April 2018]“financial year”, in relation to any company, means—(a)the period, whether of 12 months or not, commencing upon the date of incorporation or creation of such company and ending upon the last day of February immediately succeeding such date or upon such other date as the Commissioner having regard to the circumstances of the case may approve; or(b)any period subsequent to the period referred to in paragraph (a), whether of 12 months or not, commencing immediately after the last day of the immediately preceding financial year of such company and ending upon the first anniversary of such last day or upon such other date as the Commissioner having regard to the circumstances of the case may approve;“foreign company” means any company which is not a resident;“foreign dividend” means any amount that is paid or payable by a foreign company in respect of a share in that foreign company where that amount is treated as a dividend or similar payment by that foreign company for the purposes of the laws relating to—(a)tax on income on companies of the country in which that foreign company has its place of effective management; or(b)companies of the country in which that foreign company is incorporated, formed or established, where the country in which that foreign company has its effective place of management does not have any applicable laws relating to tax on income,but does not include any amount so paid or payable that—(i)constitutes a redemption or other disposal of a participatory interest in an arrangement or scheme contemplated in paragraph (e)(ii) of the definition of “company” to that arrangement or scheme or to the management company of that arrangement or scheme; or[paragraph (i) substituted by section 1(1)(a) of Act 20 of 2022; effective date 5 January 2023, date of promulgation of that Act](iii)constitutes a share in that foreign company;“foreign investment entity” means any person other than a natural person—(a)that is not incorporated, established or formed in the Republic;(b)the assets of which consist solely of a portfolio of one or more of the following:(i)amounts in cash or that constitute cash equivalents;(ii)financial instruments that—(aa)are issued by a listed company or by the government of the Republic in the national, provincial or local sphere; or(bb)if not issued by a listed company or by the government of the Republic in the national, provincial or local sphere, are traded by members of the general public and a market for that trade exists;(iii)financial instruments, the values of which are determined with reference to financial instruments contemplated in subparagraph (ii); or(iv)rights to receive any asset contemplated in subparagraph (i), (ii) or (iii),which amounts, financial instruments and rights are held by that person for investment purposes;(c)where no more than 10 per cent of the shares, units or other form of participatory interest in that person are directly or indirectly held by persons that are residents; and(d)where that person has no employees and has no directors or trustees that are engaged in the management of that person on a full-time basis;“foreign partnership”, in respect of any year of assessment, means any partnership, association, body of persons or entity formed or established under the laws of any country other than the Republic if—(a)for the purposes of the laws relating to tax on income of the country in which that partnership, association, body of persons or entity is formed or established—(i)each member of the partnership, association, body of persons or entity is required to take into account the member’s interest in any amount received by or accrued to that partnership, association, body of persons or entity when that amount is received by or accrued to the partnership, association, body of persons or entity; and(ii)the partnership, association, body of persons or entity is not liable for or subject to any tax on income, other than a tax levied by a municipality, local authority or a comparable authority, in that country; or(b)where the country in which that partnership, association or body of persons is formed or established does not have any applicable laws relating to tax on income—(i)any amount—(aa)that is received by or accrued to; or(bb)of expenditure that is incurred by,the partnership, association, body of persons or entity is allocated concurrently with the receipt, accrual or incurral to the members of that partnership, association, body of persons or entity in terms of an agreement between those members; and(ii)no amount distributed to a member of a partnership, association, body of persons or entity may exceed the allocation contemplated in subparagraph (i) after taking into account any prior distributions made by the partnership, association or body of persons;“foreign return of capital” means any amount that is paid or payable by a foreign company in respect of any share in that foreign company where that amount is treated as a distribution or similar payment (other than an amount that constitutes a foreign dividend) by that foreign company for the purposes of the laws relating to—(a)tax on income on companies of the country in which that foreign company has its place of effective management; or(b)companies of the country in which that foreign company is incorporated, formed or established, where that country in which that foreign company has its place of effective management does not have any applicable laws relating to tax on income,but does not include any amount so paid or payable to the extent that the amount so paid or payable—(i)is deductible by that foreign company in the determination of any tax on income of companies of the country in which that foreign company has its place of effective management; or(ii)constitutes shares in that foreign company;“foreign tax year”, in relation to a foreign company, means any year or period of reporting for foreign income tax purposes by that company or, if that company is not subject to foreign income tax, any annual period of financial reporting by that company;“functional currency”, in relation to—(a)a person, means the currency of the primary economic environment in which the business operations of that person are conducted; and(b)a permanent establishment of any person, means the currency of the primary economic environment in which the business operations of that permanent establishment are conducted;“gross income”, in relation to any year or period of assessment, means—(i)in the case of any resident, the total amount, in cash or otherwise, received by or accrued to or in favour of such resident; or(ii)in the case of any person other than a resident, the total amount, in cash or otherwise, received by or accrued to or in favour of such person from a source within the Republic,during such year or period of assessment, excluding receipts or accruals of a capital nature, but including, without in any way limiting the scope of this definition, such amounts (whether of a capital nature or not) so received or accrued as are described hereunder, namely—(a)any amount received or accrued by way of an annuity, including any amount contemplated in the definition of “living annuity” or the definition of “annuity amount” in section 10A(1), other than an amount contemplated in paragraph (d)(ii);[paragraph (a) substituted by section 1(1)(b) of Act 20 of 2022; effective date 5 January 2023, date of promulgation of that Act](b)any amount payable to the taxpayer—(i)by the spouse or former spouse of that taxpayer, under any judicial order or written agreement of separation or under any order of divorce, by way of alimony or allowance or maintenance of the taxpayer; or(ii)in terms of any maintenance order for the maintenance of a child as contemplated in section 15(1) of the Maintenance Act, 1998 (Act No. 99 of 1998);(c)any amount, including any voluntary award, received or accrued in respect of services rendered or to be rendered or any amount (other than an amount referred to in section 8(1), 8B or 8C) received or accrued in respect of any employment or the holding of any office: Provided that—(i)the provisions of this paragraph shall not apply in respect of any benefit or advantage in respect of which the provisions of paragraph (i) apply;(ii)any amount received by or accrued to or for the benefit of any person in respect of services rendered or to be rendered by any other person shall for the purposes of this definition be deemed to have been received by or to have accrued to the said other person;(vii)the provisions of this paragraph shall not apply in respect of any amount received by or accrued to or for the benefit of any person in respect of long service as defined in paragraph 5(4) of the Seventh Schedule, to the extent that the aggregate value of an amount determined under this paragraph together with all amounts determined under paragraphs 5(2)(b), 6(4)(d) and 10(2)(e) of the Seventh Schedule do not exceed R5 000;[paragraph (vii) added by section 4(1)(d) of Act 20 of 2021; effective date 1 March 2022, applicable in respect of years of assessment commencing on or after that date](cA)any amount received by or accrued to any person who—(ii)is or was 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 that Schedule);(iii)is or was a personal service provider as defined in the Fourth Schedule; or(iv)was a personal service company or personal service trust as defined in the Fourth Schedule prior to section 66 of the Revenue Laws Amendment Act, 2008, coming into operation,as consideration for any restraint of trade imposed on such person;(cB)any amount received by or accrued to any natural person as consideration for any restraint of trade imposed on that person in respect or by virtue of—(i)employment or the holding of any office; or(ii)any past or future employment or the holding of an office;(d)any amount (other than an amount contemplated in paragraph (a)), including any voluntary award, received or accrued—(i)in respect of the relinquishment, termination, loss, repudiation, cancellation or variation of any office or employment or of any appointment (or right or claim to be appointed) to any office or employment;(ii)by or to a person, or dependant or nominee of the person, directly or indirectly in respect of proceeds from a policy of insurance where the person is or was an employee or director of the policyholder; or(iii)by or to a person, or dependant or nominee of the person, in respect of any policy of insurance (other than a risk policy with no cash value or surrender value) that has been ceded to—(aa)the person;(bb)a dependant or nominee of the person; orfor the benefit of the person, or dependant or nominee of the person, by—(A)the employer or former employer of the person; or(B)the company of which the person is or was a director:Provided that—(aa)the provisions of subparagraphs (i) and (ii) shall not apply to any lump sum award from any pension fund, pension preservation fund, provident fund, provident preservation fund or retirement annuity fund;(bb)any such amount which becomes payable in consequence of or following upon the death of any person shall be deemed to be an amount which accrued to such person immediately prior to his or her death;(cc)for the purposes of subparagraphs (ii) and (iii), any amount received by or accrued to a dependant or nominee of a person shall be deemed to be received by or to accrue to that person;(e)a retirement fund lump sum benefit or retirement fund lump sum withdrawal benefit other than any amount included under paragraph (eA);(eA)where, in relation to a member who effectively remains in the employment of the same employer, or the dependants or nominees of a deceased member—(i)any amount in a fund contemplated in paragraph (a), (b) or (d) of the definition of “pension fund” or paragraph (a), (b) or (c) of the definition of “provident fund”, the rules of which provide that on retirement of such member a portion of his benefit has to be taken in the form of an annuity, has been transferred to a fund, the rules of which entitle such member, or the dependants or nominees of a deceased member, to a benefit on retirement in the form of a lump sum exceeding one-third of the capitalised value of all benefits (including lump sum payments and annuities); or[subparagraph (i) substituted by section 1(1)(c) of Act 20 of 2022; effective date deemed to have been 1 March 2021, applies in respect of years of assessment commencing on or after that date](ii)a fund contemplated in paragraph (a), (b) or (d) of the definition of “pension fund” or paragraph (a), (b) or (c) of the definition of “provident fund”, the rules of which provide that on retirement of such member a portion of his benefit has to be taken in the form of an annuity, is wholly or partially converted by way of an amendment to its rules or otherwise, to entitle such member, or the dependants or nominees of a deceased member, to a benefit on retirement in the form of a lump sum exceeding one-third of the capitalised value of all benefits (including lump sum payments and annuities); or[subparagraph (ii) substituted by section 1(1)(c) of Act 20 of 2022; effective date deemed to have been 1 March 2021, applies in respect of years of assessment commencing on or after that date](iii)any amount in a fund contemplated in paragraph (a), (b) or (d) of the definition of “pension fund” or paragraph (a), (b) or (c) of the definition of “provident fund” has become payable to the member or is being utilised to redeem a debt,[subparagraph (iii) substituted by section 1(1)(c) of Act 20 of 2022; effective date deemed to have been 1 March 2021, applies in respect of years of assessment commencing on or after that date]an amount equal to two-thirds—(aa)of the amount so transferred; or(bb)in the case of a conversion, of the amount representing the amount converted for the benefit or ultimate benefit of the member or the dependants or nominees of the deceased member, and such amount shall be deemed to have been received by or accrued to or in favour of such member, dependants or nominees, as the case may be: Provided that where a court order granting a decree of divorce in respect of such member has made an order that any part of such amount shall be paid to the former spouse of such member, as provided for in section 7(8) of the Divorce Act, 1979 (Act No. 70 of 1979), such part shall for the purposes of this paragraph be deemed to be an amount converted for the benefit or ultimate benefit of such member; or(cc)in the case of an amount becoming payable to a member or being utilised to redeem a debt, of the amount so payable or so utilised:Provided that the Commissioner may, on application by a fund, in particular circumstances, increase the proportion of one-third contemplated in subparagraph (i) up to a maximum of one-half on the following conditions:(a)that on 12 March 1997 the proportion of the benefit on retirement in such fund that could be taken in the form of a lump sum was greater than one-third, but not greater than one-half, of the total capitalized value of all benefits;(b)that the rules of such fund are amended so that the maximum proportion of such member’s benefit on retirement that can be taken in the form of a lump sum is one-third of the total capitalized value of all benefits; and(c)such further conditions as the Commissioner may determine from time to time;(f)any amount received or accrued in commutation of amounts due under any contract of employment or service;(g)any amount received or accrued from another person, as a premium or consideration in the nature of a premium—(i)for the use or occupation or the right of use or occupation of land or buildings; or(ii)for the use or the right of use of plant or machinery; or(iibis)for the use or the right of use of any motion picture film or any film or video tape or disc for use in connection with television or any sound recording or advertising matter connected with such motion picture film, film or video tape or disc; or(iii)for the use or right of use of 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 model, pattern, plan, formula or process or any other property or right of a similar nature;(gA)any amount received or accrued from another person as consideration for the imparting of or the undertaking to impart any scientific, technical, industrial or commercial knowledge or information, or for the rendering of or the undertaking to render any assistance or service in connection with the application or utilization of such knowledge or information;(h)in the case of any person to whom, in terms of any agreement relating to the grant to any other person of the right of use or occupation of land or buildings, or by virtue of the cession of any rights under any such agreement, there has accrued in any such year or period the right to have improvements effected on the land or to the buildings by any other person—(i)the amount stipulated in the agreement as the value of the improvements or as the amount to be expended on the improvements; or(ii)if no amount is so stipulated, an amount representing the fair and reasonable value of the improvements;(i)the cash equivalent, as determined under the provisions of the Seventh Schedule, of the value during the year of assessment of any benefit or advantage granted in respect of employment or to the holder of any office, being a taxable benefit as defined in the said Schedule, and any amount required to be included in the taxpayer’s income under section 8A;(j)so much of the sum of any amounts received or accrued during any year of assessment in respect of disposals of assets the cost of which has in whole or in part been included in capital expenditure taken into account (whether under this Act or any previous Income Tax Act) for the purposes of any deduction in respect of any mine under section 15(a) of this Act or the corresponding provisions of any previous Income Tax Act, as exceeds the sum of so much of any capital expenditure as in the case of such mine is unredeemed at the commencement of the said year of assessment and the capital expenditure that is incurred during that year in respect of such mine, as determined before applying the definition of “capital expenditure incurred” in section 36(11);(jA)any amount received by or accrued to any person during the year of assessment in respect of the disposal of any asset manufactured, produced, constructed or assembled by that person, which is similar to any other asset manufactured, produced, constructed or assembled by that person for purposes of manufacture, sale or exchange by that person or on that person’s behalf;(k)any amount received or accrued by way of a dividend or a foreign dividend;(l)any amount received or accrued by way of grant or subsidy in respect of any soil erosion works referred to in section 17A(1) or any of the matters mentioned in items (a) to (i), inclusive, of paragraph 12(1) of the First Schedule;(lA)any amount received by or accrued to a company or association as contemplated in subparagraph (ii) of section 11E;(lC)any amount received by or accrued to a person by way of a government grant as defined in section 12P;(m)any amount received or accrued in respect of a policy of insurance of which the taxpayer is the policyholder, where the policy relates to the death, disablement or illness of an employee or director (or former employee or director) of the taxpayer, including by way of any debt: Provided that any amount so received or accrued shall be reduced by the amount of any such debt which is or has been included in the taxpayer’s gross income;[paragraph (m) substituted by section 2(1)(d) of Act 23 of 2020; effective date 20 January 2021, date of promulgation of that Act](mA)any amount in respect of a policy as contemplated in—(a)section 11(w) if that policy was concluded prior to 1 January 2011; or(b)section 11(w)(ii) if that policy was concluded on or after 1 January 2011,that is received by or accrues to a person other than the taxpayer contemplated in paragraph (m) subsequent to a cession of that policy, reduced by an amount not exceeding the amount so received or accrued equal to so much of the premiums paid by any person that ranked for deduction but has been disallowed solely by reason of the fact that the amount exceeded the amount of the deduction allowable in respect of the year of assessment;(n)any amount which in terms of any other provision of this Act is specifically required to be included in the taxpayer’s income and that amount must for the purposes of this paragraph be deemed to have been received by or to have accrued to the taxpayer:[words and subparagraphs preceding the proviso substituted by section 2(1)(c) of Act 34 of 2019, effective date 15 January 2020, date of promulgation of that Act]Provided that 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 such year, that amount shall be deemed to have accrued to the person during such year;“group of companies” means two or more companies in which one company (hereinafter referred to as the “controlling group company”) directly or indirectly holds shares in at least one other company (hereinafter referred to as the “controlled group company”), to the extent that—(a)at least 70 per cent of the equity shares in each controlled group company are directly held by the controlling group company, one or more other controlled group companies or any combination thereof; and(b)the controlling group company directly holds at least 70 per cent of the equity shares in at least one controlled group company;“headquarter company” in respect of any year of assessment means a company contemplated in section 9I(1) in respect of which an election has been made in terms of that section;“hotel keeper” means any person carrying on the business of hotel keeper or boarding or lodging house keeper where meals and sleeping accommodation are supplied to others for money or its equivalent;“identical security” means in respect of a listed security, as defined in the Securities Transfer Tax Act, 2007 (Act No. 25 of 2007), that is the subject of a securities lending arrangement—(a)a security of the same class in the same company as that security; or(b)any other security that is substituted for that listed security in terms of an arrangement that is announced and released as a corporate action as contemplated in the JSE Limited Listings Requirements in the SENS (Stock Exchange News Service) as defined in the JSE Limited Listings Requirements;[paragraph (b) substituted by section 1(1)(d) of Act 20 of 2022; effective date 5 January 2023, date of promulgation of that Act]“identical share” means in respect of a share—(a)a share of the same class in the same company as that share; or(b)any other share that is substituted for a listed share in terms of an arrangement that is announced and released as a corporate action as contemplated in the JSE Limited Listings Requirements in the SENS (Stock Exchange News Service) as defined in the JSE Limited Listings Requirements or a corporate action as contemplated in the listings requirements of any other exchange, licensed under the Financial Markets Act, that are substantially the same as the requirements prescribed by the JSE Limited Listings Requirements, where that corporate action complies with the applicable requirements of that exchange;[paragraph (b) substituted by section 1(1)(f) of Act 23 of 2018; effective date 17 January 2019, and by section 2(1)(d) of Act 34 of 2019, effective date 15 January 2020, date of promulgation of that Act]“IFRS” means the International Financial Reporting Standards issued by the International Accounting Standards Board;“income” means the amount remaining of the gross income of any person for any year or period of assessment after deducting therefrom any amounts exempt from normal tax under Part I of Chapter II;“insolvent estate” means an insolvent estate as defined in section 2 of the Insolvency Act, 1936 (Act No. 24 of 1936);“Insurance Act” means the Insurance Act, 2017 (Act No. 18 of 2017);[definition of “Insurance Act” inserted by section 3(1)(i) of Act 25 of 2015 (section 3(1)(i) and (5) of Act 25 of 2015 retroactively deleted by section 103(1)(b) and (c) of Act 23 of 2018), and inserted again by section 1(1)(h) of Act 23 of 2018; effective date 17 January 2019, date of promulgation of that Act]“JSE Limited Listings Requirements” means the JSE Limited Listings Requirements, 2003, made by the JSE Limited in terms of section 11 of the Financial Markets Act;“linked unit” means a unit comprising a share and a debenture in a company, where that share and that debenture are linked and are traded together as a single unit;“liquidation and distribution account” means the account required to be submitted by an executor to a Master in accordance with section 35 of the Administration of Estates Act, 1965 (Act No. 66 of 1965);[definition of “liquidation and distribution account” inserted by section 4(1)(e) of Act 20 of 2021; effective date 1 March 2022, applicable in respect of liquidation and distribution accounts finalised on or after that date]“listed company” means a company where its shares or depository receipts in respect of its shares are listed on—(a)an exchange as defined in section 1 of the Financial Markets Act and licensed under section 9 of that Act; or(b)a stock exchange in a country other than the Republic which has been recognised by the Minister as contemplated in paragraph (c) of the definition of “recognised exchange” in paragraph 1 of the Eighth Schedule;“listed share” means a share that is listed on an exchange as defined in section 1 of the Financial Markets Act and licensed under section 9 of that Act;“living annuity” means a right of a member or former member of a pension fund, pension preservation fund, provident fund, provident preservation fund or retirement annuity fund, or his or her dependant or nominee, or any subsequent nominee, to an annuity purchased from a person or provided by any fund on or after the retirement date of that member or former member in respect of which—(a)the value of the annuity is determined solely by reference to the value of assets which are specified in the annuity agreement and are held for purposes of providing the annuity;(b)the amount of the annuity is determined in accordance with a method or formula prescribed by the Minister by notice in the Gazette;(c)the full remaining value of the assets contemplated in paragraph (a) may be paid as a lump sum when the value of those assets become at any time less than an amount prescribed by the Minister by notice in the Gazette;(d)the amount of the annuity is not guaranteed by that person or fund;(e)on the death of the member or former member, the value of the assets referred to in paragraph (a) may be paid to a nominee of the member or former member as an annuity or lump sum or as an annuity and a lump sum, or, in the absence of a nominee, to the deceased’s estate as a lump sum;[paragraph (e) amended by section 2(1)(e) of Act 23 of 2020; effective date 1 March 2021](eA)in anticipation of the termination of a trust, the value of the assets referred to in paragraph (a) must be paid to the trust as a lump sum pursuant to that termination; and[paragraph (eA) inserted by section 2(1)(f) of Act 23 of 2020; effective date 1 March 2021](f)further requirements regarding the annuity may be prescribed by the Minister by notice in the Gazette;[words preceding paragraph (a) substituted by section 1(1)(e) of Act 20 of 2022; effective date 5 January 2023, date of promulgation of that Act]“Long-term Insurance Act” means the Long-term Insurance Act, 1998 (Act No. 52 of 1998);“low-cost residential unit” means—(a)an apartment qualifying as a residential unit in a building located within the Republic, where—(i)the cost of the apartment does not exceed R350 000; and(ii)the owner of the apartment does not charge a monthly rental in respect of that apartment that exceeds one per cent of the cost; or(b)a building qualifying as a residential unit located within the Republic, where—(i)the cost of the building does not exceed R300 000; and(ii)the owner of the building does not charge a monthly rental in respect of that building that exceeds one per cent of the cost contemplated in subparagraph (i) plus a proportionate share of the cost of the land and the bulk infrastructure:Provided that for the purposes of paragraphs (a)(ii) and (b)(ii), the cost is deemed to be increased by 10 per cent in each year succeeding the year in which the apartment or building is first brought into use;“lump sum benefit” means a retirement fund lump sum benefit or retirement fund lump sum withdrawal benefit;“Medical Schemes Act” means the Medical Schemes Act, 1998 (Act No. 131 of 1998);“Mineral and Petroleum Resources Development Act” means the Mineral and Petroleum Resources Development Act, 2002 (Act No. 28 of 2002);“mining for gold” or “to mine for gold” includes mining for uranium or to mine for uranium;“mining operations” and “mining” include every method or process by which any mineral is won from the soil or from any substance or constituent thereof;“Minister” means the Minister of Finance;“municipality” means a municipality which is within a category listed in section 155(1) of the Constitution of the Republic of South Africa, 1996, and which is an organ of state within the local sphere of government exercising legislative and executive authority within an area determined in terms of the Local Government: Municipal Demarcation Act, 1998 (Act No. 27 of 1998);“municipal value” means an amount determined in terms of section 46 of the Local Government: Municipal Property Rates Act, 2004 (Act No. 6 of 2004);“natural oil” means any liquid or solid hydrocarbon or combustible gas existing in a natural condition in the earth’s crust, but does not include coal or bituminous shales or other stratified deposits from which oil can be obtained by destructive distillation, or gas arising from marsh or other surface deposits;“neighbouring country” means Botswana, eSwatini, Lesotho and Namibia;[definition of “neighbouring country” substituted by section 3 of Act 16 of 2022; effective date 5 January 2023, date of promulgation of that Act]“normal retirement age” means—(a)in the case of a member of a pension fund or provident fund, the date on which the member becomes entitled to retire from employment for reasons other than sickness, accident, injury or incapacity through infirmity of mind or body;(b)in the case of a member of a retirement annuity fund, a pension preservation fund or a provident preservation fund, the date on which the member attains 55 years of age; or(c)in the case of a member of any fund contemplated in this definition, the date on which that member becomes permanently incapable of carrying on his or her occupation due to sickness, accident, injury or incapacity through infirmity of mind or body;“normal tax” means income tax referred to in section 5(1);“officer” means, where used in the context of a person who is engaged by the Commissioner in carrying out the provisions of this Act, a SARS official as defined in section 1 of the Tax Administration Act;“official rate of interest” means—(a)in the case of a debt which is denominated in the currency of the Republic, a rate of interest equal to the South African repurchase rate plus 100 basis points; or(b)in the case of a debt which is denominated in any other currency, a rate of interest that is the equivalent of the South African repurchase rate applicable in that currency plus 100 basis points:Provided that where a new repurchase rate or equivalent rate is determined, the new rate of interest applies for the purposes of this definition from the first day of the month following the date on which that new repurchase rate or equivalent rate came into operation;[definition of “official rate of interest” substituted by section 1(1)(i) of Act 23 of 2018; effective date 17 January 2019, date of promulgation of that Act]“Patents Act” means the Patents Act, 1978 (Act No. 57 of 1978);“pension fund” means—(a)(i)any pension or dependants’ fund or pension scheme established by law, other than the Government Employees Pension Fund, as contemplated in the Government Employees Pension Law, 1996 (Proclamation No. 21 of 1996);[subparagraph (i) substituted by section 7(1)(o) of Act 17 of 2009; effective date 30 September 2009, and by section 3(1)(k) of Act 25 of 2015, as retroactively substituted by section 74(1)(a) of Act 23 of 2020; effective date, retroactively amended by section 3(1)(b) of Act 2 of 2016, by section 98(1) of Act 17 of 2017, and by section 111(1) of Act 23 of 2018 to 1 March 2021, applicable in respect of years of assessment commencing on or after that date](ii)any pension, provident or dependants’ fund or pension scheme established for the benefit of the employees of any municipality or of any local authority (as defined in the definition of “local authority” in this section prior to the coming into operation of section 3(1)(h) of the Revenue Laws Amendment Act, 2006 (Act No. 20 of 2006), that was established prior to the date that section so came into operation); or[subparagraph (ii) substituted by section 7(1)(o) of Act 17 of 2009; effective date 30 September 2009, and by section 3(1)(l) of Act 25 of 2015 (retroactively deleted by section 74(1)(b) of Act 23 of 2020)](iii)any fund contemplated in subparagraph (ii), which includes as members employees of any municipal entity created in accordance with the provisions of the Municipal Systems Act, 2000 (Act No. 32 of 2000), over which one or more municipalities or local authorities (as defined in section 1 prior to the coming into operation of section 3(1)(h) of the Revenue Laws Amendment Act, 2006, and that was established prior to the date that section so came into operation) exercise ownership control as contemplated by that Act, where such fund was established—(aa)on or before 14 November 2000, and such employees were employees of a local authority (as defined in section 1 prior to the coming into operation of section 3(1)(h) of the Revenue Laws Amendment Act, 2006, and that was established prior to the date that section so came into operation) immediately prior to becoming employees of such municipal entity; or(bb)after 14 November 2000, and such fund has been approved by the Commissioner subject to such limitations, conditions and requirements as contemplated in paragraph (c);(b)with effect from a date determined by the Commissioner in relation to any fund hereinafter referred to (not being a date earlier than 4 December 1981), any pension fund established for the benefit of employees of a control board as defined in section 1 of the Marketing of Agricultural Products Act, 1996 (Act No. 47 of 1996), or for the benefit of employees of the Development Bank of Southern Africa, if the rules of such fund are in all material respects identical to those of the Government Employees’ Pension Fund; or(c)the Municipal Councillors Pension Fund provisionally registered under the Pension Funds Act on 23 May 1988, or any fund (other than a retirement annuity fund, a pension preservation fund or a fund contemplated in paragraph (a) or (b)) which is approved by the Commissioner in respect of the year of assessment in question and, in the case of any such fund established on or after 1 July 1986, is registered under the provisions of that Act:[first proviso to paragraph (c) deleted by section 1(1)(f) of Act 20 of 2022; effective date 5 January 2023, date of promulgation of that Act]Provided further that a fund contemplated in paragraph (i) of the further proviso to the definition of “pension preservation fund” which is deemed to be approved or which is approved in terms of that definition or which fails to submit its rules as required by that paragraph is deemed with effect from the earlier of the date of the deemed approval or 30 September 2010 to be a fund which is not approved in terms of this definition;(d)the Government Employees Pension Fund, as contemplated in the Government Employees Pension Law, 1996 (Proclamation No. 21 of 1996);[paragraph (d) added by section 3(1)(o) of Act 25 of 2015; effective date, retroactively amended by section 3(1)(b) of Act 2 of 2016, by section 98(1) of Act 17 of 2017, and by section 111(1) of Act 23 of 2018 to 1 March 2021, applicable in respect of years of assessment commencing on or after that date]Provided that the Commissioner may approve any fund contemplated in paragraph (c) subject to such limitations or conditions as he may determine, and shall not approve a fund in respect of any year of assessment unless the Commissioner is in respect of that year of assessment satisfied—(i)that the fund is a permanent fund bona fide established for the purpose of providing annuities for employees on retirement date or for the dependants or nominees of deceased employees, or mainly for the said purpose and also for the purpose of providing benefits other than annuities for the persons aforesaid or for the purpose of providing any benefit contemplated in paragraph 2C of the Second Schedule or section 15A or 15E of the Pension Funds Act; and(ii)that the rules of the fund provide—(aa)that all annual contributions of a recurrent nature to the fund shall be in accordance with specified scales;(bb)that membership of the fund throughout the period of employment shall be a condition of the employment by the employer of all persons of the class or classes specified therein who enter employment with that employer on or after the date upon which—(A)the fund comes into operation; or(B)the employer becomes a participant in that fund;(cc)those persons who immediately prior to the said date were employed by the employer and who on the said date fall within the said class or classes may, upon application made, be permitted to become members of that fund on such conditions as may be specified in the rules;(dd)that not more than one-third of the total value of the retirement interest may be commuted for a single payment, and that the remainder must be paid in the form of an annuity (including a living annuity), a combination of annuities (including a combination of methods of paying the annuity) or a combination of types of annuities except where two-thirds of the total value does not exceed R165 000, where the employee is deceased or where the employee elects to transfer the retirement interest to a pension preservation fund or a retirement annuity fund: Provided that in determining the value of the retirement interest an amount calculated as follows must not be taken into account—(A)in the case of a person who was a member of a provident fund or provident preservation fund and who was 55 years of age or older on 1 March 2021—(AA)any amount contributed to a provident fund or transferred to a provident preservation fund prior to, on and after 1 March 2021 of which that person was a member on 1 March 2021;(BB)with the addition of any other amount credited to the member’s individual account or minimum individual reserve of the provident fund or provident preservation fund prior to, on and after 1 March 2021; and(CC)any fund return, as defined in the Pension Funds Act, in relation to the contributions contemplated in subparagraph (AA) or amounts credited contemplated in subparagraph (BB); or[subparagraph (CC) substituted by section 1(1)(c) of Act 17 of 2023; effective date deemed to have been 1 March 2022, applies in respect of years of assessment commencing on or after that date](B)in any other case of a person who was a member of a provident fund or provident preservation fund on 1 March 2021—(AA)any amount contributed to a provident fund or transferred to a provident preservation fund prior to 1 March 2021;(BB)with the addition of any other amount credited to the member’s individual account or minimum individual reserve of the provident fund or provident preservation fund as a result of the value of the member’s individual account or minimum individual reserve on 1 March 2021; and(CC)any fund return, as defined in the Pension Funds Act, in relation to the contributions contemplated in subparagraph (AA) or amounts credited contemplated in subparagraph (BB),[subparagraph (CC) substituted by section 1(1)(d) of Act 17 of 2023; effective date deemed to have been 1 March 2022, applies in respect of years of assessment commencing on or after that date]reduced proportionally by an amount permitted in terms of the Pension Funds Act to be deducted from the member’s individual account or minimum individual reserve of the provident fund or provident preservation fund prior to, on and after 1 March 2021: Provided further that in the case where the remaining balance is utilised to provide or purchase more than one annuity, the amount utilised to provide or purchase each annuity must exceed R165 000;[subparagraph (dd) substituted by section 4(1)(f) of Act 20 of 2021; effective date 1 March 2022, applicable in respect of annuities purchased on or after that date](ee)that a partner of a partnership is regarded as an employee of the partnership; and(ff)that the Commissioner shall be notified of all amendments of the rules; and(iii)that the rules of the fund have been complied with:[proviso added by section 1(1)(a) of Act 2 of 2016, as retroactively substituted by section 97(1)(a) of Act 17 of 2017, by section 110(1)(a) of Act 23 of 2018, and by section 75(1) of Act 23 of 2020; effective date, retroactively amended by section 110(1)(b) of Act 23 of 2018 to 1 March 2021, applicable in respect of years of assessment commencing on or after that date]Provided further that the Commissioner may recognise a fund contemplated in paragraph (a), (b) or (d) in respect of any year of assessment if the Commissioner is satisfied that the rules of the fund provide that in determining the value of retirement interest, an amount calculated as follows must not be taken into account—(i)in the case of a person who was a member of a provident fund or a provident preservation fund and who was 55 years of age or older on 1 March 2021—(aa)any amount contributed to a provident fund or transferred to a provident preservation fund prior to, on and after 1 March 2021 of which that person was a member on 1 March 2021;(bb)with the addition of any other amount credited to the member’s individual account or minimum individual reserve of the provident fund or provident preservation fund prior to, on or after 1 March 2021; and(cc)where applicable, any fund return, as defined in the Pension Funds Act, in relation to the contributions or transfers contemplated in subparagraph (aa) or amounts credited as contemplated in subparagraph (bb); or(ii)in any other case of a person who was a member of a provident fund or a provident preservation fund on 1 March 2021—(aa)any amount contributed to a provident fund or transferred to a provident preservation fund prior to 1 March 2021;(bb)with the addition of any other amounts credited to the member’s individual account or minimum individual reserve of the provident fund or provident preservation fund as a result of the value of the member’s individual account or minimum individual reserve on 1 March 2021; and(cc)where applicable, any fund return, as defined in the Pension Funds Act, in relation to the contributions or transfers contemplated in subparagraph (aa) or amounts credited as contemplated in subparagraph (bb),where applicable, reduced proportionally by any amount permitted to be deducted in terms of the Pension Funds Act from the member’s individual account or minimum individual reserve of the provident fund or provident preservation fund prior to, on or after 1 March 2021;[further proviso added by section 1(1)(g) of Act 20 of 2022; effective date 1 March 2023, applies in respect of years of assessment commencing on or after that date]“Pension Funds Act” means the Pension Funds Act, 1956 (Act No. 24 of 1956);“pension preservation fund” means a pension fund organisation which is registered under the Pension Funds Act and which is approved by the Commissioner in respect of the year of assessment in question: Provided that the Commissioner may approve a fund subject to such limitations and conditions as the Commissioner may determine, and shall not approve a fund in respect of any year of assessment unless the Commissioner is satisfied in respect of that year of assessment that the rules of the fund provide that—(a)membership of the fund consists of—(i)former members of a pension fund or provident fund whose membership of that fund has terminated due to—(aa)resignation, retrenchment or dismissal from employment and who elected to have any lump sum benefit that is payable as a result of the termination transferred to that fund;(bb)the winding up or partial winding up of that fund, if the member elects or is required in terms of the rules to transfer to this fund; or(cc)a transfer of business from one employer to another in terms of section 197 of the Labour Relations Act, 1995 (Act No. 66 of 1995), and the employment of the employee with the transferor employer is transferred to the transferee employer, if the member elects or is required in terms of the rules to transfer to this fund;(ii)former members of any other pension preservation fund or a provident preservation fund—(aa)if that fund was wound up or partially wound up; or(bb)if the member elected to have any lump sum benefit contemplated in paragraph 2(1)(b)(ii) of the Second Schedule transferred to this pension preservation fund and who made this election while they were members of that other fund;[words preceding item (a) substituted by section 3(1)(q) of Act 25 of 2015 (retroactively deleted by section 74(1)(c) of Act 23 of 2020)](iii)[subparagraph (iii) substituted by section 1(1)(o) of Act 23 of 2018; effective date 1 March 2019, and deleted by section 2(1)(g) of Act 23 of 2020; effective date 1 March 2021](iv)persons who have elected to transfer to that fund amounts awarded to those persons in terms of any court order contemplated in section 7(8) of the Divorce Act, 1979 (Act No. 70 of 1979), from any pension fund, pension preservation fund, provident fund or provident preservation fund for the benefit of those persons;[subparagraph (iv) substituted by section 1(1)(o) of Act 23 of 2018; effective date 1 March 2019](v)former members of a pension fund, pension preservation fund, provident fund or provident preservation fund who have elected to have a lump sum benefit contemplated in paragraph 2(1)(c) of the Second Schedule transferred to this pension preservation fund and who made the election while they were members of that other fund; or[subparagraph (v) added by section 1(1)(l) of Act 23 of 2018; effective date 1 March 2019, and substituted by section 4(1)(g) of Act 20 of 2021; effective date 1 March 2022, applicable in respect of years of assessment commencing on or after that date](vi)former members of a pension fund, pension preservation fund, provident fund or provident preservation fund or nominees or dependants of that former member in respect of whom an “unclaimed benefit” as defined in section 1 of the Pension Funds Act and as contemplated in section 37C(1)(c) of the said Act is due or payable by that fund;[subparagraph (vi) added by section 2(1)(h) of Act 23 of 2020 and substituted by section 1(1)(h) of Act 20 of 2022; effective date 5 January 2023, date of promulgation of that Act](b)payments or transfers to the fund in respect of a member are limited to any amount contemplated in paragraph 2(1)(a)(ii), (b) or (c) of the Second Schedule or any unclaimed benefit as defined in the Pension Funds Act that is paid or transferred to the fund by—(i)a pension fund, provident fund, provident preservation fund or any other pension preservation fund of which such member was previously a member; or(ii)a pension fund, provident fund, pension preservation fund or pension preservation fund of which such member’s former spouse is or was previously a member and such payment or transfer was made pursuant to an election by such member in terms of section 37D(4)(b)(ii) of the Pension Funds Act;[paragraph (b) amended by section 3(1)(r) of Act 25 of 2015 (retroactively deleted by section 74(1)(c) of Act 23 of 2020), and substituted by section 1(1)(m) of Act 23 of 2018; effective date 1 March 2019](c)with the exception of amounts transferred to any other pension fund, pension preservation fund, provident preservation fund or retirement annuity fund, not more than one amount contemplated in paragraph 2(1)(b)(ii) of the Second Schedule is allowed to be paid to the member during the period of membership of the fund or any other preservation fund: Provided that—[words preceding the proviso substituted by section 1(1)(i) of Act 20 of 2022; effective date 5 January 2023, date of promulgation of that Act](i)this paragraph applies separately to each payment or transfer to the fund contemplated in paragraph (b);(ii)a member shall, prior to his or her retirement date, be entitled to the payment of a lump sum benefit contemplated in paragraph 2(1)(b)(ii) of the Second Schedule where a member—(aa)(A)is a person who is or was a resident who emigrated from the Republic and that emigration is recognised by the South African Reserve Bank for purposes of exchange control in respect of applications for that recognition received on or before 28 February 2021 and approved by the South African Reserve Bank or an authorised dealer in foreign exchange for the delivery of currency on or before 28 February 2022; or(B)is a person who is not a resident for an uninterrupted period of three years or longer on or after 1 March 2021; or[item (aa) substituted by section 2(1)(i) of Act 23 of 2020; effective date 1 March 2021](bb)departed from the Republic at the expiry of a visa obtained for the purposes of—(A)working as contemplated in paragraph (i) of the definition of “visa” in section 1 of the Immigration Act, 2002 (Act No. 13 of 2002); or(B)a visit as contemplated in paragraph (b) of the definition of “visa” in section 1 of the Immigration Act, 2002 (Act No. 13 of 2002), issued in terms of paragraph (b) of the proviso to section 11 of that Act by the Director-General, as defined in that Act; and(iii)a member who has transferred a retirement interest in terms of paragraph 2(1)(c) of the Second Schedule to this fund shall not be entitled to payment of a withdrawal benefit as contemplated in paragraph 2(1)(b)(ii) in respect of that transferred amount, except to the extent that it is an amount contemplated in subparagraph (ii); and[proviso to paragraph (c) substituted by section 1(1)(n) of Act 23 of 2018; effective date 1 March 2019](d)a member, other than a member contemplated in paragraph (a)(vi) of this proviso, will become entitled to a benefit on his or her retirement date; and[paragraph (d) substituted by section 1(1)(g) of Act 17 of 2023; effective date deemed to have been 1 March 2021, applies in respect of years of assessment commencing on or after that date](e)not more than one-third of the total value of the retirement interest may be commuted for a single payment, and that the remainder must be paid in the form of an annuity (including a living annuity), a combination of annuities (including a combination of methods of paying the annuity) or a combination of types of annuities except where two-thirds of the total value does not exceed R165 000, where the member is deceased or where the member elects to transfer the retirement interest to a pension preservation fund, a provident preservation fund or a retirement annuity fund: Provided that in determining the value of the retirement interest an amount calculated as follows must not be taken into account—(a)in the case of a person who was a member of a provident fund or provident preservation fund and who was 55 years of age or older on 1 March 2021—(i)any amount contributed to a provident fund or transferred to a provident preservation fund prior to, on and after 1 March 2021 of which that person was a member on 1 March 2021;(ii)with the addition of any other amount credited to the member’s individual account or minimum individual reserve of the provident fund or provident preservation fund prior to, on and after 1 March 2021; and(iii)any fund return, as defined in the Pension Funds Act, in relation to the contributions contemplated in subparagraph (i) or amounts credited contemplated in subparagraph (ii); or(b)in any other case of a person who was a member of a provident fund or a provident preservation fund on 1 March 2021—(i)any amount contributed to a provident fund or transferred to a provident preservation fund prior to 1 March 2021;(ii)with the addition of any other amounts credited to the member’s individual account or minimum individual reserve of the provident fund or provident preservation fund as a result of the value of the member’s individual account or minimum individual reserve on 1 March 2021; and(iii)any fund return, as defined in the Pension Funds Act, in relation to the contributions or transfers contemplated in subparagraph (i) or amounts credited contemplated in subparagraph (ii),reduced proportionally by an amount permitted to be deducted in terms of the Pension Funds Act from the member’s individual account or minimum individual reserve of the provident fund or the provident preservation fund prior to, on or after 1 March 2021:Provided further that in the case where the remaining balance is utilised to provide or purchase more than one annuity, the amount utilised to provide or purchase each annuity must exceed R165 000:[paragraph (e) substituted by section 3(1)(s) of Act 25 of 2015; effective date 1 March 2016, by section 1(1)(b) of Act 2 of 2016, as retroactively substituted by section 97(1)(a) of Act 17 of 2017, by section 110(1)(a) of Act 23 of 2018, and by section 75(1) of Act 23 of 2020; effective date retroactively amended by section 110(1)(b) of Act 23 of 2018 to 1 March 2021, and by section 4(1)(h) of Act 20 of 2021; effective date 1 March 2022, applicable in respect of years of assessment commencing on or after that date]Provided further that—(i)the rules of a pension fund that is doing the business of a preservation fund as prescribed by the Commissioner from time to time must be submitted to the Commissioner for approval in terms of the provisions of this definition before 30 September 2010; and(ii)the rules of a pension fund contemplated in paragraph (i) that are submitted before 30 September 2010 are deemed to have been approved under this definition with effect from the date that the rules are submitted until the date that the Commissioner notifies the fund of its status under this definition;“permanent establishment” means a permanent establishment as defined from time to time in Article 5 of the Model Tax Convention on Income and on Capital of the Organisation for Economic Co-operation and Development: Provided that in determining whether a qualifying investor in relation to a partnership, trust or foreign partnership has a permanent establishment in the Republic, any act of that partnership, trust or foreign partnership in respect of any financial instrument must not be ascribed to that qualifying investor;“person” includes—(a)an insolvent estate;(b)the estate of a deceased person;(c)any trust; and(d)any portfolio of a collective investment scheme,but does not include a foreign partnership;“portfolio of a collective investment scheme” means any—(a)portfolio of a collective investment scheme in participation bonds;(b)portfolio of a collective investment scheme in property;(c)portfolio of a collective investment scheme in securities; or(d)portfolio of a declared collective investment scheme;“portfolio of a collective investment scheme in participation bonds” means any portfolio comprised in any collective investment scheme in participation bonds contemplated in Part VI of the Collective Investment Schemes Control Act managed or carried on by any company registered as a manager under and for the purposes of that Part;“portfolio of a collective investment scheme in property” means any portfolio comprised in any collective investment scheme in property contemplated in Part V of the Collective Investment Schemes Control Act managed or carried on by any company registered as a manager under section 51 of that Act for the purposes of that Part;“portfolio of a collective investment scheme in securities” means any portfolio comprised in any collective investment scheme in securities contemplated in Part IV of the Collective Investment Schemes Control Act managed or carried on by any company registered as a manager under section 42 of that Act for the purposes of that Part;“portfolio of a declared collective investment scheme” means any portfolio comprised in any declared collective investment scheme contemplated in Part VII of the Collective Investment Schemes Control Act managed or carried on by any company registered as a manager under section 64 of that Act for the purposes of that Part;“portfolio of a hedge fund collective investment scheme” means any portfolio held by any hedge fund business that qualifies as a declared collective investment scheme in terms of section 63 of the Collective Investment Schemes Control Act;“post-1973 gold mine” means a gold mine—(a)which, in the opinion of the Director-General: Mineral and Energy Affairs, is an independent workable proposition and in respect of which a mining authorisation for gold mining was issued for the first time after 14 March 1990 in terms of the Minerals Act, 1991 (Act No. 50 of 1991); or(b)for which a mining permit or mining right for gold mining (other than a mining permit or mining right issued on conversion of an old order mining right as defined in paragraph 1 of Schedule II to the Mineral and Petroleum Resources Development Act) was issued for the first time on or after 1 May 2004 in terms of that Act;“post-1990 gold mine” means a gold mine which, in the opinion of the Director-General: Mineral and Energy Affairs, is an independent workable proposition and in respect of which a mining authorization for gold mining was issued for the first time after 14 March 1990;“prescribed” means prescribed or deemed to be prescribed by or under this Act;“prescribed rate” means the rate contemplated in section 189(3) of the Tax Administration Act;“provident fund” means—(a)any provident fund established by law;(b)any provident fund established for the benefit of the employees of any municipality or of any local authority (as defined in the definition of “local authority” in this section prior to the coming into operation of section 3(1)(h) of the Revenue Laws Amendment Act, 2006 (Act No. 20 of 2006), that was established prior to the date that section so came into operation); or(c)any fund contemplated in subparagraph (b), which includes as members employees of any municipal entity created in accordance with the provisions of the Municipal Systems Act, 2000 (Act No. 32 of 2000), over which one or more municipalities or local authorities (as defined in section 1 prior to the coming into operation of section 3(1)(h) of the Revenue Laws Amendment Act, 2006, and that was established prior to the date that section so came into operation) exercise ownership control as contemplated by that Act, where such fund was established—(aa)on or before 14 November 2000, and such employees were employees of a local authority (as defined in section 1 prior to the coming into operation of section 3(1)(h) of the Revenue Laws Amendment Act, 2006, and that was established prior to the date that section so came into operation) immediately prior to becoming employees of such municipal entity; or(bb)after 14 November 2000, and such fund has been approved by the Commissioner subject to such limitations, conditions and requirements as contemplated in paragraph (c) of the definition of “provident fund”; and(d)any fund (other than a pension fund, pension preservation fund, provident preservation fund, benefit fund or retirement annuity fund) which is approved by the Commissioner in respect of the year of assessment in question and, in the case of any such fund established on or after 1 July 1986, is registered under the provisions of the Pension Funds Act:[words preceding the proviso substituted by section 4(1)(zM) of Act 31 of 2013; effective date 12 December 2013, and by section 3(1)(u) of Act 25 of 2015, as retroactively substituted by section 74(1)(c) of Act 23 of 2020; effective date, retroactively amended by section 3(1)(b) of Act 2 of 2016, by section 98(1) of Act 17 of 2017, and by section 111(1) of Act 23 of 2018 to 1 March 2021, applicable in respect of years of assessment commencing on or after that date]Provided that the Commissioner may approve a fund subject to such limitations or conditions as he may determine, and shall not approve a fund in respect of any year of assessment unless he is in respect of that year of assessment satisfied—(i)that the fund is a permanent fund bona fide established solely for the purpose of providing benefits for employees on retirement date or solely for the purpose of providing benefits for the dependants or nominees of deceased employees or deceased former employees or solely for a combination of such purposes or mainly for the said purpose and also for the purpose of providing any benefit contemplated in paragraph 2C of the Second Schedule or section 15A or 15E of the Pension Funds Act; and[paragraph (i) (previously (a)) substituted by section 1(1)(c) of Act 2 of 2016, as retroactively substituted by section 97(1)(a) of Act 17 of 2017, section 110(1)(a) of Act 23 of 2018, and section 75(1) of Act 23 of 2020; effective date, retroactively amended by section 97(1)(a) of Act 17 of 2017 and by section 110(1)(b) of Act 23 of 2018 to 1 March 2021, applicable in respect of years of assessment commencing on or after that date](ii)that the rules of the fund provide—(aa)that all annual contributions of a recurrent nature to the fund shall be in accordance with specified scales;(bb)that membership of the fund throughout the period of employment shall be a condition of the employment by the employer of all persons of the class or classes specified therein who enter the employment of the employer on or after the date upon which—(a)the fund comes into operation; or(b)the employer becomes a participant in that fund;(cc)that person who immediately prior to the said date were employed by the employer and who on the said date fall within the said class or classes may, on application made, be permitted to become members of the fund on such conditions as may be specified in the rules;(dd)that not more than one-third of the total value of the retirement interest may be commuted for a single payment, and that the remainder must be paid in the form of an annuity (including a living annuity), a combination of annuities (including a combination of methods of paying the annuity) or a combination of types of annuities except where two-thirds of the total value does not exceed R165 000, where the employee is deceased or where the employee elects to transfer the retirement interest to a pension preservation fund, provident preservation fund or a retirement annuity fund: Provided that in determining the value of the retirement interest an amount calculated as follows must not be taken into account—(a)in the case of a person who is or was a member of a provident fund or provident preservation fund and who is or was 55 years of age or older on 1 March 2021—(AA)any amount contributed to a provident fund or transferred to provident preservation fund prior to, on and after 1 March 2021 of which that person is or was a member on 1 March 2021;(BB)with the addition of any other amount credited to the member’s individual account or minimum individual reserve of the provident fund or provident preservation fund prior to, on and after 1 March 2021; and(CC)any fund return, as defined in the Pension Funds Act, in relation to the contributions or transfers contemplated in subparagraph (AA) or amounts credited contemplated in subparagraph (BB); or[subparagraph (CC) substituted by section 1(1)(h) of Act 17 of 2023; effective date deemed to have been 1 March 2022, applies in respect of years of assessment commencing on or after that date](b)in any other case of a person who is or was a member of a provident fund or provident preservation fund on 1 March 2021—(AA)any amount contributed to a provident fund or transferred to a provident preservation fund prior to 1 March 2021;(BB)with the addition of any other amounts credited to the member’s individual account or minimum individual reserve of the provident fund or provident preservation fund as a result of the value of the member’s individual account or minimum individual reserve on 1 March 2021; and(CC)any fund return, as defined in the Pension Funds Act, in relation to the contributions or transfers contemplated in subparagraph (AA) or amounts credited contemplated in subparagraph (BB),[subparagraph (CC) substituted by section 1(1)(i) of Act 17 of 2023; effective date deemed to have been 1 March 2022, applies in respect of years of assessment commencing on or after that date]reduced proportionally by an amount permitted in terms of the Pension Funds Act to be deducted from the member’s individual account or minimum individual reserve of the provident fund or provident preservation fund prior to, on and after 1 March 2021: Provided further that in the case where the remaining balance is utilised to provide or purchase more than one annuity, the amount utilised to provide or purchase each annuity must exceed R165 000;[subparagraph (dd) substituted by section 4(1)(i) of Act 20 of 2021; effective date 1 March 2022, applicable in respect of annuities purchased on or after that date](ee)that the employee may elect to transfer the withdrawal interest to a pension fund established by the same employer or a pension fund in which that employer participates;(ff)that a partner of a partnership is regarded as an employee of the partnership; and[paragraph (ii) (previously (b)) substituted by section 1(1)(p) of Act 23 of 2018; effective date 1 March 2018, amended by section 1(1)(q) of Act 23 of 2018; effective date 1 March 2019, and substituted by section 1(1)(c) of Act 2 of 2016, as retroactively substituted by section 97(1)(a) of Act 17 of 2017, section 110(1)(a) of Act 23 of 2018, and section 75(1) of Act 23 of 2020; effective date, retroactively amended by section 97(1)(a) of Act 17 of 2017 and by section 110(1)(b) of Act 23 of 2018 to 1 March 2021, applicable in respect of years of assessment commencing on or after that date](iii)that the rules of the fund have been complied with:[paragraph (iii) (previously (c)) renumbered by section 1(1)(c) of Act 2 of 2016, as retroactively substituted by section 97(1)(a) of Act 17 of 2017, section 110(1)(a) of Act 23 of 2018, and section 75(1) of Act 23 of 2020; effective date, retroactively amended by section 97(1)(a) of Act 17 of 2017 and by section 110(1)(b) of Act 23 of 2018 to 1 March 2021, applicable in respect of years of assessment commencing on or after that date; Note: while paragraph (c) was not mentioned explicitly in the latest substitution, paragraph (iii) was included and had identical wording]Provided further that a fund contemplated in paragraph (i) of the further proviso to the definition of “provident preservation fund” which is deemed to be approved or which is approved in terms of that definition or which fails to submit its rules as required by that paragraph is deemed with effect from the earlier of the date of the deemed approval or 30 September 2010 to be a fund which is not approved in terms of this definition:Provided further that the Commissioner may recognise a fund contemplated in paragraph (a), (b) or (c) in respect of any year of assessment if the Commissioner is satisfied that the rules of the fund provide that in determining the value of retirement interest an amount calculated as follows must not be taken into account—(i)in the case of a person who was a member of a provident fund or a provident preservation fund and who was 55 years of age or older on 1 March 2021—(aa)any amount contributed to a provident fund or transferred to a provident preservation fund prior to, on or after 1 March 2021 of which that person was a member on 1 March 2021;(bb)with the addition of any other amount credited to the member’s individual account or minimum individual reserve of the provident fund or provident preservation fund prior to, on or after 1 March 2021; and(cc)where applicable, any fund return, as defined in the Pension Funds Act, in relation to the contributions or transfers contemplated in subparagraph (aa) or amounts credited contemplated in subparagraph (bb); or(ii)in any other case of a person who was a member of a provident fund or a provident preservation fund on 1 March 2021—(aa)any amount contributed to a provident fund or transferred to a provident preservation fund prior to 1 March 2021;(bb)with the addition of any other amounts credited to the member’s individual account or minimum individual reserve of the provident fund or provident preservation fund as a result of the value of the member’s individual account or minimum individual reserve on 1 March 2021; and(cc)where applicable, any fund return, as defined in the Pension Funds Act, in relation to the contributions or transfers contemplated in subparagraph (aa) or amounts credited contemplated in subparagraph (bb),where applicable, reduced proportionally by any amount permitted to be deducted in terms of the Pension Funds Act from the member’s individual account or minimum individual reserve of the provident fund or provident preservation fund prior to, on or after 1 March 2021;[further proviso added by section 1(1)(j) of Act 20 of 2022; effective date 1 March 2023, applies in respect of years of assessment commencing on or after that date]“provident preservation fund” means a pension fund organisation which is registered under the Pension Funds Act and which is approved by the Commissioner in respect of the year of assessment in question: Provided that the Commissioner may approve a fund subject to such limitations and conditions as the Commissioner may determine, and shall not approve a fund in respect of any year of assessment unless the Commissioner is satisfied in respect of that year of assessment that the rules of the fund provide that—(a)membership of the fund consists of—(i)former members of any other pension fund, pension preservation fund, provident fund or provident preservation fund whose membership of that fund has terminated due to—(aa)resignation, retrenchment or dismissal from employment and who elected to have any lump sum benefit that is payable as a result of the termination transferred to that fund;(bb)the winding up or partial winding up of that fund, if the members elected or are required in terms of the rules to transfer to this fund; or(cc)a transfer of business from one employer to another in terms of section 197 of the Labour Relations Act, 1995 (Act No. 66 of 1995), and the employment of the employee with the transferor employer is transferred to the transferee employer, if the members elected or are required in terms of the rules to transfer to this fund;[words preceding subparagraph (aa) substituted by section 3(1)(w) of Act 25 of 2015; effective date, retroactively amended by section 3(1)(b) of Act 2 of 2016, by section 98(1) of Act 17 of 2017, and by section 111(1) of Act 23 of 2018 to 1 March 2021, applicable in respect of years of assessment commencing on or after that date](ii)former members of any other pension fund, pension preservation fund, provident fund or provident preservation fund—(aa)if that fund was wound up or partially wound up; or(bb)if the member elected to have any lump sum benefit contemplated in paragraph 2(1)(b)(ii) of the Second Schedule transferred to that fund and who made this election while they were members of that other fund;[words preceding subparagraph (aa) substituted by section 3(1)(x) of Act 25 of 2015; effective date, retroactively amended by section 3(1)(b) of Act 2 of 2016, by section 98(1) of Act 17 of 2017, and by section 111(1) of Act 23 of 2018 to 1 March 2021, applicable in respect of years of assessment commencing on or after that date](iii)[subparagraph (iii) deleted by section 2(1)(k) of Act 23 of 2020; effective date 1 March 2021](iv)a person who has elected to transfer an amount awarded to that person in terms of a court order contemplated in section 7(8) of the Divorce Act, 1979 (Act No. 70 of 1979), from a pension fund, pension preservation fund, provident fund or provident preservation fund for the benefit of that person;[subparagraph (iv) substituted by section 2(1)(l) of Act 23 of 2020; effective date 1 March 2021](v)former members of a pension fund, pension preservation fund, provident fund or provident preservation fund who have elected to have a lump sum benefit contemplated in paragraph 2(1)(c) of the Second Schedule transferred to this provident preservation fund and who made the election while they were members of that other fund; or[subparagraph (v) added by section 1(1)(r) of Act 23 of 2018; effective date 1 March 2019, and substituted by section 2(1)(l) of Act 23 of 2020; effective date 1 March 2021, and by section 4(1)(j) of Act 20 of 2021; effective date 1 March 2022, applicable in respect of years of assessment commencing on or after that date](vi)former members of a pension fund, pension preservation fund, provident fund or provident preservation fund or nominees or dependants of that former member in respect of whom an “unclaimed benefit” as defined in section 1 of the Pension Funds Act and as contemplated in section 37C(1)(c) of the said Act is due or payable by that fund;[subparagraph (vi) added by section 2(1)(m) of Act 23 of 2020 and substituted by section 1(1)(k) of Act 20 of 2022; effective date 5 January 2023, date of promulgation of that Act](b)payments or transfers to the fund in respect of a member are limited to any amount contemplated in paragraph 2(1)(a)(ii), (b) or (c) of the Second Schedule or any unclaimed benefit as defined in the Pension Funds Act that is paid or transferred to the fund by—(i)a pension fund, pension preservation fund, provident fund or provident preservation fund of which that member was previously a member; or[subparagraph (i) substituted by section 3(1)(y) of Act 25 of 2015; effective date, retroactively amended by section 3(1)(b) of Act 2 of 2016, by section 98(1) of Act 17 of 2017, and by section 111(1) of Act 23 of 2018 to 1 March 2021, applicable in respect of years of assessment commencing on or after that date](ii)a pension fund, pension preservation fund, provident fund or provident preservation fund of which such member’s former spouse is or was previously a member and such payment or transfer was made pursuant to an election by such member in terms of section 37D(4)(b)(ii) of the Pension Funds Act;[subparagraph (ii) substituted by section 2(1)(j) of Act 23 of 2020; effective date 1 March 2021][words preceding subparagraph (i) substituted by section 1(1)(s) of Act 23 of 2018; effective date 1 March 2019](c)with the exception of amounts transferred to any pension fund, pension preservation fund, other provident fund, provident preservation fund or retirement annuity fund, not more than one amount contemplated in paragraph 2(1)(b)(ii) of the Second Schedule is allowed to be paid to the member during the period of membership of the fund or any other pension preservation fund: Provided that—(i)this paragraph applies separately to each payment or transfer to the fund contemplated in paragraph (b);(ii)a member shall, prior to his or her retirement date, be entitled to the payment of a lump sum benefit contemplated in paragraph 2(1)(b)(ii) of the Second Schedule where a member—(aa)(a)is a person who is or was a resident who emigrated from the Republic and that emigration is recognised by the South African Reserve Bank for purposes of exchange control in respect of applications for that recognition received on or before 28 February 2021 and approved by the South African Reserve Bank or an authorised dealer in foreign exchange for the delivery of currency on or before 28 February 2022; or(b)is a person who is not a resident for an uninterrupted period of three years or longer on or after 1 March 2021; or[item (aa) substituted by section 2(1)(n) of Act 23 of 2020; effective date 1 March 2021](bb)departed from the Republic at the expiry of a visa obtained for the purposes of—(A)working as contemplated in paragraph (i) of the definition of “visa” in section 1 of the Immigration Act, 2002 (Act No. 13 of 2002); or(B)a visit as contemplated in paragraph (b) of the definition of “visa” in section 1 of the Immigration Act, 2002 (Act No. 13 of 2002), issued in terms of paragraph (b) of the proviso to section 11 of that Act by the Director-General, as defined in that Act; and(iii)a member who has transferred a retirement interest in terms of paragraph 2(1)(c) of the Second Schedule to this fund shall not be entitled to payment of a withdrawal benefit as contemplated in paragraph 2(1)(b)(ii) in respect of that transferred amount, except to the extent that it is an amount contemplated in subparagraph (ii); and[proviso to paragraph (c) substituted by section 1(1)(t) of Act 23 of 2018; effective date 1 March 2019](d)a member, other than a member contemplated in paragraph (a)(vi) of this proviso, will become entitled to a benefit on his or her retirement date; and[paragraph (d) substituted by section 1(1)(k) of Act 17 of 2023; effective date deemed to have been 1 March 2021, applies in respect of years of assessment commencing on or after that date](e)that not more than one-third of the total value of the retirement interest may be commuted for a single payment, and that the remainder must be paid in the form of an annuity (including a living 60 annuity), a combination of annuities (including a combination of methods of paying the annuity) or a combination of types of annuities except where two-thirds of the total value does not exceed R165 000, where the member is deceased or where the member elects to transfer the retirement interest to a pension preservation fund, a provident preservation fund or a retirement annuity fund: Provided that in determining the value of the retirement interest an amount calculated as follows must not be taken into account:(a)in the case of a person who is or was a member of a provident fund or provident preservation fund and who is or was 55 years of age or older on 1 March 2021—(i)any amount contributed to a provident fund or transferred to a provident preservation fund prior to, on and after 1 March 2021 of which that person is or was a member on 1 March 2021;(ii)with the addition of any other amount credited to the member’s individual account or minimum individual reserve of the provident fund or provident preservation fund prior to, on and after 1 March 2021; and(iii)any fund return, as defined in the Pension Funds Act, in relation to the contributions or transfers contemplated in subparagraph (i) or amounts credited contemplated in subparagraph (ii);(b)in any other case of a person who is or was a member of a provident fund or provident preservation fund on 1 March 2021—(i)any amount contributed to a provident fund or transferred to a provident preservation fund prior to 1 March 2021;(ii)with the addition of any other amounts credited to the member’s individual account or minimum individual reserve of the provident fund or provident preservation fund as a result of the value of the member’s individual account or minimum individual reserve on 1 March 2021; and(iii)any fund return, as defined in the Pension Funds Act, in relation to the contributions or transfers contemplated in subparagraph (i) or amounts credited contemplated in subparagraph (ii),reduced proportionally by an amount permitted in terms of the Pension Funds Act to be deducted from the member’s individual account or minimum individual reserve of the provident fund or provident preservation fund prior to, on and after 1 March 2021: Provided further that in the case where the remaining balance is utilised to provide or purchase more than one annuity, the amount utilised to provide or purchase each annuity must exceed R165 000;[further proviso substituted by section 1(1)(l) of Act 17 of 2023; effective date deemed to have been 1 March 2021, applies in respect of years of assessment commencing on or after that date][paragraph (e) substituted by section 1(1)(d) of Act 2 of 2016, as amended by section 97(1)(a) of Act 17 of 2017, section 110(1)(a) of Act 23 of 2018, and section 75(1) of Act 23 of 2020; effective date 1 March 2021, and by section 4(1)(k) of Act 20 of 2021; effective date 1 March 2022, applicable in respect of years of assessment commencing on or after that date]Provided further that—(i)the rules of a provident fund that is doing the business of a preservation fund as prescribed by the Commissioner from time to time must be submitted to the Commissioner for approval in terms of the provisions of this definition before 30 September 2010; and(ii)the rules of the provident fund contemplated in paragraph (i) that are submitted before 30 September 2010 are deemed to have been approved under this definition with effect from the date that the rules are submitted until the date that the Commissioner notifies the fund of its status under this definition;“Public Finance Management Act” means the Public Finance Management Act, 1999 (Act No. 1 of 1999);“Public Private Partnership” means a Public Private Partnership as defined in—(a)Regulation 16 of the Treasury Regulations issued in terms of section 76 of the Public Finance Management Act; or(b)the Municipal Public-Private Partnership Regulations made in terms of section 168 of the Local Government: Municipal Finance Management Act, 2003 (Act No. 56 of 2003);“qualifying investor” means a member of a partnership or foreign partnership or a beneficiary of a trust if the liability of the member or beneficiary to any creditor of the partnership, trust or foreign partnership is limited to the amount that the member or beneficiary has contributed or undertaken to contribute to the partnership, trust or foreign partnership, unless that member or beneficiary—(a)participates in the effective management of the trade or business of the partnership, trust or foreign partnership;(b)has the authority to act on behalf of—(i)the partnership or foreign partnership;(ii)the members of the partnership or foreign partnership; or(iii)the trust; or(c)renders any services to or on behalf of the partnership, trust or foreign partnership;“regulation” means a regulation in force under this Act;“REIT” means a company—(a)that is a resident; and(b)the equity shares of which are listed—(i)on an exchange (as defined in section 1 of the Financial Markets Act and licensed under section 9 of that Act); and(ii)as shares in a REIT as defined in the listing requirements of that exchange approved in consultation with the Director-General of the National Treasury and published, after approval of those listing requirements by the Director-General of the National Treasury, by the appropriate authority, as contemplated in section 1 of the Financial Markets Act, in terms of section 11 of that Act or by the Financial Sector Conduct Authority;[paragraph (b) amended by section 1(1)(u) of Act 23 of 2018; effective date 17 January 2019, and by section 2(1)(f) of Act 34 of 2019, effective date 15 January 2020, and substituted by section 2(1)(o) of Act 23 of 2020; effective date 20 January 2021, date of promulgation of that Act]“relative” in relation to any person, means the spouse of that person or anybody related to that person or that person’s spouse within the third degree of consanguinity, or any spouse of anybody so related, and for the purpose of determining the relationship between any child referred to in the definition of “child” in this section and any other person, that child shall be deemed to be related to the adoptive parent of that child within the first degree of consanguinity;[definition of “relative” substituted by section 1(1)(v) of Act 23 of 2018; effective date 17 January 2019, date of promulgation of that Act]“remuneration proxy”, in relation to a year of assessment, means the remuneration, as defined in paragraph 1 of the Fourth Schedule, derived by an employee from an employer during the year of assessment immediately preceding that year of assessment, other than the cash equivalent of the value of a taxable benefit derived from the occupation of residential accommodation as contemplated in subparagraph (3) of paragraph 9 of the Seventh Schedule in the application of that subparagraph: Provided that—(a)where during a portion of such preceding year the employee was not in the employment of the employer or of any associated institution in relation to the employer, the remuneration proxy as respects that employee must be deemed to be an amount which bears to the amount of the employee’s remuneration for the portion of such preceding year during which the employee was in such employment the same ratio as the period of 365 days bears to the number of days in such last-mentioned portion;(b)where during the whole of such preceding year, the employee was not in the employment of the employer or of any associated institution in relation to the employer, the remuneration proxy as respects that employee must be deemed to be an amount which bears to the employee’s remuneration during the first month during which the employee was in the employment of the employer the same ratio as 365 days bears to the number of days during which the employee was in such employment;“representative taxpayer” means a natural person who resides in the Republic and—(a)in respect of the income of a company, the public officer thereof, or in the event of such company being placed under business rescue in terms of Chapter 6 of the Companies Act, the business rescue practitioner;(b)in respect of the income under his or her management, disposition or control, the agent of any person;(c)in respect of income which is the subject of any trust or in respect of the income of any minor or mentally disordered or defective person or any other person under legal disability, the trustee, guardian, curator or other person entitled to the receipt, management, disposal or control of such income or remitting or paying to or receiving moneys on behalf of such person under disability;(d)in respect of income paid under the decree or order of any court or judge to any receiver or other person, such receiver or person, whoever may be entitled to the benefit of such income, and whether or not it accrues to any person on a contingency or an uncertain event;(e)in respect of the income received by or accrued to any deceased person during his lifetime and the income received by or accrued to the estate of any deceased person, the executor or administrator of the estate of such deceased person;(f)in respect of the income received by or accrued to an insolvent estate, the trustee or administrator of such insolvent estate:Provided that for the purposes of this definition income includes any amount received or accrued or deemed to have been received or accrued in consequence of the disposal of any asset envisaged in the Eighth Schedule;“Republic” means the Republic of South Africa and, when used in a geographical sense, includes the territorial sea thereof as well as any area outside the territorial sea which has been or may be designated, under international law and the laws of South Africa, as areas within which South Africa may exercise sovereign rights or jurisdiction with regard to the exploration or exploitation of natural resources;“resident” means any—(a)natural person who is—(i)ordinarily resident in the Republic; or(ii)not at any time during the relevant year of assessment ordinarily resident in the Republic, if that person was physically present in the Republic—(aa)for a period or periods exceeding 91 days in aggregate during the relevant year of assessment, as well as for a period or periods exceeding 91 days in aggregate during each of the five years of assessment preceding such year of assessment; and(bb)for a period or periods exceeding 915 days in aggregate during those five preceding years of assessment,in which case that person will be a resident with effect from the first day of that relevant year of assessment:Provided that—(A)a day shall include a part of a day, but shall not include any day that a person is in transit through the Republic between two places outside the Republic and that person does not formally enter the Republic through a “port of entry” as contemplated in section 9(1) of the Immigration Act, 2002 (Act No. 13 of 2002), or at any other place as may be permitted by the Director General of the Department of Home Affairs or the Minister of Home Affairs in terms of that Act; and(B)where a person who is a resident in terms of this subparagraph is physically outside the Republic for a continuous period of at least 330 full days immediately after the day on which such person ceases to be physically present in the Republic, such person shall be deemed not to have been a resident from the day on which such person so ceased to be physically present in the Republic; or(b)person (other than a natural person) which is incorporated, established or formed in the Republic or which has its place of effective management in the Republic,but does not include any person who is deemed to be exclusively a resident of another country for purposes of the application of any agreement entered into between the governments of the Republic and that other country for the avoidance of double taxation:Provided that where any person that is a resident ceases to be a resident during a year of assessment, that person must be regarded as not being a resident from the day on which that person ceases to be a resident:Provided further that in determining whether a person that is a foreign investment entity has its place of effective management in the Republic, no regard must be had to any activity that—(a)constitutes—(i)a financial service as defined in section 1 of the Financial Advisory and Intermediary Services Act, 2002 (Act No. 37 of 2002); or(ii)any service that is incidental to a financial service contemplated in subparagraph (i) where the incidental service is in respect of a financial product that is exempted from the provisions of that Act, as contemplated in section 1(2) of that Act; and(b)is carried on by a financial service provider as defined in section 1 of the Financial Advisory and Intermediary Services Act, 2002 (Act No. 37 of 2002), in terms of a licence issued to that financial service provider under section 8 of that Act.“residential unit” means a building or self-contained apartment mainly used for residential accommodation, unless the building or apartment is used by a person in carrying on a trade as an hotel keeper;“retirement annuity fund” means any fund (other than a pension fund, provident fund or benefit fund) which is approved by the Commissioner in respect of the year of assessment in question and, in the case of any such fund established on or after 1 July 1986, is registered under the provisions of the Pension Funds Act: Provided that the Commissioner may approve a fund subject to such limitations or conditions as he may determine, and shall not approve any fund in respect of any year of assessment unless he is in respect of that year of assessment satisfied—(a)that the fund is a permanent fund bona fide established for the sole purpose of providing life annuities for the members of the fund or annuities for the dependants or nominees of deceased members; and(b)that the rules of the fund provide—(i)for contributions by the members, including contributions made by way of transfer of members’ interests in approved pension funds, pension preservation funds, provident funds, provident preservation funds or other retirement annuity funds;(ii)that not more than one-third of the total value of the retirement interest may be commuted for a single payment, and that the remainder must be paid in the form of an annuity (including a living annuity), a combination of annuities (including a combination of methods of paying the annuity) or a combination of types of annuities except where two-thirds of the total value does not exceed R165 000 or where the member is deceased: Provided that in determining the value of the retirement interest an amount calculated as follows must not be taken into account:(a)in the case of a person who was a member of a provident fund or a provident preservation fund and who was 55 years of age or older on 1 March 2021—(i)any amount contributed to a provident fund or transferred to a provident preservation fund prior to, on and after 1 March 2021 of which that person was a member on 1 March 2021;(ii)with the addition of any other amounts credited to the member’s individual account or minimum individual reserve of the provident fund or provident preservation fund prior to, on and after 1 March 2021; and(iii)any fund return, as defined in the Pension Funds Act, in relation to the contributions or transfers contemplated in subparagraph (i) or amounts credited contemplated in subparagraph (ii);(b)in any other case of a person who was a member of a provident fund or provident preservation fund on 1 March 2021—(i)any amount contributed to a provident fund or transferred to a provident preservation fund prior to 1 March 2021;(ii)with the addition of any other amounts credited to the member’s individual account or minimum individual reserve of the provident fund or provident preservation fund as a result of the value of the member’s individual account or minimum individual reserve on 1 March 2021; and(iii)any fund return, as defined in the Pension Funds Act, in relation to the contributions or transfers contemplated in subparagraph (i) or amounts credited contemplated in subparagraph (ii),reduced proportionally by an amount permitted to be deducted in terms of the Pension Funds Act from the member’s individual account or minimum individual reserve of the provident fund or provident preservation fund prior to, on and after 1 March 2021:Provided further that in the case where the remaining balance is utilised to provide or purchase more than one annuity, the amount utilised to provide or purchase each annuity must exceed R165 000;[words preceding the proviso to subparagraph (ii) substituted by section 4(1)(l) of Act 20 of 2021; effective date 1 March 2022, applicable in respect of annuities purchased on or after that date][further proviso to subparagraph (ii) added by section 4(1)(m) of Act 20 of 2021; effective date 1 March 2022, applicable in respect of annuities purchased on or after that date][subparagraph (ii) substituted by section 3(1)(zB) of Act 25 of 2015; effective date 1 March 2016, and by section 1(1)(e) of Act 2 of 2016, as retroactively substituted by section 97(1)(a) of Act 17 of 2017, by section 110(1)(a) of Act 23 of 2018, and by section 75(1) of Act 23 of 2020; effective date 1 March 2021, applicable in respect of years of assessment commencing on or after that date](v)that no member shall become entitled to the payment of any annuity or lump sum benefit contemplated in paragraph 2(1)(a) of the Second Schedule prior to reaching normal retirement age;(x)that a member who discontinues his or her contributions prior to his or her retirement date shall be entitled to—(aa)an annuity or a lump sum benefit contemplated in paragraph 2(1)(a) of the Second Schedule payable on that date;(bb)be reinstated as a full member under conditions prescribed in the rules of the fund;(cc)the payment of a lump sum benefit contemplated in paragraph 2(1)(b)(ii) of the Second Schedule where that member’s interest in the fund is less than an amount determined by the Minister by notice in the Gazette; or(dd)the payment of a lump sum benefit contemplated in paragraph 2(1)(b)(ii) of the Second Schedule where that member—(A)(AA)is a person who is or was a resident who emigrated from the Republic and that emigration is recognised by the South African Reserve Bank for purposes of exchange control in respect of applications for that recognition received on or before 28 February 2021 and approved by the South African Reserve Bank or an authorised dealer in foreign exchange for the delivery of currency on or before 28 February 2022; or(BB)is a person who is not a resident for an uninterrupted period of three years or longer on or after 1 March 2021;[subitem (A) substituted by section 2(1)(p) of Act 23 of 2020; effective date 1 March 2021](B)departed from the Republic at the expiry of a visa obtained for the purposes of—(AA)working as contemplated in paragraph (i) of the definition of “visa” in section 1 of the Immigration Act, 2002 (Act No. 13 of 2002); or(BB)a visit as contemplated in paragraph (b) of the definition of “visa” in section 1 of the Immigration Act, 2002 (Act No. 13 of 2002), issued in terms of paragraph (b) of the proviso to section 11 of that Act by the Director-General, as defined in section 1 of that Act;[words following sub-subitem (BB) deleted by section 2(1)(q) of Act 23 of 2020; effective date 1 March 2021](xi)that upon the winding up of the fund a member’s withdrawal interest therein must—(aa)where the member received an annuity from the fund on the date upon which the fund is wound up, be used to purchase an annuity (including a living annuity) from any other fund; or(bb)in any other case, be paid for the member’s benefit into any other retirement annuity fund;(xii)that save—(aa)as is contemplated in subparagraph (ii);(bb)for the transfer of any member’s interest in any approved retirement annuity fund into another approved retirement annuity fund:Provided that the value of each individual contract being transferred must exceed R371 250:Provided further that—(a)in the case where the total member’s interest in any approved retirement annuity fund is not transferred into another approved retirement annuity fund, the value of the member’s remaining interest after the transfer must exceed R371 250; and(b)the provisions of the first proviso and paragraph (a) of the further proviso shall not apply in the case where the member’s total interest in any approved retirement annuity fund is transferred into another approved retirement annuity fund;[item (bb) substituted by section 1(1)(l) of Act 20 of 2022 and by section 1(1)(m) of Act 17 of 2023; effective date of both amendments 1 March 2023, applies in respect of years of assessment commencing on or after that date](cc)for the benefit contemplated in subparagraph (x)(cc);(dd)as is contemplated in Part V of the Policyholder Protection Rules promulgated in terms of section 62 of the Long-term Insurance Act; or(ee)for any deduction contemplated in paragraph 2(1)(b) of the Second Schedule,no member’s rights to benefits shall be capable of surrender, commutation or assignment or of being pledged as security for any loan;(xiii)that the Commissioner shall be notified of all amendments of the rules; and(c)that the rules of the fund have been complied with;“retirement date” means the date on which—(a)a member of a pension fund, pension preservation fund, provident fund, provident preservation fund or retirement annuity fund, elects to retire and in terms of the rules of that fund, becomes entitled to an annuity or a lump sum benefit contemplated in paragraph 2(1)(a)(i) of the Second Schedule on or subsequent to attaining normal retirement age; or[paragraph (a) substituted by section 1(1)(w) of Act 23 of 2018; effective date 1 March 2018, applicable in respect of years of assessment commencing on or after that date](b)a nominee or dependant of a deceased member of a pension fund, pension preservation fund, provident fund, provident preservation fund or retirement annuity fund, in terms of the rules of that fund, becomes entitled to an annuity or a lump sum benefit contemplated in paragraph 2(1)(a)(i) of the Second Schedule on the death of the member;“retirement fund lump sum benefit” means an amount determined in terms of paragraph 2(1)(a) or (c) of the Second Schedule;“retirement fund lump sum withdrawal benefit” means an amount determined in terms of paragraph 2(1)(b) of the Second Schedule;“retirement interest” means a member’s share of the value of a pension fund, pension preservation fund, provident fund, provident preservation fund or retirement annuity fund as determined in terms of the rules of the fund on the date on which he or she elects to retire or transfer to a pension preservation fund, provident preservation fund or retirement annuity fund;[definition of “retirement interest” substituted by section 1(1)(x) of Act 23 of 2018; effective date 1 March 2019]“return” means a return as defined in section 1 of the Tax Administration Act;“return of capital” means any amount transferred by a company that is a resident for the benefit or on behalf of any person in respect of any share in that company to the extent that that transfer results in a reduction of contributed tax capital of the company, whether that amount is transferred—(a)by way of a distribution made by; or(b)as consideration for the acquisition of any share in,that company, but does not include any amount so transferred to the extent that the amount so transferred constitutes—(i)shares in the company; or(ii)an acquisition by the company of its own securities by way of a general repurchase of securities as contemplated in subparagraph (b) of paragraph 5.67(B) of section 5 of the JSE Limited Listings Requirements, where that acquisition complies with any applicable requirements prescribed by paragraphs 5.68 and 5.72 to 5.81 of section 5 of the JSE Limited Listings Requirements or by way of a general repurchase of securities as contemplated in the listings requirements of any other exchange, licensed under the Financial Markets Act, that are substantially the same as the requirements prescribed by the JSE Limited Listings Requirements, where that acquisition complies with the applicable requirements of that exchange;[paragraph (ii) substituted by section 2(1)(g) of Act 34 of 2019; effective date 1 March 2019]“securities lending arrangement” means a “lending arrangement” as defined in the Securities Transfer Tax Act, 2007 (Act No. 25 of 2007);“severance benefit” means any amount (other than a lump sum benefit or an amount contemplated in paragraph (d)(ii) or (iii) of the definition of “gross income” received by or accrued to a person by way of a lump sum from or by arrangement with the person’s employer or an associated institution in relation to that employer in respect of the relinquishment, termination, loss, repudiation, cancellation or variation of the person’s office or employment or of the person’s appointment (or right or claim to be appointed) to any office or employment, if—(a)such person has attained the age of 55 years;(b)such relinquishment, termination, loss, repudiation, cancellation or variation is due to the person becoming permanently incapable of holding the person’s office or employment due to sickness, accident, injury or incapacity through infirmity of mind or body; or(c)such termination or loss is due to—(i)the person’s employer having ceased to carry on or intending to cease carrying on the trade in respect of which the person was employed or appointed; or(ii)the person having become redundant in consequence of a general reduction in personnel or a reduction in personnel of a particular class by the person’s employer,unless, where the person’s employer is a company, the person at any time held more than five per cent of the issued shares or members’ interest in the company:Provided that any such amount which becomes payable in consequence of or following upon the death of a person must be deemed to be an amount which accrued to such person immediately prior to his or her death;“share” means, in relation to any company, any unit into which the proprietary interest in that company is divided;“Share Blocks Control Act” means the Share Blocks Control Act, 1980 (Act No. 59 of 1980);“Short-term Insurance Act” means the Short-term Insurance Act, 1998 (Act No. 53 of 1998);“small business funding entity” means any entity, approved by the Commissioner in terms of section 30C;“small, medium or micro-sized enterprise” means any—(a)person that qualifies as a micro business as defined in paragraph 1 of the Sixth Schedule; or(b)any person that is a small business corporation as defined in section 12E(4);“South African Reserve Bank” means the central bank of the Republic regulated in terms of the South African Reserve Bank Act, 1989 (Act No. 90 of 1989);“South African Revenue Service” means the South African Revenue Service established by section 2 of the South African Revenue Service Act, 1997;“special trust” means a trust created—(a)solely for the benefit of one or more persons who is or are persons with a disability as defined in section 6B(1) where such disability incapacitates such person or persons from earning sufficient income for their maintenance, or from managing their own financial affairs: Provided that—(aa)such trust shall be deemed not to be a special trust in respect of years of assessment ending on or after the date on which all such persons are deceased; and(bb)where such trust is created for the benefit of more than one person, all persons for whose benefit the trust is created must be relatives in relation to each other; or(b)by or in terms of the will of a deceased person, solely for the benefit of beneficiaries who are relatives in relation to that deceased person and who are alive on the date of death of that deceased person (including any beneficiary who has been conceived but not yet born on that date), where the youngest of those beneficiaries is on the last day of the year of assessment of that trust under the age of 18 years;“specified date”, in relation to any company, means—(a)in respect of the year of assessment ending the thirtieth day of June, 1962, that date or, if such company’s return is under the proviso to subsection (13) of section sixty-six accepted in respect of a period ending upon some other date, such other date; or(b)in respect of any other year of assessment, the last day of such other year of assessment;“specified period”, in relation to a year of assessment of any company commencing on or after 1 April 1977, means—(a)where such year of assessment is the first financial year of such company, the period commencing on the first day of such year and ending six months after the specified date in respect of such year; and(b)where such year of assessment is a subsequent financial year of such company, the period commencing the day after the end of the specified period in respect of the immediately preceding year of assessment and ending six months after the specified date in respect of the year of assessment in question:Provided that where by reason of the amalgamation under section 94 of the Co-operative Societies Act, 1939 (Act No. 29 of 1939), of two or more agricultural co-operatives (as defined in section 27(9) of this Act), the assets and liabilities of such co-operatives have vested in a new agricultural co-operative (as so defined), the Commissioner may, having regard to the circumstances of the case, direct that the specified period of each of the co-operatives which have so amalgamated, as applicable in relation to the final year of assessment of the co-operative in question be extended so as to end on such day as the Commissioner may determine;“spot rate” means the appropriate quoted exchange rate at a specific time by any authorised dealer in foreign exchange for the delivery of currency;“spouse”, in relation to any person, means a person who is the partner of such person—(a)in a marriage or customary union recognised in terms of the laws of the Republic;(b)in a union recognised as a marriage in accordance with the tenets of any religion; or(c)in a same-sex or heterosexual union which is intended to be permanent,and “married”, “husband” or “wife” shall be construed accordingly: Provided that a marriage or union contemplated in paragraph (b) or (c) shall, in the absence of proof to the contrary, be deemed to be a marriage or union out of community of property;“tax” means tax or a penalty imposed in terms of this Act;“Tax Administration Act” means the Tax Administration Act, 2011 (Act No. 28 of 2011);“tax benefit” includes any avoidance, postponement or reduction of any liability for tax;“taxable capital gain” means an amount determined in terms of paragraph 10 of the Eighth Schedule;“taxable income” means the aggregate of—(a)the amount remaining after deducting from the income of any person all the amounts allowed under Part I of Chapter II to be deducted from or set off against such income; and(b)all amounts to be included or deemed to be included in the taxable income of any person in terms of this Act;“taxpayer” means any person chargeable with any tax leviable under this Act;“this Act” includes the regulations;“trade” includes every profession, trade, business, employment, calling, occupation or venture, including the letting of any property and the use of or the grant of permission to use 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 other property which is of a similar nature;“Trade Marks Act” means the Trade Marks Act, 1993 (Act No. 194 of 1993);“trading stock”—(a)includes—(i)anything produced, manufactured, constructed, assembled, purchased or in any other manner acquired by a taxpayer for the purposes of manufacture, sale or exchange by the taxpayer or on behalf of the taxpayer;(ii)anything the proceeds from the disposal of which forms or will form part of the taxpayer’s gross income, otherwise than—(aa)in terms of paragraph (j) or (m) of the definition of “gross income”;(bb)in terms of paragraph 14(1) of the First Schedule; or(cc)as a recovery or recoupment contemplated in section 8(4) which is included in gross income in terms of paragraph (n) of the definition of “gross income”; or(iii)any consumable stores and spare parts acquired by the taxpayer to be used or consumed in the course of the taxpayer’s trade; but(b)but does not include—(i)a foreign currency option contract; or(ii)a forward exchange contract,as defined in section 24I(1);“trust” means any trust fund consisting of cash or other assets which are administered and controlled by a person acting in a fiduciary capacity, where such person is appointed under a deed of trust or by agreement or under the will of a deceased person;“trustee”, in addition to every person appointed or constituted as such by act of parties, by will, by order or declaration of court or by operation of law, includes an executor or administrator, tutor or curator, and any person having the administration or control of any property subject to a trust, usufruct, fideicommissum or other limited interest or acting in any fiduciary capacity or having, either in a private or in an official capacity, the possession, direction, control or management of any property of any person under legal disability;“Value-Added Tax Act” means the Value-Added Tax Act, 1991 (Act No. 89 of 1991);“water services provider” means a person who provides water supply services and sanitation services and who is—(a)a public entity regulated under the Public Finance Management Act;(b)a wholly owned subsidiary or entity of a public entity contemplated in paragraph (a) if the operations of the subsidiary or entity are ancillary or complementary to the operations of that public entity;(c)a company as contemplated in paragraph (a) of the definition of “company”, which is wholly owned by one or more municipalities; or(d)a board or institution which has powers similar to a water board established in terms of the Water Services Act, 1997 (Act No. 108 of 1997), and would have fallen within the ambit of the definition of “local authority” prior to the coming into operation of section 3(1)(h) of the Revenue Laws Amendment Act, 2006;“withdrawal interest” means the value of the pension fund, pension preservation fund, provident fund, provident preservation fund or retirement annuity fund value, as determined in terms of the rules of the fund on the date on which the member elects to withdraw due to an event other than the member attaining normal retirement age;[definition of “withdrawal interest” substituted by section 2(1)(h) of Act 34 of 2019; effective date 1 March 2019]“year of assessment” means any year or other period in respect of which any tax or duty leviable under this Act is chargeable, and any reference in this Act to any year of assessment ending the last or the twenty-eighth or the twenty-ninth day of February shall, unless the context otherwise indicates, in the case of a company or a portfolio of a collective investment scheme in securities be construed as a reference to any financial year of that company or portfolio ending during the calendar year in question.

(2)Unless the context indicates otherwise, a word or expression to which a meaning has been assigned in the Tax Administration Act bears that meaning for purposes of this Act.

Chapter I
Administration

2. Administration of Act

(1) The Commissioner is responsible for carrying out the provisions of this Act.

(2) Administrative requirements and procedures for purposes of the performance of any duty, power or obligation or the exercise of any right in terms of this Act are, to the extent not regulated in this Act, regulated by the Tax Administration Act.

3. Exercise of powers and performance of duties

(1) The powers conferred and the duties imposed upon the Commissioner by or under the provisions of this Act may be exercised or performed by the Commissioner or by any officer under the control, direction or supervision of the Commissioner.

(4) Any decision of the Commissioner under the following provisions of this Act is subject to objection and appeal in accordance with Chapter 9 of the Tax Administration Act, namely—

(a) the definitions of “pension fund”, “pension preservation fund”, “provident fund”, “provident preservation fund” and “retirement annuity fund” in section 1;

(b) section 8(5)(b) and (bA), section 10(1)(cA), (e)(i)(cc), (j) and (nB), section 10A(8), section 11(e), (f), (g), (gA), (j) and (l), section 12B(6), section 12C, section 12E, section 12J(6), (6A) and (7), section 13, section 15, section 18A(1)(a)(cc), (b) and (c), section 22(1) and (3), section 23H(2), section 23K, section 24(2), section 24A(6), section 24C, section 24D, section 24I(1) and (7), section 24J(9), section 24P, section 25A, section 27, section 28(9), section 30, section 30A, section 30B, section 30C, section 31, section 37A, section 38(2)(a) and (b) and (4), section 44(13)(a), section 47(6)(c)(i), section 62(1)(c)(iii) and (d) and (2)(a) and (4), section 80B and section 103(2); [paragraph (b) substituted by section 1 of Act 33 of 2019; effective date 15 January 2020, date of promulgation of that Act]

(d) paragraph 4 of the Second Schedule;

(e) paragraphs 5(2), 14(6), and 24 of the Fourth Schedule;

(f) paragraphs 10(3) and 11(2) of the Sixth Schedule;

(g) paragraphs 3, 7(6), 11 and 12A(3) of the Seventh Schedule;

(h) paragraph (bb)(A) of the proviso to paragraph 12A(6)(e) and paragraphs 29(2A), 29(7), 31(2), 65(1)(d) and 66(1)(e) of the Eighth Schedule.

(5) The Commissioner may, in writing, and on such conditions as may be agreed upon between the Commissioner and the Financial Sector Conduct Authority delegate to the Financial Sector Conduct Authority his or her power— [words preceding paragraph (a) substituted by section 2(1)(a) of Act 23 of 2018; effective date 1 April 2018]

(a) to approve a fund contemplated in the definition of a “pension fund”, “pension preservation fund”, “provident fund”, “provident preservation fund” or “retirement annuity fund”, subject to—

(i) any limitation or condition as may be determined by the Commissioner in terms of those definitions;

(ii) the compliance by any such fund with the requirements under those definitions; and

(b) to withdraw any such approval if any of the limitations, conditions or requirements listed in paragraph (a) are not met; and

(6) Any person aggrieved by a decision of the Financial Sector Conduct Authority to approve or to withdraw an approval of a fund in terms of subsection (5) must, notwithstanding section 219 of the Financial Sector Regulation Act, lodge his or her objection with the Commissioner in accordance with the provisions of Chapter 9 of the Tax Administration Act. [subsection (6) substituted by section 2(1)(b) of Act 23 of 2018; effective date 1 April 2018]

(7) A decision by the Financial Sector Conduct Authority against which an objection has been lodged is, for the purpose of subsection (6), deemed to be a decision of the Commissioner. [subsection (7) substituted by section 2(1)(c) of Act 23 of 2018; effective date 1 April 2018]

4A. Exercise of powers and performance of duties by Minister

The powers conferred and the duties imposed upon the Minister by or under the provisions of this Act may be exercised or performed by the Minister personally or, except for the power to issue notices or regulations, delegated by the Minister to the Director-General of the National Treasury and the Director-General may in turn delegate the powers and duties so delegated to him or her to any officer or person under his or her control, direction or supervision.

Chapter II
The taxes

Part I – Normal tax

5. Levy of normal tax and rates thereof

(1)Subject to the provisions of the Fourth Schedule there shall be paid annually for the benefit of the National Revenue Fund, an income tax (in this Act referred to as the normal tax) in respect of the taxable income received by or accrued to or in favour of—

(c)any person (other than a company) during the year of assessment ending during the period of 12 months ending the last day of February each year; and

(d)any company during every financial year of such company.

(2)

(a)The Minister may announce in the national annual budget contemplated in section 27(1) of the Public Finance Management Act, 1999, (Act No. 1 of 1999), that, with effect from a date or dates mentioned in that announcement, the rates of tax chargeable in respect of taxable income 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.[paragraph (b) substituted by section 3(a) of Act 23 of 2018; effective date 17 January 2019, date of promulgation of that Act]

(9)For the purposes of subsection (10) “special remuneration” means any amount received by or accrued to any mineworker over and above his normal remuneration and any regular allowance, in respect of special services rendered by him (otherwise than in the course of his normal duties) in combating any fire, flood, subsidence or other disaster in a mine or in rescuing persons trapped in a mine or in performing any hazardous task during any emergency in a mine, if such services are rendered by him as a member of a team recognized by the management of the mine and the members of such team have been appointed for the purpose of rendering such services.

(10)Where any taxpayer’s income includes any special remuneration, or where the provisions of paragraph 15(3), 17 or 19(1) of the First Schedule are applicable in the case of the taxpayer in respect of any year of assessment, the normal tax (excluding tax on any lump sum benefit or severance benefit) payable by the taxpayer in respect of such year (as determined before the deduction of any rebate) shall be determined in accordance with the formula—

in which formula—

(a)“Y” represents the amount of normal tax to be determined;

(b)“A” represents the amount of normal tax (as determined before the deduction of any rebate) calculated at the full rate of tax chargeable for the said year in respect of taxable income equal to the amount represented by the expression “B + D – C” in the formula;

(c)“B” represents the taxpayer’s taxable income (excluding any lump sum benefit or severance benefit) for the said year;[paragraph (c) substituted by section 3(b) of Act 23 of 2018; effective date 17 January 2019, date of promulgation of that Act]

(d)“C” represents an amount equal to the sum of—

(i)the amount of any special remuneration (as defined in subsection (9)) which is included in the taxpayer’s income for the said year;

(ii)where the provisions of paragraph 15(3) of the First Schedule are in the case of the taxpayer applicable in respect of the said year, an amount determined in accordance with those provisions as being the amount, if any, by which the taxable income derived by the taxpayer during the said year from the disposal of plantations and forest produce exceeds the annual average taxable income derived by the taxpayer from that source over the three years of assessment immediately preceding the said year;

(iii)where the provisions of paragraph 17 of the First Schedule are in the case of the taxpayer applicable in respect of the said year, an amount equal to so much of the taxable income of the taxpayer for such year as has been derived from the disposal of sugar cane as a result of fire in the taxpayer’s cane fields and but for such fire would not have been derived by the taxpayer in that year; and

(iv)where the provisions of subparagraph (1) of paragraph 19 of the First Schedule are in the case of the taxpayer applicable in respect of the said year, the amount by which the taxpayer’s taxable income derived from farming for that year exceeds the taxpayer’s average taxable income from farming as determined in relation to that year in accordance with subparagraph (2) of the said paragraph; and

(e)“D” represents an amount equal to so much of any current contribution to a pension fund, provident fund or retirement annuity fund as is allowable as a deduction in terms of section 11F solely by reason of the inclusion in the taxpayer’s income of any amount contemplated in paragraph (d)(i), (ii), (iii) or (iv):

Provided that in no case shall the amount of normal tax so payable be less than the amount of normal tax which would be chargeable at the relevant rate fixed in terms of subsection (2) in respect of the first rand of taxable income, and nothing in this section contained shall be construed as relieving any person from liability for taxation under this Act upon any portion of that person’s taxable income.

6. Normal tax rebates

(1)In determining the normal tax payable by any natural person, other than normal tax in respect of any retirement fund lump sum benefit, retirement fund lump sum withdrawal benefit or severance benefit, there must be deducted an amount equal to the sum of the amounts allowed to the natural person by way of rebates under subsection (2).

(2)In the case of a natural person there shall, subject to the provisions of subsection (4), be allowed by way of—

(a)a primary rebate, an amount of R17 235;[paragraph (a) substituted by section 3(1) of Act 21 of 2018, section 2(1) of Act 32 of 2019, section 3(1) of Act 22 of 2020, section 2(1) of Act 19 of 2021, section 2(1) of Act 19 of 2022, and section 3(1) of Act 19 of 2023; effective date deemed to have been 1 March 2023, applies in respect of years of assessment commencing on or after that date]

(b)a secondary rebate, if the taxpayer was or, had he or she lived, would have been 65 years of age or older on the last day of the year of assessment, an amount of R9 444; and[paragraph (b) substituted by section 3(1) of Act 21 of 2018, section 2(1) of Act 32 of 2019, section 3(1) of Act 22 of 2020, section 2(1) of Act 19 of 2021, section 2(1) of Act 19 of 2022, and section 3(1) of Act 19 of 2023; effective date deemed to have been 1 March 2023, applies in respect of years of assessment commencing on or after that date]

(c)a tertiary rebate if the taxpayer was or, had he or she lived, would have been 75 years of age or older on the last day of the year of assessment, an amount of R3 145.[paragraph (c) substituted by section 3(1) of Act 21 of 2018, section 2(1) of Act 32 of 2019, section 3(1) of Act 22 of 2020, section 2(1) of Act 19 of 2021, section 2(1) of Act 19 of 2022, and section 3(1) of Act 19 of 2023; effective date deemed to have been 1 March 2023, applies in respect of years of assessment commencing on or after that date]

(4)Where the period assessed is less than 12 months, the amount to be allowed by way of a rebate under subsection (2) shall be such amount as bears to the full amount of such rebate, the same ratio as the period assessed bears to 12 months.

(6)

(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 amounts allowed to a natural person by way of rebates under subsection (2) 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.

[subsection (6) added by section 4 of Act 23 of 2018; effective date 17 January 2019, date of promulgation of that Act]

6A. Medical scheme fees tax credit

(1)In determining the normal tax payable by any natural person there must be deducted an amount, to be known as the medical scheme fees tax credit, equal to the sum of the amounts allowed to that natural person by way of rebates under subsection (2), subject to subsection (3A).[subsection (1) substituted by section 5(1)(a) of Act 23 of 2018; effective date 1 March 2018, applicable in respect of years of assessment commencing on or after that date]

(2)

(a)The medical scheme fees tax credit applies in respect of fees paid by the person to—

(i)a medical scheme registered under the Medical Schemes Act; or

(ii)a fund which is registered under any similar provision contained in the laws of any other country where the medical scheme is registered,

that relate to benefits from that fund in respect of that person or of any person that is a dependant of that person.[words after subparagraph (ii) added by section 5(1)(b) of Act 23 of 2018; effective date 1 March 2018, applicable in respect of years of assessment commencing on or after that date]

(b)The amount of the medical scheme fees tax credit must be—

(i)

(aa)R364, in respect of benefits to the person, or if the person is not a member of a medical scheme or fund in respect of benefits to a dependant who is a member of a medical scheme or fund or a dependant of a member of a medical scheme or fund;

(bb)R728, in respect of benefits to the person, and one dependant; or

(cc)R728, in respect of benefits to two dependants; and

[subparagraph (i) substituted by section 4(1) of Act 21 of 2018, section 5(1)(c) of Act 23 of 2018, section 4(1) of Act 22 of 2020, section 3(1) of Act 19 of 2021, section 3(1) of Act 19 of 2022, and section 4(1) of Act 19 of 2023; effective date deemed to have been 1 March 2023, applies in respect of years of assessment commencing on or after that date]

(ii)R246, in respect of benefits to each additional dependant,[subparagraph (ii) substituted by section 4(1) of Act 21 of 2018, section 5(1)(c) of Act 23 of 2018, section 4(1) of Act 22 of 2020, section 3(1) of Act 19 of 2021, section 3(1) of Act 19 of 2022, and section 4(1) of Act 19 of 2023; effective date deemed to have been 1 March 2023, applies in respect of years of assessment commencing on or after that date]

for each month in that year of assessment in respect of which those fees are paid.

(3)For the purposes of this section, any amount contemplated in subsection (2) that has been paid by—

(a)the estate of a deceased person is deemed to have been paid by the person on the day before his or her death; or

(b)an employer of the person is, to the extent that the amount has been included in the income of that person as a taxable benefit in terms of the Seventh Schedule, deemed to have been paid by that person.

(3A)Where more than one person pay any fees in respect of benefits to a person or dependant, the amount allowed to be deducted in respect of the medical scheme fees tax credit under subsection (1) must be an amount that bears to the total amount in respect of that person or dependant contemplated in subsection (2)(b) the same ratio as the amount of the fees paid by that person bears to the total amount of the fees payable.[subsection (3A) inserted by section 5(1)(d) of Act 23 of 2018; effective date 1 March 2018, applicable in respect of years of assessment commencing on or after that date]

(4)For the purposes of this section a “dependant” in relation to a person means a “dependant” as defined in section 6B(1).[subsection (4) substituted by section 5(1)(e) of Act 23 of 2018; effective date 1 March 2018, applicable in respect of years of assessment commencing on or after that date]

(5)

[subsection (5) added by section 5(1)(f) of Act 23 of 2018; effective date 1 March 2018, applicable in respect of years of assessment commencing on or after that date]

6B. Additional medical expenses tax credit

(1)For the purposes of this section—“child” means a person’s child or child of his or her spouse who was alive during any portion of the year of assessment, and who on the last day of the year of assessment—

(a)was unmarried and was not or would not, had he or she lived, have been—

(i)over the age of 18 years;

(ii)over the age of 21 years and was wholly or partially dependent for maintenance upon the person and has not become liable for the payment of normal tax in respect of such year; or

(iii)over the age of 26 years and was wholly or partially dependent for maintenance upon the person and has not become liable for the payment of normal tax in respect of such year and was a full-time student at an educational institution of a public character; or

(b)in the case of any other child, was incapacitated by a disability from maintaining himself or herself and was wholly or partially dependent for maintenance upon the person and has not become liable for the payment of normal tax in respect of that year;

“dependant” means—

(a)a person’s spouse;

(b)a person’s child and the child of his or her spouse;

(c)any other member of a person’s family in respect of whom he or she is liable for family care and support; or[paragraph (c) amended by section 6(a) of Act 23 of 2018; effective date 17 January 2019, date of promulgation of that Act]

(d)any other person who is recognised as a dependant of that person in terms of the rules of a medical scheme or fund contemplated in section 6A(2)(a)(i) or (ii),

at the time the fees contemplated in section 6A(2)(a) were paid, the amounts contemplated in paragraph (a) and (b) of the definition of “qualifying medical expenses” were paid or the expenditure contemplated in paragraph (c) of that definition was incurred and paid;“disability” means a moderate to severe limitation of any person’s ability to function or perform daily activities as a result of a physical, sensory, communication, intellectual or mental impairment, if the limitation—

(a)has lasted or has a prognosis of lasting more than a year; and

(b)is diagnosed by a duly registered medical practitioner in accordance with criteria prescribed by the Commissioner;

“qualifying medical expenses” means—

(a)any amounts (other than amounts recoverable by a person or his or her spouse) which were paid by the person during the year of assessment to any duly registered—

(i)medical practitioner, dentist, optometrist, homeopath, naturopath, osteopath, herbalist, physiotherapist, chiropractor or orthopedist for professional services rendered or medicines supplied to the person or any dependant of the person;

(ii)nursing home or hospital or any duly registered or enrolled nurse, midwife or nursing assistant (or to any nursing agency in respect of the services of such a nurse, midwife or nursing assistant) in respect of the illness or confinement of the person or any dependant of the person; or

(iii)pharmacist for medicines supplied on the prescription of any person mentioned in subparagraph (i) for the person or any dependant of the person;

(b)any amounts (other than amounts recoverable by a person or his or her spouse) which were paid by the person during the year of assessment in respect of expenditure incurred outside the Republic on services rendered or medicines supplied to the person or any dependant of the person, and which are substantially similar to the services and medicines contemplated in paragraph (a); and

(c)any expenditure that is prescribed by the Commissioner (other than expenditure recoverable by a person or his or her spouse) necessarily incurred and paid by the person during the year of assessment in consequence of any physical impairment or disability suffered by the person or any dependant of the person.

(2)In determining the normal tax payable by any natural person there must be deducted an amount, to be known as the additional medical scheme fees tax credit, equal to the sum of the amounts allowed to that natural person by way of rebates under subsection (3).

(3)The amount of the additional medical expenses tax credit must be—

(a)where the person is entitled to a rebate under section 6(2)(b), the aggregate of—

(i)33,3 per cent of so much of the amount of the fees paid by the person to a medical scheme or fund contemplated in section 6A(2)(a) as exceeds three times the amount of the medical scheme fees tax credit to which that person is entitled under section 6A(2)(b); and

(ii)33,3 per cent of the amount of qualifying medical expenses paid by the person;

(b)where the person, his or her spouse or his or her child is a person with a disability, the aggregate of—

(ii)33,3 per cent of the amount of qualifying medical expenses paid by the person; or

(c)in any other case, if the aggregate of—

(i)the amount of the fees paid by the person to a medical scheme or fund contemplated in section 6A(2)(a) as exceeds four times the amount of the medical scheme fees tax credit to which that person is entitled under section 6A(2)(b); and

(ii)the amount of qualifying medical expenses paid by the person,

exceeds 7,5 per cent of the person’s taxable income (excluding any retirement fund lump sum benefit, retirement fund lump sum withdrawal benefit and severance benefit), 25 per cent of the excess.

(4)For the purposes of this section, any amount contemplated in subsection (3) or the definition of “qualifying medical expenses” that has been paid by—

(a)the estate of a deceased person is deemed to have been paid by the person on the day before his or her death; or

(5)

(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 amounts allowed to a natural person by way of rebates under subsection 25 (3) will be altered to the extent mentioned in the announcement.

[subsection (5) added by section 6(b) of Act 23 of 2018; effective date 17 January 2019, date of promulgation of that Act]

6C. Solar energy tax credit

(1)In determining the normal tax payable by any natural person, there must, subject to subsection 4, be deducted an amount to be known as the solar energy tax credit, equal to the amount of the rebate determined under subsection (2).

(2)

(a)The solar energy tax credit applies in respect of the cost actually incurred by the natural person—

(i)for the acquisition of any new and unused solar photovoltaic panels, the generation capacity of each being not less than 275W; and

(ii)if the solar photovoltaic panels referred to in subparagraph (i) are brought into use for the first time, by that person on or after 1 March 2023 and before 1 March 2024.

(b)The amount of the solar energy tax credit allowed to the natural person referred to in paragraph (a) must—

(i)be 25 per cent of the actual cost of the solar photovoltaic panels described in paragraph (a); and

(ii)in aggregate be limited to an amount not exceeding R15 000.

(3)A solar energy tax credit will be allowed under subsection (1) only if—

(a)the solar panels are installed and mounted on or affixed to a residence mainly used for domestic purposes by the natural person referred to in subsection (2)(a);

(b)the installation is connected to the distribution board of such residence; and

(c)an electrical certificate of compliance contemplated in the Electrical Installation Regulations, 2009, is issued in respect of the installation referred to in paragraph (a).

(4)No deduction shall be allowed under this section on any asset in respect of which a deduction has been allowed to the taxpayer under section 12B or 12BA.

[section 6C inserted by section 2(1) of Act 17 of 2023; effective date deemed to have been 1 March 2023, applies in respect of years of assessment commencing on or after that date]

6quat. Rebate or deduction in respect of foreign taxes on income

(1)Subject to subsection (2), where the taxable income of any resident during a year of assessment includes—

(a)any income received by or accrued to such resident from any source outside the Republic; or

(b)any proportional amount contemplated in section 9D; or

(e)any taxable capital gain contemplated in section 26A, from a source outside the Republic; or

(f)any amount—

(i)contemplated in paragraph (a) or (b) which is received by or accrued to any other person and which is deemed to have been received by or accrued to such resident in terms of section 7;

(ii)of capital gain of any other person from a source outside the Republic and which is attributed to that resident in terms of paragraph 68, 69, 70, 71, 72 or 80 of the Eighth Schedule; or

(iii)contemplated in paragraphs (a), (b) or (e) which represents capital of a trust, and which is included in the income of that resident in terms of section 25B(2A) or taken into account in determining the aggregate capital gain or aggregate capital loss of that resident in terms of paragraph 80(3) of the Eighth Schedule,

in determining the normal tax payable in respect of that taxable income there must be deducted a rebate determined in accordance with this section.

(1A)For the purposes of subsection (1), the rebate shall be an amount equal to the sum of any taxes on income proved to be payable to any sphere of government of any country other than the Republic, without any right of recovery by any person (other than a right of recovery in terms of any entitlement to carry back losses arising during any year of assessment to any year of assessment prior to such year of assessment) by—

(a)such resident in respect of—

(i)any income contemplated in subsection (1)(a); or

(iii)any amount of taxable capital gain as contemplated in subsection (1)(e); or

(b)any controlled foreign company, in respect of such proportional amount contemplated in subsection (1)(b), subject to section 72A(3); or

(f)any other person contemplated in subsection (1)(f)(i) or (ii) or any trust contemplated in subsection (1)(f)(iii), in respect of the amount included in the taxable income of that resident as contemplated in subsection (1)(f),

which is so included in that resident’s taxable income: Provided that—

(i)where such resident is a member of any partnership or a beneficiary of any trust and such partnership or trust is liable for tax as a separate entity in such other country, a proportional amount of any tax payable by such entity, which is attributable to the interest of such resident in such partnership or trust, shall be deemed to have been payable by such resident; and

(ii)for the purposes of this subsection, the amount so included in such resident’s taxable income must be determined without regard to section 10B(3).

(1B)Notwithstanding the provisions of subsection (1A)—

(a)the rebate or rebates of any tax proved to be payable as contemplated in subsection (1A), shall not in aggregate exceed an amount which bears to the total normal tax payable the same ratio as the total taxable income attributable to the income, proportional amount, taxable capital gain or amount, as the case may be, which is included as contemplated in subsection (1), bears to the total taxable income: Provided that—

(i)in determining the amount of the taxable income that is attributable to that income, proportional amount, taxable capital gain or amount—

(aa)any allowable deductions contemplated in sections 11F and 18A must be deemed to have been incurred proportionately in respect of taxable income derived from sources within and outside the Republic;

(bb)the deduction under section 11F must be allocated in relation to the taxable income from sources within and outside the Republic before taking into account any deduction in terms of that section, subsection (1C) and section 18A; and

(cc)the deduction under section 18A must be allocated in relation to taxable income from sources within and outside the Republic before taking into account any deduction in terms of that section and subsection (1C);

[paragraph (i) substituted by section 7(1)(a) of Act 23 of 2018; effective date 1 March 2018, applicable in respect of years of assessment commencing on or after that date]

(iA)the taxes contemplated in subsection (1A)(b) that are attributable to any proportional amount which—

(bb)relates to any amount contemplated in section 9D(9A)(a) which is not excluded from the application of section 9D(2) in terms of that section or section 9D(9)(b),

shall in aggregate be limited to the amount of the normal tax which is attributable to those proportional amounts;

(iB)the taxes contemplated in subsection (1A)(a)(iii) which are attributable to any taxable capital gain in respect of an asset which is not attributable to a permanent establishment of the resident outside the Republic, must in aggregate be limited to the amount of normal tax which is attributable to that taxable capital gain;

(ii)where the sum of any such taxes proved to be payable (excluding any taxes contemplated in paragraphs (iA) and (iB) of this proviso) exceeds the rebate as so determined (hereinafter referred to as the excess amount), that excess amount may—

(aa)be carried forward to the immediately succeeding year of assessment and shall be deemed to be a tax on income paid to the government of any other country in that year; and

(bb)be set off against the amount of any normal tax payable by that resident during that year of assessment in respect of any amount derived from any other country which is included in the taxable income of that resident during that year, as contemplated in subsection (1), after any tax payable to the government of any other country in respect of any amount so included during such year of assessment which may be deducted in terms of subsections (1) and (1A), has been deducted from the amount of such normal tax payable in respect of such amount so included; and

(iii)the excess amount shall not be allowed to be carried forward for more than seven years reckoned from the year of assessment when such excess amount was for the first time carried forward;

(1C)

(a)For the purpose of determining the taxable income derived by any resident from carrying on any trade, there may at the election of the resident be allowed as a deduction from the income of such resident so derived the sum of any taxes on income (other than taxes contemplated in subsection (1A)) paid or proved to be payable by that resident to any sphere of government of any country other than the Republic, without any right of recovery by any person other than in terms of a mutual agreement procedure in terms of an international tax agreement or a right of recovery in terms of any entitlement to carry back losses arising during any year of assessment to any year of assessment prior to such year of assessment.

(b)Where, during any year of assessment, any amount was deducted in terms of this subsection from the income of a resident and, in any year of assessment subsequent to that year of assessment, that resident receives any amount by way of refund in respect of the amount so deducted or is discharged from any liability in respect of that amount, so much of the amount so received or so much of the amount of that discharge as does not exceed that amount must be included in the income of that resident in respect of that subsequent year of assessment.

(1D)Notwithstanding subsection (1C), the deduction of any tax paid or proved to be payable as contemplated in that subsection shall not in aggregate exceed the total taxable income (before taking into account any such deduction) attributable to income which is subject to taxes as contemplated in that subsection: Provided that in determining the amount of the taxable income that is attributable to that income—

(a)any allowable deductions contemplated in sections 11F and 18A must be deemed to have been incurred proportionately in respect of attributable and non-attributable taxable income;

(b)the deduction under section 11F must be allocated in relation to the taxable income from attributable and non-attributable taxable income before taking into account any deduction in terms of that section, subsection (1C) and section 18A; and

(c)the deduction under section 18A must be allocated in relation to attributable and non-attributable taxable income before taking into account any deduction in terms of that section and subsection (1C).

[subsection (1D) substituted by section 7(1)(b) of Act 23 of 2018; effective date 1 March 2018, applicable in respect of years of assessment commencing on or after that date]

(2)The rebate under subsection (1) and the deduction under subsection (1C) shall not be granted in addition to any relief to which the resident is entitled under any agreement between the governments of the Republic and the said other country for the prevention of or relief from double taxation, but may be granted in substitution for the relief to which the resident would be so entitled.

(3)For the purposes of this section—“taxes on income” does not include any compulsory payment to the government of any other country which constitutes a consideration for the right to extract any mineral or natural oil.

(4)For the purpose of this section the amount of any foreign tax proved to be payable as contemplated in subsection (1A) or any amount paid or proved to be payable as contemplated in subsection (1C) in respect of any amount which is included in the taxable income of any resident during any year of assessment, shall be translated to the currency of the Republic on the last day of that year of assessment by applying the average exchange rate for that year of assessment.

(4A)If the amount translated in accordance with subsection (4) includes a number of cents that is less than one rand, that amount must be rounded off to the nearest rand.

(5)Notwithstanding section 99(1) or 100 of the Tax Administration Act, an additional or reduced assessment in respect of a year of assessment to give effect to subsections (1) and (1A) may be made within a period that does not exceed six years from the date of the original assessment in respect of that year.

6quin. Rebate in respect of foreign taxes on income from source within Republic

(5)Where, during any year of assessment, a rebate was deducted in terms of this section from the normal tax payable by a resident and, in any year of assessment subsequent to that year of assessment, that resident receives any amount by way of refund in respect of the amount so deducted or is discharged from any liability in respect of that amount, so much of the amount so received or so much of the amount of that discharge as does not exceed that rebate must be deemed to be an amount of normal tax payable by that resident in respect of that subsequent year of assessment.

7. When income is deemed to have accrued or to have been received

(1)Income shall be deemed to have accrued to a person notwithstanding that such income has been invested, accumulated or otherwise capitalized by him or that such income has not been actually paid over to him but remains due and payable to him or has been credited in account or reinvested or accumulated or capitalized or otherwise dealt with in his name or on his behalf, and a complete statement of all such income shall be included by any person in the returns rendered by him under this Act.

(2)Any income received by or accrued to any person married in or out of community of property (hereinafter referred to as the recipient) shall be deemed for the purposes of this Act to be income accrued to such person’s spouse (hereinafter referred to as the donor) if—

(a)such income was derived by the recipient in consequence of a donation, settlement or other disposition made by the donor on or after 20 March 1991 or of a transaction, operation or scheme entered into or carried out by the donor on or after that date, and the sole or main purpose of such donation, settlement or other disposition or of such transaction, operation or scheme was the reduction, postponement or avoidance of the donor’s liability for any tax, levy or duty which, but for such donation, settlement, other disposition, transaction, operation or scheme, would have become payable by the donor under this Act or any other Act administered by the Commissioner; or

(b)income was received by or accrued to the recipient—

(i)from any trade carried on by the recipient in partnership or association with the donor or which is in any way connected with any trade carried on by the donor; or

(ii)from the donor or any partnership of which the donor was at the time of such receipt or accrual a member or any private company of which the donor was at such time the sole or main holder of shares or one of the principal holders of shares,

and such income represents the whole or any portion of the total income so received by or accrued to the recipient which exceeds the amount of income to which the recipient would reasonably be entitled having regard to the nature of the relevant trade, the extent of the recipient’s participation therein, the services rendered by the recipient or any other relevant factor; or

(2A)In the case of spouses who are married in community of property—

(a)any income (other than income derived from the letting of fixed property) which has been derived from the carrying on of any trade shall, if such trade is carried on—

(i)by only one of the spouses, be deemed to have accrued to that spouse; or

(ii)jointly by both spouses, be deemed, subject to the provisions of subsection (2)(b), to have accrued to both spouses in the proportions determined by them in terms of the agreement that regulates their joint trade or, if there is no such agreement, in the proportion to which each spouse would reasonably be entitled having regard to the nature of the relevant trade, the extent of each spouse’s participation therein, the services rendered by each spouse or any other relevant factor; and

(b)any income derived from the letting of fixed property and any income derived otherwise than from the carrying on of any trade shall be deemed to have accrued in equal shares to both spouses: Provided that any such income which does not fall into the joint estate of the spouses shall be deemed to be income accrued to the spouse who is entitled thereto.

(2B)So much of any deduction or allowance which may be made under the provisions of this Act in the determination of the taxable income derived from any income referred to in subsections (2) and (2A) as relates to any portion of such income which is under the provisions of that subsection deemed to be income accrued to a spouse shall be deemed to be a deduction or allowance which may be made in the determination of the taxable income of such spouse.

(2C)For the purposes of subsection (2A)—

(a)any benefit paid or payable to a spouse in his or her capacity as a member or past member of a pension fund, pension preservation fund, provident fund, provident preservation fund, benefit fund, retirement annuity fund or any other fund of a similar nature shall be deemed to be income derived by such spouse from a trade carried on by him or her;

(b)any annuity amount (as defined in section 10A) paid or payable to a spouse shall be deemed to be income derived by such spouse from a trade carried on by him; and

(c)where any spouse is the—

(i)registered holder of a 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

(ii)author of a work on which copyright has been conferred in terms of the Copyright Act or the owner of such a copyright by reason of assignment, testamentary disposition or operation of law; or

(iii)holder of any other property or right of a similar nature,

any income derived from the grant of the right of use of such patent, design, trade mark, copyright or other property or right shall be deemed to be income derived by such spouse from a trade carried on by him.

(3)Income shall be deemed to have been received by the parent of any minor child or stepchild, if by reason of any donation, settlement or other disposition made by that parent of that child—

(a)it has been received by or has accrued to or in favour of that child or has been expended for the maintenance, education or benefit of that child; or

(b)it has been accumulated for the benefit of that child.

(4)Any income received by or accrued to or in favour of any minor child or stepchild of any person, by reason of any donation, settlement or other disposition made by any other person, shall be deemed to be the income of the parent of that child, if such parent or his or her spouse has made a donation, settlement or other disposition or given some other consideration in favour directly or indirectly of the said other person or his or her family.

(5)If any person has made any donation, settlement or other disposition which is subject to a stipulation or condition, whether made or imposed by such person or anybody else, to the effect that the beneficiaries thereof or some of them shall not receive the income or some portion of the income thereunder until the happening of some event, whether fixed or contingent, so much of any income as would, but for such stipulation or condition, in consequence of the donation, settlement or other disposition be received by or accrue to or in favour of the beneficiaries, shall, until the happening of that event or the death of that person, whichever first takes place, be deemed to be the income of that person.

(6)If any deed of donation, settlement or other disposition contains any stipulation that the right to receive any income thereby conferred may, under powers retained by the person by whom that right is conferred, be revoked or conferred upon another, so much of any income as in consequence of the donation, settlement or other disposition is received by or accrues to or in favour of the person on whom that right is conferred, shall be deemed to be the income of the person by whom it is conferred, so long as he retains those powers.

(7)If by reason of any donation, settlement or other disposition made, whether before or after the commencement of this Act, by any person (hereinafter referred to as the donor)—

(a)the donor’s right to receive or have paid to him or for his benefit any amount by way of rent, dividend, foreign dividend, interest, royalty or similar income in respect of any movable or immovable property (including without limiting the foregoing any lease, company share, marketable security, deposit, loan, copyright, design or trade mark) or in respect of the use of, or the granting of permission to use, such property, is ceded or otherwise made over to any other person or to a third party for that other person’s benefit in such manner that the donor remains the owner of or retains an interest in the said property or if the said property or interest is transferred, delivered or made over to the said other person or to a third party for the said other person’s benefit, in such manner that the donor is or will at a fixed or determinable time be entitled to regain ownership of or the interest in the said property; or

(b)the donor’s right to receive or have paid to him or for his benefit any income that is or may become due to him by any other person acting in a fiduciary capacity is ceded or otherwise made over to any other person or to a third party for that other person’s benefit in such manner that the donor is or will at a determinable time be entitled to regain the said right,

any such rent, dividend, foreign dividend, interest, royalty or income (including any amount which, but for this subsection, would have been exempt from tax in the hands of the said other person) as is received by or accrues to or for the benefit of the said other person on or after 1 July 1983 and which would otherwise, but for the said donation, settlement or other disposition, have been received by or have accrued to or for the benefit of the donor, shall be deemed to have been received by or to have accrued to the donor.

(8)

(a)Where by reason of or in consequence of any donation, settlement or other disposition (other than a donation, settlement or other disposition to an entity which is not a resident and which is similar to a public benefit organisation contemplated in section 30) made by any resident, any amount is received by or accrued to any person who is not a resident (other than a controlled foreign company in relation to such resident), which would have constituted income had that person been a resident, there shall be included in the income of that resident so much of that amount as is attributable to that donation, settlement or other disposition.

(aA)In determining, for purposes of paragraph (a), whether an amount received by or that accrued to a person who is not a resident would have constituted income had that person been a resident, the provisions of section 10B(2)(a) must be disregarded in respect of a receipt or accrual consisting of or derived, directly or indirectly, from a foreign dividend—

(i)paid or payable by a company if—

(aa)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

(bb)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

(ii)to the extent to which that foreign dividend is not derived from an amount that must be included in the income of or that must be attributed as a capital gain to—

(aa)the resident who made that donation, settlement or other disposition; or

(bb)a resident who is a connected person in relation to the resident referred to in item (aa).

[paragraph (aA) inserted by section 8(1) of Act 23 of 2018; effective date 1 March 2019, applicable in respect of amounts received or accrued on or after that date]

(b)So much of any expenditure, allowance or loss incurred by the person contemplated in paragraph (a) as does not exceed the amount included in the income of the resident in terms of that paragraph and which would be allowable as a deduction under this Act in the determination of the taxable income derived from that amount had that person been a resident, is deemed to be an expenditure, allowance or loss incurred by that resident for purposes of the determination of the taxable income of that resident from that amount.

(9)Where any asset has been disposed of for a consideration which is less than the market value of such asset, the amount by which such market value exceeds such consideration shall for the purposes of this section be deemed to be a donation.

(10)Any resident who, at any time during any year of assessment makes any donation, settlement or other disposition as contemplated in this section, shall disclose such fact to the Commissioner in writing when submitting his return of income for such year and at the same time furnish such information as may be required by the Commissioner for the purposes of this section.

(11)Any amount received by or accrued to any person by way of deduction from the minimum individual reserve of any other person in terms of—

(a)section 37D(1)(d)(iA) of the Pension Funds Act; or

(b)section 37D(1)(e) of the Pension Funds Act to the extent that the deduction is a result of a deduction contemplated in paragraph (a),

shall be deemed for the purposes of this Act to be income accrued to that other person on the date of the deduction.

7A. Date of receipt or accrual of antedated salaries or pensions and of certain retirement gratuities

(1)For the purposes of this section—“antedated salary or pension” means an amount of salary or pension which has become payable to any person under a permanent grant, made with retrospective effect, of a salary or pension or of an increase in a salary or pension, and which in terms of such grant is payable in respect of a period ending on or before the date on which the grant has become effective;“pension” means an annuity payable under any law or under the rules of a pension fund or provident fund or by an employer to a former employee of that employer or to the dependant or nominee of a deceased person who was employed by such employer;“salary” means salary, wages or similar remuneration payable by an employer to an employee, but does not include any bonus.

(2)Where any antedated salary or pension has been received by or has accrued to any person during any year or period of assessment and the period in respect of which such antedated salary or pension has become payable (hereinafter referred to as the accrual period) commenced before the commencement of the said year or period of assessment, such antedated salary or pension shall at the option of the taxpayer be deemed—

(a)if the accrual period commenced not more than two years before the commencement of the said year or period of assessment, to have been received by or to have accrued to the said person in part during each of the years or periods of assessment in which any portion of the accrual period falls (the part of the said amount relating to any such year or period of assessment being determined on the basis of a reasonable apportionment of the whole of the said amount between all the said years or periods of assessment); or

(b)if the accrual period commenced more than two years before the commencement of the first-mentioned year or period of assessment, to have been received by or to have accrued to the said person in three equal annual instalments (the first and second instalments two years and one year respectively before the date on which the said amount accrued to the said person and the third instalment on the said date).

(3)Where any member of the citizen force or of the commandos has bound himself to serve in such force or the commandos for a continuous period of service of at least eighteen months as contemplated in section 22(6A) or 44(5A) of the Defence Act, 1957 (Act No. 44 of 1957), the provisions of subsection (2) shall mutatis mutandis apply in respect of any gratuity which has become payable to him by the State upon and by reason of the completion of such period of service, as though such gratuity were antedated salary or pension granted permanently and with retrospective effect, in respect of the said period of service.

7B. Timing of accrual and incurral of variable remuneration

(1)For the purposes of this section—“employee” means an employee as defined in paragraph 1 of the Fourth Schedule;“employer” means an employer as defined in paragraph 1 of the Fourth Schedule;“variable remuneration” means—(a)overtime pay, bonus or commission contemplated in the definition of “remuneration” in paragraph 1 of the Fourth Schedule;(b)an allowance or advance paid in respect of transport expenses as contemplated in section 8(1)(b)(ii) or (iii);[paragraph (b) substituted by section 3(1)(a) of Act 34 of 2019; effective date 1 March 2020, applicable in respect of amounts accrued on or after that date](c)any amount which an employer has during any year of assessment become liable to pay to an employee in consequence of the employee having during such year become entitled to any period of leave which had not been taken by the employee during that year;(d)any night shift allowance;[paragraph (d) added by section 3(1)(b) of Act 34 of 2019; effective date 1 March 2020, applicable in respect of amounts accrued on or after that date](e)any standby allowance;[paragraph (e) added by section 3(1)(b) of Act 34 of 2019; effective date 1 March 2020, applicable in respect of amounts accrued on or after that date](f)any amount paid or granted in reimbursement of any expenditure as contemplated in section 8(1)(a)(ii); or[paragraph (f) added by section 3(1)(b) of Act 34 of 2019; effective date 1 March 2020, applicable in respect of amounts accrued on or after that date](g)any amount of “remuneration” as defined in paragraph 1 of the Fourth Schedule (other than a bonus) that is determined based on the employee’s work performance.[paragraph (g) added by section 2(1)(b) of Act 20 of 2022; effective date 1 March 2023, applies in respect of amounts accrued or expenditure incurred on or after that date]

(2)In determining the taxable income derived by any person during a year of assessment, any amount to which an employee becomes entitled from an employer in respect of variable remuneration is deemed to—

(a)accrue to the employee; and

(b)constitute expenditure incurred by the employer,

on the date during the year of assessment on which the amount is paid to the employee by the employer:Provided that where the employee is deceased before the date of payment, the amount is deemed to accrue to the employee and constitutes expenditure incurred by the employer, on the day during the year of assessment prior to the date of the employee’s death.[proviso added by section 2(1)(c) of Act 20 of 2022; effective date 1 March 2023, applies in respect of amounts accrued or expenditure incurred on or after that date]

7C. Loan, advance or credit granted to trust by connected person

[heading substituted by section 4 of Act 34 of 2019; effective date 15 January 2020, date of promulgation of that Act]

(1)This section applies in respect of any loan, advance or credit that—

(a)a natural person; or

(b)at the instance of a natural person, a company in relation to which that person is a connected person in terms of paragraph (d)(iv) of the definition of connected person,[paragraph (b) substituted by section 5(a) of Act 20 of 2021; effective date 19 January 2022, date of promulgation of that Act]

directly or indirectly provides to—

(i)a trust in relation to which—

(aa)that person or company; or

(bb)any person that is a connected person in relation to the person or company referred to in item (aa),

is a connected person; or

(ii)a company if at least 20 per cent of—

(aa)the equity shares in that company are held, directly or indirectly; or

(bb)the voting rights in that company can be exercised,

by a trust referred to in paragraph (i) whether alone or together with any person who is a beneficiary of that trust or the spouse of a beneficiary of that trust or any person related to that beneficiary or that spouse within the second degree of consanguinity.[words following subparagraph (bb) substituted by section 9(1) of Act 23 of 2018; effective date 19 July 2017, applicable in respect of any amount owed by a trust or a company in respect of a loan, advance or credit provided to that trust or that company before, on or after that date]

(1A)If a person acquires a claim to an amount owing by a trust or a company in respect of a loan, advance or credit referred to in subsection (1), that person must for purposes of this section be treated as having provided a loan, advance or credit to that trust or company—

(a)on the date on which that person acquired that claim; or

(b)if that person was not a connected person on that date in relation to—

(i)that trust; or

(ii)the person who provided that loan, advance or credit to that trust or company,

on the date on which that person became a connected person in relation to that trust or person,

that is equal to the amount of the claim so acquired.

(1B)Where—

(a)a natural person; or

(b)at the instance of a natural person, a company that is a connected person in relation to that natural person in terms of paragraph (d)(iv) of the definition of “connected person”,

subscribes for a preference share in a company in which 20 per cent or more of the equity shares are held (whether directly or indirectly) or the voting rights can be exercised by a trust that is a connected person in relation to that natural person or to that company, whether alone or together with any person who is a beneficiary of that trust—

(i)consideration received by or accrued to that company for the issue of that preference share shall be deemed to be a loan for the purposes of subsection (3); and

(ii)any dividend or foreign dividend accrued in respect of that preference share shall be deemed to be interest in respect of the loan contemplated in paragraph (i).

[subsection (1B) inserted by section 3(1)(a) of Act 23 of 2020; effective date 1 January 2021, applicable in respect of any dividend or foreign dividend accruing during any year of assessment commencing on or after that date]

(2)No deduction, loss, allowance or capital loss may be claimed in respect of—

(a)a disposal, including by way of a reduction or waiver; or

(b)the failure, wholly or partly, of a claim for the payment,

of any amount owing in respect of a loan, advance or credit referred to in subsection (1).

(3)If a trust or company incurs—

(a)no interest in respect of a loan, advance or credit referred to in subsection (1), (1A) or (1B); or[paragraph (a) substituted by section 3(1)(b) of Act 23 of 2020; effective date 1 January 2021, applicable in respect of any dividend or foreign dividend accruing during any year of assessment commencing on or after that date]

(b)interest at a rate lower than the official rate of interest,

an amount equal to the difference between the amount incurred by that trust or company during a year of assessment as interest in respect of that loan, advance or credit and the amount that would have been incurred by that trust or company at the official rate of interest must, for purposes of Part V of Chapter II, be treated as a donation made to that trust by the person referred to in subsection (1)(a), (1A) or (1B) on the last day of that year of assessment of that trust or company.[words following paragraph (b) substituted by section 3(1)(c) of Act 23 of 2020 and by section 3 of Act 20 of 2022; effective date 5 January 2023, date of promulgation of that Act]

(4)If a loan, advance or credit was provided by a company to a trust or another company at the instance of more than one person that is a connected person in relation to that company as referred to in paragraph (b) of subsection (1), each of those persons must be treated as having donated, to that trust or company, the part of that amount that bears to that amount the same ratio as the equity shares or voting rights in that company that were held by that person during that year of assessment bears to the equity shares or voting rights in that company held in aggregate by those persons during that year of assessment.

(5)Subsections (2) and (3) do not apply in respect of any amount owing by a trust or company during a year of assessment in respect of a loan, advance or credit referred to in subsection (1) if—

(a)that trust or company is a public benefit organisation approved by the Commissioner in terms of section 30(3) or a small business funding entity approved by the Commissioner in terms of section 30C;

(b)that loan, advance or credit was provided to that trust by a person by reason of or in return for a vested interest held by that person in the receipts and accruals and assets of that trust and—

(i)the beneficiaries of that trust hold, in aggregate, a vested interest in all the receipts and accruals and assets of that trust;

(ii)no beneficiary of that trust can, in terms of the trust deed governing that trust, hold or acquire an interest in that trust other than a vested interest in the receipts and accruals and assets of that trust;

(iii)the vested interest of each beneficiary of that trust is determined solely with reference and in proportion to the assets, services or funding contributed by that beneficiary to that trust; and

(iv)none of the vested interests held by the beneficiaries of that trust is subject to a discretionary power conferred on any person in terms of which that interest can be varied or revoked;

(c)that trust is a special trust as defined in paragraph (a) of the definition of a special trust;

(d)that trust or company used that loan, advance or credit wholly or partly for purposes of funding the acquisition of an asset and—

(i)the natural person referred to in subsection (1)(a) or (b) or the spouse of that person used that asset as a primary residence as contemplated in paragraph (b) of the definition of “primary residence” in paragraph 44 of the Eighth Schedule throughout the period during that year of assessment during which that trust or company held that asset; and[subparagraph (i) substituted by section 5(b) of Act 20 of 2021; effective date 19 January 2022, date of promulgation of that Act]

(ii)the amount owed relates to the part of that loan, advance or credit that funded the acquisition of that asset;

(e)that loan, advance or credit constitutes an affected transaction as defined in section 31(1) that is subject to the provisions of that section;

(f)that loan, advance or credit was provided to that trust or company in terms of an arrangement that would have qualified as a sharia compliant financing arrangement as contemplated in section 24JA, had that trust or company been a bank as defined in that section;

(g)that loan, advance or credit is subject to the provisions of section 64E(4); or

(h)that trust was created solely for purposes of giving effect to an employee share incentive scheme in terms of which—

(i)that loan, advance or credit was provided—

(aa)by a company to that trust; or

(bb)for purposes of funding the acquisition, by that trust, of shares in that company or in any other company forming part of the same group of companies as that company (hereinafter referred to as a “scheme company”);

(ii)equity instruments, as defined in section 8C, that relate to or derive their value from shares in a scheme company may be offered by that trust to a person solely by virtue of that person—

(aa)being in employment on a full-time basis with; or

(bb)holding the office of director of,

a scheme company; and

(iii)a person that is a connected person in terms of paragraph (d)(iv) of the definition of connected person in relation to any scheme company is not entitled to participate in that scheme.

(6)For the purposes of this section “preference share” means a preference share as defined in section 8EA(1).[subsection (6) added by section 3(1)(d) of Act 23 of 2020; effective date 1 January 2021, applicable in respect of any dividend or foreign dividend accruing during any year of assessment commencing on or after that date]

7D. Calculation of amount of interest

Where it must be determined, for the purposes of this Act, what amount would have accrued or been incurred as interest in respect of any loan, debt, advance or amount of credit provided to a person or an amount owed by a person had that interest accrued or been incurred at a specific rate of interest, that amount must be determined—

(a)without regard to any rule of the common law or provision of any Act in terms of which—

(i)the amount of any interest, fee or similar finance charge that accrues or is incurred in respect of a debt may not in aggregate exceed the amount of that debt; or

(ii)no interest may accrue or be incurred in respect of a debt once the amount that has accrued or been incurred as interest is equal to the amount of that debt; and

(b)as simple interest calculated daily.

[section 7D substituted by section 10 of Act 23 of 2018; effective date 17 January 2019, date of promulgation of that Act]

7E. Time of accrual of interest payable by SARS

In determining the taxable income derived by any person during a year of assessment, any amount of interest to which a person becomes entitled that is payable by SARS in terms of a tax Act is deemed to accrue to that person on the date on which that amount is paid to that person.

7F. Deduction of interest repaid to SARS

In determining the taxable income derived by any person during a year of assessment, any amount of interest paid by SARS to that person under a tax Act and deemed to have accrued to that person in terms of section 7E that has to be repaid by that person to SARS, to the extent that the amount of interest is or was included in the taxable income of that person, must be deducted from that person’s income in the year of assessment during which that amount is repaid to SARS.[section 7F inserted by section 11(1) of Act 23 of 2018; effective date 1 March 2018, applicable to amounts of interest repaid to SARS on or after that date, and substituted by section 5 of Act 34 of 2019; effective date 15 January 2020, date of promulgation of that Act]

8. Certain amounts to be included in income or taxable income

(1)

(a)

(i)There shall be included in the taxable income of any person (hereinafter referred to as the “recipient”) for any year of assessment any amount which has been paid or granted during that year by his or her principal as an allowance or advance, excluding any portion of any allowance or advance to the extent that the allowance or advance or a portion of the allowance or advance is exempt from normal tax under section 10(1) or has actually been expended by that recipient—[words preceding item (aa) substituted by section 6(a) of Act 34 of 2019; effective date 15 January 2020, date of promulgation of that Act]

(aa)on travelling on business, as contemplated in paragraph (b), unless an allowance or advance has been granted by an employer in respect of the use of a motor vehicle as contemplated in paragraph 7 of the Seventh Schedule;

(bb)on any accommodation, meals and other incidental costs, as contemplated in paragraph (c), while such recipient is by reason of the duties of his or her office or employment obliged to spend at least one night away from his or her usual place of residence in the Republic; or

(cc)by reason of the duties attendant upon his or her office, as contemplated in paragraph (d).

(ii)There shall not be included in the taxable income of a person in terms of the provisions of paragraph (a)(i), any amount paid or granted by a principal in reimbursement of, or as an advance for, any expenditure incurred or to be incurred by the recipient—

(aa)

(A)on the instruction of his or her principal; or

(B)where the recipient is allowed by his or her principal to incur expenditure on meals and other incidental costs while such recipient is by reason of the duties of his or her office or employment obliged to spend a part of a day away from his or her usual place of work or employment, not exceeding an amount determined by way of notice in the Gazette,

in the furtherance of the trade of that principal; and[item (aa) substituted by section 4(1)(a) of Act 23 of 2020; effective date 1 March 2021, applicable in respect of years of assessment commencing on or after that date]

(bb)where that recipient must produce proof to that principal that such expenditure was wholly incurred as aforesaid and must account to that principal for that expenditure:

Provided that where that expenditure was incurred to acquire any asset, the ownership in that asset must vest in that principal.

(iii)For the purposes of this paragraph, “principal” in relation to a recipient includes his or her employer or the authority, company, body or other organisation in relation to which any office is held, or any associated institution, as defined in the Seventh Schedule, in relation to such employer, authority, company, body or organisation.

(iv)The provisions of this paragraph shall not apply in respect of any amount paid or granted as an allowance or advance that is received by or accrued to a person in respect of—

(aa)the holding of a public office by that person as contemplated in section 9(2)(g); or

(bb)services rendered or work or labour performed by that person as contemplated in section 9(2)(h),

if that person is stationed outside the Republic and that amount is attributable to services rendered by that person outside the Republic.

(b)For the purposes of paragraph (a)(i)(aa)—

(i)any allowance or advance in respect of transport expenses shall, to the extent to which such allowance or advance has been expended by the recipient on private travelling (including travelling between his or her place of residence and his or her place of employment or business or any other travelling done for his or her private or domestic purposes), be deemed not to have been actually expended on travelling on business;

(ii)subject to the provisions of subparagraph (iii), where such allowance or advance has been paid to the recipient in order that it may be utilized for defraying expenditure in respect of any motor vehicle used by the recipient, the portion of the allowance expended by the recipient during the year of assessment for business purposes shall, unless an acceptable calculation based on accurate data is furnished by the recipient, be deemed to be an amount calculated by applying the rate per kilometre determined in the manner prescribed by the Minister of Finance by notice in the Gazette for the category of vehicle used, on a distance travelled during the said year for business purposes (other than private travelling as contemplated in subparagraph (i)): Provided that where an allowance or advance is deemed to have accrued under section 7B to the recipient in the year of assessment during which that allowance or advance is paid, the distance travelled for business purposes in respect of which that allowance or advance is received shall be deemed to have been travelled during the year in which that allowance or advance is paid;[proviso to subparagraph (ii) added by section 6(b) of Act 34 of 2019; effective date 15 January 2020, date of promulgation of that Act]

(iii)where such allowance or advance is based on the actual distance travelled by the recipient in using a motor vehicle on business (excluding the said private travelling), or such actual distance is proved to the satisfaction of the Commissioner to have been travelled by the recipient, the amount expended by the recipient on such business travelling shall, unless the contrary appears, be deemed to be an amount determined on such actual distance at the rate per kilometre fixed by the Minister of Finance by notice in the Gazette for the category of vehicle used: Provided that where an allowance or advance is deemed to have accrued under section 7B to the recipient in the year of assessment during which that allowance or advance is paid, the distance travelled for business purposes in respect of which that allowance or advance is received shall be deemed to have been travelled during the year in which that allowance or advance is paid;[proviso to subparagraph (iii) added by section 6(c) of Act 34 of 2019; effective date 15 January 2020, date of promulgation of that Act]

(iiiA)where the portion of the allowance or advance which is claimed by the recipient to be actually expended is calculated based on accurate data furnished by the recipient in respect of any vehicle—

(aa)in the case of a vehicle that is being leased, the total amount of payments in respect of that lease may not in any year of assessment exceed an amount of the fixed cost determined by the Minister in the notice contemplated in subparagraph (ii), for the category of vehicle used;

(bb)in any other case—

(A)the wear and tear of that vehicle must be determined over a period of seven years from the date of original acquisition by that recipient and the cost of the vehicle must for this purpose be limited to R800 000, or such other amount determined by the Minister by notice in the Gazette; and[subitem (A) substituted by section 5(1) of Act 22 of 2020, and section 5(1) of Act 19 of 2023; effective date deemed to have been 1 March 2023, applies in respect of years of assessment commencing on or after that date]

(B)the finance charges in respect of any debt incurred in respect of the purchase of that vehicle must be limited to an amount which would have been incurred had the original debt been R800 000, or such other amount determined by the Minister in terms of subitem (A);[subitem (B) substituted by section 5(1) of Act 22 of 2020, and section 5(1) of Act 19 of 2023; effective date deemed to have been 1 March 2023, applies in respect of years of assessment commencing on or after that date]

(iv)where any motor vehicle which is owned or leased by an employee, his spouse or his child, whether directly or indirectly by virtue of an interest in a company or trust or otherwise, has been let to the employer or any associated institution in relation to the employer, the sum of the rental paid by the employer or associated institution and any expenditure defrayed by the employer or associated institution in respect of the vehicle, shall be deemed to be an allowance paid to the employee in respect of transport expenses, and in such case the said rental shall for the purposes of this Act (excluding this paragraph) be deemed not to have been received by or to have accrued to the lessor of such motor vehicle, and for the purposes of paragraph 2(b) of the Seventh Schedule such employee shall be deemed not to have been granted the right to use such motor vehicle.

(c)A recipient shall, for the purposes of paragraph (a)(i)(bb), be deemed to have actually expended,—

(i)where that recipient proves to the Commissioner the amount of the expenses incurred by him or her in respect of accommodation, meals or other incidental costs (other than any amount of expenditure borne by the employer otherwise than by way of payment or granting of the allowance), the amount so actually incurred but limited to the amount of the allowance or advance paid or granted to meet those expenses; or

(ii)for each day or part of a day in the period during which that recipient is absent from his or her usual place of residence, such amount in respect of meals and other incidental costs, or incidental costs only, as the Commissioner may determine for a country or region for the relevant year of assessment by way of notice in the Gazette, but limited to the amount of the allowance paid or granted to meet those expenses: Provided that this subparagraph does not apply to the extent that—

(aa)the employer has borne the expenses (otherwise than by way of granting the allowance or advance) in respect of which the allowance was paid or granted for that day or part of that day; or

(bb)the recipient has proved to the Commissioner any amount of actual expenditure in respect of meals or incidental costs for that day or part of that day, as contemplated in subparagraph (i).

(d)Any allowance granted to the holder of any public office contemplated in paragraph (e) to enable him to defray expenditure incurred by him in connection with such office shall for the purposes of paragraph (a) be deemed to have been so expended by him to the extent that expenditure relevant to such allowance and not otherwise recoverable by him has actually been incurred by him for the purposes of his office in respect of—

(i)secretarial services, duplicating services, stationery, postage, telephone calls, the hire of office accommodation and the maintenance of such accommodation;

(ii)travelling;

(iii)hospitality extended at any official or civic function which the holder of such office is by reason of the nature of such office normally expected to arrange;

(v)subsistence and incidental costs incurred in the circumstances contemplated in paragraph (c).

(e)For the purposes of paragraph (d) the holder of a public office includes—

(i)the President, Deputy President, a Minister, Deputy Minister, a member of the National Assembly, a permanent delegate to the National Council of Provinces, a Premier, a member of an Executive Council or a member of a provincial legislature;

(ii)any member of a municipal council, a traditional leader, a member of a provincial House of Traditional Leaders and a member of the Council of Traditional Leaders; and

(iii)a person occupying the office of president, chairman or chief executive officer of any non-profitmaking organization which is organized on a national or regional basis to represent persons with common interests and the funds of which are derived wholly or mainly from subscriptions of members or donations from the general public.

(f)Where it is expected of any person contemplated in paragraph (e)(i) to defray any expenditure referred to in paragraph (d) out of his salary received as the holder of any public office, an amount equal to a portion (which shall be determined by the National Assembly or the President, as the case may be, as provided for in the Remuneration of Public Office Bearers Act, 1998 (Act No. 20 of 1998)) of such salary shall for the purposes of paragraph (d) be deemed to be an allowance granted to such person.

(g)Where, during any year of assessment, any person contemplated in paragraph (e) has held a public office for less than 12 months, the amount determined in terms of paragraph (f), shall be reduced to an amount which bears to the relevant amount, the same ratio as the number of months (in the determination of which a part of a month shall be reckoned as a full month), for which the office was held bears to 12 months.

(4)

(a)There shall be included in the taxpayer’s income all amounts allowed to be deducted or set off under the provisions of sections 11 to 20, inclusive, section 24D, section 24F, section 24G, section 24I, section 24J, section 27(2)(b) and section 37B(2) of this Act, except section 11(k), 11(n), 11(p) and (q), section 11F, section 12(2) or section 12(2) as applied by section 12(3), section 12A(3), section 13(5), or section 13(5) as applied by section 13(8), or section 13bis(7), section 15(a) or section 15A, or under the corresponding provisions of any previous Income Tax Act, whether in the current or any previous year of assessment which have been recovered or recouped during the current year of assessment: Provided that the provisions of this paragraph shall not apply in respect of any such amount so recovered or recouped which has been—

(i)included in the gross income of such taxpayer in terms of paragraph (jA) of the definition of “gross income”;

(ii)applied to reduce any cost or expenditure incurred by such taxpayer in terms of section 19; or

(iii)previously taken into account as an amount that is deemed to have been recovered or recouped in terms of section 19(4), (5), (6) or (6A).[paragraph (iii) substituted by section 6 of Act 20 of 2021; effective date 19 January 2022, date of promulgation of that Act]

(b)For the purposes of paragraph (a), where during any year of assessment any actuarial surplus is paid to a taxpayer pursuant to the provisions of section 15E(1)(f) or (g) of the Pension Funds Act the taxpayer must be deemed to have recovered or recouped an amount equal to the amount of that actuarial surplus less any expenditure incurred by that taxpayer in respect of that actuarial surplus that was not allowed as a deduction during any year of assessment.

(e)Notwithstanding paragraph (a), but subject to paragraph (eB), (eC), (eD) and (eE), there shall not be included in the income of a person any amount recovered or recouped as a result of the disposal of any asset, where that person has elected that paragraph 65 or 66 of the Eighth Schedule applies in respect of the disposal of that asset.

(eA)Where a person acquires more than one asset (hereinafter referred to as “the replacement asset or assets”) contemplated in paragraph (e), that person must, in applying paragraphs (eB), (eC) and (eD), apportion the amount recovered or recouped to each replacement asset in the same ratio as the receipts and accruals from that disposal respectively expended in acquiring each replacement asset bear to the total amount of those receipts and accruals expended in acquiring all those replacement assets.

(eB)Where a replacement asset in relation to an asset of a person as contemplated in paragraph (e) constitutes a depreciable asset, that person shall be deemed to have recovered or recouped in a year of assessment so much of the amount contemplated in paragraph (e) apportioned to that asset as contemplated in paragraph (eA) as bears to the total amount of the recovery or recoupment contemplated in paragraph (e) the same ratio as the amount of any deduction or allowance allowed in that year of assessment in respect of that 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) allowable for all years of assessment in respect of that replacement asset.

(eC)Where a person during any year of assessment disposes of a replacement asset in relation to an asset contemplated in paragraph (e) and any portion of the recovery or recoupment which is apportioned to that replacement asset has not been included in the income of that person in terms of paragraph (eB) or (eD), that portion must be deemed to be an amount recovered or recouped by that person in respect of that replacement asset in that year of assessment.

(eD)Where during any year of assessment a person ceases to use a replacement asset in relation to an asset contemplated in paragraph (e), in respect of which paragraph 66 of the Eighth Schedule applies, for the purposes of that person’s trade and any portion of the amount which is apportioned to that replacement asset has not been included in the income of that person in terms of paragraph (eB) or (eC), that portion must be deemed to be an amount recovered or recouped in that year of assessment.

(eE)Where a person contemplated in paragraph (e) fails to conclude a contract or fails to bring any replacement asset into use within the period prescribed in paragraphs 65 or 66 of the Eighth Schedule, as the case may be, paragraph (e) shall not apply and that person must—

(i)deem the amount contemplated in paragraph (e) to be an amount recovered or recouped for purposes of paragraph (a) on the date on which the relevant period ends;

(ii)determine interest at the prescribed rate on the amount recovered or recouped from the date of the disposal contemplated in paragraph (e) to the date contemplated in subparagraph (i); and

(iii)deem that interest to be an amount recovered or recouped for purposes of paragraph (a) on the date contemplated in subparagraph (i).

(f)If as a result of the loss, sale or disposal in any other manner by the taxpayer of the further asset referred to in paragraph (e) there has accrued to or has been received by the taxpayer an amount in excess of the cost thereof less the amount referred to in the said paragraph, so much of the excess as does not exceed such last-mentioned amount shall (unless such last-mentioned amount has been included in income in terms of the proviso to the said paragraph) be deemed to have been recovered or recouped and shall be included in the taxpayer’s income for the year of assessment during which such further asset was so lost, sold or disposed of in addition to any recovery or recoupment referred to in paragraph (a).

(k)For the purposes of paragraph (a), where during any year of assessment any person has—

(i)donated any asset;

(ii)in the case of a company, transferred in whatever manner or form any asset to any holder of a share in that company;

(iii)disposed of any asset to a person who is a connected person in relation to that person; or

(iv)commenced to hold any asset as trading stock which was previously not held as trading stock,[subparagraph (iv) added by section 6(d) of Act 34 of 2019; effective date 15 January 2020, date of promulgation of that Act]

in respect of which a deduction or an allowance has been granted to such person in terms of any of the provisions referred to in that paragraph, that person shall be deemed to have disposed of that asset for an amount equal to the market value of that asset as at the date of that donation, transfer, disposal or commencement.[words following subparagraph (iv) substituted by section 4(1)(b) of Act 23 of 2020; effective date 15 January 2020]

(l)For the purposes of paragraph (a), where—

(i)any person was entitled to a deduction in respect of any interest or related finance charges (including a discount or premium), which was incurred or deemed to have been incurred by such person in relation to any financial arrangement during any year of assessment and such interest or related finance charges were allowed as a deduction in terms of the provisions of this Act during such year of assessment in the hands of such person;

(ii)such person has transferred such financial arrangement during any year of assessment to any other person; and

(iii)any obligation or part thereof in respect of such interest or related finance charges which such person is legally liable to pay has, as a result of such transfer, been transferred to such other person,

such person shall be deemed to have recovered or recouped an amount equal to the amount of such obligation or part thereof so transferred during the year of assessment in which such obligation or part thereof has been so transferred.

(n)Where a taxpayer disposes of an industrial asset contemplated in section 12G or a manufacturing asset contemplated in section 12I before completion of the write off period of that asset for purposes of section 11(e), 12C or 13, as applicable, there shall be included in the taxpayer’s income, all amounts allowed to be deducted in respect of that industrial asset under section 12G or manufacturing asset under section 12I, whether in the current year or any previous year of assessment, which have been recovered or recouped during the current year of assessment, in addition to the inclusion of those amounts in terms of paragraph (a).

(nA)Where, before 1 March 2026, a taxpayer disposes of an asset contemplated in section 12BA, there shall be included in the taxpayer’s income 25 per cent of the cost of that asset, which has been recouped during the current year of assessment, in addition to the inclusion of amounts in terms of paragraph (a), but limited to the total amount allowed to be deducted in respect of that asset.[paragraph (nA) inserted by section 4(1) of Act 17 of 2023; effective date deemed to have been 1 March 2023, applies in respect of assets brought into use on or after that date]

(4A)The provisions of subsection (4)(a), (e), (f) or (k) shall not apply in respect of any amount which is deemed to have been allowed as a deduction in terms of subparagraph (ix) of the proviso to section 11(e), section 12B(4B), section 12C(4A), section 12D(3A), section 12DA(4), section 12F(3A), section 13(1A), section 13bis(3A), section 13ter(6A), section 13quin(3) or section 37B(4).

(5)

(a)Any amount which has been paid, whether in the form of rent or otherwise, by any person for the right of use or occupation of any movable or immovable property and has been allowed as a deduction in the determination of such person’s taxable income, and which or the equivalent of which is upon the subsequent acquisition of such property by that or any other person applied in reduction or towards settlement of the purchase price of such property, shall be included in the income of the person by whom the property is acquired as aforesaid for the year of assessment in which such person exercises the option or concludes the agreement, as the case may be, in consequence of which the property is acquired by him: Provided that the provisions of this subsection shall not apply in any case where, in consequence of the acquisition of such property, the person who has acquired the property or any other person has derived a taxable benefit the cash equivalent of which has been included in his gross income in terms of the provisions of paragraph (i) of the definition of “gross income” in section 1.

(b)Where any amount has been paid by any person for the right of use or occupation of any property which is thereafter acquired by that or any other person for a consideration which is less than the fair market value of such property, it shall for the purposes of paragraph (a) be deemed that the said amount, or so much thereof as does not exceed the fair market value of such property less the amount of the consideration, if any, for which it has been acquired as aforesaid, has been applied in reduction or towards settlement of the purchase price of such property.

(bA)If after the termination by the effluxion of time or otherwise of a lease of property consisting of corporeal movable goods or of any machinery or plant in respect of which the lessor under such lease was entitled to any allowance under the provisions of this Act, the person who was the lessee under such lease (hereinafter referred to as the former lessee) is, with the express or implied consent or acquiescence of the person who was the lessor under such lease (hereinafter referred to as the former lessor) or of the owner of the property, allowed to use, enjoy or deal with the property as the former lessee may deem fit—

(i)without the payment of any consideration; or

(ii)in the case of a lease without the payment of any rental or other consideration or subject to the payment of any consideration which is nominal in relation to the fair market value of the property,

the former lessee shall be deemed for the purposes of paragraph (b) to have acquired the property for no consideration and, if the property was owned by the former lessor, the fair market value thereof shall, be deemed for the said purposes to be the cost to the former lessor of the property (or, where the said lease was a financial lease contemplated in paragraph (b) of the definition of “instalment credit agreement” in section 1 of the Value-Added Tax Act, the cash value as defined in that Act of the property, less a depreciation allowance calculated in accordance with paragraph (bB)(i) for the period from the commencement to the termination of the lease.

(bB)For the purposes of paragraph (bA)—

(i)the depreciation allowance shall be calculated as an aggregate of annual allowances for the years in the period for which the depreciation allowance may be made, the allowance for the first year in the said period being calculated at the rate of 20 per cent of the said cost or cash value, as the case may be, of the property in question and the allowance for each succeeding year in that period being calculated at the said rate on the balance of the said cost or cash value, as the case may be, remaining after the deduction therefrom of the allowance or allowances calculated for the year or years preceding such succeeding year;

(ii)the former lessor of the property in question, or the owner thereof, as the case may be, shall, unless and until the contrary is proved, be deemed to have consented to the former lessee using, enjoying or dealing with the property as contemplated in the said paragraph if, at the end of a period of three months reckoned after the date on which the lease in question terminated, the former lessor has not instituted proceedings to compel the former lessee to return the property to the former lessor or to relinquish possession thereof or to dispose thereof in accordance with the terms of the lease;

(iii)where any consideration is payable in respect of the property in question for the period after the termination of the lease in question, such consideration shall be deemed to be nominal in relation to the fair market value of the property if that consideration, in relation to the period for which it is payable, amounts to less than 10 per cent per annum of the said fair market value;

(iv)if after the termination of a lease referred to in the said paragraph (bA) the former lessee is required to pay a consideration in respect of his right to use, enjoy or deal with the property in question but ceases to pay such consideration or, in the case of a lease referred to in subparagraph (ii) of the said paragraph (bA), pays a consideration in respect of such right which is nominal in relation to the fair market value of the property, the said lease shall be deemed to have been terminated on the date from which the former lessee is no longer required to pay such consideration or in the case of a lease referred to in the said subparagraph (ii), whereafter the consideration payable by him becomes nominal as aforesaid.

(bC)Any person who, as a former lessor of property referred to in paragraph (bA) or as the owner thereof, has after the termination of the lease of such property consented to the former lessee thereof using, enjoying or dealing with such property as contemplated in the said paragraph, or is deemed to have so consented under the provisions of paragraph (bB)(ii), shall not later than 14 days after the end of three months after the termination of the relevant lease advise the former lessee of the fair market value of such property as determined in accordance with paragraph (bA).

8A. Gains made by directors of companies or by employees in respect of rights to acquire marketable securities

(1)

(a)There shall be included in the taxpayer’s income for the year of assessment the amount of any gain made by the taxpayer after the first day of June, 1969, by the exercise, cession or release during such year of any right to acquire any marketable security (whether such right be exercised, ceded or released in whole or part), if such right was obtained by the taxpayer before 26 October 2004 as a director or former director of any company or in respect of services rendered or to be rendered by him as an employee to an employer.

(b)Where the taxpayer has exercised such right but, by reason of a condition imposed by the said company or employer or the grantor of the right, the taxpayer is not entitled to dispose of the marketable security until after the end of the said year of assessment, the gain made by the exercise of the right shall, if the taxpayer makes an election as provided in paragraph (c), not be included in his income for such year of assessment but shall be included in his income for the year of assessment during which he becomes entitled to dispose of the marketable security: Provided that in the event of the taxpayer’s death or insolvency before he becomes entitled to dispose of the marketable security the said gain shall be deemed to have been made by him on the day before the date of his death or insolvency, as the case may be, and shall be assessed accordingly.

(c)The taxpayer may, in the circumstances contemplated in paragraph (b), elect that the provisions of that paragraph shall apply in respect of the gain referred to in that paragraph, and such election shall be in writing and shall be furnished to the Commissioner not later than the date on which the taxpayer’s return of income is furnished for the year of assessment referred to in paragraph (a), or within such further time as the Commissioner may allow.

(2)For the purposes of this section—

(a)a gain shall be deemed to have been made by the taxpayer by the exercise of a right to acquire any marketable security if the amount by which the market value of such marketable security at the time such right was exercised exceeds the consideration given by the taxpayer for such marketable security and any consideration given by him for such right or the grant of such right: Provided that such market value shall for the purpose of this paragraph be deemed to be the sum which a person having the right freely to dispose of such marketable security might reasonably expect to obtain from a sale of such marketable security in the open market;

(b)where the taxpayer for a consideration accepts a restriction upon his right to acquire any marketable security such right shall be deemed to be released in part;

(c)where any gain is made by the exercise, cession or release of a right to acquire any marketable security, such gain shall be deemed to be made at the time when such right is exercised, ceded or released, as the case may be.

(3)The amount to be included in the taxpayer’s income in respect of any gain referred to in subsection (1) shall be—

(a)where such gain is made by the exercise of a right to obtain any marketable security, the amount referred to in subsection (2)(a); or

(b)where such gain is made by the cession or release of a right to obtain any marketable security, the amount by which the amount or value of the consideration received by or accrued to the taxpayer for the cession or release, exceeds the amount or value of any consideration given by the taxpayer for such right or the grant of such right.

(4)In determining under subsections (2)(a) and (3) whether any gain has been made by the exercise, cession or release of a right to obtain any marketable security, and in determining the amount of such gain—

(a)where any consideration was given by the taxpayer for such right or the grant of such right and the right is exercised, ceded or released in part only or the consideration was given for something in addition to the right, only the portion of such consideration which relates to so much of the right as is exercised, ceded or released, as the case may be, shall be deductible and for that purpose a fair apportionment of such consideration shall be made; and

(b)no deduction shall be made in respect of any consideration in the form of services rendered or to be rendered or anything done or to be done or not to be done.

(5)Where any right (hereinafter referred to as the first right) to acquire any marketable security is ceded or released by the taxpayer in whole or in part for a consideration which consists of or includes another right (hereinafter referred to as the second right) to acquire such marketable security or any other marketable security—

(a)the second right shall for the purposes of this section not be deemed to be consideration for the cession or release of the first right; and

(b)any gain made by the taxpayer (other than a gain in respect of which section 8C applies or will apply) by the exercise, cession or release of the second right, shall be determined and included in the taxpayer’s income as though such gain had been made by the exercise, cession or release of the first right, and for the purpose of determining such gain, the amount to be deducted under subsection (2)(a) or (3) in respect of the amount or value of the consideration given by the taxpayer for the second right shall be deemed to be the consideration given by the taxpayer for the first right or the grant of such right, less so much of the amount or value of that consideration as has been offset by any consideration other than the consideration consisting of the second right.

(6)For the purposes of this section, a gain made by any person other than the taxpayer by the exercise, cession or release of a right to acquire any marketable security shall be deemed to be made by the taxpayer and shall be included in the taxpayer’s income as though it were a gain referred to in subsection (1)—

(a)if that right was originally obtained by any person other than the taxpayer by reason of the taxpayer’s office or former office as a director of any company or any services rendered or to be rendered by the taxpayer as an employee of any employer; or

(b)if that right was originally obtained by the taxpayer as a director or former director of any company or in respect of services rendered or to be rendered by him as an employee to an employer, and—

(i)the right was ceded by the taxpayer to any person otherwise than by or under a cession made by way of a bargain at arm’s length; or

(ii)the gain was made by a relative of the taxpayer.

(7)The provisions of subsections (2), (3), (4) and (5) shall mutatis mutandis apply in relation to the determination of any gain referred to in subsection (6).

(8)Where any gain is made after the first day of June, 1969, by the exercise, cession or release of a right to acquire any marketable security granted to any person on or before that date, the amount required to be included in income under this section in respect of such gain shall be reduced by an amount which bears to the amount of the gain, as determined under the preceding provisions of this section, the same ratio as the exemption period, as determined under subsection (9) in relation to the said gain, bears to the accrual period, as so determined.

(9)For the purposes of determining any reduction to be made under subsection (8) in respect of any gain made by the exercise, cession or release or any right to acquire any marketable security—

(a)the exemption period shall be deemed to be the period commencing on the date on which the person referred to in subsection (8) was granted such right and ending on the first day of June, 1969; and

(b)the accrual period shall be deemed to be the period commencing on the first day of the exemption period and ending on the date on which such right is exercised, ceded or released, as the case may be.

(10)For the purposes of this section “marketable security” means any security, debenture, share, option or other interest capable of being sold in a share-market or exchange or otherwise.

8B. Taxation of amounts derived from broad-based employee share plan

(1)Notwithstanding section 9C, there must be included in the income of a person for a year of assessment any gain made by that person during that year from the disposal of any qualifying equity share or any right or interest in a qualifying equity share, which is disposed of by that person within five years from the date of grant of that qualifying equity share, otherwise than—

(a)in exchange for another qualifying equity share as contemplated in subsection (2);

(b)on the death of that person; or

(c)on the insolvency of that person.

(2)If a person disposes of a qualifying equity share in exchange solely for any other equity share in that employer or any company that is an associated institution as defined in the Seventh Schedule in relation to that employer, that other equity share acquired in exchange is deemed to be—

(a)a qualifying equity share which was acquired by that person on the date of grant of the qualifying equity share disposed of in exchange; and

(b)acquired for a consideration equal to any consideration given for the qualifying equity share disposed of in exchange.

(2A)If a person acquires any equity share by virtue of any qualifying equity share held by that person, that other equity share so acquired is deemed to be a qualifying equity share which was acquired by that person on the date of grant of the qualifying equity share so held by that person.

(2B)If a person disposes of any right or interest in a qualifying equity share, the amount of consideration incurred in respect of the acquisition of that qualifying equity share that is attributable to that right or interest must be determined in accordance with the ratio that the amount received for the disposal of that right or interest bears to the market value of that qualifying equity share immediately before that disposal.

(3)For the purposes of this section—“broad-based employee share plan” of an employer means a plan in terms of which—

(a)equity shares in that employer, or in a company that is an associated institution as defined in the Seventh Schedule in relation to the employer are acquired by employees of that employer;[paragraph (a) substituted by section 7 of Act 34 of 2019; effective date 15 January 2020, date of promulgation of that Act]

(b)employees who participate in any other equity scheme of that employer or of a company that is an associated institution as defined in the Seventh Schedule in relation to that employer are not entitled to participate and where at least 80 per cent of all other employees who are employed by that employer on a permanent basis on the date of grant (and who have continuously been so employed on a full-time basis for at least one year) are entitled to participate;

(c)the employees who acquire the equity shares as contemplated in paragraph (a) are entitled to all dividends and foreign dividends and full voting rights in relation to those equity shares; and

(d)no restrictions have been imposed in respect of the disposal of those equity shares, other than—

(i)a restriction imposed by legislation;

(ii)a right of any person to acquire those equity shares from the employee or former employee who acquired the equity shares as contemplated in paragraph (a)—

(aa)in the case where the employee or former employee is or was guilty of misconduct or poor performance, at the lower of market value on the date of grant or the market value on the date of acquisition by that employer; or

(bb)in any other case, at market value on the date of acquisition by that person; or

(iii)a restriction in terms of which the employee or former employee who acquired the equity shares as contemplated in paragraph (a) may not dispose of those equity shares for a period, which may not extend beyond five years from the date of grant;

“date of grant” in relation to an equity share means the date on which the granting of that equity share is approved by the directors of the employer company or some other person or body of persons with comparable authority;“gain” in relation to the disposal by a person of a qualifying equity share or a right or interest in a qualifying equity share, means the amount by which any amount received by or accrued to that person from that disposal exceeds the consideration given by him or her for that qualifying equity share, right or interest (otherwise than in the form of services rendered or to be rendered or anything done or to be done or not to be done);“market value” in relation to an equity share means the price which could be obtained upon the sale of that equity share between a willing buyer and a willing seller dealing freely at arm’s length in an open market and without having regard to any restrictions imposed in respect of that equity share;“qualifying equity share”, in relation to a person, means an equity share acquired in a year of assessment in terms of a broad-based employee share plan, where the market value of all equity shares (as determined on the relevant date of grant of each equity share and excluding the market value of any qualifying equity share acquired in the circumstances contemplated in subsection (2A)), which were acquired by that person in terms of that plan in that year and the four immediately preceding years of assessment, does not in aggregate exceed R50 000.

(4)The provisions of section 25 do not apply in respect of any amount received or accrued from the disposal of any qualifying equity share after the date of death of the person contemplated in subsection (1).

8C. Taxation of directors and employees on vesting of equity instruments

(1)

(a)Notwithstanding sections 9C and 23(m), a taxpayer must include in or deduct from his or her income for a year of assessment any gain or loss determined in terms of subsection (2) in respect of the vesting during that year of any equity instrument, if that equity instrument was acquired by that taxpayer—

(i)by virtue of his or her employment or office of director of any company or from any person by arrangement with the taxpayer’s employer;

(ii)by virtue of any restricted equity instrument held by that taxpayer in respect of which this section will apply upon vesting thereof; or

(iii)as a restricted equity instrument during the period of his or her employment by or office of director of any company from—

(aa)that company or any associated institution in relation to that company; or

(bb)any person employed by or that is a director of—

(A)that company; or

(B)any associated institution in relation to that company.

(b)This section does not apply in respect of any equity instrument which—

(i)was acquired by the exercise or conversion of, or in exchange for the disposal of, any other equity instrument where this section applied in respect of the vesting of that other equity instrument before that exercise, conversion or exchange; or

(ii)constitutes a qualifying equity share contemplated in section 8B.

(1A)A taxpayer must include any amount received by or accrued to him or her during a year of assessment in respect of a restricted equity instrument in his or her income for that year of assessment if that amount does not constitute—

(a)a return of capital or foreign return of capital by way of a distribution of a restricted equity instrument;

(b)a dividend or foreign dividend in respect of that restricted equity instrument; or

(c)an amount that must be taken into account in determining the gain or loss, in terms of this section, in respect of that restricted equity instrument.

(2)

(a)The gain to be included in the income of a taxpayer—

(i)in the case of—

(aa)a disposal contemplated in subsection (5)(c); or

(bb)a disposal by way of release, abandonment or lapse of an option or financial instrument contemplated in paragraph (a) or (b) of the definition of “equity instrument”,

is the amount received or accrued in respect of that disposal which exceeds the sum of any consideration in respect of that equity instrument; or

(ii)in any other case, is the amount by which the market value of the equity instrument determined at the time that it vests in that taxpayer exceeds the sum of any consideration in respect of that equity instrument.

(b)The loss to be deducted from the income of a taxpayer—

(i)in the case of—

(aa)a disposal contemplated in subsection (5)(c); or

(bb)a disposal by way of release, abandonment or lapse of an option or financial instrument contemplated in paragraph (a) or (b) of the definition of “equity instrument”,

is the amount by which the sum of any consideration in respect of that equity instrument exceeds the amount received or accrued in respect of that disposal; or

(ii)in any other case, is the amount by which the consideration in respect of the equity instrument exceeds the market value of that equity instrument determined at the time that it vests in that taxpayer.

(3)An equity instrument acquired by a taxpayer is deemed for the purposes of this section to vest in that taxpayer—

(a)in the case of the acquisition of an unrestricted equity instrument, at the time of that acquisition; or

(b)in the case of the acquisition of a restricted equity instrument, at the earliest of—

(i)when all the restrictions, which result in that equity instrument being a restricted equity instrument, cease to have effect;

(ii)immediately before that taxpayer disposes of that restricted equity instrument, other than a disposal contemplated in subsection (4) or (5)(a), (b) or (c);

(iii)immediately after that equity instrument, which is an option contemplated in paragraph (a) of the definition of “equity instrument” or a financial instrument contemplated in paragraph (b) of that definition, terminates (otherwise than by the exercise or conversion of that equity instrument);

(iv)immediately before that taxpayer dies, if all the restrictions relating to that equity instrument are or may be lifted on or after death; and

(v)the time a disposal contemplated in subsection (2)(a)(i) or (b)(i) occurs.

(4)

(a)If a taxpayer disposes of a restricted equity instrument which was acquired in the manner contemplated in subsection (1) for an amount which consists of or includes any other restricted equity instrument in the employer of the taxpayer or an associated institution in relation to the employer, that other restricted equity instrument acquired in exchange is deemed to be acquired by that taxpayer by virtue of his or her employment or office of director of any company.

(b)If the amount received or accrued in respect of the restricted equity instrument which is disposed of as contemplated in paragraph (a) includes any payment in a form other than restricted equity instruments, that payment less any consideration attributable to that payment must be deemed to be a gain or loss which must be included in or deducted from the income of the taxpayer in the year of assessment during which that restricted equity instrument is so disposed of.

(5)

(a)If a restricted equity instrument which was acquired by a taxpayer in the manner contemplated in subsection (1) is disposed of by that taxpayer to any person—

(i)otherwise than by or under a disposal made in terms of a transaction at arm’s length; or

(ii)who is a connected person in relation to that taxpayer,

the provisions of subsections (2), (3) and (4) apply mutatis mutandis in the determination of any gain or loss made by that person as if that person had been the taxpayer, and that gain or loss is for purposes of subsection (1) deemed to be made by that taxpayer in respect of the vesting of that equity instrument.

(b)If an equity instrument was acquired by any person other than the taxpayer by virtue of the taxpayer’s employment or office of director, that equity instrument must, for purposes of this section, be deemed to have been so acquired by that taxpayer and disposed of to that person in the manner contemplated in paragraph (a).

(c)Paragraph (a) does not apply where a taxpayer disposes of any restricted equity instrument (including by way of forfeiture, lapse or cancellation) to his or her employer, an associated institution or other person by arrangement with the employer in terms of a restriction imposed in relation to that equity instrument for an amount which is less than the market value of that restricted equity instrument.

(6)If a person who acquires a restricted equity instrument from the taxpayer as contemplated in subsection (5), disposes of that restricted equity instrument to any other person in the manner contemplated in subsection (5)(a)(i) or to a connected person in relation to the taxpayer, subsection (5) applies in respect of that other person as if he or she had acquired that restricted equity instrument directly from that taxpayer.

(7)For purposes of this section, unless the context otherwise indicates—“associated institution” means an associated institution as contemplated in paragraph 1 of the Seventh Schedule;“consideration” in respect of an equity instrument means any amount given or to be given (otherwise than in the form of services rendered or to be rendered or anything done, to be done or not to be done)—

(a)by the taxpayer in respect of that equity instrument;

(b)by the taxpayer in respect of any other restricted equity instrument which had been disposed of by that taxpayer in exchange for that equity instrument, reduced by any amount attributable to the gain or loss determined in terms of subsection (4)(b); or

(c)by any person contemplated in subsection (5)(a) or (b) in respect of that restricted equity instrument to the extent that the amount does not exceed the amount the taxpayer would have had to give to acquire that equity instrument had it not been disposed of or deemed to have been disposed of by him or her, but does not include any amount given or to be given by that person to the taxpayer to acquire that restricted equity instrument:

Provided that where a taxpayer acquires—

(a)an equity instrument in exchange for any other equity instrument, as contemplated in subsection (4)(a), the market value of the equity instrument given in exchange must not be taken into account in determining the consideration in respect of the equity instrument so acquired; or

(b)a right to acquire any marketable security in exchange for any other such right, as contemplated in section 8A(5), and the right so acquired constitutes an equity instrument acquired in the manner contemplated in subsection (1), the consideration for that equity instrument must be determined as if it was acquired in the manner contemplated in subsection (4)(a);

“employer” means an employer as contemplated in paragraph 1 of the Seventh Schedule;“equity instrument” means a share or a member’s interest in a company, and includes—

(a)an option to acquire such a share, part of a share or member’s interest;

(b)any financial instrument that is convertible to a share or member’s interest; and

(c)any contractual right or obligation the value of which is determined directly or indirectly with reference to a share or member’s interest;

“market value”, in relation to an equity instrument—

(a)of a private company as defined in the Companies Act or a company that would be regarded as a private company if it were incorporated under that Act, means an amount determined as its value in terms of a method of valuation—

(i)prescribed in the rules relating to the acquisition and disposal of that equity instrument;

(ii)which is regarded as a proxy for the market value of that equity instrument for the purposes of those rules; and

(iii)used consistently to determine both the consideration for the acquisition of that equity instrument and the price of the equity instrument repurchased from the taxpayer after it has vested in that taxpayer; or

(b)of any other company, means the price which could be obtained upon the sale of that equity instrument between a willing buyer and a willing seller dealing freely at arm’s length in an open market and, in the case of a restricted equity instrument, had the restriction to which that equity instrument is subject not existed;

“restricted equity instrument” in relation to a taxpayer means an equity instrument—

(a)which is subject to any restriction (other than a restriction imposed by legislation) that prevents the taxpayer from freely disposing of that equity instrument at market value;

(b)which is subject to any restriction that could result in the taxpayer—

(i)forfeiting ownership or the right to acquire ownership of that equity instrument otherwise than at market value; or

(ii)being penalised financially in any other manner for not complying with the terms of the agreement for the acquisition of that equity instrument;

(c)if any person has retained the right to impose a restriction contemplated in paragraph (a) or (b) on the disposal of that equity instrument;

(d)which is an option contemplated in paragraph (a) of the definition of “equity instrument” and where the equity instrument which can be acquired in terms of that option will be a restricted equity instrument;

(e)which is a financial instrument contemplated in paragraph (b) of the definition of “equity instrument” and where the equity instrument to which that financial instrument can be converted will be a restricted equity instrument;

(f)if the employer, associated institution in relation to the employer or other person by arrangement with the employer has at the time of acquisition by the taxpayer of the equity instrument undertaken to—

(i)cancel the transaction under which that taxpayer acquired the equity instrument; or

(ii)repurchase that equity instrument from that taxpayer at a price exceeding its market value on the date of repurchase,

if there is a decline in the value of the equity instrument after that acquisition; or

(g)which is not deliverable to the taxpayer until the happening of an event, whether fixed or contingent; and

“unrestricted equity instrument” means an equity instrument which is not a restricted equity instrument.

8E. Dividends derived from certain shares and equity instruments deemed to be income in relation to recipients thereof

(1)For the purposes of this section—“date of issue”, in relation to a share in a company, means the date on which—

(a)the share is issued by the company;

(b)the company at any time after the share has been issued undertakes the obligation to redeem that share in whole or in part; or

(c)the holder of the share at any time after the share has been issued obtains the right to require that share to be redeemed in whole or in part, otherwise than as a result of the acquisition of that share by that holder;

“equity instrument” means any right or interest the value of which is determined directly or indirectly with reference to—

(a)a share; or

(b)an amount derived from a share;

“financial instrument” means any—

(a)interest-bearing arrangement; or

(b)financial arrangement based on or determined with reference to a specified rate of interest or the time value of money;

“hybrid equity instrument” means—

(a)any share, other than an equity share, if—

(i)the issuer of that share is obliged to redeem that share or to distribute an amount constituting a return of the issue price of that share (in whole or in part); or[subparagraph (i) substituted by section 8(1)(a) of Act 34 of 2019; effective date 21 July 2019, applicable in respect of years of assessment ending on or after that date]

(ii)the holder of that share may exercise an option in terms of which the issuer must redeem that share or distribute an amount constituting a return of the issue price of that share (in whole or in part),[subparagraph (ii) substituted by section 8(1)(a) of Act 34 of 2019; effective date 21 July 2019, applicable in respect of years of assessment ending on or after that date]

within a period of three years from the date of issue of that share;

(b)any share, other than a share contemplated in paragraph (a), if—

(i)

(aa)the issuer of that share is obliged to redeem that share or to distribute an amount constituting a return of the issue price of that share (in whole or in part) within a period of three years from the date of issue of that share;[item (aa) substituted by section 8(1)(b) of Act 34 of 2019; effective date 21 July 2019, applicable in respect of years of assessment ending on or after that date]

(bb)the holder of that share may exercise an option in terms of which the issuer must redeem that share or distribute an amount constituting a return of the issue price of that share (in whole or in part) within a period of three years from the date of issue of that share; or[item (bb) substituted by section 8(1)(b) of Act 34 of 2019; effective date 21 July 2019, applicable in respect of years of assessment ending on or after that date]

(cc)at any time on the date of issue of that share, the existence of the company issuing that share—

(A)is to be terminated within a period of three years; or

(B)is likely to be terminated within a period of three years upon a reasonable consideration of all the facts at that time; and

(ii)

(aa)that share does not rank pari passu as regards its participation in dividends or foreign dividends with all other equity shares in the capital of the relevant company or, where the equity shares in such company are divided into two or more classes, with the shares of at least one of such classes; or[item (aa) substituted by section 12 of Act 23 of 2018; effective date 17 January 2019, date of promulgation of that Act]

(bb)any dividend or foreign dividend payable on such share is to be calculated directly or indirectly with reference to any specified rate of interest or the time value of money;

(c)any preference share if that share is—

(i)secured by a financial instrument; or

(ii)subject to an arrangement in terms of which a financial instrument may not be disposed of,

unless that share was issued for a qualifying purpose;

(d)any equity instrument the value of which is determined directly or indirectly with reference to—

(i)a share contemplated in paragraph (a) or (b) or a preference share contemplated in paragraph (c); or

(ii)an amount derived from a share or preference share contemplated in subparagraph (i); or

(e)any equity instrument, other than an equity instrument contemplated in paragraph (d), if that equity instrument is subject to a right or arrangement that would have constituted a right or arrangement contemplated in paragraph (a), (b) or (c) had that right or arrangement applied in respect of the share with reference to which the value of that equity instrument is directly or indirectly determined;[paragraph (e) substituted by section 8(1)(c) of Act 34 of 2019; effective date 21 July 2019, and by section 7 of Act 20 of 2021; effective date 19 January 2022, date of promulgation of that Act]

“issue price”, in relation to a share in a company, means the amount that was received by or that accrued to that company in respect of the issue of that share;[definition of “issue price” inserted by section 8(1)(d) of Act 34 of 2019; effective date 21 July 2019, applicable in respect of years of assessment ending on or after that date]“preference share” means a preference share as defined in section 8EA(1);“qualifying purpose” means a qualifying purpose as defined in section 8EA(1).

(2)Any dividend or foreign dividend received by or accrued to a person during any year of assessment in respect of a share or equity instrument must be deemed in relation to that person to be an amount of income accrued to that person if that share or equity instrument constitutes a hybrid equity instrument at any time during that year of assessment.

(2A)Where any share or preference share that was issued in terms of an agreement, all the terms of which were finally agreed to before 1 April 2012 by all the parties to that agreement, constitutes a hybrid equity instrument solely by reason of a right of redemption or a security arrangement acquired in accordance with the terms of that agreement and that right or arrangement is cancelled on or after 26 October 2016 and on or before 31 December 2017—

(a)the provisions of subsection (2) will not apply in respect of any dividend or foreign dividend that accrues in respect of that share after the date of cancellation of that right or arrangement; and

(b)the cancellation of that right or arrangement must not be treated as a disposal of that share if no consideration is payable in respect of that cancellation.

8EA. Dividends on third-party backed shares deemed to be income in relation to recipients thereof

(1)For the purposes of this section—“enforcement obligation” [definition of “enforcement obligation” deleted by section 9(a) of Act 34 of 2019; effective date 15 January 2020, date of promulgation of that Act]“enforcement right” in relation to a share or equity instrument means any right, whether fixed or contingent, of the holder of that share or equity instrument or of any person that is a connected person in relation to that holder to require any person other than the issuer of that share or equity instrument to—

(a)acquire that share or equity instrument from the holder;

(b)make any payment in respect of that share or equity instrument in terms of a guarantee, indemnity or similar arrangement; or

(c)procure, facilitate or assist with any acquisition contemplated in paragraph (a) or the making of any payment contemplated in paragraph (b);

“equity instrument” means a right or interest the value of which is determined directly or indirectly with reference to—

(a)a preference share; or

(b)an amount derived from a preference share;

“operating company” means—

(a)any company that carries on business continuously, and in the course or furtherance of that business—

(i)provides goods or services for consideration; or

(ii)carries on exploration for natural resources;

(b)any company that is a controlling group company in relation to a company contemplated in paragraph (a); or

(c)any company that is a listed company;

“preference share” means any share—

(a)other than an equity share; or

(b)that is an equity share, if an amount of any dividend or foreign dividend in respect of that share is based on or determined with reference to a specified rate of interest or the time value of money;

“qualifying purpose”, in relation to the application of the funds derived from the issue of a preference share, means one or more of the following purposes:

(a)The direct or indirect acquisition of an equity share by any person in a company that is an operating company at the time of the receipt or accrual of any dividend or foreign dividend in respect of that preference share, other than a direct or indirect acquisition of an equity share from a company that, immediately before that acquisition, formed part of the same group of companies as the person acquiring that equity share;

(b)the partial or full settlement by any person of any—

(i)debt incurred for one or more of the following purposes:

(aa)The direct or indirect acquisition of an equity share by any person in a company that is an operating company at the time of the receipt or accrual of any dividend or foreign dividend in respect of that preference share, other than a direct or indirect acquisition of an equity share from a company that, immediately before that acquisition, formed part of the same group of companies as the person acquiring that equity share;

(bb)a direct or indirect acquisition or a redemption contemplated in paragraph (c);

(cc)the payment of any dividend or foreign dividend as contemplated in paragraph (d); or

(dd)the partial or full settlement, directly or indirectly, of any debt incurred as contemplated in item (aa), (bb) or (cc); or

(ii)interest accrued on any debt contemplated in subparagraph (i);

(c)the direct or indirect acquisition by any person or a redemption by any person of any other preference share if—

(i)that other preference share was issued for any purpose contemplated in this definition; and

(ii)the amount received by or accrued to the issuer of that preference share as consideration for the issue of that preference share does not exceed the amount outstanding in respect of that other preference share being acquired or redeemed, being the sum of—

(aa)that amount; and

(bb)any amount of dividends, foreign dividends or interest accrued in respect of that other preference share; or

(d)the payment by any person of any dividend or foreign dividend in respect of the other preference share contemplated in paragraph (c);

“third-party backed share” means any preference share or equity instrument in respect of which an enforcement right is exercisable by the holder of that preference share or equity instrument as a result of any amount of any specified dividend, foreign dividend, return of capital or foreign return of capital attributable to that share or equity instrument not being received by or accruing to any person entitled thereto.[definition of “third-party backed share” substituted by section 9(b) of Act 34 of 2019; effective date 15 January 2020, date of promulgation of that Act]

(2)Any dividend or foreign dividend received by or accrued to a person during any year of assessment in respect of a share or equity instrument must be deemed in relation to that person to be an amount of income received by or accrued to that person if that share or equity instrument constitutes a third-party backed share at any time during that year of assessment.

(2A)Where a preference share that was issued in terms of an agreement, all the terms of which were finally agreed to before 1 April 2012 by all the parties to that agreement, constitutes a third-party backed share solely by reason of an enforcement right acquired in accordance with the terms of that agreement and that enforcement right is cancelled on or after 26 October 2016 and on or before 31 December 2017, the provisions of subsection (2) will not apply in respect of any dividend or foreign dividend that accrues in respect of that share after the date of cancellation of that enforcement right.[subsection (2A) substituted by section 13 of Act 23 of 2018; effective date 17 January 2019, date of promulgation of that Act]

(3)

(a)Where the funds derived from the issue of a preference share were applied for a qualifying purpose, in determining whether an enforcement right is exercisable in respect of that share, no regard must be had to any arrangement in terms of which the holder of that share has an enforcement right in respect of that share and that right is exercisable, against the persons contemplated in paragraph (b).[paragraph (a) substituted by section 9(c) of Act 34 of 2019; effective date 15 January 2020, date of promulgation of that Act]

(b)For the purposes of the determination contemplated in paragraph (a) no regard must be had to the following persons:

(i)The operating company to which that qualifying purpose relates;

(ii)any issuer of a preference share if that preference share was issued for a qualifying purpose;

(iii)any other person that directly or indirectly holds at least 20 per cent of the equity shares in—

(aa)the operating company contemplated in subparagraph (i); or

(bb)the issuer contemplated in subparagraph (ii);

(iv)any company that forms part of the same group of companies as—

(aa)the operating company contemplated in subparagraph (i);

(bb)the issuer contemplated in subparagraph (ii); or

(cc)the other person that directly or indirectly holds at least 20 per cent of the equity shares in the operating company contemplated in subparagraph (i) or the issuer contemplated in subparagraph (ii);

(v)any natural person;

(vi)any organisation—

(aa)which is—

(A)a non-profit company as defined in section 1 of the Companies Act; or

(B)a trust or association of persons; and

(bb)if—

(A)all the activities of that organisation are carried on in a non-profit manner; and

(B)none of the activities of that organisation are intended to directly or indirectly promote the economic self-interest of any fiduciary or employee of that organisation, otherwise than by way of reasonable remuneration payable to that fiduciary or employee; or

(vii)any person that holds equity shares in an issuer contemplated in subparagraph (ii) if the enforcement right exercisable against that person is limited to any rights in and claims against that issuer that are held by that person.[subparagraph (vii) substituted by section 9(d) of Act 34 of 2019; effective date 15 January 2020, date of promulgation of that Act]

8F. Interest on hybrid debt instruments deemed to be dividends in specie

(1)For the purposes of this section—“enforcement right” in relation to an instrument means any right, whether fixed or contingent, to require any person other than the issuer of that instrument to—

(a)acquire that instrument from the holder thereof;

(b)make any payment in respect of that instrument in terms of a guarantee, indemnity or similar arrangement; or

(c)procure, facilitate or assist with any acquisition contemplated in paragraph (a) or the making of any payment contemplated in paragraph (b);

“hybrid debt instrument” means any instrument in respect of which a company owes an amount during a year of assessment if in terms of any arrangement as defined in section 80L—

(a)that company is in that year of assessment entitled or obliged to—

(i)convert that instrument (or any part thereof) in any year of assessment to; or

(ii)exchange that instrument (or any part thereof) in any year of assessment for,

shares unless the market value of those shares is equal to the amount owed in terms of the instrument at the time of conversion or exchange;

(b)the obligation to pay an amount so owed on a date or dates falling within that year of assessment has been deferred by reason of that obligation being conditional upon the market value of the assets of that company not being less than the amount of the liabilities of that company; or

(c)that company owes the amount to a connected person in relation to that company and is not obliged to redeem the instrument, excluding any instrument payable on demand, within 30 years from the date of issue of that instrument:Provided that, for the purposes of this paragraph, where the company has the right to—

(aa)convert that instrument to; or

(bb)exchange that instrument for,

a financial instrument other than a share—

(A)that conversion or exchange must be deemed to be an arrangement in respect of that instrument; and

(B)that instrument and that financial instrument must be deemed to be one and the same instrument for the purposes of determining the period within which the company is obliged to redeem that instrument;

“instrument” means any form of interest-bearing arrangement or debt that is issued by—

(a)a company that is a resident;

(b)a company that is not a resident if the interest in respect of that instrument is attributable to a permanent establishment of that company in the Republic; or

(c)a company that is a controlled foreign company as contemplated in section 9D if the interest incurred in respect of that instrument must be taken into account in determining the net income of that controlled foreign company as contemplated in that section;

“issue”, in relation to an instrument, means the creation of a liability to pay an amount in terms of that instrument;“interest” means interest as defined in section 24J(1);“redeem”, in relation to an instrument, means the discharge of all liability to pay all amounts in terms of that instrument;“third-party backed instrument” means any instrument in respect of which an enforcement right is exercisable as a result of any amount relating to that instrument not being received by or accruing to any person entitled thereto.

(2)Any amount that is incurred by a company or accrues to a person in respect of interest on or after the date that an instrument becomes a hybrid debt instrument is—

(a)deemed to be a dividend in specie in respect of a share that is declared and paid by that company to the person to whom that amount accrued on the last day of the year of assessment of that company during which it was incurred;

(b)not deductible; and

(c)deemed to be a dividend in specie in respect of a share that accrues to that person on the date contemplated in paragraph (a).

[subsection (2) amended by section 14(1) of Act 23 of 2018; effective date 18 December 2017, and substituted by section 8(1) of Act 20 of 2021; effective date 19 January 2022, date of promulgation of the Taxation Laws Amendment Act, 2021, applicable in respect of amounts incurred or accrued on or after that date]

(3)This section does not apply to any instrument—

(a)in respect of which all amounts are owed by a small business corporation as defined in section 12E(4);

(b)that constitutes a tier 1 or tier 2 capital instrument referred to in the regulations issued in terms of section 90 of the Banks Act (contained in Government Notice No. R.1029 published in Government Gazette No. 35950 of 12 December 2012) issued—

(i)by a bank as defined in section 1 of that Act; or

(ii)by a controlling company in relation to that bank;

(c)of any class that is subject to approval as contemplated in the—

(i)Short-term Insurance Act in accordance with the conditions determined in terms of section 23(a)(i) of that Act by the Registrar defined in that Act, where an amount is owed in respect of that instrument by a short-term insurer as defined in that Act; or

(ii)Long-term Insurance Act in accordance with the conditions determined in terms of section 24(a)(i) of that Act by the Registrar defined in that Act, where an amount is owed in respect of that instrument by a long-term insurer as defined in that Act;

(d)that constitutes a linked unit in a company where the linked unit is held by a long-term insurer as defined in the Long-term Insurance Act, a pension fund, a provident fund, a REIT or a short-term insurer as defined in the Short-term Insurance Act, if—

(i)the long-term insurer, pension fund, provident fund, REIT or short-term insurer holds at least 20 per cent of the linked units in that company;

(ii)the long-term insurer, pension fund, provident fund, REIT or short-term insurer acquired those linked units before 1 January 2013; and

(iii)at the end of the previous year of assessment 80 per cent or more of the value of the assets of that company, reflected in the annual financial statements prepared in accordance with the Companies Act for the previous year of assessment, is directly or indirectly attributable to immovable property;

(e)that constitutes a third-party backed instrument; or

(f)that constitutes a hybrid debt instrument solely in terms of paragraph (b) of the definition of hybrid debt instrument if a registered auditor, as contemplated in the Auditing Profession Act, 2005 (Act No. 26 of 2005), has certified that the payment, by a company, of an amount owed in respect of that instrument has been or is to be deferred by reason of the market value of the assets of that company being less than the amount of the liabilities of that company.

8FA. Hybrid interest deemed to be dividends in specie

(1)For the purposes of this section—“hybrid interest”, in relation to any debt owed by a company in terms of an instrument, means—

(a)any interest where the amount of that interest is—

(i)not determined with reference to a specified rate of interest; or

(ii)not determined with reference to the time value of money; or

(b)if the rate of interest has in terms of that instrument been raised by reason of an increase in the profits of the company, so much of the amount of interest as has been determined with reference to the raised rate of interest as exceeds the amount of interest that would have been determined with reference to the lowest rate of interest in terms of that instrument during the current year of assessment and the previous five years of assessment;

“instrument” means an instrument as defined in section 8F(1);“issue”, in relation to an instrument, means the creation of a liability to pay or a right to receive an amount in terms of that instrument.“interest” means interest as defined in section 24J(1);

(2)Any amount that is incurred by a company or accrues to a person in respect of interest on or after the date that the interest becomes hybrid interest is—

(b)not deductible; and

(c)deemed to be a dividend in specie in respect of a share that accrues to that person on the date contemplated in paragraph (a).

[subsection (2) amended by section 15(1) of Act 23 of 2018; effective date 18 December 2017, and substituted by section 9(1) of Act 20 of 2021; effective date 19 January 2022, date of promulgation of the Taxation Laws Amendment Act, 2021, applicable in respect of amounts incurred or accrued on or after that date]

(3)This section does not apply to any interest owed in respect of—

(a)a debt owed by a small business corporation as defined in section 12E(4);

(b)an instrument that constitutes a tier 1 or tier 2 capital instrument referred to in the regulations issued in terms of section 90 of the Banks Act (contained in Government Notice No. R.1029 published in Government Gazette No. 35950 of 12 December 2012) issued—

(i)by a bank as defined in section 1 of that Act; or

(ii)by a controlling company in relation to that bank; or

(c)an instrument of any class that is subject to approval as contemplated—

(i)in the Short-term Insurance Act in accordance with the conditions determined in terms of section 23(1)(a) of that Act by the Registrar defined in that Act, where an amount is owed in respect of that instrument by a short-term insurer as defined in that Act; or

(ii)in the Long-term Insurance Act in accordance with the conditions determined in terms of section 24(1)(a) of that Act by the Registrar defined in that Act, where an amount is owed in respect of that instrument by a long-term insurer as defined in that Act; or

(d)an instrument that constitutes a linked unit in a company where the linked unit is held by a long-term insurer as defined in the Long-term Insurance Act, a pension fund, a provident fund, a REIT or a short-term insurer as defined in the Short-term Insurance Act, if—

(i)the long-term insurer, pension fund, provident fund, REIT or short-term insurer holds at least 20 per cent of the linked units in that company;

(ii)the long-term insurer, pension fund, provident fund, REIT or short-term insurer acquired those linked units before 1 January 2013; and

(e)an instrument that constitutes a third-party backed instrument as defined in section 8F(1).

8G. Determination of contributed tax capital in respect of shares issued to a group company

(1)For the purposes of this section “group of companies” means two or more companies in which one company (hereinafter referred to as the “controlling group company”) directly or indirectly holds shares or voting rights in at least one other company (hereinafter referred to as the “controlled group company”), to the extent that—

(a)at least 50 per cent of the equity shares or voting rights in each controlled group company are directly held by the controlling group company, one or more other controlled group companies or any combination thereof; and

(b)the controlling group company directly holds at least 50 per cent of the equity shares or voting rights in at least one controlled group company.

(2)Where a company issues shares (hereinafter referred to as the “issuing company”) to any company that is not a resident (hereinafter referred to as the “subscribing company”) that forms, after that transaction, part of the same group of companies as the issuing company, the amount of the contributed tax capital in relation to those shares will, to the extent that the consideration for those shares—

(a)consists of; or

(b)is used, directly or indirectly to acquire,

any shares in another company that is a resident (hereinafter referred to as the “target company”) and that forms part of a group of companies in relation to the subscribing company, be equal to so much of the total contributed tax capital attributable to shares of that class in that target company so acquired, determined in terms of subsection (3), as bears the same ratio that the number of shares so acquired bears to the total number of shares of that class.

(3)The contributed tax capital in relation to the shares in that target company must be determined—

(a)in terms of paragraph (b) of the definition of “contributed tax capital” in section 1; and

(b)with reference to the date from which that target company formed part of a group of companies in relation to the subscribing company.

(4)Paragraph (a) of the definition of “contributed tax capital” in section 1 does not apply in respect of any shares of a class that were issued, as contemplated in subsection (2), by an issuing company before that issuing company became a resident.

9. Source of income

(1)For the purposes of this section, “royalty” means any amount that is received or accrues in respect of the use, right of use or permission to use any intellectual property as defined in section 23I.

(2)An amount is received by or accrues to a person from a source within the Republic if that amount—

(a)constitutes a dividend received by or accrued to that person;

(b)constitutes interest as defined in section 24J where that interest—

(i)is attributable to an amount incurred by a person that is a resident, unless the interest is attributable to a permanent establishment which is situated outside the Republic; or

(ii)is received or accrues in respect of the utilisation or application in the Republic by any person of any funds or credit obtained in terms of any form of interest-bearing arrangement;

(c)constitutes a royalty that is attributable to an amount incurred by a person that is a resident, unless that royalty is attributable to a permanent establishment which is situated outside the Republic;

(d)constitutes a royalty that is received or accrues in respect of the use or right of use of or permission to use in the Republic any intellectual property as defined in section 23I;

(e)is attributable to an amount incurred by a person that is a resident and is received or accrues in respect of the imparting of or the undertaking to impart any scientific, technical, industrial or commercial knowledge or information, or the rendering of or the undertaking to render, any assistance or service in connection with the application or utilisation of such knowledge or information, unless the amount so received or accrued is attributable to a permanent establishment which is situated outside the Republic;

(f)is received or accrues in respect of the imparting of or the undertaking to impart any scientific, technical, industrial or commercial knowledge or information for use in the Republic, or the rendering of or the undertaking to render, any assistance or service in connection with the application or utilisation of such knowledge or information;

(g)is received or accrues in respect of the holding of a public office to which that person has been appointed or is deemed to have been appointed in terms of an Act of Parliament;

(h)is received or accrues in respect of services rendered to or work or labour performed for or on behalf of any employer—

(i)in the national, provincial or local sphere of government of the Republic;

(ii)that is a constitutional institution listed in Schedule 1 to the Public Finance Management Act;

(iii)that is a public entity listed in Schedule 2 or 3 to that Act; or

(iv)that is a municipal entity as defined in section 1 of the Local Government: Municipal Systems Act, 2000 (Act No. 32 of 2000);

(i)constitutes a lump sum, a pension or an annuity payable by a pension fund, pension preservation fund, provident fund or provident preservation fund and the services in respect of which that amount is so received or accrues were rendered within the Republic: Provided that if the amount is received or accrues in respect of services which were rendered partly within and partly outside the Republic, only so much of that amount as bears to the total of that amount the same ratio as the period during which the services were rendered in the Republic bears to the total period during which the services were rendered must be regarded as having been received by or accrued to the person from a source within the Republic;

(j)constitutes an amount received or accrued in respect of the disposal of an asset that constitutes immovable property held by that person or any interest or right of whatever nature of that person to or in immovable property contemplated in paragraph 2 of the Eighth Schedule and that property is situated in the Republic;

(k)constitutes an amount received or accrued in respect of the disposal of an asset other than an asset contemplated in paragraph (j) if—

(i)that person is a resident and—

(aa)that asset is not effectively connected with a permanent establishment of that person which is situated outside the Republic; and[item (aa) substituted by section 16 of Act 23 of 2018; effective date 17 January 2019, date of promulgation of that Act]

(bb)the proceeds from the disposal of that asset are not subject to any taxes on income payable to any sphere of government of any country other than the Republic; or

(ii)that person is not a resident and that asset is effectively connected with a permanent establishment of that person which is situated in the Republic; or[subparagraph (ii) substituted by section 5 of Act 23 of 2020; effective date 20 January 2021, date of promulgation of that Act]

(l)is attributable to any exchange difference determined in terms of section 24I in respect of any exchange item as defined in that section to which that person is a party if—

(i)that person is a resident and—

(aa)that exchange item is not attributable to a permanent establishment of that person which is situated outside the Republic; and

(bb)that amount is not subject to any taxes on income payable to any sphere of government of any country other than the Republic; or

(ii)that person is not a resident and that exchange item is attributable to a permanent establishment of that person which is situated in the Republic.

(4)An amount is received by or accrues to a person from a source outside the Republic if that amount—

(a)constitutes a foreign dividend received by or accrued to that person;

(b)constitutes interest as defined in section 24J(1) received by or accrued to that person that is not from a source within the Republic in terms of subsection (2)(b);

(c)constitutes a royalty received by or accrued to that person that is not from a source within the Republic in terms of subsection (2)(c) or (d);

(d)constitutes an amount received or accrued to that person in respect of the disposal of an asset that is not from a source within the Republic in terms of subsection (2)(j) or (k); or

(e)is attributable to any exchange difference determined in terms of section 24I in respect of any exchange item as defined in that section to which that person is a party and is not from a source within the Republic in terms of subsection (2)(l).

9A. Blocked foreign funds

(1)Where any amount, or any portion of any amount, received by or accrued to any person which is required to be included in the income of that person during any year of assessment may not be remitted to the Republic during that year as a result of currency or other restrictions or limitations imposed in terms of the laws of the country where the amount arose, that person shall be allowed to deduct from his or her income for that year an amount equal to so much of the amount or portion which may not be remitted as is required to be included in the income of that person for that year.

(2)The amount or portion which may not be remitted during the year of assessment contemplated in subsection (1) shall be deemed to be an amount received by or accrued to the person contemplated in that subsection in the following year of assessment.

(3)Where any amount, or any portion of any amount, of the net income of a controlled foreign company in respect of a foreign tax year of the controlled foreign company may not be remitted to the Republic for the reasons contemplated in subsection (1), there shall be allowed to be deducted from the net income of the controlled foreign company for that foreign tax year an amount equal to so much of the amount or portion which may not be remitted.

(4)The amount or portion which may not be remitted as contemplated in subsection (3) shall be deemed to be an amount received by or accrued to the controlled foreign company contemplated in that subsection in the following foreign tax year of the controlled foreign company.

9C. Circumstances in which certain amounts received or accrued from disposal of shares are deemed to be of a capital nature

(1)For the purposes of this section—“connected person” means a connected person as defined in section 1, provided that the expression “and no holder of shares holds the majority voting rights in the company” in paragraph (d)(v) of that definition shall be disregarded;“disposal” means a disposal as defined in paragraph 1 of the Eighth Schedule;[definition of “disposal” substituted by section 17(a) of Act 23 of 2018; effective date 17 January 2019, date of promulgation of that Act]“equity share”, includes a participatory interest in a portfolio of a collective investment scheme in securities and a portfolio of a hedge fund collective investment scheme excluding a share which at any time prior to the disposal of that share was—[words preceding paragraph (a) substituted by section 17(b) of Act 23 of 2018; effective date 17 January 2019, date of promulgation of that Act]

(a)a share in a share block company as defined in section 1 of the Share Blocks Control Act;

(b)a share in a company which was not a resident, other than a company contemplated in paragraph (a) of the definition of “listed company”; or

(c)a hybrid equity instrument as defined in section 8E;

(2)Any amount received or accrued (other than a dividend or foreign dividend) or any expenditure incurred in respect of an equity share must be deemed to be of a capital nature if that equity share had, at the time of the receipt or accrual of that amount or incurral of that expenditure, been held for a period of at least three years.

(2A)Subsection (2) does not apply in respect of so much of the amount received or accrued in respect of the disposal of an equity share contemplated in that subsection, other than an equity share held for longer than five years, as does not exceed the expenditure allowed in respect of that share in terms of section 12J(2).[subsection (2A) substituted by section 17(c) of Act 23 of 2018; effective date 17 January 2019, date of promulgation of that Act]

(3)The provisions of this section shall not apply to any equity share if at the time of the receipt or accrual of any amount (other than an amount constituting a dividend or foreign dividend) in respect of that share the taxpayer was a connected person in relation to the company that issued that share and—

(a)more than 50 per cent of the market value of the equity shares of that company was attributable directly or indirectly to immovable property other than—

(i)immovable property held directly or indirectly by a person that is not a connected person in relation to the taxpayer; or

(ii)immovable property held directly or indirectly for a period of at least three years immediately prior to that receipt or accrual; or

(b)that company acquired any asset during the period of three years immediately prior to that receipt or accrual and amounts were paid or payable by any person to any person other than that company for the use of that asset while that asset was held by that company during that period.

[subsection (3) substituted by section 17(d) of Act 23 of 2018; effective date 17 January 2019, date of promulgation of that Act]

(4)For purposes of this section, where any share has been transferred by a lender to a borrower in terms of a securities lending arrangement, and an identical share has been returned by the borrower to the lender, in terms of that securities lending arrangement, that share and that other share shall be deemed to be one and the same share in the hands of the lender.

(4A)For purposes of this section, where any share has been transferred by a transferor to a transferee in terms of a collateral arrangement and an identical share has in turn been transferred by the transferee to the transferor in terms of that collateral arrangement, that share and that other share shall be deemed to be one and the same share in the hands of the transferor.

(5)There shall in the year of assessment in which any equity share held for a period of at least three years is disposed of by the taxpayer be included in the taxpayer’s income any expenditure or losses incurred in respect of such equity share and allowed as a deduction from the income of the taxpayer during that or any previous year of assessment in terms of section 11: Provided that this subsection must not apply—

(a)in respect of any expenditure or loss to the extent that the amount of that expenditure or loss is taken into account in terms of section 8(4)(a) or section 19; or

(b)to expenditure in respect of equity shares in a REIT or a controlled company, as defined in section 25BB(1), that is a resident except to the extent that such amount was taken into account in determining the cost price or value of trading stock under section 11(a), 22(1) or (2).

(6)Where the taxpayer holds shares of the same class in the same company which were acquired by the taxpayer on different dates and the taxpayer has disposed of any of those shares, the taxpayer shall for the purposes of this section be deemed to have disposed of the shares held by the taxpayer for the longest period of time.

(7)The provisions of section 22(8) shall not apply on or after the date that an equity share has been held for a period exceeding three years.

(8)For the purposes of this section, where a company issues shares to a person in substitution of previously held shares in that company by reason of a subdivision, consolidation or similar arrangement or a conversion contemplated in section 40A or 40B, such share and such previously held shares shall be deemed to be one and the same share if—

(i)the participation rights and interests of that person in that company remain unaltered; and

(ii)no consideration whatsoever passes directly or indirectly from that person to that company in relation to the issued shares.

9D. Net income of controlled foreign companies

(1)For the purposes of this section—“controlled foreign company” means—

(a)any foreign company where more than 50 per cent of the total participation rights in that foreign company are directly or indirectly held, or more than 50 per cent of the voting rights in that foreign company are directly or indirectly exercisable, by one or more persons that are residents other than persons that are headquarter companies: Provided that—

(i)no regard must be had to any voting rights in any foreign company—

(aa)which is a listed company; or

(bb)if the voting rights in that foreign company are exercisable indirectly through a listed company;

(ii)any voting rights in a foreign company which can be exercised directly by any other controlled foreign company in which that resident (together with any connected person in relation to that resident) can directly or indirectly exercise more than 50 per cent of the voting rights are deemed for purposes of this definition to be exercisable directly by that resident; and

(iii)a person is deemed not to be a resident for purposes of determining whether residents directly or indirectly hold more than 50 per cent of the participation rights or voting rights in a foreign company, if—

(aa)in the case of a listed company or a foreign company the participation rights of which are held by that person indirectly through a listed company, that person holds less than five per cent of the participation rights of that listed company; or

(bb)in the case of a scheme or arrangement contemplated in paragraph (e)(ii) of the definition of “company” in section 1 or a foreign company the participation rights of which are held and the voting rights of which may be exercised by that person indirectly through such a scheme or arrangement, that person—

(A)holds less than five per cent of the participation rights of that scheme or arrangement; and

(B)may not exercise at least five per cent of the voting rights in that scheme or arrangement,

unless more than 50 per cent of the participation rights or voting rights of that foreign company or other foreign company are held by persons who are connected persons in relation to each other; or

[paragraph (a) amended by section 10(1)(a) of Act 34 of 2019; effective date 15 January 2020, date of promulgation of that Act]

(b)any foreign company where the financial results of that foreign company are reflected in the consolidated financial statements, as contemplated in IFRS 10, of any company that is a resident, other than a headquarter company;[paragraph (b) substituted by section 18(a) of Act 23 of 2018; effective date 17 January 2019, and by section 10(1)(b) of Act 34 of 2019; effective date 15 January 2020, date of promulgation of that Act]

“country of residence”, in relation to a foreign company, means the country where that company has its place of effective management;“foreign business establishment”, in relation to a controlled foreign company, means—

(a)a fixed place of business located in a country other than the Republic that is used or will continue to be used for the carrying on of the business of that controlled foreign company for a period of not less than one year, where—

(i)that business is conducted through one or more offices, shops, factories, warehouses or other structures;

(ii)that fixed place of business is suitably staffed with on-site managerial and operational employees of that controlled foreign company who conduct the primary operations of that business;

(iii)that fixed place of business is suitably equipped for conducting the primary operations of that business;

(iv)that fixed place of business has suitable facilities for conducting the primary operations of that business; and

(v)that fixed place of business is located outside the Republic solely or mainly for a purpose other than the postponement or reduction of any tax imposed by any sphere of government in the Republic:

Provided that for the purposes of determining whether there is a fixed place of business as contemplated in this definition, a controlled foreign company may take into account the utilisation of structures as contemplated in subparagraph (i), employees as contemplated in subparagraph (ii), equipment as contemplated in subparagraph (iii), and facilities as contemplated in subparagraph (iv) of any other company—

(aa)if that other company is subject to tax in the country in which the fixed place of business of the controlled foreign company is located by virtue of residence, place of effective management or other criteria of a similar nature;

(bb)if that other company forms part of the same group of companies as the controlled foreign company; and

(cc)to the extent that the structures, employees, equipment and facilities are located in the same country as the fixed place of business of the controlled foreign company;

(b)any place outside the Republic where prospecting or exploration operations for natural resources are carried on, or any place outside the Republic where mining or production operations of natural resources are carried on, where that controlled foreign company carries on those prospecting, exploration, mining or production operations;

(c)a site outside the Republic for the construction or installation of buildings, bridges, roads, pipelines, heavy machinery or other projects of a comparable magnitude which lasts for a period of not less than six months, where that controlled foreign company carries on those construction or installation activities;

(d)agricultural land in any country other than the Republic used for bona fide farming activities directly carried on by that controlled foreign company;

(e)a vessel, vehicle, rolling stock or aircraft used for purposes of transportation or fishing, or prospecting or exploration for natural resources, or mining or production of natural resources, where that vessel, vehicle, rolling stock or aircraft is used solely outside the Republic for such purposes and is operated directly by that controlled foreign company or by any other company that has the same country of residence as that controlled foreign company and that forms part of the same group of companies as that controlled foreign company;

(f)a South African ship as defined in section 12Q engaged in international shipping as defined in that section; or

(g)a ship engaged in international traffic used mainly outside the Republic;

“foreign company” means any—

(a)cell or segregated account contemplated in the definition of “protected cell company”;

(b)protected cell company to the extent that—

(i)specified assets of that company are not segregated into structurally independent cells or segregated accounts as contemplated in paragraph (a) of the definition of “protected cell company”; or

(ii)specified assets and liabilities of that company are not linked or attributed to cells or segregated accounts as contemplated in paragraph (b) of the definition of “protected cell company”; or

(c)foreign company, as defined in section 1, other than a protected cell company;

“participation rights”, in relation to a company, means—

(a)the right to participate in all or part of the benefits of the rights (other than voting rights) attaching to a share, or any interest of a similar nature, in that company; or

(b)in the case where no person has any right in that company as contemplated in paragraph (a) or no such rights can be determined for any person, the right to exercise any voting rights in that company; and

“protected cell company” means any entity incorporated, established or formed, whether by way of conversion or otherwise, in terms of any law of any country other than the Republic—

(a)if the principal trading activities of that entity constitute the business of an insurer; and

(b)where that law makes provision for—

(i)the segregation of specified assets of that entity into structurally independent cells or segregated accounts;

(ii)the linking or attribution of specified assets and liabilities to those cells or segregated accounts; or

(iii)separate participation rights in respect of each such cell or segregated account,

irrespective of whether or not that law provides that the establishment or formation of a cell or segregated account creates a legal person distinct from that entity.

(2)There shall be included in the income for the year of assessment of any resident (other than a resident that is a headquarter company) who directly or indirectly holds any participation rights in a controlled foreign company—

(a)on the last day of the foreign tax year of that controlled foreign company which ends during that year of assessment, an amount equal to—

(i)where that foreign company was a controlled foreign company for the entire foreign tax year, the proportional amount of the net income of that controlled foreign company determined for that foreign tax year, which bears to the total net income of that company during that foreign tax year, the same ratio as the percentage of the participation rights of that resident in relation to that company bears to the total participation rights in relation to that company on that last day; or

(ii)where that foreign company became a controlled foreign company at any stage during that foreign tax year, at the option of the resident, either—

(aa)an amount which bears to the proportional amount determined in accordance with subparagraph (i), the same ratio as the number of days during that foreign tax year that the foreign company was a controlled foreign company bears to the total number of days in that foreign tax year; or

(bb)the proportional amount determined in the manner contemplated in subparagraph (i) (as if the day that foreign company commenced to be a controlled foreign company was the first day of its foreign tax year), of the net income of that company for the period commencing on the day that the foreign company commenced to be a controlled foreign company and ending on the last day of that foreign tax year; or

(b)immediately before that foreign company ceased to be a controlled foreign company at any stage during that year of assessment before the last day of the foreign tax year of that controlled foreign company, an amount which shall be equal to, at the option of the resident, either—

(i)an amount determined in accordance with paragraph (a)(ii)(aa); or

(ii)the proportional amount determined in the manner contemplated in paragraph (a)(i) of the net income of that company determined for the period commencing on the first day of that foreign tax year and ending on the day before the company so ceased to be a controlled foreign company:[subparagraph (ii) substituted by section 10(1)(c) of Act 34 of 2019; effective date 15 January 2020, date of promulgation of that Act]

Provided that this subsection shall not apply—

(A)where that resident (together with any connected person in relation to that resident)—

(i)at the end of the last day of the foreign tax year of the controlled foreign company; or

(ii)in the case where that foreign company ceased to be a controlled foreign company during the relevant foreign tax year, immediately before that foreign company so ceased to be a controlled foreign company,

in aggregate holds less than 10 per cent of the participation rights and may not exercise at least 10 per cent of the voting rights in that controlled foreign company; or

(B)to the extent that the participation rights are held by that resident indirectly through any company (other than a resident that is a headquarter company) which is a resident; or

(C)to the extent that—

(i)the participation rights are held by an insurer as defined in section 29A in any policyholder fund as defined in terms of that section, and are directly attributable to—

(aa)a policy as defined in section 29A that is “linked” as defined in Schedule 2 to the Insurance Act; or[item (aa) substituted by section 4(1)(a) of Act 20 of 2022; effective date 5 January 2023, date of promulgation of that Act]

(bb)a policy as defined in section 29A, other than a policy contemplated in item (aa), of which the amount of the policy benefits as defined in the Long-term Insurance Act is not guaranteed by the insurer and is to be determined wholly by reference to the value of particular assets or categories of assets; and

(ii)the holding of the participation rights by the insurer does not form part of any transaction, operation or scheme entered into or effected solely or mainly for purposes of utilising the provisions of this paragraph in order to avoid the inclusion of an amount in the income of a resident as contemplated in this subsection

(D)to the extent that the participation rights are held by a portfolio of a collective investment scheme in securities or a portfolio of a collective investment scheme in participation bonds that is a resident directly or indirectly in a scheme or arrangement contemplated in paragraph (e)(ii) of the definition of “company” in section 1; and

: Provided further that for purposes of applying this subsection to a foreign company that is a controlled foreign company only in terms of paragraph (b) of the definition of “controlled foreign company”, the percentage of the participation rights of a resident in relation to that controlled foreign company is equal to the net percentage of the financial results of that foreign company that are included in the consolidated financial statements, as contemplated in IFRS 10, for the year of assessment of the resident, that is a holding company, as defined in the Companies Act;

(2A)For the purposes of this section the “net income” of a controlled foreign company in respect of a foreign tax year is an amount equal to the taxable income of that company determined in accordance with the provisions of this Act as if that controlled foreign company had been a taxpayer, and as if that company had been a resident for purposes of the definition of “gross income”, sections 7(8), 10(1)(h), 10(1)(l), 25B, 28 and paragraphs 2(1)(a), 24, 70, 71, 72 and 80 of the Eighth Schedule: Provided that—[words preceding the proviso substituted by section 13(1)(a) of Act 25 of 2015 (as amended by section 104(1) of Act 23 of 2018) and by section 4(1)(b) of Act 20 of 2022; effective date 1 January 2023, applies in respect of years of assessment commencing on or after that date]

(a)any deductions or allowances which may be allowed, or any amounts which may be set off against, the income of that foreign company in terms of this Act shall be limited to the amount of that income;

(b)any amount whereby such deductions or allowances or amounts exceed the amount of such income, shall be carried forward to the immediately succeeding foreign tax year and be deemed to be a balance of assessed loss which may be set off against the income of such company in such succeeding year for the purposes of section 20;

(c)no deduction shall be allowed in respect of any—

(i)interest, royalties, rental, insurance premium or income of a similar nature which is paid or payable or deemed to be paid or payable by that company to any other controlled foreign company (including any similar amount adjusted in terms of section 31);

(ii)exchange difference determined in terms of section 24I in respect of any exchange item to which that company and any other controlled foreign company are parties;

(iii)exchange difference in respect of any forward exchange contract or foreign currency option contract entered into to hedge the exchange item referred to in subparagraph (ii); or

(iv)reduction or discharge by that company of a debt owed to that company by any other controlled foreign company for no consideration or for consideration less than the amount by which the face value of the debt has been so reduced or discharged,

where that controlled foreign company and that other controlled foreign company form part of the same group of companies, unless that interest, rental, royalty, insurance premium, other income, adjusted amount, exchange difference, reduction or discharge is taken into account to determine the net income of that other controlled foreign company;

(d)any exemption from normal tax in respect of dividends received or accrued as contemplated in section 10(1)(k) must not apply in respect of the portion of an amount of the aggregate amount of dividends received by or accrued to a controlled foreign company during any foreign tax year, determined in accordance with the formula:A = B × (C-D)in which formula—

(i)“A” represents the amount to be determined;

(ii)“B” represents the ratio of the number 20 to the number 27;[subparagraph (ii) substituted by section 7(1) of Act 17 of 2023; effective date deemed to have been 31 March 2023, applies in respect of years of assessment ending on or after that date]

(iii)“C” represents the aggregate of dividends received by or accrued to the controlled foreign company during the foreign tax year of that controlled foreign company; and

(iv)“D” represents, in respect of dividends contemplated in symbol ‘C’, an amount equal to the aggregate of—

(aa)100 per cent of the amount of any dividend in respect of which dividends tax was paid at a rate of 20 per cent;

(bb)75 per cent of the amount of any dividend in respect of which dividends tax was paid at a rate of 15 per cent;

(cc)50 per cent of the amount of any dividend in respect of which dividends tax was paid at a rate of 10 per cent;

(dd)40 per cent of the amount of any dividend in respect of which dividends tax was paid at a rate of 8 per cent;

(ee)37.5 per cent of the amount of any dividend in respect of which dividends tax was paid at a rate of 7.5 per cent; and

(ff)25 per cent of the amount of any dividend in respect of which dividends tax was paid at a rate of 5 per cent;

[subparagraph (iv) substituted by section 10(1)(a) of Act 20 of 2021; effective date 1 January 2021, applicable in respect of dividends received by or accrued to any controlled foreign company on or after that date]

[paragraph (d) inserted by section 6(1)(a) of Act 23 of 2020; effective date 1 January 2021, applicable in respect of dividends received by or accrued to any controlled foreign company on or after that date]

(e)where a foreign company becomes a controlled foreign company after 1 October 2001, the valuation date for purposes of the determination of any taxable capital gain or assessed capital loss in terms of the Eighth Schedule, shall be the day before such company becomes a controlled foreign company;

(f)where the resident contemplated in subsection (2) is an insurer in respect of its individual policyholder fund, the taxable capital gain of the controlled foreign company shall, for the purposes of paragraph 10 of the Eighth Schedule, be 40 per cent of that company’s net capital gain for the relevant foreign tax year;[paragraph (f) substituted by section 6(1)(b) of Act 23 of 2020; effective date 1 January 2021, applicable in respect of any net capital gain of any controlled foreign company during any foreign tax year commencing on or after that date]

(k)for the purposes of section 24I and paragraph 43 of the Eighth Schedule, “local currency” of a controlled foreign company otherwise than in relation to a permanent establishment of that controlled foreign company, means the functional currency of that company; and[paragraph (k) substituted by section 18(b) of Act 23 of 2018; effective date 17 January 2019, date of promulgation of that Act]

(l)where the functional currency of a controlled foreign company—

(i)was the currency of a country which—

(aa)abandoned its currency; and

(bb)had an official rate of inflation of 100 per cent or more for the foreign tax year preceding the abandonment of the currency; and

(ii)the controlled foreign company adopted a new functional currency as a consequence of the abandonment contemplated in subparagraph (i)(aa),

the controlled foreign company must, for the purposes of determining the cost of an asset of the controlled foreign company, be deemed to have acquired the asset in the new currency contemplated in subparagraph (ii)—

(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:

Provided further that—

(i)the net income of a controlled foreign company in respect of a foreign tax year shall be deemed to be nil where—

(aa)the aggregate amount of taxes on income payable to all spheres of government of any country other than the Republic by the controlled foreign company in respect of the foreign tax year of that controlled foreign company is at least 67,5 per cent of the amount of normal tax that would have been payable in respect of any taxable income of the controlled foreign company had the controlled foreign company been a resident for that foreign tax year; or[subparagraph (aa) substituted by section 10(1)(d) of Act 34 of 2019; effective date 1 January 2020, applicable in respect of years of assessment ending on or after that date]

(bb)all the receipts and accruals of that controlled foreign company are—

(i)attributable to any foreign business establishment of that controlled foreign company as contemplated in subsection (9)(b); and

(ii)not required to be taken into account in terms of subsection (9A); and

(ii)the aggregate amount of tax payable by a controlled foreign company in respect of a foreign tax year of that controlled foreign company as contemplated in subparagraph (i) must be determined—

(aa)after taking into account any applicable agreement for the prevention of double taxation and any credit, rebate or other right of recovery of tax from any sphere of government of any country other than the Republic;

(bb)after disregarding any loss arising during foreign tax years ending after the date that foreign company became a controlled foreign company; and

(cc)[subparagraph (cc) deleted by section 18(c) of Act 23 of 2018; effective date 17 January 2019, date of promulgation of that Act]

(iii)the normal tax that would have been payable as contemplated in paragraph (i) must be determined before taking into account any amount which would, had that controlled foreign company been a resident for that foreign tax year, have been included in the income of that controlled foreign company in terms of subsection (2) for that foreign tax year.[paragraph (iii) added by section 18(d) of Act 23 of 2018; effective date 17 January 2019, date of promulgation of that Act]

(6)The net income of a controlled foreign company in respect of a foreign tax year shall be determined in the functional currency of that controlled foreign company and shall, for purposes of determining the amount to be included in the income of any resident during any year of assessment under the provisions of this section, be translated to the currency of the Republic by applying the average exchange rate for that foreign tax year: Provided that any exchange item denominated in any currency other than the functional currency of that controlled foreign company shall be deemed not to be attributable to any permanent establishment of the controlled foreign company if the functional currency is the currency of a country which has an official rate of inflation of 100 per cent or more for that foreign tax year.

(9)Subject to subsection (9A), in determining the net income of a controlled foreign company in terms of subsection (2A), there must not be taken into account any amount which—

(b)is attributable to any foreign business establishment of that controlled foreign company (whether or not as a result of the disposal or deemed disposal of any assets forming part of that foreign business establishment) and, in determining that amount and whether that amount is attributable to a foreign business establishment—

(i)that foreign business establishment must be treated as if that foreign business establishment were a distinct and separate enterprise engaged in the same or similar activities under the same or similar conditions and dealing wholly independently with the controlled foreign company of which the foreign business establishment is a foreign business establishment; and

(ii)that determination must be made as if the amount arose in the context of a transaction, operation, scheme, agreement or understanding that was entered into on the terms and conditions that would have existed had the parties to that transaction, operation, scheme, agreement or understanding been independent persons dealing at arm’s length;

(c)is attributable to any policyholder that is not a resident or a controlled foreign company in relation to a resident in respect of any policy issued by a company licensed to issue any long-term policy as defined in the Long-term Insurance Act in its country of residence;

(d)is subject to—

(i)the withholding tax on interest in terms of Part IVB;

(ii)the withholding tax on royalties in terms of Part IVA,

after taking into account any applicable agreement for the prevention of double taxation;

(e)is included in the taxable income of the company;

(f)is attributable to any foreign dividend declared to that controlled foreign company, by any other controlled foreign company in relation to the resident, to the extent that the foreign dividend does not exceed the aggregate of all amounts which have been or will be included in the income of the resident in terms of this section in any year of assessment, which relate to the net income of—

(i)the company declaring the dividend; or

(ii)any other company which has been included in the income of that resident by virtue of that resident’s participation rights in that other company held indirectly through the company declaring the dividend,

reduced by—

(aa)the amount of any foreign tax payable, in respect of the amounts so included in that resident’s income; and

(bb)so much of all foreign dividends received by or accrued to that controlled foreign company as was—

(A)excluded from the application of this section in terms of this paragraph or section 10B(2)(a), (b), (c) or (d);[item (A) substituted by section 10(1)(b) of Act 20 of 2021; effective date 19 January 2022, date of promulgation of the Taxation Laws Amendment Act, 2021, applicable in respect of amounts incurred or accrued on or after that date]

(B)previously not included in the income of that resident by virtue of any prior inclusion in terms of section 9D;

(fA)is attributable to—

(i)any interest, royalties, rental, insurance premium or income of a similar nature which is paid or payable or deemed to be paid or payable to that company by any other controlled foreign company (including any similar amount adjusted in terms of section 31);

(iA)an amount of income that accrued to that company, in respect of a foreign dividend from a hybrid equity instrument held in any other controlled foreign company, in terms of section 8E(2), or in respect of a foreign dividend from a third party backed share held in any other controlled foreign company, in terms of section 8EA(2), including any similar amount adjusted in terms of section 31;[subparagraph (iA) inserted by section 4(1)(c) of Act 20 of 2022; effective date 1 January 2023, applies in respect of years of assessment commencing on or after that date]

(ii)any exchange difference determined in terms of section 24I in respect of any exchange item to which that company and any other controlled foreign company are parties;

(iii)any exchange difference in respect of any forward exchange contract or foreign currency option contract entered into to hedge the exchange item referred to in subparagraph (ii); or

(iv)the reduction or discharge by any other controlled foreign company of a debt owed by that company to that other controlled foreign company for no consideration or for consideration less than the amount by which the face value of the debt has been so reduced or discharged,

where that controlled foreign company and that other controlled foreign company form part of the same group of companies; or

(fB)is attributable to the disposal of any asset, as defined in the Eighth Schedule, (other than any financial instrument or intangible asset as defined in paragraph 16 of the Eighth Schedule), where that asset was attributable to any foreign business establishment of any other controlled foreign company, where that company and that other controlled foreign company form part of the same group of companies;

(9A)

(a)Any amount which is attributable to a foreign business establishment of a controlled foreign company as contemplated in subsection (9)(b) must, notwithstanding that subsection, be taken into account in determining the net income of that controlled foreign company if that amount—

(i)is derived from the sale of goods by that controlled foreign company directly or indirectly to any connected person (in relation to that controlled foreign company) who is a resident, unless—[words preceding item (aa) substituted by section 10(1)(e) of Act 34 of 2019; effective date 15 January 2019, date of promulgation of that Act]

(aa)that controlled foreign company purchased those goods for delivery in the country of residence of that controlled foreign company from any person who is not a connected person in relation to that controlled foreign company;[item (aa) substituted by section 10(1)(c) of Act 20 of 2021; effective date 1 January 2022, applicable in respect of years of assessment commencing on or after that date]

(bb)the creation, extraction, production, assembly, repair or improvement of goods undertaken by that controlled foreign company amount to more than minor assembly or adjustment, packaging, repackaging and labelling;

(cc)that controlled foreign company sells a significant quantity of goods of the same or a similar nature to persons who are not connected persons in relation to that controlled foreign company, at comparable prices (after accounting for the level of the market, volume discounts and costs of delivery); or

(dd)that controlled foreign company purchases the same or similar goods mainly for delivery in the country of residence of that controlled foreign company from persons who are not connected persons in relation to that controlled foreign company;[item (dd) substituted by section 10(1)(d) of Act 20 of 2021; effective date 1 January 2022, applicable in respect of years of assessment commencing on or after that date]

(iA)is derived from the sale of goods by that controlled foreign company directly or indirectly to a person, other than a connected person (in relation to that controlled foreign company) who is a resident, where that controlled foreign company initially purchased those goods or any tangible intermediary inputs thereof directly or indirectly from one or more connected persons (in relation to that controlled foreign company) who are residents, unless—[words preceding item (aa) substituted by section 10(1)(f) of Act 34 of 2019; effective date 15 January 2019, date of promulgation of that Act]

(aa)those goods or tangible intermediary inputs thereof purchased from connected persons (in relation to such controlled foreign company) who are residents amount to an insignificant portion of the total goods or tangible intermediary inputs of those goods;

(cc)the products are sold by that controlled foreign company to a person who is not a connected person in relation to that controlled foreign company, for physical delivery to a customer’s premises situated within the country of residence of that controlled foreign company; or

(dd)products of the same or similar nature are sold by that controlled foreign company mainly to persons who are not connected persons in relation to that controlled foreign company for physical delivery to customers’ premises situated within the country of residence of that controlled foreign company;

(ii)is derived from any service performed by that controlled foreign company directly or indirectly for the benefit of a connected person (in relation to that controlled foreign company) who is a resident, unless that service is performed outside the Republic and—[words preceding item (aa) substituted by section 10(1)(g) of Act 34 of 2019; effective date 15 January 2019, date of promulgation of that Act]

(aa)the service relates directly to the creation, extraction, production, assembly, repair or improvement of goods utilised within one or more countries other than the Republic;

(bb)the service relates directly to the sale or marketing of goods of a connected person (in relation to that controlled foreign company) who is a resident and those goods are sold to persons who are not connected persons in relation to that controlled foreign company for physical delivery to customers’ premises situated within the country of residence of that controlled foreign company;

(cc)the service is rendered mainly in the country of residence of that controlled foreign company for the benefit of customers that have premises situated in that country; or

(dd)to the extent that no deduction is allowed of any amount paid by that connected person to that controlled foreign company in respect of the service;

(iii)arises in respect of a financial instrument—

(aa)unless that financial instrument is attributable to the principal trading activities of the foreign business establishment and those principal trading activities—

(A)constitute the activities of a bank, financial service provider or insurer; and

(B)do not constitute the activities of a treasury operation or captive insurer;

(bb)unless—

(A)that amount is attributable to any exchange difference determined in terms of section 24I in respect of that financial instrument;

(B)the exchange difference contemplated in subitem (A) arises in the ordinary course of business of the principal trading activities of that foreign business establishment; and

(C)the principal trading activities contemplated in subitem (B) do not constitute the activities of a treasury operation or captive insurer; or

(cc)to the extent that the total of—

(A)those amounts arising in respect of financial instruments attributable to activities of that foreign business establishment; and

(B)amounts arising from exchange gains determined in terms of section 24I attributable to activities of that foreign business establishment,

other than amounts in respect of which paragraphs (c) to (fB) of subsection (9) apply or amounts derived from the activities of a treasury operation or a captive insurer, exceeds five per cent of the total of all amounts received by or accrued to the controlled foreign company that are attributable to that foreign business establishment, other than amounts in respect of which paragraphs (c) to (fB) of subsection (9) apply or amounts derived from the activities of a treasury operation or a captive insurer;

(iv)arises by way of rental in respect of any movable property, unless that movable property is leased by the controlled foreign company in terms of—

(aa)an operating lease; or

(bb)a lease that constitutes a financial instrument;

(v)arises in respect of the use or right of use of or permission to use any intellectual property as defined in section 23I, unless—

(aa)that controlled foreign company directly and regularly creates, develops or substantially upgrades any intellectual property as defined in section 23I which gives rise to that amount; and

(bb)that intellectual property does not constitute property which constitutes tainted intellectual property as defined in section 23I;

(vi)is a capital gain determined in respect of the disposal or deemed disposal of any intellectual property as defined in section 23I, unless that controlled foreign company directly and regularly creates, develops or substantially upgrades any intellectual property as defined in section 23I which gives rise to that amount; or

(vii)is in the form of an insurance premium, unless that amount is attributable to the principal trading activities of the foreign business establishment and those principal trading activities—

(aa)constitute the activities of an insurer; and

(bb)do not consititute the activities of a captive insurer:

Provided that if any amount which is attributable to a foreign business establishment of a controlled foreign company as contemplated in subsection (9)(b) is, solely as a result of the application of subparagraph (iii) of this paragraph, not taken into account in determining the net income of that controlled foreign company, that amount must be so taken into account—

(A)to the extent that a deduction is allowed in respect of any other amount incurred by a connected person (in relation to that controlled foreign company) who is a resident; and

(B)where that amount is attributable to that other amount.

(b)For the purposes of—

(iii)items (aa) and (bb) of paragraph (a)(iii), where the principal trading activities of a foreign business establishment do not constitute the activities of a treasury operation, the principal trading activities of that foreign business establishment must be deemed to constitute the activities of a treasury operation where—

(aa)less of those principal trading activities are conducted in the country in which the foreign business establishment is located than in any other single country;

(bb)those principal trading activities do not involve the regular and continuous acceptance of deposits from or the provision of credit to clients who are not connected persons in relation to that controlled foreign company; or

(cc)less than 50 per cent of the amounts attributable to the activities of the foreign business establishment are derived from those principal trading activities with respect to clients who are not connected persons in relation to that controlled foreign company;

(iv)items (aa) and (bb) of paragraph (a)(iii) and paragraph (a)(vii), where the principal trading activities of a foreign business establishment do not constitute the activities of a captive insurer, the principal trading activities of that foreign business establishment must be deemed to constitute the activities of a captive insurer where—

(aa)less of those principal trading activities are conducted in the country in which that foreign business establishment is located than in any other single country;

(bb)those principal trading activities do not involve the regular transaction of business as an insurer with clients who are not connected persons in relation to that controlled foreign company; or

(cc)less than 50 per cent of the amounts attributable to activities of that foreign business establishment are derived from those principal trading activities with respect to clients who are not connected persons in relation to that controlled foreign company; and

(v)paragraph (a)(iv), “operating lease” means a lease of movable property concluded by a lessor in the ordinary course of business of letting such property if—

(aa)such property may be hired by members of the general public directly from that lessor in terms of such a lease, for a period of no more than five years;

(bb)either—

(A)the cost of maintaining such property and of carrying out repairs thereto required in consequence of normal wear and tear is ultimately borne by the lessor; or

(B)the activities of maintaining and repairing such property that are required in consequence of normal wear and tear are performed by the lessor; and

(cc)subject to any claim that the lessor may have against the lessee by reason of the lessee’s failure to take proper care of the property, the risk of destruction or loss of or other disadvantage to such property is not assumed by the lessee.

9H. Change of residence, ceasing to be controlled foreign company or becoming headquarter company

(1)For the purposes of this section—“asset” means an asset as defined in paragraph 1 of the Eighth Schedule; and“market value”, in relation to an asset, means the price which could be obtained upon a sale of that asset between a willing buyer and a willing seller dealing at arm’s length in an open market.

(2)Subject to subsection (4), where a person (other than a company) that is a resident ceases during any year of assessment of that person to be a resident—

(a)that person must be treated as having—

(i)disposed of each of that person’s assets to a person that is a resident on the date immediately before the day on which that person so ceases to be a resident for an amount received or accrued equal to the market value of the asset on that date; and

(ii)reacquired each of those assets on the day on which that person so ceases to be a resident at an expenditure equal to the market value contemplated in subparagraph (i);

(b)that year of assessment must be deemed to have ended on the date immediately before the day on which that person so ceases to be a resident; and

(c)the next succeeding year of assessment of that person must be deemed to have commenced on the day on which that person so ceases to be a resident.

(3)

(a)Where a company that is a resident ceases during any year of assessment of that company to be a resident or where a company that is a resident becomes a headquarter company in respect of a year of assessment, that company must be treated as having—

(i)disposed of each of that company’s assets to a person that is a resident on the date immediately before the day on which that company so ceased to be a resident or became a headquarter company; and

(ii)reacquired each of those assets on the day on which that company so ceased to be a resident or became a headquarter company,

for an amount equal to the market value of each of those assets.

(b)Where a controlled foreign company ceases, otherwise than by way of becoming a resident, to be a controlled foreign company during any foreign tax year of that controlled foreign company, that controlled foreign company must be treated as having—

(i)disposed of each of the assets of that controlled foreign company, to a person that is a resident, on the date immediately before the day on which that controlled foreign company so ceased to be a controlled foreign company; and

(ii)reacquired each of the assets disposed of as contemplated in subparagraph (i) on the day on which that controlled foreign company so ceased to be a controlled foreign company, for an amount equal to the market value of each of those assets.

(c)Where a company that is a resident ceases to be a resident or becomes a headquarter company during any year of assessment of that company as contemplated in paragraph (a)—

(i)that year of assessment must be deemed to have ended on the date immediately before the day on which that company so ceased to be a resident or became a headquarter company;

(ii)the next succeeding year of assessment of that company must be deemed to have commenced on the day on which that company so ceased to be a resident or became a headquarter company; and

(iii)that company must, on the date immediately before the day on which the company so ceased to be a resident or became a headquarter company and for the purposes of section 64EA(b), be deemed to have declared and paid a dividend that consists solely of a distribution of an asset in specie—

(aa)the amount of which must be deemed to be equal to the sum of the market values of all the shares in that company on that date less the sum of the contributed tax capital of all the classes of shares in the company as at that date; and

(bb)to the person or persons holding shares in that company in accordance with the effective interest of that person or those persons in the shares in the company as at that date.

(d)Where a controlled foreign company ceases to be a controlled foreign company during any foreign tax year of that controlled foreign company as contemplated in paragraph (b)—

(i)that foreign tax year must be deemed to have ended on the date immediately before the day on which that controlled foreign company so ceased to be a controlled foreign company; and

(ii)the next succeeding foreign tax year of that controlled foreign company must be deemed to have commenced on the day on which that controlled foreign company so ceased to be a controlled foreign company.

(e)Where a company ceases to be a resident as contemplated in paragraph (a), the amount of any capital gain disregarded in terms of paragraph 64B of the Eighth Schedule that was determined in respect of a disposal of an equity share by that company within three years immediately preceding the date on which that company ceases to be a resident, must be deemed, in respect of the year of assessment of that company ending as contemplated in paragraph (c), to be an amount of net capital gain derived by that company from that capital gain.

(f)Where a company ceases to be a resident as contemplated in paragraph (a), the amount of any foreign dividend that was exempt from normal tax only in terms of section 10B(2)(a) within the three years immediately preceding the date on which that company ceases to be a resident, must be deemed to be a foreign dividend received by or accrued to that company in respect of the year of assessment of that company ending as contemplated in paragraph (c) that is not exempt in terms of section 10B(2).

(3A)Any person that is a holder of at least 10 per cent of the equity shares and voting rights in shares in a company must, where that company is a resident that ceases to be a resident and where section 64FA applies to the dividend in specie as referred to in subsection (3)(c)(iii) in respect of that company, be treated as having—

(i)disposed of each of those shares to a person that is a resident on the date immediately before the day on which that company so ceased to be a resident; and

(ii)reacquired each of those shares on the day on which that company so ceased to be a resident,

for an amount equal to the market value of each of those shares.[subsection (3A) inserted by section 7(1) of Act 23 of 2020; effective date 1 January 2021, applicable in respect of a holder of shares in a company that ceases to be a resident on or after that date]

(4)Subsections (2) and (3) do not apply in respect of an asset of a person where that asset constitutes—

(a)immovable property situated in the Republic that is held by that person;

(c)any asset which is, after the person ceases to be a resident or a controlled foreign company as contemplated in subsection (2) or (3), attributable to a permanent establishment of that person in the Republic;

(d)any qualifying equity share contemplated in section 8B that was granted to that person less than five years before the date on which that person ceases to be a resident as contemplated in subsection (2) or (3);

(e)any equity instrument contemplated in section 8C that had not yet vested as contemplated in that section at the time that the person ceases to be a resident as contemplated in subsection (2) or (3); or

(f)any right of that person to acquire any marketable security contemplated in section 8A.

(5)If—

(a)a person disposes of an equity share in a foreign company that is a controlled foreign company;

(b)the capital gain or capital loss determined in respect of a disposal contemplated in paragraph (a) is wholly or partly disregarded in terms of paragraph 64B of the Eighth Schedule; and[paragraph (b) substituted by section 11(1) of Act 20 of 2021; effective date 1 January 2021, applicable in respect of disposals on or after that date]

(c)as a direct or indirect result of a disposal contemplated in paragraph (a), a foreign company ceases to be a controlled foreign company,

subsection (3) must not apply to any foreign company contemplated in paragraph (c).

(6)This section must not apply in respect of any company that ceases to be a controlled foreign company as a result of—

(a)an amalgamation transaction as defined in section 44(1) to which section 44 applies; or

(b)a liquidation distribution as defined in section 47(1) to which section 47 applies.

(7)For the purposes of subsections (2) and (3), the market value of any asset must be determined in the currency of expenditure incurred to acquire that asset.

9HA. Disposal by deceased person

(1)A deceased person must be treated as having disposed of his or her assets, other than—

(a)assets disposed of for the benefit of his or her surviving spouse as contemplated in subsection (2);[paragraph (a) substituted by section 19(a) of Act 23 of 2018; effective date 17 January 2019, date of promulgation of that Act]

(b)a long-term insurance policy of the deceased, if any capital gain or capital loss that would have been determined in respect of a disposal that resulted in proceeds of that policy being received by or accruing to the deceased would have been disregarded in terms of paragraph 55 of the Eighth Schedule; or

(c)an interest of the deceased in—

(i)a pension, pension preservation, provident, provident preservation or retirement annuity fund in the Republic; or

(ii)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,

if any capital gain or capital loss that would have been determined in respect of a disposal of that interest that resulted in a lump sum benefit being received by or accruing to the deceased would have been disregarded in terms of paragraph 54 of the Eighth Schedule,

at the date of that person’s death for an amount received or accrued equal to the market value, as defined in paragraph 1 of the Eighth Schedule, of those assets as at that date.[words following paragraph (c) substituted by section 19(b) of Act 23 of 2018; effective date 17 January 2019, and by section 11 of Act 34 of 2019; effective date 15 January 2020, date of promulgation of that Act]

(2)A deceased person must, if his or her surviving spouse is a resident, be treated—

(a)as having disposed of an asset for the benefit of that surviving spouse if that asset is acquired by that surviving spouse—

(i)by ab intestato or testamentary succession;

(ii)as a result of a redistribution agreement between the heirs and legatees of that person in the course of liquidation or distribution of the deceased estate of that person; or

(iii)in settlement of a claim arising under section 3 of the Matrimonial Property Act, 1984 (Act No. 88 of 1984); and

(b)as having disposed of that asset for an amount received or accrued that is equal to, in the case of—

(i)trading stock, or livestock or produce contemplated in the First Schedule, the amount that was allowed as a deduction in respect of that asset for purposes of determining that person’s taxable income, before the inclusion of any taxable capital gain, for the year of assessment ending on the date of that person’s death; or

(ii)any other asset, the base cost of that asset, as contemplated in the Eighth Schedule, as at the date of that person’s death.

(3)If any asset that is treated as having been disposed of by a deceased person as contemplated in subsection (1) is transferred directly to an heir or legatee of that person, that heir or legatee must be treated as having acquired that asset for an amount of expenditure incurred equal to the market value, as contemplated in paragraph 1 of the Eighth Schedule, of that asset as at the date of that deceased person’s death.[subsection (3) substituted by section 19(c) of Act 23 of 2018; effective date 17 January 2019, date of promulgation of that Act]

9HB. Transfer of asset between spouses

(1)

(a)A person (hereinafter referred to as “the transferor”) must disregard any capital gain or capital loss determined in respect of the disposal of an asset to his or her spouse (hereinafter referred to as “the transferee”).

(b)The transferee must be treated as having—

(i)acquired the asset on the same date that such asset was acquired by the transferor;[subparagraph (i) substituted by section 12 of Act 34 of 2019; effective date 17 January 2019]

(ii)incurred an amount of expenditure equal to the expenditure contemplated in paragraph 20 of the Eighth Schedule that was incurred by that transferor in respect of that asset;

(iii)incurred that expenditure on the same date and in the same currency that it was incurred by the transferor;

(iv)used that asset in the same manner that it was used by the transferor; and

(v)received an amount equal to any amount received by or accrued to that transferor in respect of that asset that would have constituted proceeds on disposal of that asset had that transferor disposed of it to a person other than the transferee.

(2)For the purposes of subsection (1)—

(a)a person whose spouse dies must be treated as having disposed of an asset to that spouse immediately before the date of death of that spouse, if ownership of that asset is acquired by the deceased estate of that spouse in settlement of a claim arising under section 3 of the Matrimonial Property Act, 1984 (Act No. 88 of 1984); or

(b)a person must be treated as having disposed of an asset to his or her spouse, if that asset is transferred 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, an agreement of division of assets which has been made an order of court.

(3)A person who disposes of an asset consisting of trading stock, livestock or produce contemplated in the First Schedule to his or her spouse, must be treated as having disposed of that asset for an amount received or accrued that is equal to the amount that was allowed as a deduction in respect of that asset for purposes of determining that person’s taxable income, before the inclusion of any taxable capital gain.

(4)Where a person acquires an asset consisting of trading stock, livestock or produce contemplated in the First Schedule from his or her spouse, that person and his or her spouse must, for purposes of determining any taxable income derived by that person, be deemed to be one and the same person with respect to the date of acquisition of that asset by that person and the amount and date of incurral by that spouse of any cost or expenditure incurred in respect of that asset as contemplated in section 11(a) or 22(1) or (2).

(5)This section must not apply in respect of the disposal of an asset by a person to his or her spouse who is not a resident, unless the asset disposed of is an asset contemplated in section 9J or in paragraph 2(1)(b) of the Eighth Schedule.[section 9HB inserted by section 20 of Act 23 of 2018; effective date 17 January 2019, date of promulgation of that Act]

9I. Headquarter companies

(1)Any company that—

(a)is a resident; and

(b)complies with the requirements prescribed by subsection (2),

may elect in the form and manner determined by the Commissioner to be a headquarter company for a year of assessment of that company.

(2)A company complies with the requirements contemplated in subsection (1)(b) for a year of assessment of that company if—

(a)for the duration of that year of assessment, each holder of shares in the company (whether alone or together with any other company forming part of the same group of companies as that holder) held 10 per cent or more of the equity shares and voting rights in that company: Provided that in determining whether a company complies with the requirements prescribed by this paragraph in relation to any year of assessment of that company during which the company commenced the carrying on of trade, no regard must be had to any period during that year before which the company so commenced the carrying on of trade;

(b)at the end of that year of assessment and of all previous years of assessment of that company, 80 per cent or more of the cost of the total assets of the company was attributable to one or more of the following:

(i)any interest in equity shares in;

(ii)any debt owed by; or

(iii)any intellectual property as defined in section 23I(1) that is licensed by that company to,

any foreign company in which that company (whether alone or together with any other company forming part of the same group of companies as that company) held at least 10 per cent of the equity shares and voting rights:Provided that in determining—

(aa)the total assets of the company, there must not be taken into account any amount in cash or in the form of a bank deposit payable on demand; and

(bb)whether a company complies with the requirements prescribed by this paragraph in relation to any year of assessment of that company, no regard must be had to any such year of assessment if the company did not at any time during such year of assessment own assets with a total market value exceeding R50 000; and

(c)where the gross income of that company for that year of assessment exceeds R5 million, 50 per cent or more of that gross income consisted of amounts in the form of one or both of the following:

(i)any rental, dividend, interest, royalty or service fee paid or payable by any foreign company contemplated in paragraph (b); or

(ii)any proceeds from the disposal of any interest contemplated in paragraph (b)(i) or of any intellectual property contemplated in paragraph (b)(iii):

Provided that in determining the gross income of the company, there must not be taken into account any exchange difference determined in terms of section 24I in respect of any exchange item as defined in that section to which that company is a party.

(3)An election made by a company in terms of subsection (1) is effective from the commencement of the year of assessment in respect of which that election is made.

(4)A headquarter company must submit to the Minister an annual report providing the Minister with the information that the Minister may prescribe within such time and containing such information as the Minister may prescribe.

9J. Interest of non-resident persons in immovable property

(1)Any amount received or accrued in respect of the disposal by a person of trading stock consisting of—

(a)immovable property situated in the Republic held by that person; or

(b)any interest or right of whatever nature of that person to or in immovable property situated in the Republic,

shall be an amount received or accrued from a source within the Republic.

(2)For purposes of subsection (1), any interest or right in immovable property situated in the Republic includes—

(a)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

(b)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—

(i)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 in or to 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[subparagraph (i) substituted by section 8 of Act 23 of 2020; effective date 20 January 2021, date of promulgation of that Act]

(ii)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.

[section 9J inserted by section 21 of Act 23 of 2018; effective date 17 January 2019, date of promulgation of that Act]

9K. Listing of security on exchange outside Republic

(1)Where a natural person or a trust that is a resident holds a security in a company and that security is delisted on an exchange as defined in section 1 of the Financial Markets Act and licenced under section 9 of that Act, and subsequent to that delisting that security is listed on an exchange outside the Republic, that person must be treated as having—

(a)disposed of that security for an amount received or accrued equal to the market value of that security as contemplated in the definition of “market value” in section 9H(1) on the day that the security is listed on the exchange outside the Republic; and

(b)reacquired that security on the same day on which that security is treated as having been disposed of under paragraph (a) for expenditure in an amount equal to that market value.

(2)For the purposes of section 9C(2), a security that is listed on an exchange outside the Republic as contemplated in subsection (1) must be treated to be one and the same security that is delisted.[section 9K inserted by section 9(1) of Act 23 of 2020; effective date 1 March 2021, applicable in respect of any security listed on an exchange outside the Republic on or after that date]

10. Exemptions

(1)There shall be exempt from normal tax—

(a)the receipts and accruals of the government of the Republic in the national, provincial or local sphere;

(bA)the receipts and accruals of—

(i)any sphere of government of any country other than the Republic;

(ii)any institution or body established by a foreign government to the extent that—

(aa)the institution or body has been appointed by that government to perform its functions in terms of an official development assistance agreement that is binding in terms of section 231(3) of the Constitution of the Republic of South Africa, 1996; and

(bb)the agreement provides that the receipts and accruals of that institution or body must be exempt; and

(iii)any multinational organisation providing foreign donor funding in terms of an official development assistance agreement that is binding in terms of section 231(3) of the Constitution of the Republic of South Africa Act, 1996, to the extent—

(aa)the receipts and accruals are derived pursuant to the organisation supplying goods or rendering services in relation to projects that are approved by the Minister after consultation with the Minister of Foreign Affairs;

(bb)that agreement provides that those receipts and accruals of that organisation must be exempt; and

(cc)the Minister announces that those receipts and accruals are exempt by notice in the Gazette;

(bB)the receipts and accruals of the—

(i)African Development Bank established on 10 September 1964;

(ii)World Bank established on 27 December 1945 including the International Bank for Reconstruction and Development and International Development Association;

(iii)International Monetary Fund established on 27 December 1945;

(iv)African Import and Export Bank established on 8 May 1993;

(v)European Investment Bank established on 1 January 1958 under the Treaty of Rome;

(vi)New Development Bank established on 15 July 2014;

(c)

(ii)any pension payable to any person or his surviving spouse by reason of such person having occupied the office of State President or Vice State President: Provided that the provisions of this subparagraph shall not apply to any amount payable to any person or his surviving spouse by reason of such person having occupied the office of President as elected in terms of section 77 of the Constitution;

(iii)the salary and emoluments payable to any person who holds office in the Republic as an official of any government, other than the Government of the Republic, provided such person is stationed in the Republic for that purpose and is not ordinarily resident in the Republic;

(iv)any salary and emoluments payable to any domestic or private servant of any person referred to in subparagraph (iii) in respect of domestic or private services rendered or to be rendered by such servant to such person if such servant is not a South African citizen and is not ordinarily resident in the Republic;

(v)any salary and emoluments payable to any subject of a foreign state who is temporarily employed in the Republic, provided the exemption of such salary and emoluments is authorized by an agreement entered into by the governments of such foreign state and the Republic;

(vi)any salary and emoluments payable to any person that is a subject of a foreign state and who is not a resident to the extent that that salary or those emoluments are paid by—

(aa)an institution or body contemplated in subsection (1)(bA)(ii) in respect of any agreement contemplated therein; or

(bb)an organisation contemplated in subsection (1)(bA)(iii) in respect of services rendered in relation to a project contemplated therein;

(cA)the receipts and accruals of—

(i)any institution, board or body (other than a company as defined in the Companies Act, any co-operative, close corporation, trust or water services provider) established by or under any law and which, in the furtherance of its sole or principal object—

(aa)conducts scientific, technical or industrial research;

(bb)provides necessary or useful commodities, amenities or services to the State (including any provincial administration) or members of the general public; or

(cc)carries on activities (including the rendering of financial assistance by way of loans or otherwise) designed to promote commerce, industry or agriculture or any branch thereof;

(ii)any association, corporation or company contemplated in paragraph (a) of the definition of “company” in section 1, all the shares of which are held by any such institution, board or body, if the operations of such association, corporation or company are ancillary or complementary to the object of such institution, board or body:

Provided that such institution, board, body or company—

(a)has been approved by the Commissioner subject to such conditions as he may deem necessary to ensure that the activities of such institution, board, body or company are wholly or mainly directed to the furtherance of its sole or principal object;

(b)is by law or under its constitution—

(i)not permitted to distribute any amount to any person, other than, in the case of such company, to the holders of shares in that company;[subparagraph (i) substituted by section 10(a) of Act 23 of 2020; effective date 20 January 2021, date of promulgation of that Act]

(ii)required to utilize its funds solely for investment or the object for which it has been established; and

(iii)required on dissolution—

(aa)where the institution, board, body or company is established under any law, to transfer its assets to some other institution, board or body which has been granted exemption from tax in terms of this paragraph and which has objects similar to those of such institution, board, body or company; or

(bb)where the institution, board or body is established by law, to transfer its assets to—

(A)some other institution, board or body which has been granted exemption from tax in terms of this paragraph and which has objects similar to those of such institution, board, body or company; or

(B)to the State:

Provided further that—

(a)where the Commissioner is satisfied that any such institution, board, body or company has during any year of assessment failed to comply with the provisions of this paragraph, he may withdraw his approval of the institution, board, body or company with effect from the commencement of that year of assessment;

(b)where the institution, board, body or company fails to transfer, or take reasonable steps to transfer, its assets as contemplated in paragraph (b)(iii) of the first proviso, the accumulated net revenue which has not been distributed shall be deemed for the purposes of this Act to be an amount of taxable income which accrued to such institution, board, body or company during the year of assessment contemplated in paragraph (a); and

(cE)the receipts and accruals of any political party registered in terms of section 15 of the Electoral Commission Act, 1996 (Act No. 51 of 1996);

(cG)the receipts and accruals of any person who is not a resident, which are derived by such person from carrying on business as the owner or charterer of any ship or aircraft, if a similar exemption or equivalent relief is granted by the country of which such person is a resident, to any resident in respect of any tax imposed in that country on income which may be derived by such person from carrying on in such country any business as owner or charterer of any ship or aircraft;

(cN)the receipts and accruals of any public benefit organisation approved by the Commissioner in terms of section 30(3), to the extent that the receipts and accruals are derived—

(i)otherwise than from any business undertaking or trading activity; or

(ii)from any business undertaking or trading activity—

(aa)if the undertaking or activity—

(A)is integral and directly related to the sole or principal object of that public benefit organisation as contemplated in paragraph (b) of the definition of “public benefit organisation” in section 30;

(B)is carried out or conducted on a basis substantially the whole of which is directed towards the recovery of cost; and

(C)does not result in unfair competition in relation to taxable entities;

(bb)if the undertaking or activity is of an occasional nature and undertaken substantially with assistance on a voluntary basis without compensation;

(cc)if the undertaking or activity is approved by the Minister by notice in the Gazette, having regard to—

(A)the scope and benevolent nature of the undertaking or activity;

(B)the direct connection and interrelationship of the undertaking or activity with the sole or principal object of the public benefit organisation;

(C)the profitability of the undertaking or activity; and

(D)the level of economic distortion that may be caused by the tax exempt status of the public benefit organisation carrying out the undertaking or activity; or

(dd)other than an undertaking or activity in respect of which item (aa), (bb) or (cc) applies and do not exceed the greater of—

(i)5 per cent of the total receipts and accruals of that public benefit organisation during the relevant year of assessment; or

(ii)R200 000;

(cO)the receipts and accruals of any recreational club approved by the Commissioner in terms of section 30A, to the extent that the receipts and accruals are derived—

(i)in the form of membership fees or subscriptions paid by its members;

(ii)from any business undertaking or trading activity that—

(aa)is integral and directly related to the provision of social and recreational amenities or facilities for the members of that club;

(bb)is carried out on a basis substantially the whole of which is directed towards the recovery of cost; and

(cc)does not result in unfair competition in relation to taxable entities;

(iii)from any fundraising activities of that club, which are of an occasional nature and undertaken substantially with assistance on a voluntary basis without compensation; and

(iv)from any other source and do not in total exceed the greater of—

(aa)five per cent of the total membership fees and subscriptions due and payable by its members during the relevant year of assessment; or

(bb)R120 000;

(cP)the receipts and accruals of a company or trust contemplated in section 37A: Provided that this paragraph does not apply where—

(a)the constitution of a company or the instrument establishing a trust does not comply with section 37A(5)(a); and

(b)the person contemplated in section 37A(5)(b) does not furnish the Commissioner with a written undertaking as contemplated in that section;

(cQ)the receipts and accruals of any small business funding entity approved by the Commissioner in terms of section 30C, to the extent that the receipts and accruals are derived—

(i)otherwise than from any business undertaking or trading activity; or

(ii)from any business undertaking or trading activity—

(aa)if the undertaking or activity—

(A)is integral and directly related to the sole or principal object of that small business funding entity;

(B)is carried out or conducted on a basis substantially the whole of which is directed towards the recovery of cost; and

(C)does not result in unfair competition in relation to taxable entities;

(bb)if the undertaking or activity is of an occasional nature and undertaken substantially with assistance on a voluntary basis without compensation;

(cc)if the undertaking or activity is approved by the Minister by notice in the Gazette, having regard to—

(A)the scope and benevolent nature of the undertaking or activity;

(B)the direct connection and interrelationship of the undertaking or activity with the sole or principal object of the small business funding entity;

(C)the profitability of the undertaking or activity; and

(D)the level of economic distortion that may be caused by the tax exempt status of the small business funding entity carrying out the undertaking or activity; or

(dd)other than an undertaking or activity in respect of which item (aa), (bb) or (cc) applies and do not exceed the greater of—

(A)5 per cent of the total receipts and accruals of that small business funding entity during the relevant year of assessment; or

(B)R200 000;

(d)the receipts and accruals of any—

(i)pension fund, pension preservation fund, provident fund, provident preservation fund or retirement annuity fund, or a beneficiary fund defined in section 1 of the Pension Funds Act;

(ii)benefit fund; or

(iii)mutual loan association, fidelity or indemnity fund, trade union, chamber of commerce or industries (or an association of such chambers) or local publicity association approved by the Commissioner in terms of section 30B; or

(iv)company, society or other association of persons established to—

(bb)promote the common interests of persons (being members of such company, society or association of persons) carrying on any particular kind of business, profession or occupation,

approved by the Commissioner in terms of section 30B;

(e)

(i)any levy received by or accrued to—

(aa)any body corporate established in terms of the Sectional Titles Act, 1986 (Act No. 95 of 1986), from its members;

(bb)a share block company as defined in the Share Blocks Control Act from the holders of shares in that share block company; or

(cc)any other association of persons (other than a company as defined in the Companies Act, any co-operative, close corporation and trust, but including a non-profit company as defined in that Act) from its members, where the Commissioner is satisfied that, subject to such conditions as he or she may deem necessary, such association of persons—

(A)has been formed solely for purposes of managing the collective interests common to all its members, which includes expenditure applicable to the common immovable property of such members and the collection of levies for which such members are liable; and

(B)is not permitted to distribute any of its funds to any person other than a similar association of persons:

Provided that such body, company or association is or was not knowingly a party to, or does not knowingly permit or has not knowingly permitted, itself to be used as part of any transaction, operation or scheme of which the sole or main purpose is or was the reduction, postponement or avoidance of liability for any tax, duty or levy which, but for such transaction, operation or scheme, would have been or would become payable by any person under this Act or any other law administered by the Commissioner; and

(ii)any receipts and accruals other than levies derived by a body corporate, share block company or association contemplated in subparagraph (i), to the extent that the aggregate of those receipts and accruals does not exceed R50 000;

(g)any amount received as a war pension, or as an award or a benefit under any law relating to the payment of compensation in respect of diseases contracted by persons employed in mining operations;

(gA)any disability pension paid under section 2 of the Social Assistance Act, 1992 (Act No. 59 of 1992);

(gB)any—

(i)compensation paid in terms of the Workmen’s Compensation Act, 1941 (Act No. 30 of 1941), or the Compensation for Occupational Injuries and Diseases Act, 1993 (Act No. 130 of 1993);

(ii)pension paid in respect of the death or disablement caused by any occupational injury or disease sustained or contracted by an employee before 1 March 1994 in the course of employment, where that employee would have qualified for compensation under the Compensation for Occupational Injuries and Diseases Act, 1993, had that injury or disease been sustained or contracted on or after 1 March 1994; or

(iii)compensation paid in respect of the death of any person where that death arises out of and in the course of the employment of that person, to the extent that that compensation—

(A)was paid in addition to any compensation contemplated in subparagraph (i) paid in that respect;

(B)does not exceed an amount of R300 000; and

(C)was paid by the employer of that person; and

(iv)compensation paid in terms of section 17 of the Road Accident Fund Act, 1996 (Act No. 56 of 1996);

(gC)any—

(i)amount received by or accrued to any resident under the social security system of any other country; or

(ii)lump sum, pension or annuity received by or accrued to any resident from a source outside the Republic as consideration for past employment outside the Republic other than from any pension fund, pension preservation fund, provident fund, provident preservation fund or retirement annuity fund as defined in section 1(1) or a company that is a resident and that is registered in terms of the Long-term Insurance Act as a person carrying on long-term insurance business excluding any amount transferred to that fund or that insurer from a source outside the Republic in respect of that member;[subparagraph (ii) substituted by section 16(1)(b) of Act 34 of 2017; effective date 18 December 2017, date of promulgation of that Act]

(gD)any funeral benefit payable in terms of section 6F of the Special Pensions Act, 1996 (Act No. 69 of 1996);

(gE)any amount awarded to a person by a beneficiary fund as defined in the Pension Funds Act;

(gF)any value required to be taken into account in determining the gross income of any person in respect of the cession by another person of a policy contemplated in section 11(w) ceded to or in favour of that person—

(i)where that person is—

(aa)an employee or director of that other person or a connected person in relation to the employee or director;

(bb)the estate of the employee or director; or

(cc)any person who is or was wholly or partly dependent for his or her maintenance upon the employee or director; and

(ii)where that policy was concluded before 1 January 2011;

(gG)any amount received by or accrued to a person as contemplated in subparagraph (ii) or (iii) of paragraph (d) of the definition of “gross income”—

(i)in the case of a policy that is a risk policy with no cash value or surrender value, if the amount of premiums paid in respect of that policy by the employer of the person has been deemed to be a taxable benefit of the person in terms of the Seventh Schedule since the later of—

(aa)the date on which the employer or company contemplated in those subparagraphs became the policyholder of that policy; or

(bb)1 March 2012;

(ii)in the case of any other policy, if an amount equal to the aggregate of the amount of any premiums has been included in the income of the person as a taxable benefit in terms of the Seventh Schedule since the date on which the policy was entered into;

(gH)any amount received or accrued in respect of a policy of insurance where—

(i)the policy relates to death, disablement or illness of an employee or director, or former employee or director, of the person that is the policyholder; and

(ii)no amount of premiums payable in respect of that policy on or after 1 March 2012 is deductible from the income of that person for the purposes of determining the taxable income derived by the person from carrying on any trade;

(gI)any amount received or accrued in respect of a policy of insurance relating to the death, disablement, illness or unemployment of any person who is insured in terms of that policy of insurance, including the policyholder or an employee of the policyholder in respect of that policy of insurance to the extent to which the benefits in terms of that policy are paid as a result of death, disablement, illness or unemployment other than any policy of which the benefits are paid or payable by a retirement fund;

(gJ)any amount received by or accrued to a person who is a member of a bargaining council that is established in terms of section 27 of the Labour Relations Act, 1995 (Act No. 66 of 1995), from a scheme or fund as contemplated in section 28(1)(g) of that Act, other than an amount from a pension fund or a provident fund;[paragraph (gJ) inserted by section 22(1)(a) of Act 23 of 2018; effective date 1 March 2019]

(h)any amount of the interest which is received by or accrues to any person that is not a resident, unless—

(i)that person is a natural person who was physically present in the Republic for a period exceeding 183 days in aggregate during the twelve-month period preceding the date on which the interest is received by or accrues to that person; or[subparagraph (i) substituted by section 22(1)(b) of Act 23 of 2018; effective date 17 January 2019, date of promulgation of that Act]

(ii)the debt from which the interest arises is effectively connected to a permanent establishment of that person in the Republic;

(hA)any amount received by or accrued to the holder of a debt—

(i)if the holder of that debt is a company that forms part of the same group of companies, as defined in section 41, as the issuer of that debt; and

(ii)to the extent that the amount is attributable to any amount of interest as defined in section 23K(1) that is not deductible as a result of the application of section 23K;

(i)in the case of any taxpayer who is a natural person, so much of the aggregate of any interest received by or accrued to him or her, other than interest in respect of a tax free investment as defined in section 12T(1), from a source in the Republic as does not during the year of assessment exceed—

(i)in the case of any person who was or, had he or she lived, would have been at least 65 years of age on the last day of the year of assessment, the amount of R34 500; or

(ii)in any other case, the amount of R23 800:

Provided that where any person’s year of assessment is less than a period of 12 months, the amount that shall be exempt from normal tax under subparagraph (i) or (ii) shall be the amount that bears to the amount referred to in that subparagraph the same ratio as the number of days in that year of assessment bears to 365 days;[proviso added by section 5(1) of Act 20 of 2022; effective date 1 March 2023, applies in respect of years of assessment commencing on or after that date]

(iB)any amount received by or accrued to a holder of a participatory interest in a portfolio of a collective investment scheme in securities by way of a distribution from that portfolio if that amount is deemed to have accrued to that portfolio in terms of section 25BA(1)(b) and that amount was subject to normal tax in the hands of that portfolio;

(j)the receipts and accruals of any bank, if such bank is not resident in the Republic and is entrusted by the Government of a territory outside the Republic with the custody of the principal foreign exchange reserves of that territory;[paragraph (j) substituted by section 13 of Act 34 of 2019; effective date 15 January 2020, date of promulgation of that Act]

(k)

(i)dividends (other than dividends paid or declared by a headquarter company) received by or accrued to any person: Provided that this exemption shall not apply—

(aa)to dividends (other than those received by or accrued to or in favour of a person that is not a resident or a dividend contemplated in paragraph (b) of the definition of “dividend”) distributed by a company that is a REIT, or a controlled company as defined in section 25BB;

(dd)to any dividend in respect of a restricted equity instrument as defined in section 8C to the extent that the restricted equity instrument was acquired in the circumstances contemplated in section 8C, unless—

(A)the restricted equity instrument constitutes an equity share, other than an equity share that would have constituted a hybrid equity instrument as defined in section 8E(1) but for the three-year period requirement contemplated in that definition;

(B)the dividend constitutes an equity instrument as defined in that section; or

(C)the restricted equity instrument constitutes an interest in a trust and, where that trust holds shares, all of those shares constitute equity shares, other than equity shares that would have constituted hybrid equity instruments as defined in section 8E(1) but for the three-year period requirement contemplated in that definition;

(ee)to any dividend received by or accrued to a company in consequence of—

(A)any cession of the right to that dividend; or

(B)the exercise of a discretionary power by any trustee of a trust,

unless that cession or exercise results in the holding by that company of all of the rights attaching to a share;

(ff)to any dividends received by or accrued to a company in respect of a share borrowed by that company; or

(gg)to any dividends received by or accrued to a company in respect of a share held by that company to the extent that the aggregate of those dividends does not exceed an amount equal to the aggregate of any amounts incurred by that company as compensation for any distributions in respect of any other share borrowed by the company, other than a share in respect of which any dividends were received by or accrued to that company as contemplated in paragraph (ff), where the share so borrowed and the share so held are identical shares: Provided that where the company borrowing the share has lent out any other share that is an identical share to the share so borrowed, the aggregate amount so incurred must be reduced by the amount accrued to that company as compensation for any distribution in respect of the share so lent;

(hh)to any dividends received by or accrued to a company in respect of a share to the extent that—

(A)the aggregate of those dividends does not exceed an amount equal to the aggregate of any deductible expenditure incurred by that company or any amount taken into account that has the effect of reducing income in the application of section 24JB(2); and

(B)the amount of that expenditure or reduction is determined directly or indirectly with reference to the dividend in respect of an identical share to that share:

Provided that the deductible expenditure so incurred or the amount of the reduction must be reduced by any amount of income accrued to the company in respect of any distribution in respect of any other share that is an identical share in relation to that share;

(ii)to any dividend received by or accrued to a person in respect of services rendered or to be rendered or in respect of or by virtue of employment or the holding of any office, other than a dividend received or accrued in respect of a restricted equity instrument as defined in section 8C held by that person or in respect of a share held by that person;

(jj)notwithstanding the provisions of paragraphs (dd) and (ii), to any dividend in respect of a restricted equity instrument as defined in section 8C that was acquired in the circumstances contemplated in section 8C(1) if that dividend constitutes—

(A)an amount transferred or applied by a company as consideration for the acquisition or redemption of any share in that company;

(B)an amount received or accrued in anticipation or in the course of the winding up, liquidation, deregistration or final termination of a company; or

(C)an equity instrument that does not qualify, at the time of the receipt or accrual of that dividend, as a restricted equity instrument as defined in section 8C; or

(kk)notwithstanding the provisions of paragraphs (dd) and (ii), to any dividend in respect of a restricted equity instrument as defined in section 8C that was acquired in the circumstances contemplated in section 8C(1) if that dividend is derived directly or indirectly from—

(A)an amount transferred or applied by a company as consideration for the acquisition or redemption of any share in that company; or

(B)an amount received or accrued in anticipation or in the course of the winding up, liquidation, deregistration or final termination of a company;

(l)the amount of any royalty as defined in section 49A which is received by or accrues to any person that is not a resident, unless—

(ii)the intellectual property or the knowledge or information in respect of which that royalty is paid is effectively connected with a permanent establishment of that person in the Republic;

(lA)any amount received by or accrued to any person who is not a resident if that amount is subject to tax on foreign entertainers and sportspersons in terms of Part IIIA of this Chapter;

(mB)any benefit or allowance payable in terms of the Unemployment Insurance Act, 2001 (Act No. 63 of 2001);

(nA)where an employee is as a condition of his employment required while on duty to wear a special uniform which is clearly distinguishable from ordinary clothing, the value of any such uniform given to the employee by his employer, or so much of any allowance made by the employer to the employee in lieu of any such uniform as is reasonable;

(nB)any benefit or advantage accruing to any employee (as defined in paragraph 1 of the Seventh Schedule) by reason of the fact that his employer (as defined in the said paragraph), has, in consequence of the transfer of the employee from one place of employment to another place of employment or the appointment of the employee as an employee of the employer or the termination of the employee’s employment, borne the expense—

(i)of transporting such employee, members of his household and the personal goods and possessions of himself and the members of his household from his previous place of residence to his new place of residence; or

(ii)of the costs which have been incurred by the employee in respect of the sale of his or her previous residence and in settling in permanent residential accommodation at his or her new place of residence; or

(iii)of hiring residential accommodation in an hotel or elsewhere for the employee or members of his household during the period ending 183 days after his transfer took effect or after he took up his appointment, as the case may be, if such residential accommodation was occupied temporarily pending the obtaining of permanent residential accommodation;

(nC)any amount received by or accrued to that person in the form of a qualifying equity share contemplated in section 8B;

(nD)any amount received by or accrued to that person which constitutes—

(i)an equity instrument contemplated in section 8C acquired by that person and in respect of which that section applies; or

(ii)consideration for the disposal of an equity instrument contemplated in subparagraph (i),

which had not yet vested as contemplated in that section at the time of that acquisition or disposal;

(nE)any amount (including any taxable benefit determined under the provisions of the Seventh Schedule, but excluding any gain or loss as a result of any transaction in respect of which section 8C applies or the cancellation of any such transaction) received by or accrued to an employee, as so defined, under a share incentive scheme operated for the benefit of employees of the taxpayer’s employer, as so defined, which was derived—

(i)upon the cancellation of a transaction under which the taxpayer purchased shares under that scheme; or

(ii)upon the repurchase from the taxpayer, at a price not exceeding the selling price to him or her, of shares purchased by him or her under that scheme,

if in consequence of such cancellation or repurchase the taxpayer has not received or become entitled to receive any compensation or consideration other than the repayment of any portion of the purchase price actually paid by him;

(o)any form of remuneration—

(i)as defined in paragraph 1 of the Fourth Schedule, derived by any person as an officer or crew member of a ship engaged—

(aa)in the international transportation for reward of passengers or goods; or

(bb)in the prospecting, exploration or mining (including surveys and other work of a similar nature) for, or production of, any minerals (including natural oils) from the seabed outside the Republic, where such officer or crew member is employed on board such ship solely for purposes of the “passage” of such ship, as defined in the Marine Traffic Act, 1981 (Act No. 2 of 1981),

if such person was outside the Republic for a period or periods exceeding 183 full days in aggregate during the year of assessment;

(iA)as defined in paragraph 1 of the Fourth Schedule, derived by any person as an officer or crew member of a South African ship as defined in section 12Q(1) mainly engaged—

(aa)in international shipping as defined in section 12Q(1); or

(bb)in fishing outside the Republic; or

(ii)to the extent to which that remuneration does not exceed R1,25 million in respect of a year of assessment and is received by or accrues to any employee during any year of assessment by way of any salary, leave pay, wage, overtime pay, bonus, gratuity, commission, fee, emolument or allowance, including any amount referred to in paragraph (i) of the definition of gross income in section 1 or an amount referred to in section 8, 8B or 8C, in respect of services rendered outside the Republic by that employee for or on behalf of any employer, if that employee was outside the Republic—[words preceding item (aa) substituted by section 6(1) of Act 22 of 2020; effective date 1 March 2020, applicable in respect of years of assessment commencing on or after that date]

(aa)

(a)for a period or periods exceeding 183 full days in aggregate during any period of 12 months; or

(b)for a period or periods exceeding 117 full days in aggregate during any period of 12 months in respect of any year of assessment ending on or after 29 February 2020 but on or before 28 February 2021; and

[item (aa) substituted by section 10(c) of Act 23 of 2020; effective date 29 February 2020]

(bb)for a continuous period exceeding 60 full days during that period of 12 months,

and those services were rendered during that period or periods: Provided that—

(A)for purposes of this subparagraph, a person who is in transit through the Republic between two places outside the Republic and who does not formally enter the Republic through a port of entry as contemplated in section 9(1) of the Immigration Act, 2002 (Act No. 13 of 2002), or at any other place as may be permitted by the Director General of the Department of Home Affairs or the Minister of Home Affairs in terms of that Act, shall be deemed to be outside the Republic;

(B)the provisions of this subparagraph shall not apply in respect of any remuneration—

(AA)derived in respect of the holding of a public office contemplated in section 9(2)(g); or

(BB)received by or accrued to any person in respect of services rendered or work or labour performed as contemplated in section 9(2)(h); and

(C)for the purposes of this subparagraph, where remuneration is received by or accrues to any employee during any year of assessment in respect of services rendered by that employee in more than one year of assessment, the remuneration is deemed to have accrued evenly over the period that those services were rendered;

(p)any amount received by or accrued to any person who is not a resident, for services rendered or work or labour done by him outside the Republic for or on behalf of any employer in the national or provincial sphere of Government or any municipality in the Republic or any national or provincial public entity if not less than 80 per cent of the expenditure of such entity is defrayed directly or indirectly from funds voted by Parliament, if such amount is chargeable with income tax in the country in which he is ordinarily resident and the income tax so chargeable is borne by himself and is not paid on his behalf by the Government, the municipality concerned or such public entity;

(q)any bona fide scholarship or bursary, other than any scholarship or bursary contemplated in paragraph (qA), granted to enable or assist any person to study at a recognized educational or research institution: Provided that if any such scholarship or bursary has been so granted by an employer or an associated institution (as respectively defined in paragraph 1 of the Seventh Schedule) to an employee (as defined in the said paragraph) or to a relative of such employee, the exemption under this paragraph shall not apply—

(i)in the case of a scholarship or bursary granted to so enable or assist any such employee, unless the employee agrees to reimburse the employer for any scholarship or bursary granted to that employee if that employee fails to complete his or her studies for reasons other than death, ill-health or injury;

(ii)in the case of a scholarship or bursary granted to enable or assist any such relative of an employee so to study—

(aa)if the remuneration proxy derived by the employee in relation to a year of assessment exceeded R600 000;

(bb)to so much of any scholarship or bursary contemplated in this subparagraph as in the case of any such relative, during the year of assessment, exceeds—

(A)R20 000 in respect of—

(AA)grade R to grade twelve as contemplated in the definition of “school” in section 1 of the South African Schools Act, 1996 (Act No. 84 of 1996); or

(BB)a qualification to which an NQF level from 1 up to and including 4 has been allocated in accordance with Chapter 2 of the National Qualifications Framework Act, 2008 (Act No. 67 of 2008); and

(B)R60 000 in respect of a qualification to which an NQF level from 5 up to and including 10 has been allocated in accordance with Chapter 2 of the National Qualifications Framework Act, 2008 (Act No. 67 of 2008); and

(cc)if any remuneration to which the employee was entitled or might in the future have become entitled was in any manner whatsoever reduced or forfeited as a result of the grant of such scholarship or bursary;[subparagraph (cc) added by section 10(b) of Act 23 of 2020; effective date 1 March 2021, applicable in respect of years of assessment commencing on or after that date]

(qA)any bona fide scholarship or bursary granted to enable or assist any person who is a person with a disability as defined in section 6B(1) to study at a recognised educational or research institution:Provided that if any such scholarship or bursary has been so granted by an employer or an associated institution (as respectively defined in paragraph 1 of the Seventh Schedule) to an employee (as defined in the said paragraph) who is a person with a disability as defined in section 6B(1) or to any person with a disability as defined in section 6B(1) who is a member of the family of an employee (as defined in paragraph 1 of the Seventh Schedule) in respect of whom that employee is liable for family care and support, the exemption under this paragraph shall not apply—

(i)in the case of a scholarship or bursary granted to so enable or assist an employee, who is a person with a disability as defined in section 6B(1), unless that employee agrees to reimburse the employer for any scholarship or bursary granted to that employee if that employee fails to complete his or her studies for reasons other than death, ill-health or injury;

(ii)in the case of a scholarship or bursary granted to enable or assist a person with a disability as defined in section 6B(1) who is a member of the family of an employee, as defined in paragraph 1 of the Seventh Schedule, in respect of whom that employee is liable for family care and support, to study—[words preceding subparagraph (aa) substituted by section 22(1)(c) of Act 23 of 2018; effective date 1 March 2018, applicable in respect of years of assessment commencing on or after that date]

(aa)if the remuneration proxy derived by the employee in relation to a year of assessment exceeded R600 000;

(bb)to so much of any scholarship or bursary contemplated in this subparagraph as in the case of any such member of the family of that employee, during the year of assessment, exceeds—

(A)R30 000 in respect of—

(AA)grade R to grade twelve as contemplated in the definition of “school” in section 1 of the South African Schools Act, 1996 (Act No. 84 of 1996); or

(BB)a qualification to which an NQF level from 1 up to and including 4 has been allocated in accordance with Chapter 2 of the National Qualifications Framework Act, 2008 (Act No. 67 of 2008); and

(B)R90 000 in respect of a qualification to which an NQF level from 5 up to and including 10 has been allocated in accordance with Chapter 2 of the National Qualifications Framework Act, 2008 (Act No. 67 of 2008); and

(cc)if any remuneration to which the employee was entitled or might in the future have become entitled was in any manner whatsoever reduced or forfeited as a result of the grant of such scholarship or bursary;[subparagraph (cc) added by section 10(d) of Act 23 of 2020; effective date 1 March 2021, applicable in respect of years of assessment commencing on or after that date]

(r)any gratuity (other than a leave gratuity) received by or accrued to any person from public funds upon his retirement from any office or employment under the Government, including the Railway Administration and any provincial administration, or from the funds of the Land and Agricultural Bank of South Africa upon his retirement as a member of the board of the said Bank, which the Treasury declares to be free of tax;

(s)any amount by which the employees’ tax as defined in section 1 of the Employment Tax Incentive Act, 2013, payable by an employer as contemplated in section 3 of that Act is reduced in terms of section 2(2) of that Act or paid in terms of section 10 of that Act;

(t)the receipts and accruals—

(i)of the Council for Scientific and Industrial Research;

(ii)of the South African Inventions Development Corporation;

(iii)of the South African National Roads Agency Limited incorporated in terms of section 3 of the South African National Roads Agency Limited and National Roads Act, 1998 (Act No. 7 of 1998);

(v)of the Armaments Corporation of South Africa Limited, contemplated in section 2(1) of the Armaments Corporation of South Africa, Limited Act, 2003 (Act No. 51 of 2003);

(vi)of any company during any period during which all the issued shares of such company are held by the Corporation referred to in subparagraph (v), if the operations of such company are conducted in pursuance of, or are ancillary or complementary to, the objects of the said Corporation;

(vii)of any traditional council or traditional community established or recognised or deemed to have been established or recognised in terms of the Traditional Leadership and Governance Framework Act, 2003 (Act No. 41 of 2003), or any tribe as defined in section 1 of that Act;

(ix)of any water services provider;

(x)of the Development Bank of Southern Africa established on 23 June 1983;

(xvi)of—

(aa)the compensation fund established by section 15 of the Compensation for Occupational Injuries and Diseases Act, 1993 (Act No. 130 of 1993);

(bb)the reserve fund established by section 19 of the Compensation for Occupational Injuries and Diseases Act, 1993 (Act No. 130 of 1993); and

(cc)a mutual association licensed in terms of section 30 of the Compensation for Occupational Injuries and Diseases Act, 1993 (Act No. 130 of 1993), to carry on the business of insurance of employers against their liabilities to employees, if the compensation paid by the mutual association is identical to compensation that would have been payable in similar circumstances in terms of that Act;

(xvii)of the National Housing Finance Corporation established in 1996 by the National Department of Human Settlements:

Provided that any entity contemplated in this paragraph must comply with such reporting requirements as the Commissioner may determine;

(u)any amount received by or accrued to any person—

(i)from or on behalf of such person’s spouse or former spouse by way of alimony or allowance or maintenance of such person under an order of judicial separation or divorce granted in consequence of proceedings instituted after the twenty-first day of March, 1962, or under any agreement of separation entered into after that date; or

(y)any government grant or government scrapping payment received or accrued in terms of any programme or scheme which has been approved in terms of the national annual budget process and has been identified by the Minister by notice in the Gazette with effect from a date specified by the Minister in that notice (including any date that precedes the date of such notice) for purposes of this paragraph, having regard to—

(i)whether the programme or scheme meets government policy priorities and objectives with respect to—

(aa)the encouragement of economic growth and investment;

(bb)the promotion of employment creation;

(cc)the development of public infrastructure and transport;

(dd)the promotion of public health;

(ee)the development of innovation and technology;

(ff)the provision of housing and basic services; or

(gg)the provision of relief in the case of natural disasters;

(ii)the extent to which the programme or scheme will support the policy priorities and objectives contemplated in subparagraph (i);

(iii)the financial implications for government should government grants or government scrapping payments in terms of that programme or scheme be exempt from tax; and

(iv)whether the tax implications were taken into account in determining the appropriation or payment in respect of that programme or scheme;

(yA)any amount received by or accrued to any person in respect of goods or services provided to beneficiaries in terms of an official development assistance agreement that is binding in terms of section 231(3) of the Constitution of the Republic of South Africa, 1996, to the extent—

(aa)that amount is received or accrued in relation to projects that are approved by the Minister; and[subparagraph (aa) substituted by section 22(1)(d) of Act 23 of 2018; effective date 17 January 2019, date of promulgation of that Act]

(bb)where that agreement was concluded on or after 1 January 2007, that that agreement provides that those receipts and accruals of that person must be exempt;[subparagraph (bb) substituted by section 22(1)(d) of Act 23 of 2018; effective date 17 January 2019, and by section 10(e) of Act 23 of 2020; effective date 1 January 2007, applicable in respect of years of assessment commencing on or after that date]

(zE)any amount received by or accrued to the Small Business Development Corporation Limited, by way of any subsidy or assistance payable by the State;

(zJ)any amount received by or accrued to or in favour of a registered micro business as defined in the Sixth Schedule, from the carrying on of a business in the Republic, other than an amount received by or accrued to a natural person registered as a micro business that constitutes—

(i)investment income as defined in paragraph 1 of the Sixth Schedule; or

(ii)remuneration as defined in the Fourth Schedule;

(zK)any amount received by or accrued to or in favour of a small, medium or micro-sized enterprise from a small business funding entity.

(zL)any amount received or accrued previously prohibited as a deduction during any year of assessment under section 23(o)(iii) that is recovered in any subsequent year of assessment.[paragraph (zL) inserted by section 22(1)(e) of Act 23 of 2018; effective date 1 April 2019, applicable in respect of years of assessment commencing on or after that date]

(2)Notwithstanding the exemptions provided for in paragraphs (h) and (k) of subsection (1)—

(b)the said exemptions shall not apply in respect of any portion of an annuity.

(3)The exemptions from tax provided by any paragraph of subsection (1) shall not extend to—

(a)any payments out of the receipts, accruals, amounts or profits mentioned in such paragraph; or

(b)any tax leviable under this Act in respect of any taxable capital gain determined in accordance with the Eighth Schedule.

10A. Exemption of capital element of purchased annuities

(1)For the purposes of this section—“annuity amount” means an amount payable by way of annuity under an annuity contract and any amount payable in consequence of the commutation or termination of any such annuity contract;“annuity contract” means an agreement concluded between an insurer in the course of his insurance business and a purchaser, in terms of which—

(a)the insurer agrees to pay to the purchaser or the purchaser’s spouse or surviving spouse an annuity or annuities (whether to one such person or to each of them) until the death of the annuitant or the expiry of a specified term;

(b)the purchaser agrees to pay to the insurer a lump sum cash consideration for such annuity or annuities; and

(c)no amounts are or will be payable by the insurer to the purchaser or any other person other than amounts payable by way of such annuity or annuities or, where an annuity is payable for a minimum term and such annuity is in the event of the death of the annuitant before the end of such term to continue to be payable to some third person for the balance of that term, amounts which may be so payable to such third person by way of such annuity,

but does not include any agreement for the payment by any insurer of any annuity which is under the rules of a pension fund, pension preservation fund, provident fund, provident preservation fund or retirement annuity fund payable to a member of such fund or to any other person;“commencement”, in relation to an annuity contract, means the date on which the annuity contract is concluded;“expected return”, in relation to an annuity under an annuity contract, means an amount determined in a manner contemplated in this section as representing the sum of all the annuity amounts which may, as at the commencement of the annuity contract, be expected to become payable by way of the annuity from the said commencement;“purchaser”, in relation to an annuity contract means—

(a)any natural person and includes such person’s deceased or insolvent estate; or

(b)a curator bonis of, or a trust created solely for the benefit of, any natural person where the High Court has declared such person to be of unsound mind and incapable of managing his own affairs and such Court has ordered the appointment of such curator or creation of such trust, as the case may be;

“statutory actuary” means an actuary appointed in accordance with section 20(1) or 21(1)(b) of the Long-term Insurance Act;

(2)There shall be exempt from normal tax so much of any annuity amount payable to a purchaser or his spouse or surviving spouse (as contemplated in paragraph (a) of the definition of “annuity contract” in subsection (1)), or to the deceased or insolvent estate of such spouse or surviving spouse as is determined in accordance with subsection (3) to represent the capital element of such amount.

(3)The capital element of an annuity amount shall be—

(a)a sum determined in accordance with the formula

in which formula—

(i)“Y” represents the sum to be determined;

(ii)“A” represents the amount of the total cash consideration given by the purchaser under the annuity contract in question as contemplated in paragraph (b) of the definition of “annuity contract” in subsection (1);

(iii)“B” represents the total expected returns of all the annuities provided for in the annuity contract in question; and

(iv)“C” represents the aforesaid annuity amount; or

(b)where, by reason of any unpredictable contingency (other than the death or survival of any person), any amount payable by way of any annuity under the annuity contract in question is uncertain at the date on which the first payment by way of an annuity becomes due under that contract, such sum as may on the basis of a fair and reasonable calculation be taken to be the capital element of the aforesaid annuity amount: Provided that the said sum shall be determined in such manner that the capital element of all the annuity amounts becoming due during any year of assessment in respect of all the annuities under the said contract does not in total exceed an amount determined in accordance with the formula

in which formula—

(i)“Z” represents the amount to be determined;

(ii)“N” represents the probable number of years during which annuity amounts will be payable under the said annuity contract from the date on which the first of such amounts becomes due, due regard being had to the manner in which and the frequency with which such amounts are payable; and

(iii)“A” represents the amount of the total cash consideration given by the purchaser under the said annuity contract as contemplated in paragraph (b) of the definition of “annuity contract” in subsection (1); or

(c)where such annuity amount is payable in consequence of the commutation or termination of the annuity contract concerned, an amount determined in accordance with the formulaX = A – Din which formula—

(i)“X” represents the amount to be determined;

(ii)“A” represents the amount of the total cash consideration given by the purchaser under the annuity contract concerned as contemplated in paragraph (b) of the definition of “annuity contract” in subsection (1); and

(iii)“D” represents the sum of the amounts determined in accordance with paragraphs (a) and (b) as representing the capital element of all annuity amounts payable under the annuity contract prior to the commutation or termination thereof.

(4)The statutory actuary of an insurer who is a party to an annuity contract shall, before payment of the first annuity amount is made under such contract, or within such period as the Commissioner may allow, make a calculation (with due regard to the provisions of subsection (5)) in the manner prescribed in paragraph (a) of subsection (3) or, if the provisions of paragraph (b) of that subsection are applicable, in accordance with that paragraph, of the capital element of all the annuity amounts to be paid under the said contract: Provided that—

(i)where the capital element is calculated under the said paragraph (a), it shall be sufficient if the capital element is calculated as a percentage to be applied to each of the said annuity amounts; or

(ii)where the capital element is calculated under the said paragraph (b), it shall be sufficient if a calculation is made of the amount to be determined in accordance with the formula in the proviso to that paragraph.

(5)A statutory actuary who makes any calculation as provided in subsection (4) or any recalculation as provided in subsection (6)(b), shall do so in accordance with generally accepted actuarial principles or practice, and where a determination has to be made of the life expectancy of any person for the purpose of a calculation of the expected return of any annuity or the probable number of years during which annuity amounts will be paid under any annuity contract, the mortality tables to be used for such determination shall be the select tables in the volume of tables published in 1953 at the University Press, Cambridge, for the Institute of Actuaries and the Faculty of Actuaries, entitled “The a (55) Tables for Annuitants”, and the age of the person concerned shall for the purposes of such determination be taken to be his age on his birthday immediately preceding the commencement of the annuity contract in question.

(6)

(a)Where any annuity contract is varied so that it no longer conforms with the requirements prescribed in the definition of “annuity contract” in subsection (1), the exemption conferred by subsection (2) in respect of the capital element of annuity amounts under that contract shall not apply in respect of such amounts under that contract which become due on or after the date of such variation.

(b)Subject to the provisions of paragraph (a), where any annuity contract is varied as to the payment of any annuity or consideration payable thereunder, the capital element of annuity amounts becoming due thereunder after such variation is effected shall, with due regard to the provisions of subsection (5), be re-calculated by the statutory actuary of the insurer concerned.

(7)

(a)Where the capital element of annuity amounts has been calculated as provided in subsection (4) or has been re-calculated as provided in subsection (6)(b), the insurer concerned shall furnish each annuitant under the annuity contract in question, within one month after the date on which the calculation or re-calculation is made, as the case may be, or within such further period as the Commissioner may allow, with two copies of such calculation or re-calculation, as the case may be.

(b)An annuitant who has received the two copies referred to in paragraph (a) shall submit one of them to the Commissioner as and when required by the Commissioner.

(c)Where the capital element of annuity amounts has been calculated as provided in subsection (4) or has been re-calculated as provided in subsection (6)(b), the calculation or re-calculation shall apply in respect of all annuity amounts which become due to any person under the annuity contract in question and shall also apply to any year of assessment subsequent to the year of assessment in which the calculation or re-calculation took place.

(11)Where the cash consideration given by the purchaser and the annuity amount receivable under an annuity contract is denominated in any currency other than the currency of the Republic, the capital element of that annuity amount must be calculated in terms of subsection (3) in that other currency and must be translated to the currency of the Republic by applying the exchange rate applied in terms of section 25D in respect of the annuity amount payable during the relevant year of assessment.

10B. Exemption of foreign dividends and dividends paid or declared by headquarter companies

(1)For the purposes of this section, “foreign dividend” means any—

(a)foreign dividend as defined in section 1; or

(b)dividend paid or declared by a headquarter company.

(2)Subject to subsection (4), there must be exempt from normal tax any foreign dividend received by or accrued to a person—

(a)if that person (whether alone or together with any other company 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 the company declaring the foreign dividend;

(b)if that person is a foreign company and the foreign dividend is paid or declared by another foreign company that is resident in the same country as that person;

(c)who is a resident to the extent that the foreign dividend does not exceed the aggregate of all amounts which are included in the income of that resident in terms of section 9D in any year of assessment, which relate to the net income of—

(i)the company declaring the foreign dividend; or

(ii)any other company which has been included in the income of that resident in terms of section 9D by virtue of that resident’s participation rights in that other company held indirectly through the company declaring the foreign dividend,

reduced by—

(aa)the amount of any foreign tax payable in respect of the amounts so included in that resident’s income; and

(bb)so much of all foreign dividends received by or accrued to that resident at any time from any company contemplated in subparagraph (i) or (ii), as was—

(A)exempt from tax in terms of paragraph (a), (d) or (e); or[item (A) substituted by section 23(a) of Act 23 of 2018; effective date 17 January 2019, date of promulgation of that Act]

(B)previously not included in the income of that resident by virtue of any prior inclusion in terms of section 9D:

Provided that for the purposes of this paragraph, the net income of any company contemplated in subparagraphs (i) and (ii) must be determined without regard to subsection (3);

(d)to the extent that the foreign dividend is received by or accrues to that person in respect of a listed share and does not consist of a distribution of an asset in specie; or

(e)to the extent that the foreign dividend is received by or accrues to a company that is a resident in respect of a listed share and consists of the distribution of an asset in specie:

Provided that paragraphs (a) and (b) must not apply to any foreign dividend to the extent that the foreign dividend is deductible by the foreign company declaring or paying that foreign dividend in the determination of any tax on income on companies of the country in which that foreign company has its place of effective management:Provided further that paragraph (a) must not apply to any foreign dividend received by or accrued to that person in respect of a share other than an equity share.

(3)In addition to the exemption provided for in subsection (2), there must be exempt from normal tax so much of the amount of the aggregate of any foreign dividends received by or accrued to a person during a year of assessment as—

(a)is not exempt from normal tax in terms of subsection (2) for that year of assessment; and

(b)does not during the year of assessment exceed an amount determined in accordance with the following formula:A = B × Cin which formula:

(i)“A” represents the amount to be exempted for a year of assessment in terms of this paragraph;

(ii)“B” represents—

(aa)where the person is a natural person, deceased estate, insolvent estate or trust, the ratio of the number 25 to the number 45;

(bb)where the person is—

(A)a person other than a natural person, deceased estate, insolvent estate or trust; or

(B)an insurer in respect of its company policyholder fund, corporate fund and risk policy fund,

the ratio of the number 7 to the number 27; or[words following subitem (B) substituted by section 10(1)(a) of Act 17 of 2023; effective date deemed to have been 31 March 2023, applies in respect of years of assessment ending on or after that date]

(cc)where the person is an insurer in respect of its individual policyholder fund, the ratio of the number 10 to the number 30; and

(iii)“C” represents the aggregate of any foreign dividends received by or accrued to the person during a year of assessment that is not exempt from normal tax in terms of subsection (2).

(4)Subsections (2)(a) and (2)(b) do not apply in respect of any foreign dividend received by or accrued to any person—

(a)if—

(i)

(aa)any amount of that foreign dividend is determined directly or indirectly with reference to; or

(bb)that foreign dividend arises directly or indirectly from,

any amount paid or payable by any person to any other person; and

(ii)the amount so paid or payable is deductible from the income of the person by whom it is paid or payable and—

(aa)is not subject to normal tax in the hands of the other person contemplated in subparagraph (i); and

(bb)where that other person contemplated in subparagraph (i) is a controlled foreign company, is not taken into account in determining the net income, contemplated in section 9D(2A), of that controlled foreign company,

unless the amount so paid or payable is paid or payable as consideration for the purchase of trading stock by the person by whom the amount is paid or payable; or

(b)from any portfolio contemplated in paragraph (e)(ii) of the definition of “company” in section 1.

(5)The exemptions from tax provided by subsections (2) and (3) do not apply in respect of any portion of an annuity or extend to any payments out of any foreign dividend received by or accrued to any person.

(6)Subsections (2) and (3) do not apply to any foreign dividend received by or accrued to a person in respect of—

(a)services rendered or to be rendered or in respect of or by virtue of employment or the holding of any office, other than a foreign dividend in respect of a share held by that person; or

(b)a restricted equity instrument as defined in section 8C that was acquired in the circumstances contemplated in that section if that foreign dividend is derived directly or indirectly from, or constitutes—

(i)an amount—

(aa)transferred or applied by a company as consideration for the acquisition or redemption of any share in that company; or

(bb)received or accrued in anticipation or in the course of the winding up, liquidation, deregistration or final termination of a company; or

(ii)an equity instrument that does not qualify, at the time of the receipt or accrual of that foreign dividend, as a restricted equity instrument as defined in section 8C.

(6A)Subsections (2) and (3) do not apply to any foreign dividend received by or accrued to any company in respect of a share to the extent that the aggregate of those foreign dividends does not exceed an amount equal to the aggregate of any deductible expenditure incurred by that company or any amount taken into account that has the effect of reducing income in the application of section 24JB(2), and the amount of that expenditure or reduction is determined directly or indirectly with reference to the foreign dividend in respect of a share that is an identical share to that share: Provided that the deductible expenditure so incurred or the amount of the reduction must be reduced by any amount of income accrued to the company in respect of any distribution in respect of any other share that is an identical share in relation to that share.[subsection (6A) added by section 11(1) of Act 23 of 2020; effective date 1 January 2021, applicable to foreign dividends received or accrued on or after that date]

(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 numbers contemplated in subsection (3)(b)(ii) will be altered to the extent mentioned in the announcement.[paragraph (a) substituted by section 6(1) of Act 20 of 2022; effective date deemed to have been 17 January 2019]

(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 subject to Parliament passing legislation giving effect to that announcement within that period of 12 months.

[subsection (7) added by section 23(b) of Act 23 of 2018; effective date 17 January 2019, date of promulgation of that Act]

10C. Exemption of non-deductible element of qualifying annuities

[heading substituted by section 14(1)(a) of Act 34 of 2019; effective date 1 March 2020, applicable in respect of any contributions made to a provident or provident preservation fund in determining the taxable annuity received during any year of assessment from such fund in relation to annuities received on or after 1 March 2020]

(1)For the purposes of this section—“qualifying annuity” means the amount of the retirement interest of a person payable in the form of an annuity (including a living annuity)—

(a)as contemplated in paragraph (ii)(dd) of the proviso to paragraph (c) of the definition of “pension fund”;

(b)as contemplated in paragraph (e) of the proviso to the definition of “pension preservation fund”;

(c)as contemplated in paragraph (b)(ii) of the proviso to the definition of “retirement annuity fund”;

(d)as contemplated in paragraph (ii)(dd) of the proviso to the definition of “provident fund” in section 1(1); or[paragraph (d) substituted by section 12(1)(b) of Act 23 of 2020; effective date 1 March 2021, and by section 7(1) of Act 20 of 2022; effective date deemed to have been 1 March 2021]

(e)as contemplated in paragraph (e) of the definition of “provident preservation fund” in section 1(1).[paragraph (e) added by section 12(1)(c) of Act 23 of 2020; effective date 1 March 2021]

[definition of “qualifying annuity”, previously “compulsory annuity”, substituted by section 14(1)(b) of Act 34 of 2019; effective date 1 March 2020, applicable in respect of any contributions made to a provident or provident preservation fund in determining the taxable annuity received during any year of assessment from such fund in relation to annuities received on or after 1 March 2020]

(2)There shall be exempt from normal tax in respect of the aggregate of qualifying annuities payable to a person an amount equal to so much of any contributions to any pension fund, provident fund and retirement annuity fund that did not rank for a deduction against the person’s income in terms of section 11F as has not previously been—[words preceding paragraph (a) substituted by section 14(1)(c) of Act 34 of 2019; effective date 1 March 2020, applicable in respect of any contributions made to a provident or provident preservation fund in determining the taxable annuity received during any year of assessment from such fund in relation to annuities received on or after 1 March 2020, and by section 12(1)(d) of Act 23 of 2020; effective date 1 March 2021]

(a)allowed to the person as a deduction in terms of the Second Schedule; or

(b)exempted from normal tax in terms of this section,

in respect of any prior year of assessment.[words following paragraph (b) substituted by section 24(1) of Act 23 of 2018; effective date 1 March 2016]

11. General deductions allowed in determination of taxable income

For the purpose of determining the taxable income derived by any person from carrying on any trade, there shall be allowed as deductions from the income of such person so derived—

(a)expenditure and losses actually incurred in the production of the income, provided such expenditure and losses are not of a capital nature;

(c)any legal expenses (being fees for the services of legal practitioners, expenses incurred in procuring evidence or expert advice, court fees, witness fees and expenses, taxing fees, the fees and expenses of sheriffs or messengers of court and other expenses of litigation which are of an essentially similar nature to any of the said fees or expenses) actually incurred by the taxpayer during the year of assessment in respect of any claim, dispute or action at law arising in the course of or by reason of the ordinary operations undertaken by him in the carrying on of his trade: Provided that the amount to be allowed under this paragraph in respect of any such expenses shall be limited to so much thereof as—

(i)is not of a capital nature; and

(ii)is not incurred in respect of any claim made against the taxpayer for the payment of damages or compensation if by reason of the nature of the claim or the circumstances any payment which is or might be made in satisfaction or settlement of the claim does not or would not rank for deduction from his income under paragraph (a); and

(iii)is not incurred in respect of any claim made by the taxpayer for the payment to him of any amount which does not or would not constitute income of the taxpayer; and

(iv)is not incurred in respect of any dispute or action at law relating to any such claim as is referred to in paragraph (ii) or (iii) of this proviso;

(cA)an allowance in respect of any amount actually incurred by such person in the course of the carrying on of his trade, as compensation in respect of any restraint of trade imposed on any other person who—

(i)is a natural person;

(ii)is or was 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 such Schedule);

(iii)was a personal service company or personal service trust as defined in the Fourth Schedule prior to section 66 of the Revenue Laws Amendment Act, 2008, coming into operation; or

(iv)is a personal service provider as defined in the Fourth Schedule,

to the extent that such amount constitutes or will constitute income of the person to whom it is paid: Provided that the amount allowed to be deducted under this paragraph shall not exceed for any one year the lesser of—

(aa)so much of such amount so incurred as is equal to such amount divided by the number of years, or part thereof, during which the restraint of trade shall apply; or

(bb)one-third of such amount so incurred;

(d)expenditure actually incurred during the year of assessment on repairs of property occupied for the purpose of trade or in respect of which income is receivable, including any expenditure so incurred on the treatment against attack by beetles of any timber forming part of such property and sums expended for the repair of machinery, implements, utensils and other articles employed by the taxpayer for the purposes of his trade;

(e)save as provided in paragraph 12 (2) of the First Schedule, such sum as the Commissioner may think just and reasonable as representing the amount by which the value of any machinery, plant, implements, utensils and articles (other than machinery, plant, implements, utensils and articles in respect of which a deduction may be granted under section 12B, 12BA, 12C, 12DA, 12E(1), 12U or 37B) owned by the taxpayer or acquired by the taxpayer as purchaser in terms of an agreement contemplated in paragraph (a) of the definition of “installment credit agreement” in section 1 of the Value-Added Tax Act and used by the taxpayer for the purpose of his or her trade has been diminished by reason of wear and tear or depreciation during the year of assessment:[words preceding the proviso substituted by section 11(1)(a) of Act 17 of 2023; effective date deemed to have been 1 March 2023, applies in respect of assets brought into use on or after that date]Provided that—

(iA)no allowance may be made in respect of any machinery, plant, implement, utensil or article the ownership of which is retained by the taxpayer as a seller in terms of an agreement contemplated in paragraph (a) of the definition of “instalment credit agreement” in section 1 of the Value-Added Tax Act;

(ii)in no case shall any allowance be made for the depreciation of buildings or other structures or works of a permanent nature;

(iiA)where any machinery, implement, utensil or article qualifying for an allowance under this paragraph is mounted on or affixed to any concrete or other foundation or supporting structure and—

(aa)the foundation or supporting structure is designed for such machinery, implement, utensil or article and constructed in such manner that it is or should be regarded as being integrated with the machinery, implement, utensil or article; and

(bb)the useful life of the foundation or supporting structure is or will be limited to the useful life of the machinery, implement, utensil or article mounted thereon or affixed thereto,

the said foundation or supporting structure shall for the purposes of this paragraph not be deemed to be a structure or work of a permanent nature but shall for the purposes of this Act be deemed to be a part of the machinery, implement, utensil or article mounted thereon or affixed thereto;

(iiiA)no allowance shall be made under this paragraph in respect of any machinery, implement, utensil or article of which the cost has been allowed as a deduction from the taxpayer’s income under the provisions of section 24D;

(v)the value of any machinery, implements, utensils or articles used by the taxpayer for the purposes of his trade shall be increased by the amount of any expenditure (other than expenditure referred to in paragraph (a)) which is incurred by the taxpayer in moving such machinery, implements, utensils or articles from one location to another;

(vii)where the value of any such machinery, implements, utensils or articles acquired by the taxpayer on or after 15 March 1984 is for the purposes of this paragraph to be determined having regard to the cost of such machinery, implements, utensils or articles, such cost shall be deemed to be the cost which the taxpayer would, if such taxpayer had acquired such machinery, implements, utensils or articles under a cash transaction concluded at arm’s length on the date on which the transaction for the acquisition of such machinery, implements, utensils or articles was in fact concluded, have incurred in respect of the direct cost of the acquisition of such machinery, implements, utensils or articles, including the direct cost of the installation or erection thereof;[paragraph (vii) substituted by section 8(1)(a) of Act 20 of 2022; effective date deemed to have been 29 July 2022, applies in respect of years of assessment ending on or after that date]

(ix)where any such machinery, plant, implement, utensil or article was used by the taxpayer during any previous year of assessment or years of assessment for the purposes of any trade carried on by such taxpayer, the receipts and accruals of which were not included in the income of such taxpayer during such year or years the period of use of such asset during such previous year or years shall be taken into account in determining the amount by which the value of such machinery, plant, implement, utensil or article has been diminished; and[paragraph (ix) amended by section 8(1)(b) of Act 20 of 2022; effective date deemed to have been 29 July 2022, applies in respect of years of assessment ending on or after that date]

(x)no allowance may be made in respect of any machinery, plant, implement, utensil or article acquired by the taxpayer as or with a “government grant” as defined in section 12P(1);[paragraph (x) added by section 8(1)(b) of Act 20 of 2022; effective date deemed to have been 29 July 2022, applies in respect of years of assessment ending on or after that date]

(f)an allowance in respect of any premium or consideration in the nature of a premium paid by a taxpayer for—

(i)the right of use or occupation of land or buildings used or occupied for the production of income or from which income is derived; or

(ii)the right of use of any plant or machinery used for the production of income or from which income is derived; or

(iibis)the right of use of any motion picture film or any sound recording or advertising matter connected with such film, if such film, sound recording or advertising matter is used for the production of income or income is derived therefrom; or

(iii)the right of use of 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 of any other property which is of a similar nature, if such patent, design, trade mark, copyright or other property is used for the production of income or income is derived therefrom; or

(iv)the imparting of or the undertaking to impart any knowledge directly or indirectly connected with the use of such film, sound recording, advertising matter, patent, design, trade mark, copyright or other property as aforesaid; or

(v)the right of use of any pipeline, transmission line or cable or railway line contemplated in the definition of “affected asset” in section 12D, other than an asset contemplated in paragraph (c) of that definition; or[subparagraph (v) substituted by section 25(1)(a) of Act 23 of 2018; effective date 1 April 2019, applicable in respect of assets brought into use on or after that date]

(vi)the right of use of any line or cable used for the transmission of electronic communications contemplated in paragraph (c) of the definition of “affected asset” in section 12D:[subparagraph (vi) added by section 25(1)(b) of Act 23 of 2018; effective date 17 January 2019, date of promulgation of that Act]

Provided that—

(aa)the allowance under sub-paragraph (i), (ii), (ii)bis, (iii) or (v) shall not exceed for any one year such portion of the amount of the premium or consideration so paid as is equal to the said amount divided by the number of years for which the taxpayer is entitled to the use or occupation, or one twenty-fifth of the said amount, whichever is the greater;

(bb)if the taxpayer is entitled to such use or occupation for an indefinite period, or if, in the case of any such right of use or occupation granted under an agreement concluded on or after 1 July 1983, the taxpayer or the person by whom such right of use or occupation was granted holds a right or option to extend or renew the original period of such use or occupation, he shall be deemed, for the purposes of this paragraph, to be entitled to such use or occupation for the period of the probable duration of such use or occupation; and

(cc)the allowance under sub-paragraph (iv) shall not exceed for any one year such portion (not being less than one twenty-fifth) of the amount of the premium or consideration so paid as may be determined having regard to the period during which the taxpayer will enjoy the right to use such film, sound recording, advertising matter, patent, design, trade mark, copyright or other property as aforesaid and any other circumstances which are relevant;

(dd)the provisions of this paragraph shall not apply in relation to any such premium or consideration paid by the taxpayer which does not for the purposes of this Act constitute income of the person to whom it is paid, unless such premium or consideration is paid in respect of a right of use of a line or cable—

(A)used for the transmission of electronic communications; and

(B)substantially the whole of which is located outside the territorial waters of the Republic,

where the term of the right of use is 10 years or more;[words following subparagraph (B) substituted by section 25(1)(c) of Act 23 of 2018; effective date 1 April 2019]

(ee)the allowance under subparagraph (vi) shall not exceed for any one year such portion of the amount of the premium or consideration so paid as is equal to the said amount divided by the number of years for which the taxpayer is entitled to the use or occupation, or one tenth of the said amount, whichever is the greater;[paragraph (ee) added by section 25(1)(d) of Act 23 of 2018; effective date 1 April 2019]

(g)an allowance in respect of any expenditure actually incurred by the taxpayer, in pursuance of an obligation to effect improvements on land or to buildings, incurred under an agreement whereby the right of use or occupation of the land or buildings is granted by any other person, where the land or buildings are used or occupied for the production of income or income is derived therefrom: Provided that—

(i)the aggregate of the allowances under this paragraph shall not exceed the amount stipulated in the agreement as the value of the improvements or as the amount to be expended on the improvements or, if no amount is so stipulated, an amount representing the fair and reasonable value of the improvements;

(ii)any such allowance shall not exceed for any one year such portion of the aggregate of the allowances under this paragraph as is equal to the said aggregate divided by the number of years (calculated from the date on which the improvements are completed, but not more than 25 years) for which the taxpayer is entitled to the use or occupation;

(iii)if—

(aa)the taxpayer is entitled to such use or occupation for an indefinite period; or

(bb)the taxpayer or the person by whom such right of use or occupation was granted holds a right or option to extend or renew the original period of such use or occupation,

the taxpayer shall for the purposes of this paragraph be deemed to be entitled to such use or occupation for such period as represents the probable duration of such use or occupation;

(iv)the aggregate of the allowances under this paragraph in respect of any building or improvements referred to in section 13(1) or 27(2)(b) shall not exceed the cost (after the deduction of any amount which has been set off against the cost of such building or improvements under section 13(3) or section 27(4)) to the taxpayer of such building or improvements less the aggregate of the allowances in respect of such building or improvements made to the taxpayer under the said section 13(1) or 27(2)(b) or the corresponding provisions of any previous Income Tax Act;

(vi)the provisions of this paragraph shall not apply in relation to any such expenditure incurred if the value of such improvements or the amount to be expended on such improvements, as contemplated in paragraph (h) of the definition of “gross income” in section 1, does not for the purposes of this Act constitute income of the person to whom the right to have such improvements effected has accrued;

(vii)if during any year of assessment the agreement whereby the right of use or occupation of the land or buildings is granted is terminated before expiry of the period to which that taxpayer was entitled to the use or occupation, as contemplated in paragraph (ii) or (iii), so much of the allowance which may be allowed under this paragraph, which has not yet been allowed in that year or any previous year of assessment, shall be allowable as a deduction in that year of assessment;

(gA)an allowance in respect of any expenditure (other than expenditure which has qualified in whole or part for deduction or allowance under any of the other provisions of this section or the corresponding provisions of any previous Income Tax Act) actually incurred by the taxpayer—

(i)in devising or developing any invention as defined in the Patents Act or in creating or producing 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 other property which is of a similar nature;

(ii)in obtaining any patent or the restoration of any patent under the Patents Act or the registration of any design under the Designs Act or the registration of any trade mark under the Trade Marks Act or under similar laws of any other country; or

(iii)in acquiring by assignment from any other person any such patent, design, trade mark or copyright or in acquiring any other property of a similar nature or any knowledge essential to the use of such patent, design, trade mark, copyright or other property or the right to have such knowledge imparted,

if such invention, patent, design, trade mark, copyright, other property or knowledge, as the case may be, is used by the taxpayer in the production of his income: Provided that—

(aa)where such expenditure exceeds R5 000, and was incurred—

(A)before 29 October 1999, the allowance shall not exceed for any one year such portion of the amount of the expenditure as is equal to such amount divided by the number of years, which represents the probable duration of use of the invention, patent, design, trade mark, copyright, other property or knowledge, or four per cent of the said amount, whichever is the greater;

(B)on or after 29 October 1999, the allowance shall not for any one year exceed an amount equal to—

(AA)five per cent of the amount of the expenditure in the case of any invention, patent, trade mark, copyright or other property of a similar nature or any knowledge essential to the use of such invention, patent, trade mark, copyright or other property or the right to have such knowledge imparted; or

(BB)10 per cent of the amount of the expenditure in the case of any design or other property of a similar nature or any knowledge essential to the use of such design or other property or the right to have such knowledge imparted;

(bb)where such expenditure was incurred before the commencement of the year of assessment in question the allowance shall be calculated on the amount of such expenditure, less an amount equivalent to the sum of the allowances to which the taxpayer was entitled under this paragraph and the allowances to which the taxpayer would have been entitled under this paragraph if this paragraph had been applicable, in respect of such expenditure in respect of previous years of assessment, including any year of assessment under any previous Income Tax Act;

(cc)no allowance shall be made in respect of any such invention, patent, design, trade mark, copyright or other property or knowledge so acquired or obtained by the taxpayer on or after 24 June 1988, but prior to 1 July 1993 from any other person who is a resident of the Republic or who is ordinarily resident in a neighbouring country (or, in the case of a company, is incorporated or has its place of effective management in a neighbouring country), if—

(A)the taxpayer or such other person is a company and such other person or the taxpayer, as the case may be, is interested in more than 50 per cent of any class of shares issued by such company, whether directly as a holder of shares in that company or indirectly as a holder of shares in any other company; or

(B)both the taxpayer and such other person are companies and any third person is interested in more than 50 per cent of any class of shares issued by one of those companies and in more than 50 per cent of any class of shares issued by the other company, whether directly as a holder of shares in the company by which the shares in question were issued or indirectly as a holder of shares in any other company;

(dd)where any such invention, patent, design, trade mark, copyright or other property or knowledge was so acquired or obtained by the taxpayer on or after 1 July 1993 from any other person who is a resident of the Republic or who is ordinarily resident in a neighbouring country (or, in the case of a company, is incorporated or has its place of effective management in a neighbouring country), and who is a connected person in relation to the taxpayer, the allowance under this paragraph shall be calculated on an amount not exceeding the lesser of the cost of such invention, patent, design, trade mark, copyright or other property or knowledge to such connected person or the market value thereof as determined on the date upon which such invention, patent, design, trade mark, copyright or other property or knowledge was acquired or obtained by the taxpayer;

(ee)no allowance shall be made in respect of any expenditure incurred by such taxpayer on or after 29 October 1999, in respect of the acquisition from any other person of any trade mark or other property of a similar nature or any knowledge essential to the use of such trade mark or the right to have such knowledge imparted;

(ff)no deduction shall be allowed under this paragraph in respect of any expenditure incurred by the taxpayer during any year of assessment commencing on or after 1 January 2004;

(gB)expenditure (other than expenditure which has qualified in whole or part for deduction or allowance under any of the other provisions of this section) actually incurred by the taxpayer during the year of assessment in obtaining the grant of any patent or the restoration of any patent, or the extension of the term of any patent under the Patents Act or the registration of any design, or extension of the registration period of any design under the Designs Act or the registration of any trade mark, or the renewal of the registration of any trade mark under the Trade Marks Act or under similar laws of any other country, if such patent, design or trade mark is used by the taxpayer in the production of his or her income;

(gC)an allowance in respect of any expenditure actually incurred by the taxpayer during any year of assessment commencing on or after 1 January 2004 to acquire (otherwise than by way of devising, developing or creating) any—

(i)invention or patent as defined in the Patents Act;

(ii)design as defined in the Designs Act;

(iii)copyright as defined in the Copyright Act;

(iv)other property which is of a similar nature (other than trade marks as defined in the Trade Marks Act); or

(v)knowledge essential to the use of such patent, design, copyright or other property or the right to have such knowledge imparted,

which shall be allowed during the year of assessment in which that invention, patent, design, copyright, other property or knowledge is brought into use for the first time by the taxpayer for the purposes of the taxpayer’s trade, if that invention, patent, design, copyright, other property or knowledge, as the case may be, is used by the taxpayer in the production of his or her income: Provided that—

(aa)where that expenditure actually incurred by the taxpayer exceeds R5 000, that allowance shall not exceed in any year of assessment—

(A)five per cent of the amount of the expenditure in respect of any invention, patent, copyright or other property of a similar nature or any knowledge essential to the use of such invention, patent, copyright or other property or the right to have such knowledge imparted; or

(B)10 per cent of the amount of the expenditure in respect of any design or other property of a similar nature or any knowledge essential to the use of such design or other property or the right to have such knowledge imparted;

(gD)where that trade constitutes the provision of telecommunication services, the exploration, production or distribution of petroleum or the provision of gambling facilities, any expenditure (other than in respect of infrastructure) incurred to acquire a licence from the government of the Republic in the national, provincial or local sphere, contemplated in section 10(1)(a), or an institution or entity contemplated in Schedule 1 or Part A or C of Schedule 3 to the Public Finance Management Act, where that expenditure is incurred in terms of the licence and the licence is required to carry on that trade, which deduction must not exceed for any one year such portion of the expenditure as is equal to the amount of the expenditure divided by the number of years for which the taxpayer has the right to the licence after the date on which the expenditure was incurred, or 30, whichever is the lesser;

(h)such allowance in respect of amounts included in the taxpayer’s gross income under paragraph (g) or paragraph (h) of the definition of “gross income” in section 1 as the Commissioner may deem reasonable having regard to any special circumstances of the case and, in the case of an amount so included under the said paragraph (h), to the original period for which the right of use or occupation was granted or, in the case of any amount so included under the said paragraph (h) in consequence of an agreement concluded on or after 1 July 1983, to the number of years taken into account in the determination of the relevant allowance granted to any other person under the provisions of paragraph (g) of this section: Provided that where there has on or after the twenty-ninth day of March, 1972, accrued to the taxpayer the right to have improvements effected on land or to buildings by any other person and an amount is required to be included in the taxpayer’s gross income under the said paragraph (h) with respect to such improvements, no allowance shall be made to the taxpayer under this paragraph in respect of such amount, if—

(i)the taxpayer or such other person is a company and such other person or the taxpayer, as the case may be, is interested in more than 50 per cent of any class of shares issued by such company, whether directly as a holder of shares in that company or indirectly as a holder of shares in any other company; or

(ii)both the taxpayer and such other person are companies and any third person is interested in more than 50 per cent of any class of shares issued by one of those companies and in more than 50 per cent of any class of shares issued by the other company, whether directly as a holder of shares in the company by which the shares in question were issued or indirectly as a holder of shares in any other company;

(hB)an allowance in respect of expenditure actually incurred and paid in the production of income to discharge all consideration, royalties or compensation otherwise payable to a community or natural person in respect of any existing consideration, contractual royalty, future consideration or compensation that accrued to that community or natural person as contemplated in Item 11 of Schedule II of the Petroleum Resources Development Act, 2002 (Act No. 28 of 2002): Provided that for any year of assessment, the allowance shall not exceed an amount equal to the expenditure incurred and paid divided by the number of years for which all consideration, royalties or compensation otherwise payable has been discharged;

(i)the amount of any debt due to the taxpayer which has during the year of assessment become bad, provided such amount is included in the current year of assessment or was included in previous years of assessment in the taxpayer’s income;

(j)an allowance in respect of any debt due to the taxpayer, if that debt would have been allowed as a deduction under any other provision of this Part had that debt become bad, of an amount equal to—

(i)if IFRS 9 is applied to that debt by that person for financial reporting purposes, other than in respect of lease receivables as defined in IFRS 9 that have not been included in income, the sum of—[words preceding item (aa) substituted by section 13(1)(a) of Act 23 of 2020; effective date 28 October 2020, applicable in respect of years of assessment commencing on or after that date]

(aa)40 per cent of the aggregate of—

(A)the loss allowance relating to impairment that is measured at an amount equal to the lifetime expected credit loss, as contemplated in IFRS 9, in respect of debt; and[subitem (A) substituted by section 13(1)(b) of Act 23 of 2020; effective date 28 October 2020, applicable in respect of years of assessment commencing on or after that date]

(B)the amounts of debts included in the income of the taxpayer in the current or any previous year of assessment that are disclosed as bad debt written off for financial reporting purposes and that have not been allowed as a deduction under section 11(a) or (i) for the current or any previous year of assessment; and

(bb)25 per cent of the loss allowance relating to impairment, as contemplated in IFRS 9, in respect of debt other than in respect of debt taken into account under item (aa); or[item (bb) substituted by section 13(1)(c) of Act 23 of 2020; effective date 28 October 2020, applicable in respect of years of assessment commencing on or after that date]

(ii)if IFRS 9 is not applied to that debt by that person for financial reporting purposes, the sum of—

(aa)40 per cent of so much of any debt, other than a debt contemplated in subparagraph (i), due to the taxpayer, if that debt is 120 days or more in arrears, after taking into account the value of any security in respect of that debt; and[item (aa) substituted by section 13(1)(d) of Act 23 of 2020; effective date 1 January 2021, applicable in respect of years of assessment commencing on or after that date]

(bb)25 per cent of so much of any debt, other than a debt contemplated in subparagraph (i) or item (aa), due to the taxpayer, if that debt is 60 days or more in arrears, after taking into account the value of any security in respect of that debt:[item (bb) substituted by section 13(1)(d) of Act 23 of 2020; effective date 1 January 2021, applicable in respect of years of assessment commencing on or after that date]

Provided that an allowance under this paragraph must be included in the income of the taxpayer in the following year of assessment:Provided further that the Commissioner may, on application by a taxpayer, issue a directive that the percentage contemplated in subparagraph (i)(aa) or (ii)(aa) may be increased, to a percentage not exceeding 85 per cent after taking into account—

(a)the history of a debt owed to that taxpayer, including the number of repayments not met, and the duration of the debt;

(b)steps taken to enforce repayment of the debt;

(c)the likelihood of the debt being recovered;

(d)any security available in respect of that debt;

(e)the criteria applied by the taxpayer in classifying debt as bad; and

(f)such other considerations as the Commissioner may deem relevant;

[paragraph (j) substituted by section 18(1)(i) of Act 25 of 2015 (retroactively deleted by section 85(1) of Act 34 of 2019), by section 25(1)(e) of Act 23 of 2018; effective date 1 January 2019, and by section 15(1)(a) of Act 34 of 2019; effective date 15 January 2020, date of promulgation of that Act]

(jA)notwithstanding paragraph (j), an allowance equal to 25 per cent of the loss allowance relating to impairment, as contemplated in IFRS 9, other than in respect of lease receivables as defined in IFRS 9 that have not been included in income, if the person is a covered person, other than a person that is a controlling company as defined in the Banks Act, as determined by applying the criteria in paragraphs (c)(i) to (iii) and (d) of the definition of “covered person” in section 24JB(1): Provided that the allowance must be increased—[words preceding the proviso substituted by section 25(1)(f) of Act 23 of 2018; effective date 1 January 2018, by section 15(1)(b) of Act 34 of 2019; effective date 1 January 2018, and by section 13(1)(e) of Act 23 of 2020; effective date 1 January 2021, applicable in respect of years of assessment commencing on or after that date]

(a)to 85 per cent of so much of that loss allowance relating to impairment as is equal to the amount that is in default, as determined by applying to any credit exposure, including any retail exposure, the criteria in paragraphs (a)(ii) to (vi) and (b) of the definition of “default” as defined in Regulation 67 of the regulations issued in terms of section 90 of the Banks Act (contained in Government Notice No. R.1029 published in Government Gazette No. 35950 of 12 December 2012); and

(b)to 40 per cent of so much of that loss allowance relating to impairment as is equal to the difference between—

(i)the amount of the loss allowance relating to impairment that is measured at an amount equal to the lifetime expected credit losses; and

(ii)the amount that is in default as determined under paragraph (a):

Provided further that the allowance must be included in the income of that person in the following year of assessment:Provided further that the loss allowance relating to impairment must exclude any loss allowance in respect of a financial asset that would not be allowed to be deducted under paragraph (a) or (i) if it became bad;[further proviso added by section 13(1)(f) of Act 23 of 2020; effective date 28 October 2020, applicable in respect of years of assessment commencing on or after that date]

(l)any amount contributed by a person that is an employer during the year of assessment for the benefit of or on behalf of any employee or former employee of the employer or for any dependant or nominee of a deceased employee or former employee of that employer to any pension fund, provident fund or retirement annuity fund in terms of the rules of that fund: Provided that for the purposes of this paragraph 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;[paragraph (l) substituted by section 25(1)(g) of Act 23 of 2018; effective date 1 March 2018]

(lA)an amount equal to the market value of any qualifying equity share granted to an employee of that person as contemplated in section 8B, as determined on the date of grant as defined in that section less any consideration given by that employee for that qualifying equity share, which applies in lieu of any other deduction which may otherwise be allowed to that person or any other person in respect of the granting of that share: Provided that the deduction under this paragraph may not during any year of assessment in aggregate exceed an amount of R10 000 in respect of all qualifying equity shares granted to a single employee and so much as exceeds that amount may be carried forward to the immediately succeeding year of assessment and that excess is deemed to be the market value of qualifying equity shares granted to the relevant employee during that immediately succeeding year for purposes of this paragraph;

(m)any amount paid by way of annuity during the year of assessment by any taxpayer—

(i)to a former employee who has retired from the taxpayer’s employ on grounds of old age, ill health or infirmity; or

(ii)to a person who was for a period of at least five years a partner in an undertaking carried on by the taxpayer and who retired from the partnership in respect of that undertaking on grounds of old age, ill health or infirmity, provided that the amount so paid to such person is reasonable, having regard to the services rendered by such person as a partner in such undertaking prior to his retirement and the profits made in such undertaking, and that the said amount does not represent consideration payable to such person in respect of his interest in the partnership; or

(iii)to any person who is dependent for his maintenance upon a former employee or a former partner in an undertaking carried on by the taxpayer or (where such former employee or former partner is deceased) was so dependent immediately prior to his death;

(nA)so much of any amount, including any voluntary award, received or accrued in respect of services rendered or to be rendered or any amount received or accrued in respect of or by virtue of any employment or the holding of any office as was included in the taxable income of that person and is refunded by that person;

(nB)so much of any amount contemplated in paragraph (cA) or (cB) of the definition of “gross income” received by or accrued to any person as is refunded by that person;[paragraph (nB) substituted by section 25(1)(h) of Act 23 of 2018; effective date 17 January 2019, date of promulgation of that Act]

(o)at the election of the taxpayer, an amount by which the cost to that taxpayer of any depreciable asset—

(i)which qualified for an allowance or deduction in terms of section 11(e), 11D, 12B, 12BA, 12C, 12DA, 12E or 37B(2)(a); and[subparagraph (i) substituted by section 25(1)(i) of Act 23 of 2018, and by section 11(1)(b) of Act 17 of 2023; effective date deemed to have been 1 March 2023, applies in respect of assets brought into use on or after that date]

(ii)the expected useful life of which for tax purposes did not exceed ten years as determined on the date of original acquisition,

exceeds the sum of the amount received or accrued from the alienation, loss or destruction of that asset and the amount of any allowance or deduction allowed in respect of that asset in that year or any previous year of assessment or which was deemed to have been allowed in terms of section 12B(4B), 12C(4A), 12DA(4) or 37B(4) or taken into account in terms of section 11(e)(ix), as the case may be: Provided that for the purposes of this paragraph—

(aa)the cost of any plant, machinery, implements, utensils or articles shall be deemed to be the actual cost plus the amount by which the value of such plant, machinery, implements, utensils or articles has been increased in terms of paragraph (v) of the proviso to paragraph (e);

(bb)the actual cost of any plant, machinery, implement, utensil or article acquired by the taxpayer on or after 15 March 1984 shall be deemed to be the cost of that plant, machinery, implement, utensil or article as determined under paragraph (vii) of the proviso to paragraph (e):

Provided further that no election may be made in terms of this paragraph by the taxpayer if the amount received or accrued from the alienation, loss or destruction of the asset was received or accrued from a person that is a connected person in relation to the taxpayer;

(w)expenditure incurred by a taxpayer in respect of any premiums payable under a policy of insurance (other than a policy of insurance that relates to the death, disablement or illness of an employee or director of the taxpayer arising solely out of and in the course of employment of such employee or director) of which the taxpayer is the policyholder, where—

(i)

(aa)the policy relates to the death, disablement or illness of an employee or director of the taxpayer; and

(bb)the amount of expenditure incurred by the taxpayer in respect of the premiums payable under the policy is deemed to be a taxable benefit granted to an employee or director of the taxpayer in terms of paragraph 2(k) of the Seventh Schedule; or

(ii)

(aa)the taxpayer is insured against any loss by reason of the death, disablement or illness of an employee or director of the taxpayer;

(bb)the policy is a risk policy with no cash value or surrender value;

(cc)the policy is not the property of any person other than the taxpayer at the time of the payment of the premium; and

(dd)in respect of any policy entered into—

(A)on or after 1 March 2012, the policy agreement states that this paragraph applies in respect of premiums payable under that policy; or

(B)before 1 March 2012, it is stated in an addendum to the policy agreement by no later than 31 August 2012 that this paragraph applies in respect of premiums payable under that policy;

(x)any amounts which in terms of any other provision in this Part, are allowed to be deducted from the income of the taxpayer.

11A. Deductions in respect of expenditure and losses incurred prior to commencement of trade

(1)For purposes of determining the taxable income derived during any year of assessment by a person from carrying on any trade, there shall be allowed as a deduction from the income so derived, any expenditure and losses—

(a)actually incurred by that person prior to the commencement of and in preparation for carrying on that trade;

(b)which would have been allowed as a deduction in terms of section 11 (other than section 11(x)), 11B, 11D or 24J, had the expenditure or losses been incurred after that person commenced carrying on that trade; and

(c)which were not allowed as a deduction in that year or any previous year of assessment.

(2)So much of the expenditure and losses contemplated in subsection (1) as exceeds the income derived during the year of assessment from carrying on that trade after deduction of any amounts allowable in that year of assessment in terms of any other provision of this Act, shall not be set off against any income of that person which is derived otherwise than from carrying on that trade, notwithstanding section 20(1)(b).

11D. Deductions in respect of scientific or technological research and development

(1)For the purposes of this section “research and development” means systematic investigative or systematic experimental activities of which the result is uncertain for the purpose of—

(a)discovering non-obvious scientific or technological knowledge;

(b)creating or developing—

(i)an invention as defined in section 2 of the Patents Act;

(ii)a functional design—

(aa)as defined in section 1 of the Designs Act, capable of qualifying for registration under section 14 of that Act; and

(bb)that is innovative in respect of the functional characteristics or intended uses of that functional design;

(iii)a computer program as defined in section 1 of the Copyright Act which is of an innovative nature; or

(iv)knowledge essential to the use of such invention, functional design or computer program other than creating or developing operating manuals or instruction manuals or documents of a similar nature intended to be utilised in respect of that invention, functional design or computer program subsequent to the research and development being completed; or

(c)making a significant and innovative improvement to any invention, functional design, computer program or knowledge contemplated in paragraph (a)or (b) for the purposes of—

(i)new or improved function;

(ii)improvement of performance;

(iii)improvement of reliability; or

(iv)improvement of quality,

of that invention, functional design, computer program or knowledge;

(d)creating or developing a multisource pharmaceutical product, as defined in the World Health Organisation Technical Report Series, No. 937, 2006 Annex 7 Multisource (generic) pharmaceutical products: guidelines on registration requirements to establish interchangeability issued by the World Health Organisation, conforming to such requirements as must be prescribed by regulations made by the Minister after consultation with the Minister for Science and Technology; or

(e)conducting a clinical trial as defined in Appendix F of the Guidelines for good practice in the conduct of clinical trials with human participants in South Africa issued by the Department of Health (2006), conforming to such requirements as must be prescribed by regulations made by the Minister after consultation with the Minister for Science and Technology:

Provided that for the purposes of this definition, research and development does not include activities for the purpose of—

(a)routine testing, analysis, collection of information or quality control in the normal course of business;

(b)development of internal business processes unless those internal business processes are mainly intended for sale or for granting the use or right of use or permission to use thereof to persons who are not connected persons in relation to the person carrying on that research and development;

(c)market research, market testing or sales promotion;

(d)social science research, including the arts and humanities;

(e)oil and gas or mineral exploration or prospecting except research and development carried on to develop technology used for that exploration or prospecting;

(f)the creation or development of financial instruments or financial products;

(g)the creation or enhancement of trademarks or goodwill; or

(h)any expenditure contemplated in section 11(gB) or (gC).

(2)

(a)For the purposes of determining the taxable income of a taxpayer that is a company in respect of any year of assessment there shall be allowed as a deduction from the income of that taxpayer an amount equal to 150 per cent of so much of any expenditure actually incurred by that taxpayer directly and solely in respect of the carrying on of research and development in the Republic if—

(i)that expenditure is incurred in the production of income;

(ii)that expenditure is incurred in the carrying on of any trade;

(iii)that research and development is approved in terms of subsection (9); and

(iv)that expenditure is incurred on or after the date of receipt of the application by the Department of Science and Technology for approval of that research and development in terms of subsection (9).

(b)No deduction may be allowed under this subsection in respect of expenditure incurred in respect of—

(i)immovable property, machinery, plant, implements, utensils or articles excluding any prototype or pilot plant created solely for the purpose of the process of research and development and that prototype or pilot plant is not intended to be utilised or is not utilised for production purposes after that research and development is completed;

(ii)financing, administration, compliance and similar costs.

(4)Where any amount of expenditure is incurred by a taxpayer to fund expenditure of another person carrying on research and development on behalf of that taxpayer, the taxpayer may deduct an amount contemplated in subsection (2)—

(a)if that research and development is approved by the Minister of Science and Technology in terms of subsection (9);

(b)if that expenditure is incurred in respect of research and development carried on by that taxpayer;

(c)to the extent that the other person carrying on the research and development is—

(i)

(aa)an institution, board or body that is exempt from normal tax under section 10(1)(cA); or

(bb)the Council for Scientific and Industrial Research; or

(ii)a company forming part of the same group of companies, as defined in section 41, if the company that carries on the research and development does not claim a deduction under subsection (2); and

(d)if that expenditure is incurred on or after the date of receipt of the application by the Department of Science and Technology for approval of that research and development in terms of subsection (9).

(5)Where a company funds expenditure incurred by another company as contemplated in subsection (4)(c)(ii), any deduction under that subsection by the company that funds the expenditure must be limited to an amount of 150 per cent of the actual expenditure incurred directly and solely in respect of that research and development carried on by the other company that is being funded.

(6)For the purposes of subsections (2) and (4)—

(a)a person carries on research and development if that person may determine or alter the methodology of the research;

(b)notwithstanding paragraph (a), certain categories of research and development designated by the Minister by notice in the Gazette are deemed to constitute the carrying on of research and development.

(7)Where any amount is received by or accrues to a taxpayer from—

(a)a department of the Government of the Republic in the national, provincial or local sphere;

(b)a public entity that is listed in Schedule 2 or 3 to the Public Finance Management Act; or

(c)a municipal entity as defined in section 1 of the Local Government: Municipal Systems Act, 2000 (Act No. 32 of 2000),

to fund expenditure in respect of any research and development, an amount equal to the amount that is funded must not be taken into account for purposes of the deduction under subsection 2 or (4).

(9)The Minister of Science and Technology or a person appointed by the Minister of Science and Technology must approve any research and development being carried on or funded for the purposes of subsections (2) and (4) having regard to—

(a)whether the taxpayer has proved to the committee that the research and development in respect of which the approval is sought complies with the criteria contemplated in the definition of “research and development” in subsection (1); and;

(c)such other criteria as the Minister of Finance in consultation with the Minister of Science and Technology may prescribe by regulation.

(10)If research and development is approved under subsection (9) and—

(a)any material fact changes which would have had the effect that approval under subsection (9) would not have been granted had that fact been known to the Minister of Science and Technology at the time of granting approval;

(b)the taxpayer carrying on that research and development fails to submit a report to the committee as required by subsection (13); or

(c)the taxpayer carrying on that research and development is guilty of fraud, or misrepresentation or non-disclosure of material facts which would have had the effect that approval under subsection (9) would not have been granted,

the Minister of Science and Technology may, after taking into account the recommendations of the committee, withdraw the approval granted in respect of that research and development with effect from a date specified by that Minister.

(11)

(a)A committee must be appointed for the purposes of approving research and development under subsection (9) consisting of—

(i)three persons employed by the Department of Science and Technology, appointed by the Minister of Science and Technology;

(ii)one person employed by the National Treasury, appointed by the Minister of Finance; and

(iii)three persons from the South African Revenue Service, appointed by the Minister of Finance.

(b)The Minister of Science and Technology or the Minister of Finance may appoint alternative persons to the committee if a person appointed in terms of paragraph (a) is not available to perform any function as a member of the committee.

(c)If any person is appointed as an alternative in terms of paragraph (a), that person may perform the function of any other person from the Department of Science and Technology, or the South African Revenue Service in respect of which institution that person is appointed as alternative.

(12)

(a)The committee appointed in terms of subsection (11) must perform its functions impartially and without fear, favour or prejudice.

(b)The committee may—

(i)appoint its own chairperson and determine the procedures for its meetings;

(ii)evaluate any application and make recommendations to the Minister of Science and Technology for purposes of the approval of research and development in terms of subsection (9);

(iii)investigate or cause to be investigated research and development approved under subsection (9);

(iv)monitor all research and development approved under subsection (9)—

(aa)to determine whether the objectives of this section are being achieved; and

(bb)to advise the Minister of Finance and the Minister of Science and Technology on any future proposed amendment or adjustment of this section;

(v)for a specific purpose and on the conditions and for the period as it may determine, obtain the assistance of any person to advise the committee relating to any function assigned to that committee in terms of this section; and

(vi)require any taxpayer applying for approval of research and development in terms of subsection (9), to furnish any information or documents necessary for the Minister of Science and Technology and the committee to perform their functions in terms of this section.

(13)A taxpayer carrying on research and development approved under subsection (9) must report to the committee annually with respect to—

(a)the progress of that research and development; and

(b)the extent to which that research and development requires specialised skills,

within 12 months after the close of each year of assessment, starting with the year following the year in which approval is granted under subsection (9) in the form and in the manner that the Minister of Science and Technology may prescribe.

(14)Notwithstanding Chapter 6 of the Tax Administration Act, the Commissioner may disclose to the Minister of Science and Technology information in relation to research and development—

(a)as may be required by that Minister for the purposes of submitting a report to Parliament in terms of subsection (17); and

(b)if that information is material in respect of the granting of approval under subsection (9) or a withdrawal of that approval in terms of subsection (10).

(15)The members of the committee appointed in terms of subsection (11) and any person whose assistance has been obtained by that committee may not—

(a)act in any way that is inconsistent with the provisions of subsection (12)(a) or expose themselves to any situation involving the risk of a conflict between their responsibilities and private interests; or

(b)use their position or any information entrusted to them to enrich themselves or improperly benefit any other person.

(16)The Minister of Science and Technology or the person appointed by the Minister of Science and Technology contemplated in subsection (9) must—

(a)provide written reasons for any decision to grant or deny any application for approval of any research and development under subsection (9), or for any withdrawal of approval contemplated in subsection (10);

(b)inform the Commissioner of the approval of any research and development under subsection (9), setting out such particulars as are required by the Commissioner to determine the amount of the deduction in terms of subsection (2) or (4); and

(c)inform the Commissioner of any withdrawal of approval in terms of subsection (10) and of the date on which that withdrawal takes effect.

(17)The Minister of Science and Technology must annually submit a report to Parliament advising Parliament of the direct benefits of the research and development in terms of economic growth, employment and other broader government objectives and the aggregate expenditure in respect of such activities without disclosing the identity of any person.

(18)Every employee of the Department of Science and Technology, every member of the committee appointed in terms of subsection (11) and any person whose assistance has been obtained by that committee—

(a)must preserve and aid in preserving secrecy with regard to all matters that may come to their knowledge in the performance of their functions in terms of this section; and

(b)may not communicate any such matter to any person whatsoever other than to the taxpayer concerned or its legal representative, nor allow any such person to have access to any records in the possession or custody of the Department of Science and Technology or committee, except in terms of the law or an order of court.

(19)For the purposes of subsection (1), the Commissioner may, notwithstanding the provisions of sections 99 and 100 of the Tax Administration Act, raise an additional assessment for any year of assessment with respect to a deduction in respect of research and development which has been allowed, where approval has been withdrawn in terms of subsection (10).

(20)

(a)A taxpayer may, notwithstanding Chapter 8 of the Tax Administration Act, apply to the Commissioner to allow all deductions provided for under this section in respect of research and development if—

(i)expenditure in respect of that research and development was incurred on or after the date of receipt of an application by the Department of Science and Technology for the approval of that research and development;

(ii)that expenditure was not allowable in respect of a year of assessment solely by reason of the absence of approval of that research and development under subsection (9); and

(iii)that research and development is approved in terms of subsection (9) after that year of assessment.

(b)The Commissioner may, notwithstanding the provisions of sections 99 and 100 of the Tax Administration Act, make a reduced assessment for a year of assessment where expenditure incurred during that year in respect of research and development would have been allowable as a deduction in terms of this section had the approval in terms of subsection (9) been granted during that year of assessment.

11E. Deduction of certain expenditure incurred by sporting bodies

For the purpose of determining the taxable income derived by—

(a)any non-profit company as defined in the Companies Act; or

(b)an association of persons that has been incorporated, formed or established in the Republic,

from carrying on any sporting activities falling under a code of sport administered and controlled by a national federation as contemplated in section 1 of the National Sport and Recreation Act, 1998 (Act No. 110 of 1998), there shall be allowed as a deduction from the income of that company or association—

(i)expenditure, not of a capital nature, incurred by that company or association on the development and promotion, directly by that company or association; or

(ii)any payment made to any other company or association contemplated in this section for expenditure to be incurred on the development and promotion,

of sporting activities contemplated in paragraph 9 of Part I of the Ninth Schedule falling under that code of sport.

11F. Deduction in respect of contributions to retirement funds

(1)Notwithstanding section 23(g), for the purposes of determining the taxable income of a natural person in respect of any year of assessment there must be allowed as a deduction from the income of that person any amount contributed during a year of assessment to any pension fund, provident fund or retirement annuity fund in terms of the rules of that fund by a person that is a member of that fund.

(2)The total deduction allowed in terms of subsection (1) must not in a year of assessment exceed the lesser of—

(a)R350 000;[paragraph (a) amended by section 26(1)(a) of Act 23 of 2018; effective date 1 March 2019]

(b)27,5 per cent of the higher of the person’s—

(i)remuneration (other than in respect of any retirement fund lump sum benefit, retirement fund lump sum withdrawal benefit and severance benefit) as defined in paragraph 1 of the Fourth Schedule; or

(ii)taxable income (other than in respect of any retirement fund lump sum benefit, retirement fund lump sum withdrawal benefit and severance benefit) as determined before allowing any deduction under this section and sections 6quat(1C) and 18A; or[subparagraph (ii) substituted by section 26(1)(b) of Act 23 of 2018; effective date 1 March 2019]

(c)the taxable income (other than in respect of any retirement fund lump sum benefit, retirement fund lump sum withdrawal benefit and severance benefit) of that person before—[words preceding subparagraph (i) substituted by section 26(1)(c) of Act 23 of 2018; effective date 1 March 2019]

(i)allowing any deduction under this section and sections 6quat(1C) and 18A; and[subparagraph (i) substituted by section 26(1)(c) of Act 23 of 2018; effective date 1 March 2019]

(ii)the inclusion of any taxable capital gain.

(3)Any amount contributed to a pension fund, provident fund or retirement annuity fund in any previous year of assessment which has been disallowed solely by reason of the fact that the amount that was contributed exceeds the amount of the deduction allowable in respect of that year of assessment is deemed to be an amount contributed in the current year of assessment, except to the extent that the amount contributed has been—

(a)allowed as a deduction against income in any year of assessment;

(b)accounted for under paragraph 5(1)(a) or 6(1)(b)(i) of the Second Schedule; or

(c)taken into account in determining the amounts exempt under section 10C.[paragraph (c) substituted by section 26(1)(d) of Act 23 of 2018; effective date 17 January 2019, date of promulgation of that Act]

(4)Any amount paid or contributed by an employer of the person on behalf of or for the benefit of that person must be deemed—

(a)

(i)to be equal to the amount of the cash equivalent of the value of the taxable benefit contemplated in paragraph 2(l) of the Seventh Schedule determined in accordance with paragraph 12D of that Schedule; or

(ii)if that amount is paid by an employer to a retirement annuity fund, to be equal to the amount of the cash equivalent of the value of the taxable benefit contemplated in paragraph 2(h) of the Seventh Schedule determined in accordance with paragraph 13 of that Schedule; and

(b)to have been contributed by that person.

[subsection (4) substituted by section 26(1)(e) of Act 23 of 2018; effective date 17 January 2019, date of promulgation of that Act]

(5)For the purposes of this section—

(a)a partner in a partnership must be deemed to be an employee of the partnership; and

(b)a partnership must be deemed to be the employer of the partners in that partnership.

11sex. Deduction of compensation for railway operating losses

For the purpose of determining the taxable income derived by any taxpayer from carrying on any trade within the Republic, there shall be allowed as a deduction from the income of the taxpayer so derived the amount of any compensation due to Transnet Limited and paid by the taxpayer (whether directly or through any trade association of which the taxpayer is a member) in respect of any loss incurred by Transnet Limited in operating any railway line, if—

(a)such railway line was constructed under or in pursuance of a written agreement with Transnet Limited in terms of which Transnet Limited undertook to operate the railway line;

(b)the compensation so paid was paid in order to discharge an obligation under the said agreement to pay such compensation; and

(c)the taxpayer’s liability to pay such compensation was incurred in connection with his trade.

12B. Deduction in respect of certain machinery, plant, implements, utensils and articles used in farming or production of renewable energy

(1)In respect of any—

(f)machinery, implement, utensil or article (other than livestock) which is owned by the taxpayer or acquired by the taxpayer as purchaser in terms of an agreement contemplated in paragraph (a) of the definition of “instalment credit agreement” in section 1 of the Value-Added Tax Act and brought into use for the first time by that taxpayer and used by him or her in the carrying on of his or her farming operations, except any motor vehicle the sole or primary function of which is the conveyance of persons or any caravan or any aircraft (other than an aircraft used solely or mainly for the purpose of crop-spraying) or any office furniture or equipment;

(g)machinery, plant, implement, utensil or article owned by the taxpayer or acquired by the taxpayer as purchaser in terms of an agreement contemplated in paragraph (a) of the definition of “instalment credit agreement” in section 1 of the Value-Added Tax Act and which was or is brought into use for the first time by the taxpayer for the purpose of his or her trade to be used for the production of bio-diesel or bio-ethanol;

(h)machinery, plant, implement, utensil or article owned by the taxpayer or acquired by the taxpayer as purchaser in terms of an agreement contemplated in paragraph (a) of the definition of “instalment credit agreement” in section 1 of the Value-Added Tax Act and which was or is brought into use for the first time by that taxpayer for the purpose of his or her trade to be used by that taxpayer in the generation of electricity from—

(i)wind power;

(ii)

(aa)photovoltaic solar energy of more than 1 megawatt;

(bb)photovoltaic solar energy not exceeding 1 megawatt; or

(cc)concentrated solar energy;

(iii)hydropower to produce electricity of not more than 30 megawatts; or[subparagraph (iii) amended by section 16 of Act 34 of 2019; effective date 15 January 2020, date of promulgation of that Act]

(iv)biomass comprising organic wastes, landfill gas or plant material; or

(i)improvements (other than repairs) to—

(a)any machinery, plant, implement, utensil or article referred to in paragraph (f), (g) or (h); and

(b)any foundation or supporting structure that is, in terms of the proviso to this subsection, deemed to be part of the machinery, plant, implement, utensil or article referred to in paragraph (h),

which is during the year of assessment used as contemplated in the relevant paragraph,

a deduction calculated in terms of subsection (2) shall be allowed in respect of the year of assessment during which such machinery, plant, implement, utensil or article or any improvement thereto (hereinafter referred to as an asset) is so brought into use and each of the two succeeding years of assessment, such succeeding years of assessment hereinafter in this section referred to as the second and third years, in chronological order: Provided that where any machinery, plant, implement, utensil, article or improvement for which a deduction is allowed under paragraph (h) is mounted on or affixed to any concrete or other foundation or supporting structure and—

(a)the foundation or supporting structure is designed for such machinery, plant, implement, utensil, article or improvement and constructed in such manner that it is or should be regarded as being integrated with the machinery, plant, implement, utensil, article or improvement;

(b)the useful life of the foundation or supporting structure is or will be limited to the useful life of the machinery, plant, implement, utensil, article or improvement mounted thereon or affixed thereto; and

(c)the foundation or supporting structure was brought into use on or after 1 January 2013,

the foundation or supporting structure shall be deemed to be a part of the machinery, plant, implement, utensil, article or improvement mounted thereon or affixed thereto.

(2)The deduction contemplated in subsection (1) shall be calculated on the cost to the taxpayer of the asset and the rate of the allowance shall be—

(a)in the case of an asset other than an asset contemplated in paragraph (b)—

(i)in respect of the year of assessment during which the asset is so brought into use, 50 per cent of such cost;

(ii)in respect of the second year, 30 per cent of such cost; and

(iii)in respect of the third year, 20 per cent of such cost;

(b)in the case of an asset contemplated in subsection (1)(h)(ii)(bb), 100 per cent of such cost.

(3)For the purposes of this section the cost to a taxpayer of any asset acquired by that taxpayer shall be deemed to be the lesser of the actual cost to the taxpayer or the cost which a person would, if he or she had acquired the asset under a cash transaction concluded at arm’s length on the date on which the transaction for the acquisition of the asset was in fact concluded, have incurred in respect of the direct cost of acquisition of the asset, including the direct cost of the installation or erection thereof.

(4)No deduction shall be allowed under this section in respect of—

(a)any asset which has been let by the taxpayer under a lease other than an operating lease as defined in section 23A(1), unless—

(i)the lessee under such lease derives in the carrying on of his trade amounts constituting income for the purposes of this Act; and

(ii)the period for which the asset is let under such lease is at least 5 years or such shorter period as is shown by the taxpayer to be the useful life of the asset;

(c)any asset brought into use by any company during any year of assessment if such asset was previously brought into use by any other company during such year and both such companies are managed, controlled or owned by substantially the same persons, and a deduction under this section was previously granted to such other company;

(d)any asset which has been disposed of by the taxpayer during any previous year of assessment;

(f)any asset in respect of which an allowance has been granted to the taxpayer under section 12E;

(g)any asset the ownership of which is retained by the taxpayer as a seller in terms of an agreement contemplated in paragraph (a) of the definition of “instalment credit agreement” in section 1 of the Value-Added Tax Act; or

(h)any asset in respect of which a deduction has been allowed to the taxpayer under section 6C or 12BA.[paragraph (h) added by section 15(1)(b) of Act 17 of 2023; effective date deemed to have been 1 March 2023]

(4B)Where any asset in respect of which any deduction is claimed in terms of this section was during any previous financial year brought into use for the first time by the taxpayer for the purposes of any trade carried on by such taxpayer, the receipts and accruals of which were not included in the income of such taxpayer during such year, any deduction which could have been allowed in terms of this section during such previous year or any subsequent year that such asset was used by such taxpayer shall for the purposes of this section be deemed to have been allowed during such previous year or years as if the receipts and accruals of such trade had been included in the income of such taxpayer.

(5)The deductions which may be allowed in terms of this section in respect of any asset shall not in the aggregate exceed the cost to the taxpayer of such asset.

(6)Where a lessor of any asset under a lease contemplated in subsection (4)(a) has within the period contemplated in subparagraph (ii) of that paragraph, reckoned from the commencement of the period for which the asset is let under that lease, disposed of the whole or a portion of that lessor’s interest in the lease or of his or her right to receive rent under the lease, there must be included in that lessor’s income for the year of assessment during which the disposal is made a sum equal to the aggregate of any deductions allowed to that lessor under this section, less a proportionate amount in respect of the expired portion of the lease or any portion of that interest or right which has not been disposed of by the lessor.

12BA. Enhanced deduction in respect of certain machinery, plant, implements, utensils and articles used in production of renewable energy

(1)In respect of any new and unused machinery, plant, implement, utensil, or article owned by the taxpayer or acquired by the taxpayer as purchaser in terms of an agreement contemplated in paragraph (a) of the definition of “instalment credit agreement” in section 1 of the Value-Added Tax Act and which was or is brought into use for the first time by that taxpayer for the purpose of that taxpayer’s trade on or after 1 March 2023 and before 1 March 2025, to be used by that taxpayer or the lessee of that taxpayer, in the generation of electricity in the Republic from—

(a)wind power;

(b)photovoltaic solar energy;

(c)concentrated solar energy;

(d)hydropower; or

(e)biomass comprising organic wastes, landfill gas or plant material,

a deduction calculated in terms of subsection (2) shall be allowed in respect of the year of assessment during which the abovementioned assets are brought into use: Provided that where any machinery, plant, implement, utensil or article for which a deduction is allowed under this subsection is mounted on or affixed to any concrete or other foundation or supporting structure and—

(i)the foundation or supporting structure is designed for such machinery, plant, implement, utensil or article and constructed in such manner that it is or should be regarded as being integrated with the machinery, plant, implement, utensil or article; and

(ii)the useful life of the foundation or supporting structure is or will be limited to the useful life of the machinery, plant, implement, utensil or article mounted thereon or affixed thereto,

the foundation or supporting structure shall be deemed to be part of the machinery, plant, implement, utensil or article mounted thereon or affixed thereto.

(2)The deduction contemplated in subsection (1) is equal to an amount of 125 per cent of the cost incurred by the taxpayer for the acquisition of the asset.

(3)For the purposes of this section, the cost to a taxpayer of any asset acquired by that taxpayer shall be deemed to be the lesser of the actual cost to the taxpayer or the cost which a person would, if that person had acquired the asset under a cash transaction concluded at arm’s length on the date which the transaction for the acquisition of the asset was in fact concluded, have incurred in respect of the direct cost of acquisition of the asset, including the direct cost of the installation or erection thereof.

(4)No deduction shall be allowed under this section in respect of—

(a)any asset the ownership of which is retained by the taxpayer as a seller in terms of an agreement contemplated in paragraph (a) of the definition of “instalment credit agreement” in section 1 of the Value-Added Tax Act; or

(b)any asset brought into use after 28 February 2025.

[section 12BA inserted by section 16(1) of Act 17 of 2023; effective date deemed to have been 1 March 2023, applies in respect of assets brought into use on or after that date]

12C. Deduction in respect of assets used by manufacturers or hotel keepers and in respect of aircraft and ships, and in respect of assets used for storage and packing of agricultural products

[heading substituted by section 27(a) of Act 23 of 2018; effective date 17 January 2019, date of promulgation of that Act]

(1)In respect of any—

(a)machinery or plant (other than machinery or plant in respect of which an allowance has been granted to the taxpayer under paragraph (b)) owned by the taxpayer or acquired by the taxpayer as purchaser in terms of an agreement contemplated in paragraph (a) of the definition of “instalment credit agreement” in section 1 of the Value-Added Tax Act and which was or is brought into use for the first time by the taxpayer for the purposes of the taxpayer’s trade (other than mining or farming) and is used by the taxpayer directly in a process of manufacture carried on by the taxpayer or any other process carried on by the taxpayer which is of a similar nature;

(b)machinery or plant (other than machinery or plant in respect of which an allowance has been granted to the taxpayer under paragraph (a)) owned by the taxpayer or acquired by the taxpayer as purchaser in terms of an agreement contemplated in paragraph (a) of the definition of “instalment credit agreement” in section 1 of the Value-Added Tax Act and which was or is let by the taxpayer and was or is brought into use for the first time by the lessee for the purposes of the lessee’s trade (other than mining or farming) and is used by the lessee directly in a process of manufacture carried on by the lessee or any other process carried on by the lessee which is of a similar nature;

(bA)machinery or plant owned by the taxpayer or acquired by the taxpayer as purchaser in terms of an agreement contemplated in paragraph (a) of the definition of “instalment credit agreement” in section 1 of the Value-Added Tax Act and which was or is made available for use by the taxpayer in terms of a contract to another person for no consideration and was or is brought into use for the first time by that other person for the purposes of that other person’s trade (other than mining or farming) and is used by that other person solely for the benefit of that taxpayer for the purposes of the performance of that other person’s obligations under that contract in a process of manufacture under the Automotive Production and Development Programme administered by the Department of Trade, Industry and Competition or Automotive Investment Scheme administered by that Department;[paragraph (bA) substituted by section 14 of Act 23 of 2020; effective date 20 January 2021, date of promulgation of that Act]

(c)machinery or plant (other than machinery or plant in respect of which an allowance has been granted to the taxpayer under paragraph (a)) owned by the taxpayer or acquired by the taxpayer as a purchaser in terms of an agreement contemplated in paragraph (a) of the definition of “instalment credit agreement” in section 1 of the Value-Added Tax Act and which was or is brought into use for the first time by any agricultural co-operative registered or deemed to be incorporated under the Co-operatives Act, 1981 (Act No. 91 of 1981), or registered under the Co-operatives Act, 2005 (Act No. 14 of 2005) and is used by it directly for storing or packing pastoral, agricultural or other farm products of its members (including any person who is a member of another agricultural co-operative which is itself a member of such agricultural co-operative) or for subjecting such products to a primary process as defined in section 27(9);

(d)machinery, implement, utensil or article (other than any machinery, implement, utensil or article in respect of which an allowance has been granted to the taxpayer under paragraph (e)) owned by the taxpayer or acquired by the taxpayer as purchaser in terms of an agreement contemplated in paragraph (a) of the definition of “instalment credit agreement” in section 1 of the Value-Added Tax Act and which was or is brought into use for the first time by the taxpayer for the purposes of the taxpayer’s trade as hotel keeper and is used by the taxpayer in a hotel, except any vehicle or equipment for offices or managers’ or servants’ rooms;[paragraph (d) substituted by section 27(b) of Act 23 of 2018; effective date 17 January 2019, date of promulgation of that Act]

(e)machinery, implement, utensil or article (other than any machinery, implement, utensil or article in respect of which an allowance has been granted to the taxpayer under paragraph (d)) owned by the taxpayer or acquired by the taxpayer as purchaser in terms of an agreement contemplated in paragraph (a) of the definition of “instalment credit agreement” in section 1 of the Value-Added Tax Act and which was or is let by the taxpayer and was or is brought into use for the first time by the lessee for the purposes of the lessee’s trade as hotel keeper and used by the lessee in a hotel, except any vehicle or equipment for offices or managers’ or servants’ rooms;[paragraph (e) substituted by section 27(c) of Act 23 of 2018; effective date 17 January 2019, date of promulgation of that Act]

(f)aircraft owned by the taxpayer or acquired by the taxpayer as purchaser in terms of an agreement contemplated in paragraph (a) of the definition of “instalment credit agreement” in section 1 of the Value-Added Tax Act and which was or is brought into use for the first time by the taxpayer for the purposes of his or her trade (other than an aircraft in respect of which an allowance has been granted to the taxpayer under section 12B);

(g)ship owned by the taxpayer or acquired by the taxpayer as purchaser in terms of an agreement contemplated in paragraph (a) of the definition of “instalment credit agreement” in section 1 of the Value-Added Tax Act and which was or is brought into use for the first time by the taxpayer for the purposes of his or her trade (other than a South African ship contemplated in section 12Q(1));

(gA)new or unused machinery or plant, which is owned by a taxpayer, or acquired by a taxpayer as purchaser in terms of an agreement contemplated in paragraph (a) of the definition of “instalment credit agreement” in section 1 of the Value-Added Tax Act and is first brought into use by that taxpayer for purposes of research and development as defined in section 11D; or

(h)improvement (other than repairs) to any machinery, plant, implement, utensil or article referred to in paragraph (a), (b), (c), (d), (e) or (gA) which is during the year of assessment used as contemplated in that paragraph,

a deduction equal to 20 per cent of the cost to that taxpayer to acquire that machinery, plant, implement, utensil, article, ship, aircraft or improvement (hereinafter referred to as the asset) shall be allowed in the year of assessment during which the asset is so brought into use and in each of the four succeeding years of assessment: Provided that where—

(c)any new or unused machinery or plant referred to in paragraph (a) of this subsection or improvement referred to in paragraph (h) of this subsection, is or was—

(i)acquired by the taxpayer under an agreement formally and finally signed by every party to the agreement on or after 1 March 2002; and

(ii)brought into use by the taxpayer on or after that date in a process of manufacture or process which is of a similar nature, carried on by that taxpayer in the course of its business (other than banking, financial services, insurance or rental business),

the deduction under this subsection shall be increased to 40 per cent of the cost to that taxpayer of that machinery, plant or improvement in respect of the year of assessment during which the plant, machinery or improvement was or is so brought into use for the first time and shall be 20 per cent in each of the three subsequent years of assessment:

(d)any new or unused machinery or plant referred to in paragraph (gA) of this subsection or improvement referred to in paragraph (h) of this subsection, is or was—

(i)acquired by the taxpayer under an agreement formally and finally signed by every party to the agreement on or after 1 January 2012; and

(ii)brought into use by the taxpayer on or after that date for the purpose of research and development as defined in section 11D,

the deduction under this subsection shall be—

(aa)increased to 50 per cent of the cost to that taxpayer of that machinery, plant or improvement in respect of the year of assessment during which the plant, machinery or improvement is or was so brought into use for the first time;

(bb)30 per cent of that cost in the year of assessment immediately succeeding the year of assessment contemplated in item (aa); and

(cc)20 per cent of that cost in the year of assessment immediately succeeding the year of assessment contemplated in item (bb),

Provided further that where any machinery, plant, implement, utensil, article or improvement qualifying for an allowance under this section is mounted on or affixed to any concrete or other foundation or supporting structure and—

the foundation or supporting structure shall be deemed to be a part of the machinery, implement, utensil, article or improvement mounted thereon or affixed thereto.

(2)For the purposes of this section the cost to a taxpayer of any asset shall be deemed to be the lesser of the actual cost to the taxpayer to acquire that asset or the cost which a person would, if he had acquired that asset under a cash transaction concluded at arm’s length on the date on which the transaction for the acquisition of that asset was in fact concluded, have incurred in respect of the direct cost of acquisition of the asset, including the direct cost of the installation or erection thereof.

(3)No deduction shall be allowed under this section in respect of—

(a)any asset which has been let by the taxpayer under a lease other than an operating lease as defined in section 23A(1), unless the lessee under such lease derives in the carrying on of his trade amounts constituting income for the purposes of this Act;

(c)any asset which has been disposed of by the taxpayer during any previous year of assessment;

(d)any asset in respect of which an allowance has been granted to the taxpayer under section 12E; or

(e)any asset the ownership of which is retained by the taxpayer as a seller in terms of an agreement contemplated in paragraph (a) of the definition of “instalment credit agreement” in section 1 of the Value-Added Tax Act.

(4A)Where any asset in respect of which any deduction is claimed in terms of this section was during any previous year of assessment used by the taxpayer for the purposes of any trade carried on by such taxpayer, the receipts and accruals of which were not included in the income of such taxpayer during such year, any deduction which could have been allowed in terms of this section during such previous year or any subsequent year that such asset was used by such taxpayer shall for the purposes of this section be deemed to have been allowed during such previous year or years as if the receipts and accruals of such trade had been included in the income of such taxpayer.

(5)The deductions which may be allowed or deemed to have been allowed in terms of this section and section 11(o) in respect of any asset shall not in the aggregate exceed the cost to the taxpayer of such asset.

(6)Any expenditure (other than expenditure referred to in section 11(a)) incurred by a taxpayer during any year of assessment in moving an asset in respect of which a deduction was allowed or is allowable under this section or section 12B from one location to another shall—

(a)where the taxpayer is entitled to a deduction in respect of such asset under subsection (1) in that year and one or more succeeding years, be allowed to be deducted from his income in equal instalments in each year in which such a deduction is allowable; or

(b)in any other case, be allowed to be deducted from his income in that year.

12D. Deduction in respect of certain pipelines, transmission lines and railway lines

(1)For the purposes of this section—“affected asset” means any—

(a)pipeline used for the transportation of natural oil;

(aA)pipeline for the transportation of water used by power stations in the process of generating electricity;

(b)line or cable used for the transmission of electricity;

(c)line or cable used for the transmission of electronic communications; and

(d)railway line used for the transportation of persons, goods or things,

and includes any earthworks or supporting structures and equipment forming part of or ancillary to such pipeline, transmission line or cable or railway line and any improvement to such pipeline, transmission line or cable or railway line;“natural oil” means any liquid or solid hydrocarbon or combustible gas existing in a natural condition in the earth’s crust and includes any refined by-products of such liquid or solid hydrocarbon or combustible gas.

(2)There shall be allowed to be deducted an allowance in respect of the cost actually incurred by the taxpayer in respect of the acquisition of—

(a)

(i)any new and unused affected asset; or

(ii)in the case of an asset contemplated in paragraph (c) of the definition of “affected asset” any asset,

owned by the taxpayer that is brought into use for the first time by the taxpayer; and;

(b)the asset as contemplated in paragraph (a) which is used directly by such taxpayer for purposes contemplated in the definition of “affected asset”,

to the extent that such affected asset is used in the production of his income.

(2A)For the purposes of this section, if a taxpayer completes an improvement as contemplated in section 12N, the expenditure incurred by the taxpayer to complete that improvement shall be deemed to be the cost actually incurred by the taxpayer in respect of the acquisition of any new and unused affected asset contemplated in subsection (2).

(3)The allowance contemplated in subsection (2) shall not for any one year exceed—

(a)10 per cent of the cost incurred in respect of any asset contemplated in paragraph (a) of the definition of “affected asset”;

(b)5 per cent of the cost incurred in respect of any asset contemplated in paragraph (aA), (b) or (d) of the definition of affected asset; or

(c)10 per cent of the cost incurred in respect of any asset contemplated in paragraph (c) of the definition of “affected asset”.[paragraph (c) substituted by section 28(1) of Act 23 of 2018; effective date 1 April 2019, applicable in respect of assets acquired on or after that date]

(3A)Where any affected asset in respect of which any deduction is claimed in terms of this section was during any previous year of assessment used by the taxpayer for the purposes of any trade carried on by such taxpayer, the receipts and accruals of which were not included in the income of such taxpayer during such year, any deduction which could have been allowed in terms of this section during such previous year or any subsequent year in which such asset was used by such taxpayer shall for the purposes of this section be deemed to have been allowed during such previous year or years as if the receipts and accruals of such trade had been included in the income of such taxpayer.

(4)For the purposes of this section the cost to a taxpayer of any affected asset shall be deemed to be the lesser of—

(a)the actual cost of the asset incurred by the taxpayer; or

(b)the cost which the taxpayer would, if the taxpayer had acquired or improved the said asset under a cash transaction concluded at arm’s length on the date on which the transaction for the acquisition or improvement of the said asset was in fact concluded, have incurred in respect of the direct cost of acquisition or improvement of the asset (including the direct cost of the installation or erection thereof).

(5)No deduction shall be allowed under this section in respect of any affected asset which has been disposed of by the taxpayer during any previous year of assessment.

(6)The deductions which may be allowed or deemed to have been allowed in terms of this section and any other provision of this Act in respect of the cost of any affected asset shall not in the aggregate exceed the amount of such cost.

12DA. Deduction in respect of rolling stock

(1)There shall be allowed to be deducted from the income of the taxpayer an allowance, in respect of rolling stock brought into use by the taxpayer on or before 28 February 2022, in the carrying on of a trade, in respect of the cost actually incurred by the taxpayer in respect of the acquisition or improvement of any rolling stock which is owned by the taxpayer, or acquired by the taxpayer as purchaser in terms of an agreement contemplated in paragraph (a) of the definition of “instalment credit agreement” in section 1 of the Value-Added Tax Act and is used directly by the taxpayer wholly or mainly for the transportation of persons, goods or things to the extent that such rolling stock is used in the production of that taxpayer’s income.[subsection (1) substituted by section 15 of Act 23 of 2020; effective date 20 January 2021, and by section 12 of Act 20 of 2021; effective date 19 January 2022, date of promulgation of that Act]

(2)The allowance contemplated in subsection (1) shall, in respect of any one year of assessment, be 20 per cent of the cost incurred in respect of any rolling stock.

(3)For the purposes of this section the cost to a taxpayer of any rolling stock shall be deemed to be the lesser of the actual cost to the taxpayer or the cost which a person would, if that person had acquired or improved the rolling stock under a cash transaction concluded at arm’s length on the date on which the transaction for the acquisition or improvement of the rolling stock was in fact concluded, have incurred in respect of the direct cost of the acquisition or improvement of the rolling stock.

(4)Where any rolling stock in respect of which any deduction is claimed in terms of this section was during any previous year of assessment used by the taxpayer for the purposes of any trade carried on by such taxpayer, the receipts and accruals of which were not included in the income of such taxpayer during such year, any deduction which could have been allowed in terms of this section during such year or any subsequent year in which such asset was used by the taxpayer shall for the purposes of this section be deemed to have been allowed during such previous year or years as if the receipts and accruals of such trade had been included in the income of such taxpayer.

(5)No deduction shall be allowed under this section in respect of any rolling stock that has been disposed of by the taxpayer during any previous year of assessment.

(6)The deductions which may be allowed or deemed to have been allowed in terms of this section and any other provision of this Act in respect of the cost of any rolling stock shall not in the aggregate exceed the amount of such cost.

12E. Deductions in respect of small business corporations

(1)Where any plant or machinery (hereinafter referred to as an asset) owned by a taxpayer which qualifies as a small business corporation or acquired by such a taxpayer as purchaser in terms of an agreement contemplated in paragraph (a) of the definition of “instalment credit agreement” in section 1 of the Value-Added Tax Act—

(a)is brought into use for the first time by that taxpayer on or after 1 April 2001 for the purpose of that taxpayer’s trade (other than mining or farming); and

(b)is used by that taxpayer directly in a process of manufacture (or any other process which is of a similar nature) carried on by that taxpayer,

a deduction equal to the cost of such asset shall be allowed in the year that such asset is so brought into use.

(1A)Subject to subsection (1), where any machinery, plant, implement, utensil, article, aircraft or ship in respect of which a deduction is allowable under section 11(e) (“the asset”) is acquired by a small business corporation under an agreement formally and finally signed by every party to the agreement on or after 1 April 2005, the amount allowed to be deducted in respect of the asset must, at the election of the small business corporation and subject to the provisions of that section, be either—

(a)the amount allowable in terms of and subject to that section; or

(b)an amount equal to 50 per cent of the cost of the asset in the year of assessment during which it was first brought into use, 30 per cent in the first succeeding year and 20 per cent in the second succeeding year.

(2)For the purposes of this section the cost to a taxpayer of any asset shall be deemed to be the lesser of the actual cost to the taxpayer to acquire that asset or the cost which a person would, if he had acquired the said asset under a cash transaction concluded at arm’s length on the date on which the transaction for the acquisition of the said asset was in fact concluded, have incurred in respect of the direct cost of acquisition of the asset, including the direct cost of the installation or erection thereof.

(3)Any expenditure (other than expenditure referred to in section 11(a)) incurred by a taxpayer during any year of assessment in moving an asset in respect of which a deduction was allowed or is allowable under this section from one location to another must—

(a)where the taxpayer is or was entitled to a deduction in respect of that asset under subsection (1A) in that year and one or more succeeding years, be allowed to be deducted from his or her income in equal instalments in that year and each succeeding year in which that deduction is allowable; or

(b)in any other case, be allowed to be deducted from that taxpayer’s income in that year.

(3B)No deduction shall be allowed under this section in respect of any asset in respect of which a deduction has been granted to the taxpayer under section 12BA.[subsection (3B) inserted by section 17(1) of Act 17 of 2023 and substituted by section 11(1) of Act 42 of 2024; effective date deemed to have been 1 March 2023, applies in respect of assets brought into use on or after that date]

(4)For the purposes of this section—

(a)“small business corporation” means any close corporation or co-operative or any private company as defined in section 1 of the Companies Act or a personal liability company as contemplated in section 8(2)(c) of the Companies Act if at all times during the year of assessment all the holders of shares in that company, co-operative, close corporation or personal liability company are natural persons, where—

(i)the gross income for the year of assessment does not exceed an amount equal to R20 million: Provided that where the close corporation, co-operative or company during the relevant year of assessment carries on any trade, for a period which is less than 12 months, that amount shall be reduced to an amount which bears to that amount, the same ratio as the number of months (in the determination of which a part of a month shall be reckoned as a full month), during which that company, co-operative or close corporation carried on that trade bears to 12 months;

(ii)at any time during the year of assessment, no holder of shares in the company or member of the close corporation or co-operative holds any shares or has any interest in the equity of any other company as defined in section 1, other than—

(aa)a company contemplated in paragraph (a) of the definition of “listed company”;

(bb)any portfolio in a collective investment scheme contemplated in paragraph (e) of the definition of “company”;

(cc)a company contemplated in section 10(1)(e)(i)(aa), (bb) or (cc);

(dd)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;

(ee)any friendly society as defined in section 1 of the Friendly Societies Act, 1956 (Act No. 25 of 1956);

(ff)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, that may provide, participate in or undertake only the following—

(a)in the case of a primary savings co-operative bank, banking services contemplated in section 14(1)(a) to (d) of that Act; and

(b)in the case of a primary savings and loans co-operative bank, banking services contemplated in section 14(2)(a) or (b) of that Act;

(gg)a venture capital company as defined in section 12J;

(hh)any company, close corporation or co-operative if the company, close corporation or co-operative—

(A)has not during any year of assessment carried on any trade; and

(B)has not during any year of assessment owned assets, the total market value of which exceeds R5 000; or

(ii)any company, co-operative or close corporation if the company, co-operative or close corporation has taken the steps contemplated in section 41(4) to liquidate, wind up or deregister: Provided that this item ceases to apply if the company, co-operative or close corporation has at any stage withdrawn any step so taken or does anything to invalidate any step so taken, with the result that the company, co-operative or close corporation will not be liquidated, wound up or deregistered;

(iii)not more than 20 per cent of the total of all receipts and accruals (other than those of a capital nature) and all the capital gains of the company, close corporation or co-operative consists collectively of investment income and income from the rendering of a personal service; and

(iv)such company is not a personal service provider as defined in the Fourth Schedule;

(c)“investment income” means—

(i)any income in the form of dividends, foreign dividends, royalties, rental derived in respect of immovable property, annuities or income of a similar nature;

(ii)any interest as contemplated in section 24J (other than any interest received by or accrued to any co-operative bank as contemplated in paragraph (a)(ii)(gg)), any amount contemplated in section 24K and any other income which, by the laws of the Republic administered by the Commissioner, is subject to the same treatment as income from money lent; and

(iii)any proceeds derived from investment or trading in financial instruments (including futures, options and other derivatives), marketable securities or immovable property;

(d)“personal service”, in relation to a company, co-operative or close corporation, means any 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, if—

(i)that service is performed personally by any person who holds an interest in that company, co-operative or close corporation or by any person that is a connected person in relation to any person holding such an interest; and

(ii)that company, co-operative or close corporation does not throughout the year of assessment employ three or more full-time employees (other than any employee who is a holder of a share in the company or a member of the co-operative or close corporation, as the case may be, or who is a connected person in relation to a holder of a share in the company or a member), who are on a full-time basis engaged in the business of that company, co-operative or close corporation of rendering that service.

12F. Deduction in respect of airport and port assets

(1)For the purposes of this section—“airport asset” means any aircraft hangar, apron, runway or taxiway on any designated airport, and includes any earthworks or supporting structures forming part of such aircraft hangar, apron, runway or taxiway and any improvements to such aircraft hangar, apron, runway or taxiway; and“designated airport” means an airport approved by the Minister, in consultation with the Minister of Transport, as a designated airport by notice in the Gazette for purposes of this section; and“port asset” means any port terminal, breakwater, sand trap, berth, quay wall, bollard, graving dock, slipway, single point mooring, dolos, fairway, surfacing, wharf, seawall, channel, basin, sand bypass, road, bridge, jetty or off-dock container depot, and includes any earthworks or supporting structures forming part of such terminal, breakwater, sand trap, berth, quay wall, bollard, graving dock, slipway, single point mooring, dolos, fairway, surfacing, wharf, seawall, channel, basin, sand bypass, road, bridge, jetty or depot and any improvements thereto.

(2)In respect of any new and unused airport asset or port asset which—

(a)is brought into use for the first time by such taxpayer; and

(b)is used directly by such taxpayer solely for the purposes of carrying on the taxpayer’s business as airport, terminal or transport operator or port authority,

there shall be allowed to be deducted an allowance, in respect of an asset brought into use by the taxpayer on or before 28 February 2022, in the carrying on of a trade, in respect of the cost actually incurred by the taxpayer in respect of the acquisition (including the construction, erection or installation) of such asset to the extent that such asset is used in the production of the taxpayer’s income.[words following paragraph (b) substituted by section 16 of Act 23 of 2020; effective date 20 January 2021, and by section 13 of Act 20 of 2021; effective date 19 January 2022, date of promulgation of that Act]

(2A)For the purposes of this section where a taxpayer completes improvements as contemplated in section 12N, the expenditure incurred by the taxpayer to complete that improvement shall be deemed to be the cost actually incurred by that taxpayer in respect of the acquisition of a new and unused airport asset or port asset contemplated in subsection (2).

(3)The allowance contemplated in subsection (2) in respect of an asset shall, in respect of any one year of assessment, be five per cent of the cost incurred in respect of that asset.

(3A)Where any asset in respect of which any deduction is claimed in terms of this section was during any previous year of assessment used by the taxpayer for the purposes of any trade carried on by such taxpayer, the receipts and accruals of which were not included in the income of such taxpayer during such year, any deduction which could have been allowed in terms of this section during such year or any subsequent year in which such asset was used by the taxpayer shall for the purposes of this section be deemed to have been allowed during such previous year or years as if the receipts and accruals of such trade had been included in the income of such taxpayer.

(4)For the purposes of this section the cost to a taxpayer of any asset shall be deemed to be the lesser of the actual cost to the taxpayer or the cost which a person would, if he had acquired the said asset under a cash transaction concluded at arm’s length on the date on which the transaction for the acquisition of the said asset was in fact concluded, have incurred in respect of the direct cost of acquisition of the asset, including the direct cost of the installation or erection thereof or, where the asset has been acquired to replace an asset which has been damaged or destroyed, such cost less any amount which has been recovered or recouped in respect of the damaged or destroyed asset and has been excluded from the taxpayer’s income in terms of section 8(4)(e), whether in the current or any previous year of assessment.

(5)No deduction shall be allowed under this section in respect of any asset which has been disposed of by the taxpayer during any previous year of assessment.

(6)The deductions which may be allowed or deemed to have been allowed in terms of this section and any other provision of this Act in respect of the cost of any asset shall not in the aggregate exceed the amount of such cost.

12H. Additional deduction in respect of learnership agreements

(1)For the purposes of this section—“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;

(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;

“employer” means—

(a)where only one employer is party to a registered learnership agreement, that employer; or

(b)in the case where more than one employer is a party to a registered learnership agreement, the employer which is identified in that agreement as the lead employer;

“learner” means a learner as defined in section 1 of the Skills Development Act, 1998;“registered learnership agreement” means a learnership agreement that is—

(a)registered in accordance with the Skills Development Act, 1998; and

(b)entered into between a learner and an employer before 1 April 2027;[paragraph (b) substituted by section 14(1) of Act 20 of 2021, as retroactively substituted by section 65(1) of Act 42 of 2024; effective date 1 April 2022, applies in respect of learnership agreements entered into on or after that date]

“SETA” means a sector education and training authority established in terms of section 9(1) of the Skills Development Act, 1998, and defined as such in section 1 of that Act;“Skills Development Act, 1998” means the Skills Development Act, 1998 (Act No. 97 of 1998).

(2)

(a)In addition to any deductions allowable in terms of this Act and subject to paragraph (b), where—

(i)during any year of assessment a learner who holds a qualification to which an NQF level from 1 up to and including 6 has been allocated in accordance with Chapter 2 of the National Qualifications Framework Act, 2008 (Act No. 67 of 2008), is a party to a registered learnership agreement with an employer; and

(ii)that agreement was entered into pursuant to a trade carried on by that employer,

there must, in that year, be allowed to be deducted from the income derived by that employer from that trade an amount of R40 000.

(b)Where a learner is a party to a registered learnership agreement as contemplated in paragraph (a) for a period of less than 12 full months during the year of assessment contemplated in paragraph (a), the amount that is allowed to be deducted in terms of that paragraph must be limited to an amount which bears to an amount of R40 000 the same ratio as the number of full months that the learner is a party to that agreement bears to 12.

(c)If a registered learnership agreement is registered as contemplated in paragraph (a) of the definition of “registered learnership agreement” within a period of 12 months after the last day of the year of assessment contemplated in paragraph (a), the registered learnership agreement must be deemed to have been so registered on the date on which the registered learnership agreement was entered into as contemplated in paragraph (b) of that definition.

(2A)

(a)In addition to any deductions allowable in terms of this Act and subject to paragraph (b), where—

(i)during any year of assessment a learner who holds a qualification to which an NQF level from 7 up to and including 10 has been allocated in accordance with Chapter 2 of the National Qualifications Framework Act, 2008 (Act No. 67 of 2008), is a party to a registered learnership agreement with an employer; and

(ii)that agreement was entered into pursuant to a trade carried on by that employer,

there must, in that year, be allowed to be deducted from the income derived by that employer from that trade an amount of R20 000.

(b)Where a learner is a party to a registered learnership agreement as contemplated in paragraph (a) for a period of less than 12 full months during the year of assessment contemplated in paragraph (a), the amount that is allowed to be deducted in terms of that paragraph must be limited to an amount which bears to an amount of R20 000 the same ratio as the number of full months that the learner is a party to that agreement bears to 12.

(3)In addition to any deductions allowable in terms of this Act, where—

(a)during any year of assessment a learner who holds a qualification to which an NQF level from 1 up to and including 6 has been allocated in accordance with Chapter 2 of the National Qualifications Framework Act, 2008 (Act No. 67 of 2008), is a party to a registered learnership agreement with an employer for a period of less than 24 full months;

(b)that agreement was entered into pursuant to a trade carried on by that employer; and

(c)that learner successfully completes that learnership during that year of assessment,

there must, in that year, be allowed to be deducted from the income derived by that employer from that trade an amount of R40 000.

(3A)In addition to any deductions allowable in terms of this Act, where—

(a)during any year of assessment a learner who holds a qualification to which an NQF level from 7 up to and including 10 has been allocated in accordance with Chapter 2 of the National Qualifications Framework Act, 2008 (Act No. 67 of 2008), is a party to a registered learnership agreement with an employer for a period of less than 24 full months;

(b)that agreement was entered into pursuant to a trade carried on by that employer; and

(c)that learner successfully completes that learnership during that year of assessment,

there must, in that year, be allowed to be deducted from the income derived by that employer from that trade an amount of R20 000.

(4)In addition to any deductions allowable in terms of this Act, where—

(a)during any year of assessment a learner who holds a qualification to which an NQF level from 1 up to and including 6 has been allocated in accordance with Chapter 2 of the National Qualifications Framework Act, 2008 (Act No. 67 of 2008), to a registered learnership agreement with an employer for a period that equals or exceeds 24 full months;

(b)that agreement was entered into pursuant to a trade carried on by that employer; and

(c)that learner successfully completes that learnership during that year of assessment,

there must, in that year, be allowed to be deducted from the income derived by that employer from that trade an amount of R40 000 multiplied by the number of consecutive 12 month periods within the duration of that agreement.

(4A)In addition to any deductions allowable in terms of this Act, where—

(a)during any year of assessment a learner is a party who holds a qualification to which an NQF level from 7 up to and including 10 has been allocated in accordance with Chapter 2 of the National Qualifications Framework Act, 2008 (Act No. 67 of 2008), to a registered learnership agreement with an employer for a period that equals or exceeds 24 full months;

(b)that agreement was entered into pursuant to a trade carried on by that employer; and

(c)that learner successfully completes that learnership during that year of assessment,

there must, in that year, be allowed to be deducted from the income derived by that employer from that trade an amount of R20 000 multiplied by the number of consecutive 12 month periods within the duration of that agreement.

(5)Where a learner contemplated in subsection (2), (3) or (4) is a person with a disability (as defined in section 6B (1)) at the time of entering into the learnership agreement, the amounts contemplated in subsection (2), (3) or (4) must be increased by an amount of R20 000.

(5A)Where a learner contemplated in subsection (2A), (3A) or (4A) is a person with a disability (as defined in section 6B (1)) at the time of entering into the learnership agreement, the amounts contemplated in subsection (2A), (3A) or (4A) must be increased by an amount of R30 000.

(6)This section does not apply in respect of any registered learnership agreement where—

(a)the learner that is the party to that agreement previously failed to complete any other registered learnership agreement to which the employer or an associated institution in relation to that employer was a party; and

(b)the registered learnership agreement contains the same education and training component as that other registered learnership agreement.

(7)Any SETA with which a learnership agreement has been registered as contemplated in the Skills Development Act, 1998, must submit to the Minister any information relating to that learnership agreement required by the Minister in the form and manner and at the place and time that the Minister prescribes.

(8)In respect of each year of assessment during which an employer is eligible for any deduction contemplated in this section, the employer must submit to the SETA with which the learnership agreement is registered any information relating to that learnership agreement required by the SETA in the form and manner and at the place and time indicated by the SETA.

12I. Additional investment and training allowances in respect of industrial policy projects

(1)For the purposes of this section—“adjudication committee” means the committee contemplated in subsection (16);“brownfield project” means a project that represents an expansion or upgrade of an existing industrial project;“compliance period” means the period—

(a)commencing at the beginning of the year of assessment following the year of assessment in which assets are first brought into use; and

(b)ending at the end of the year of assessment three years after the year of assessment in which assets are first brought into use;

“cost of training” means—

(a)in the case of training provided by the taxpayer, the cost of remuneration of employees of the taxpayer who are employed exclusively to provide training to the taxpayer’s employees and the cost of training materials;

(b)in the case of training provided by a person that is a connected person in relation to the taxpayer, so much of the cost charged by the connected person as is incurred in respect of the remuneration of employees who are employed to provide training to the taxpayer’s employees and the cost of materials used by the connected person to provide the training; and

(c)in any other case, the cost to the taxpayer of the training charged by the person providing the training;

“date of approval” means the date of the approval contemplated in subsection (8);“greenfield project” means a project that represents a wholly new industrial project which does not utilise any manufacturing assets other than wholly new and unused manufacturing assets;“industrial project” means a trade solely or mainly for the manufacture of products, goods, articles, or other things within the Republic that—

(a)is classified under “Section C: Manufacturing” inversion 7 of the Standard Industrial Classification Code (referred to as the “SIC Code”) issued by Statistics South Africa; or

(b)in the case of products, goods, articles or things which are not yet classified, the adjudication committee is of the view will be classified as contemplated in paragraph (a),

but does not include—

(i)distilling, rectifying and blending of spirits (SIC Code 1101);

(ii)manufacture of wines (SIC Code 1102);

(iii)manufacture of malt liquors and malt (SIC Code 103);

(iv)manufacture of tobacco products (SIC Code 12);

(v)manufacture of weapons and ammunition (SIC Code 252);

(vi)manufacture of bio-fuels if that manufacture negatively impacts on food security in the Republic;

“manufacturing asset” means any building, plant or machinery acquired, contracted for or brought into use by a company, which—

(a)will mainly be used by that company in the Republic for the purposes of carrying on an industrial project of that company within the Republic; and

(b)will qualify for a deduction in terms of section 12C(1)(a), 13 or 13quat,

and includes any improvement to such building, plant or machinery.

(1A)For the purposes of this section, if a taxpayer completes an improvement as contemplated in section 12N, the improvement shall be deemed to be a new and unused manufacturing asset and the expenditure incurred by the taxpayer to complete the improvement shall be deemed to be the cost of that new and unused manufacturing asset contemplated in subsection (2).

(1B)For the purposes of this section, if a taxpayer completes an improvement on any land not owned by that taxpayer and that improvement consists of machinery or plant as contemplated in section 12C(1)(a), that taxpayer shall be deemed to be the owner of that improvement.

(2)In addition to any other deductions allowable in terms of this Act, a company may, subject to subsection (3), deduct an amount (hereinafter referred to as an additional investment allowance) equal to—

(a)

(i)55 per cent of the cost of any new and unused manufacturing asset used in an industrial policy project with preferred status; or

(ii)100 per cent of the cost of any new and unused manufacturing asset used in an industrial policy project with preferred status that is located within a special economic zone; or

(b)

(i)35 per cent of the cost of any new and unused manufacturing asset used in any industrial policy project other than an industrial policy project with preferred status; or

(ii)75 per cent of the cost of any new and unused manufacturing asset used in any industrial policy project other than an industrial policy project with preferred status that is located within a special economic zone,

in the year of assessment during which that asset is first brought into use by the company as owner thereof for the furtherance of the industrial policy project carried on by that company, if that asset was acquired and contracted for on or after the date of approval and was brought into use within four years from the date of approval.

(3)The additional investment allowance contemplated in subsection (2) may not exceed—

(a)R900 million in the case of any greenfield project with preferred status, or R550 million in the case of any other greenfield project from the date of approval;

(b)R550 million in the case of any brownfield project with preferred status, or R350 million in the case of any other brownfield project from the date of approval.

(4)In addition to any other deductions allowable in terms of this Act, a company may, subject to subsection (5), deduct an amount (hereinafter referred to as an additional training allowance) equal to the cost of training provided to employees in the year of assessment during which the cost of training is incurred for the furtherance of the industrial policy project carried on by that company.

(5)

(a)The cost of training contemplated in subsection (4) must be incurred by the end of the compliance period.

(b)Notwithstanding subsection (2), there must be allowed to be deducted, not earlier than the year of assessment preceding the year in which the asset is brought into use, any amount in respect of the additional training allowance.

(c)The additional training allowance contemplated in subsection (4) allowed to a company may not exceed R36 000 per employee.

(d)The additional training allowance contemplated in subsection (4) allowed to a company at the end of the compliance period from the date of approval may not exceed—

(i)R30 million in the case of an industrial policy project with preferred status; and

(ii)R20 million in the case of any other industrial policy project.

(6)

(a)Where a taxpayer is allowed a deduction in terms of subsection (2) in the current or any previous year of assessment, any balance of assessed loss carried forward by the taxpayer during a year of assessment must be increased by the amount by which that balance of assessed loss exceeds an amount equal to any balance of assessed loss that would have been carried forward during that year had that deduction not been allowed, multiplied by the rate contemplated in paragraph (a) of the definition of “prescribed rate” as at the end of the year of assessment.

(b)Paragraph (a) does not apply in respect of any balance of assessed loss incurred by a taxpayer during any year of assessment more than four years after the year during which the approval contemplated in subsection (8) is granted.

(7)An industrial project of a company constitutes an industrial policy project if—

(a)the Minister of Trade and Industry, after taking into account the recommendations of the adjudication committee, is satisfied that—

(i)the cost of all manufacturing assets to be acquired by the company for the purposes of the project will exceed—

(aa)in the case of greenfield projects, R200 million; and

(bb)in the case of brownfield projects, the higher of—

(A)R30 million; or

(B)the lesser of R50 million or 25 per cent of the expenditure incurred to acquire assets previously used in the project;

(ii)the project does not constitute an industrial participation project and does not receive any concurrent industrial incentive provided by any national sphere of government; and

(iii)the project is not integrally related to any other project of the company (or any other company that forms part of the same group of companies as that company) that has been approved as contemplated in subsection (8);

(c)more than 50 per cent of the manufacturing assets to be acquired by the company for the purposes of the project will be brought into use by that company within four years from the date of approval; and

(d)the application for approval of the project by the company is received by the Minister of Trade and Industry not later than 31 March 2020, in such form and containing such information as the Minister of Trade and Industry may prescribe.

(8)The Minister of Trade and Industry must, after taking into account the recommendations of the adjudication committee, approve an industrial project as an industrial policy project, either with or without preferred status, where that Minister is satisfied that the industrial policy project will significantly contribute to the Industrial Policy Programme within the Republic having regard to—

(a)the extent to which the project will upgrade an industry within the Republic by—

(i)utilising innovative processes;

(ii)utilising new technology that results in—

(aa)improved energy efficiency; and

(bb)cleaner production technology; and

(iii)providing skills development;

(b)the extent to which the project will provide general business linkages within the Republic;

(c)the extent to which the project will acquire goods or services from small, medium and micro enterprises;

(e)the extent to which the project will provide skills development in the Republic; and

(f)in the case of a greenfield project, the location of the project within a special economic zone.

(9)Notwithstanding subsection (8), the Minister of Trade and Industry may not approve any industrial project where the potential additional investment and training allowances in respect of that project and all other approved industrial projects (other than those projects where the approval thereof has been withdrawn under subsection (12)), will in the aggregate exceed R20 billion.

(10)The Minister of Finance, in consultation with the Minister of Trade and Industry, must make regulations prescribing—

(a)the factors to be taken into account in determining whether the industrial project will significantly contribute to the Industrial Policy Programme within the Republic;

(b)the factors to be taken into account in determining whether the project will provide general business linkages within the Republic;

(c)the factors to be taken into account in determining whether goods or services will be acquired from small, medium and micro enterprises;

(d)the factors to be taken into account in determining the extent to which the project creates direct employment within the Republic;

(e)the extent to which the project must provide skills development in the Republic and the factors to be taken into account in determining whether the project provides skills development in the Republic;

(f)the factors to be taken into account in determining the location of the project within an Industrial Development Zone;

(g)the extent to which the project must improve energy efficiency and the factors to be taken into account in determining the extent to which the project must utilise new technology that results in improved energy efficiency and cleaner production technology; and

(h)what constitutes an industrial participation project and a concurrent industrial incentive.

(11)Within 12 months after the close of each year of assessment, starting with the year in which approval is granted in terms of subsection (8), a company carrying on an industrial policy project must report until the end of the compliance period to the adjudication committee with respect to the progress of the industrial policy project in terms of the requirements of subsections (7) and (8) within such time, in such form and in such manner as the Minister of Finance may prescribe.

(12)Where in respect of any company carrying on an industrial policy project—

(a)

(i)during any year of assessment—

(aa)any material fact changes; or

(bb)the company fails to comply with any requirement contemplated in subsection (7), which would have had the effect that approval in terms of subsection (8) would not have been granted had such change in fact or such failure been known to the Minister of Trade and Industry at the time of granting approval; or

(ii)the company fails to comply with any requirement contemplated in subsection (8) at the end of the compliance period;

(b)the company fails to submit a report to the adjudication committee as required in terms of subsection (11); or

(c)the approval granted in terms of subsection (8) was based on fraudulent information or misrepresentation or non-disclosure of material facts,

the Minister of Trade and Industry may, after taking into account the recommendations of the adjudication committee, withdraw the approval granted in respect of that industrial policy project with effect from a date specified by that Minister, and must inform the Commissioner of that withdrawal and of that date.

(12A)Where in respect of any company carrying on an industrial policy project the Minister of Trade and Industry approved that project as an industrial policy project with preferred status in terms of subsection (8) in accordance with Regulation 4 of the Regulations (GNR.639 of 23 July 2010: (Government Gazette No. 33385) as amended) and that project did not comply with the criteria of a project with preferred status at the end of the compliance period, the Minister of Trade and Industry may, after taking into account the recommendations of the adjudication committee, withdraw the approval granted in respect of that industrial policy project as an industrial policy project with preferred status and substitute that approval with an approval of the industrial policy project as a project with qualifying status with effect from a date specified by that Minister, and must inform the Commissioner of that withdrawal, substitution and of that date.

(13)The Commissioner may, notwithstanding the provisions of Chapter 6 of the Tax Administration Act—

(a)notify the Minister of Trade and Industry whenever the Commissioner discovers information that may cause a withdrawal of approval in terms of subsection (12);

(b)disallow all deductions otherwise provided for under this section starting with the date of approval if the company is guilty of fraud or misrepresentation or non-disclosure of material facts with regard to any tax, duty or levy administered by the Commissioner and must notify the Minister of Trade and Industry accordingly; and

(c)inform the Minister of Trade and Industry where any company has requested the Commissioner to issue a certificate contemplated in subsection (7)(b)(ii) and that certificate was denied;

(d)where the approval granted in respect of that industrial policy project as an industrial policy project with preferred status was withdrawn and substituted as an industrial policy project with qualifying status as contemplated in subsection (12A), make an appropriate adjustment to the taxable income of that company during the year of assessment in which that approval is substituted in relation to all deductions of the company as at the end of that year of assessment, having regard to all amounts which would have been deemed to have been incurred by that company had the provisions of this paragraph not been applicable during all years of assessment before that year of assessment and all amounts which have been deducted from the income of that company during those years of assessment.

(14)The Commissioner may, notwithstanding the provisions of sections 99 and 100 of the Tax Administration Act, raise an additional assessment for any year of assessment where—

(a)an additional investment allowance which has been allowed in any previous year must be disallowed in terms of subsection (12) or (13); or

(b)an adjustment must be made as contemplated in subsection (13)(d).

(16)There shall for the purposes of this section be an adjudication committee which must consist of at least—

(a)three persons employed by the Department of Trade and Industry, appointed by the Minister of Trade and Industry; and

(b)three persons employed by the National Treasury or the South African Revenue Service, appointed by the Minister of Finance:

Provided that the Minister of Trade and Industry or the Minister of Finance, as the case may be, may appoint alternative persons so employed if any person appointed in terms of paragraph (a) or (b) is not available to perform any function as a member of the committee.

(17)The adjudication committee is an independent committee which performs its functions impartially and without fear, favour or prejudice and for the purpose of this section, the adjudication committee may—

(a)evaluate any application and make recommendations to the Minister of Trade and Industry for purposes of the approval of any industrial project in terms of subsection (8);

(b)investigate or cause to be investigated any industrial policy project for the purposes of this section;

(c)monitor all industrial policy projects—

(i)to determine whether the objectives of this section are being achieved; and

(ii)to advise the Minister of Finance and the Minister of Trade and Industry on any future proposed amendment or adjustment thereof;

(d)require any company applying for approval of any industrial project as an industrial policy project in terms of this section to furnish such information or documents as are necessary for the committee and Minister of Trade and Industry to perform their functions in terms of this section;

(e)for a specific purpose and on such conditions and for such period as it may determine obtain the assistance of any person to advise the adjudication committee relating to any function assigned to the committee in terms of this section; and

(f)appoint its own chairperson and determine the procedures for its meetings provided that all procedures must be properly recorded and minuted.

(18)The members of the adjudication committee and any person whose assistance has been obtained by that committee may not—

(a)act in any way that is inconsistent with the provisions of subsection (17) or expose themselves to any situation involving the risk of a conflict between their responsibilities and private interests; or

(b)use their position or any information entrusted to them, to enrich themselves or improperly benefit any other person.

(19)The Minister of Trade and Industry—

(a)may, after taking into account the recommendations of the adjudication committee, extend the periods contemplated in subsections (2), (6)(b) and (7)(c) by a period not exceeding one year;

(aA)may, if application is made to the adjudication committee, after taking into account the recommendations of the adjudication committee in respect of that application, extend the periods contemplated in—

(i)paragraph (b) of the definition of “compliance period” in subsection (1); and

(ii)subsections (2), (6)(b) and (7)(c),

by a period not exceeding two years, in addition to the extension of periods contemplated in paragraph (a), if it is shown that the fundamental reason for non-compliance was the COVID-19 pandemic or any circumstances arising therefrom;[paragraph (aA) inserted by section 15(1) of Act 20 of 2021; effective date 1 January 2020]

(b)must provide written reasons for any decision to grant or deny any application for approval of an industrial project as an industrial policy project in terms of subsection (8), or for any withdrawal of approval as contemplated in subsection (12);

(c)must inform the Commissioner of the approval of any industrial project as an industrial policy project in terms of subsection (8), setting out such particulars as are required by the Commissioner to determine the amount of the additional investment allowance allowable in terms of this section;

(d)must publish the particulars of any application received from a company for approval of an industrial project as an industrial policy project in the Gazette not later than 30 days after providing to that company the written reasons for any decision as contemplated in paragraph (b);

(e)must submit an annual report to Parliament, and must provide a copy of that report to the Auditor-General, setting out the following information in respect of each company that received approval in terms of subsection (8):

(i)The name of each company;

(ii)the description of each industrial policy project;

(iii)the potential national revenue forgone by virtue of the deductions allowable in respect of that industrial policy project in terms of this section;

(iv)the annual progress relating to the direct benefits of the industrial policy project in terms of economic growth or employment, setting out the details of the factors contemplated in subsections (7) and (8) on the basis of which approval of the industrial project as an industrial policy project was granted;

(v)any decision to withdraw the approval of an industrial policy project in terms of subsection (12); and

(vi)any decision not to withdraw the approval of an industrial policy project, despite any material change in facts.

(21)Notwithstanding the provisions of Chapter 6 of the Tax Administration Act, the Commissioner must disclose to the Minister of Trade and Industry and the adjudication committee, including any person whose assistance has been obtained by that committee, such information relating to the affairs of any company carrying on an industrial policy project as is necessary to enable the Minister of Trade and Industry and the adjudication committee to perform their functions in terms of this section.

(22)Every employee of the Department of Trade and Industry and every member of the adjudication committee, including any person whose assistance has been obtained by that committee, must preserve and aid in preserving secrecy with regard to all matters that may come to their knowledge in the performance of their functions in terms of this section, and may not communicate any such matter to any person whatsoever other than to the company concerned or its legal representative, nor allow any such person to have access to any records in the possession or custody of that Department or committee, except in terms of the law or an order of court.

(23)Any person who contravenes the provisions of subsections (18) and (22), is guilty of an offence and liable on conviction to a fine or to imprisonment for a period not exceeding two years.

(24)For the purposes of this section the cost to a taxpayer of any manufacturing asset is deemed to be the lesser of the actual cost to the taxpayer or the cost which a person would, if the person had acquired that manufacturing asset under a cash transaction concluded at arm’s length on the date on which the transaction for the acquisition was in fact concluded, have incurred in respect of the direct cost of the acquisition of the manufacturing asset.

12J. Deductions in respect of expenditure incurred in exchange for issue of venture capital company shares

(1)For the purposes of this section—“impermissible trade” means—

(a)any trade carried on in respect of immovable property, other than a trade carried on as an hotel keeper;

(b)any trade carried on by a bank as defined in the Banks Act, a long-term insurer as defined in the Long-term Insurance Act, a short term insurer as defined in the Short-term Insurance Act and any trade carried on in respect of money-lending or hire-purchase financing;

(c)any trade carried on in respect of financial or advisory services, including trade in respect of legal services, tax advisory services, stock broking services, management consulting services, auditing or accounting services;

(d)any trade carried on in respect of gambling;

(e)any trade carried on in respect of liquor, tobacco, arms or ammunition; or

(g)any trade carried on mainly outside the Republic;

“junior mining company” means any company that is solely carrying on a trade of mining exploration or production which is either an unlisted company as defined in section 41 or listed on the alternative exchange division of the JSE Limited;“qualifying company” means any company if—

(a)that company is a resident;

(b)the company is not a controlled group company in relation to a group of companies of which a venture capital company to which that company has issued any share forms part from the date of issue of any such share and at any time during any year of assessment after that date;[paragraph (b) substituted by section 29(1)(a) of Act 23 of 2018; effective date 1 January 2019, and by section 17(1)(a) of Act 34 of 2019; effective date 15 January 2020, date of promulgation of that Act]

(c)the tax affairs of the company are in order and the company has complied with all the relevant provisions of the laws administered by the Commissioner;

(d)the company is an unlisted company as defined in section 41 or a junior mining company;

(e)the company is not carrying on any impermissable trade;

(f)during any year of assessment of that company that ends after the expiry of a period of 36 months commencing on the first date on which that company issued any share to a venture capital company—

(i)the sum of the investment income, as defined in section 12E(4)(c), derived by that company does not exceed an amount equal to 20 per cent of the gross income of that company for that year; and

(ii)not more than 50 per cent of the aggregate amount received by or that accrued to that company from the carrying on of any trade was derived, directly or indirectly, from a person—

(aa)who holds a share in that venture capital company; or

(bb)who is a connected person in relation to a person referred to in item (aa);

[paragraph (f) substituted by section 29(1)(b) of Act 23 of 2018; effective date 24 October 2018]

(g)no person who holds a share in a venture capital company to which that company has issued any share holds, directly or indirectly and whether alone or together with any connected person in relation to that person, more than 50 per cent of the participation rights, as defined in section 9D(1), or of the voting rights in that company; and[paragraph (g) added by section 29(1)(c) of Act 23 of 2018; effective date 1 January 2019, applicable in respect of participation rights acquired on or after that date]

(h)that company does not carry on any trade in relation to a venture, business or undertaking or part thereof that was acquired by that company, directly or indirectly, from a person—

(i)who holds a share in a venture capital company to which that company has issued any share; or

(ii)who is a connected person in relation to a person referred to in subparagraph (i);

[paragraph (h) added by section 29(1)(d) of Act 23 of 2018; effective date 1 January 2019, applicable in respect of any trade carried on which commenced on or after that date]

“qualifying share” means an equity share held by a venture capital company which is issued to that company by a qualifying company, and does not include any share which—

(b)would have constituted a hybrid equity instrument, as defined in section 8E(1), but for the three-year period requirement contemplated in paragraph (b)(i) of the definition of “hybrid equity instrument” in that section; or[paragraph (b) substituted by section 29(1)(e) of Act 23 of 2018; effective date 1 January 2019, applicable in respect of years of assessment commencing on or after that date]

(c)constitutes a third-party backed share as defined in section 8EA(1);

“venture capital company” means a company that has been approved by the Commissioner in terms of subsection (5) and in respect of which such approval has not been withdrawn in terms of subsection (3A), (3B), (6) or (6A);[definition of “venture capital company” substituted by section 29(1)(f) of Act 23 of 2018; effective date 1 January 2019, applicable in respect of years of assessment commencing on or after that date]“venture capital share” means an equity share held by a taxpayer in a venture capital company which was issued to that taxpayer by that venture capital company, and does not include any share which—[words preceding paragraph (b) substituted by section 29(1)(g) of Act 23 of 2018; effective date 1 January 2019, applicable in respect of years of assessment commencing on or after that date]

(b)would have constituted a hybrid equity instrument, as defined in section 8E(1), but for the three-year period requirement contemplated in paragraph (b)(i) of the definition of “hybrid equity instrument” in that section;[paragraph (b) substituted by section 29(1)(h) of Act 23 of 2018; effective date 1 January 2019, applicable in respect of years of assessment commencing on or after that date]

(c)constitutes a third-party backed share as defined in section 8EA(1); or

(d)was issued to that taxpayer solely in respect or by reason of services rendered or to be rendered by that taxpayer in respect of the incorporation, marketing, management or administration of that venture capital company or of any qualifying company in which that venture capital company holds or acquires any share.[paragraph (d) added by section 29(1)(i) of Act 23 of 2018; effective date 24 October 2018]

(2)Subject to subsections (3), (3A), (3B) and (4), there must be allowed as a deduction from the income of a taxpayer in respect of a year of assessment expenditure actually incurred by that taxpayer in acquiring any venture capital share issued to that taxpayer during that year of assessment.[subsection (2) substituted by section 17(1)(b) of Act 34 of 2019; effective date 15 January 2020, date of promulgation of that Act]

(3)

(a)Where, during any year of assessment—

(i)any loan or credit has been used by a taxpayer for the payment or financing of the whole or any portion of any expenditure contemplated in subsection (2); and

(ii)any portion of that loan or credit is owed by the taxpayer on the last day of the year of assessment,

the amount which may be taken into account as expenditure that qualifies for a deduction in terms of subsection (2) must be limited to the amount for which the taxpayer is in terms of paragraph (b) deemed to be at risk on the last day of the year of assessment.

(b)For the purposes of paragraph (a), a taxpayer must be deemed to be at risk to the extent that—

(i)the incurral of the expenditure contemplated in subsection (2); or

(ii)the repayment of any loan or credit used by the taxpayer for the payment or financing of any expenditure contemplated in subsection (2),

would (having regard to any transaction, agreement, arrangement, understanding or scheme entered into before or after such expenditure is incurred) result in an economic loss to the taxpayer were no income to be received by or accrue to the taxpayer in future years from the disposal of any venture capital share issued to the taxpayer as a result of the incurral of that expenditure: Provided that the taxpayer must not be deemed to be at risk to the extent that—

(aa)the loan or credit is not repayable within a period of five years from the date on which that loan or credit was advanced to the taxpayer; and

(bb)any loan or credit used by the taxpayer for the payment or financing of the whole or any portion of any expenditure contemplated in subsection (2) is (having regard to any transaction, agreement, arrangement, understanding or scheme entered into before or after such expenditure is incurred) granted directly or indirectly to the taxpayer by the venture capital company by which the qualifying shares are issued as a result of the incurral of that expenditure.

(3A)If, at the end of any year of assessment, after the expiry of a period of 36 months commencing on the first date of the issue of venture capital shares a taxpayer has incurred expenditure as contemplated in subsection (2) and that taxpayer is a connected person in relation to that venture capital company—

(a)no deduction must be allowed in terms of subsection (2) in respect of that year of assessment in respect of any expenditure incurred by the taxpayer in acquiring any venture capital share issued to that taxpayer by that venture capital company;

(b)the Commissioner must, after due notice to the venture capital company, withdraw any approval in terms of subsection (5) with effect from the date of that approval by the Commissioner of that company as a venture capital company in terms of that subsection; and

(c)the Commissioner must withdraw the approval of that company in terms of subsection (5) and an amount equal to 125 per cent of the expenditure incurred by any person to acquire shares issued by the company must be included in the income of the company in the year of assessment in which the approval is withdrawn by the Commissioner,

if corrective steps acceptable to the Commissioner are not taken by the company within a period stated in the notice contemplated in paragraph (b).[subsection (3A) substituted by section 32(1) of Act 15 of 2016; effective date, retroactively amended by section 87(1) of Act 34 of 2019 to 21 July 2019, applicable in respect of any taxpayer to whom that venture capital company has issued any venture capital shares for the first time on or after that date]

(3B)If any taxpayer holds, at the end of any year of assessment following the expiry of a period of 36 months commencing on the first date of the issue by a venture capital company of venture capital shares of any class, more than 20 per cent of the venture capital shares of that class—

(a)no deduction must be allowed in terms of subsection (2) in respect of that year of assessment in respect of any expenditure incurred by the taxpayer in acquiring any venture capital share of that class issued to that taxpayer by that venture capital company;

(b)the Commissioner must, after due notice to the venture capital company, withdraw any approval in terms of subsection (5) with effect from the commencement of that year of assessment; and

(c)an amount equal to 125 per cent of the expenditure incurred by any person to acquire shares issued by the company must be included in the income of the company in the year of assessment in which the approval is withdrawn by the Commissioner under paragraph (b):

Provided that—

(a)this subsection must not apply during any year of assessment where that taxpayer holds more than 20 per cent of the venture capital shares of a class and that venture capital company during that year of assessment gives notice to the Commissioner in writing that the venture capital company will cancel all the issued shares in that class of shares; and

(b)that venture capital company cancels all the issued shares in that class of shares within six months from the date on which that notice is given.

[proviso added by section 17(1) of Act 23 of 2020; effective date 31 July 2020, applicable in respect of years of assessment ending on or after that date][subsection (3B) inserted by section 29(1)(j) of Act 23 of 2018; effective date, retroactively amended by section 88(1) of Act 34 of 2019 to 21 July 2019, applicable in respect of any share issued on or after that date]

(3C)The deduction to be allowed in terms of subsection (2) in respect of a year of assessment in respect of expenditure incurred during that year by a taxpayer that is—

(a)a company must not exceed R5 million; and

(b)a person other than a company must not exceed R2,5 million.

[subsection (3C) inserted by section 17(1)(c) of Act 34 of 2019; effective date 21 January 2019, applicable in respect of expenditure incurred by the taxpayer on or after that date]

(4)A claim for a deduction in terms of subsection (2) must be supported by a certificate issued by the venture capital company stating the amounts invested in that company and that the Commissioner approved that company as contemplated in subsection (5).

(5)The Commissioner must approve a venture capital company if that company has applied for approval and the Commissioner is satisfied that—

(a)the company is a resident;

(b)the sole object of the company is the management of investments in qualifying companies;

(e)the tax affairs of the company are in order and the company has complied with all the relevant provisions of the laws administered by the Commissioner;

(g)the company is licensed in terms of section 8(5) of the Financial Advisory and Intermediary Services Act, 2002 (Act No. 37 of 2002).[paragraph (g) substituted by section 29(1)(k) of Act 23 of 2018; effective date 1 January 2019, applicable in respect of years of assessment commencing on or after that date]

(6)If the Commissioner is satisfied that any venture capital company approved in terms of subsection (5) has during a year of assessment failed to comply with the provisions of that subsection, the Commissioner must after due notice to the company withdraw that approval from the commencement of that year if corrective steps acceptable to the Commissioner are not taken by the company within a period stated in that notice.

(6A)If, at the end of any year of assessment, after the expiry of a period of 48 months commencing on the first date of the issue of venture capital shares—[words preceding paragraph (a) substituted by section 17(1)(d) of Act 34 of 2019; effective date 21 July 2019]

(b)less than 80 per cent of the expenditure incurred by the company to acquire assets held by the company was incurred to acquire qualifying shares issued to the company by qualifying companies, each of which, immediately after the issue, held assets with a book value not exceeding—

(i)R500 million, where the qualifying company was a junior mining company; or

(ii)R50 million, where the qualifying company was a company other than a junior mining company; or

(c)more than 20 per cent of any amounts received in respect of the issue of shares in the company was utilised to acquire qualifying shares issued to the company by any one qualifying company,

the Commissioner must after due notice to the company withdraw that approval with effect from the commencement of the year of assessment during which the period ends that is stated in that notice during which corrective steps acceptable to the Commissioner must be taken if corrective steps acceptable to the Commissioner are not taken by the company within the period stated in that notice.[words following paragraph (c) substituted by section 29(1)(l) of Act 23 of 2018; effective date 1 January 2019, applicable in respect of years of assessment commencing on or after that date]

(7)A company may apply for approval in terms of subsection (5) in respect of the year of assessment following the year of assessment during which approval was withdrawn in respect of that company in terms of subsection (6) or (6A) if the non-compliance which resulted in the withdrawal has been rectified to the satisfaction of the Commissioner.

(8)If the Commissioner withdraws the approval of a company in terms of subsection (6) or (6A), an amount equal to 125 per cent of the expenditure incurred by any person for the issue of shares held in the company must be included in the income of the company in the year of assessment in which the approval is withdrawn by the Commissioner.

(9)Notwithstanding section 8(4), no amount shall be recovered or recouped in respect of the disposal of a venture capital share or in respect of a return of capital if that share has been held by the taxpayer for a period longer than five years.

(10)A venture capital company must submit to the Minister a report providing the Minister with the information that the Minister may prescribe.

(11)No deduction shall be allowed under this section in respect of shares acquired after 30 June 2021.

12K. ***

[section 12K repealed by section 18(1) of Act 34 of 2019; effective date 1 June 2019]

12L. Deduction in respect of energy efficiency savings

(1)For the purpose of determining the taxable income derived by any person from carrying on any trade in respect of any year of assessment ending before 1 January 2026, there must be allowed as a deduction from the income of that person an amount in respect of energy efficiency savings by that person in respect of that year of assessment determined in accordance with subsection (2), subject to subsection (3).[subsection (1) substituted by section 19(1) of Act 34 of 2019 and by section 9(1) of Act 20 of 2022; effective date 1 January 2023]

(2)The amount of the deduction contemplated in subsection (1) must be calculated at 95 cents per kilowatt hour or kilowatt hour equivalent of energy efficiency savings.

(3)A person claiming the deduction allowed in terms of subsection (1) during any year of assessment must obtain a certificate issued by an institution, board or body prescribed by the regulations contemplated in subsection (5) in respect of the energy efficiency savings for which a deduction is claimed in respect of that year of assessment containing—

(a)the baseline at the beginning of the year of assessment;

(b)the reporting period energy use at the end of the year of assessment;

(c)the annual energy efficiency savings expressed in kilowatt hours or kilowatt hours equivalent for the year of assessment including the full criteria and methodology used to calculate the energy efficiency savings; and

(d)any other information prescribed by the regulations contemplated in subsection (5).

(4)A deduction must not be allowed in terms of this section if the person claiming the allowance receives any concurrent benefit in respect of energy efficiency savings.

(5)The Minister of Finance, in consultation with the Minister of Energy and the Minister of Trade and Industry, must make regulations prescribing—

(a)the institution, board or body that must issue the certificate contemplated in subsection (3);

(b)the powers and responsibilities of the institution, board or body contemplated in paragraph (a);

(c)the information that must be contained in the certificate contemplated in subsection (3) in addition to the information contemplated in that subsection;

(d)those benefits that constitute concurrent benefits for the purpose of subsection (4); and

(e)any limitation of energy sources in respect of which the allowance may be claimed.

12M. Deduction of medical lump sum payments

(1)For the purposes of this section—“dependant”, in relation to a former employee, means a spouse or any dependant (as defined in section 1 of the Medical Schemes Act);“insurer” means an insurer as defined in section 29A.

(2)In determining the taxable income derived by any taxpayer in any year of assessment from carrying on any trade, there must be allowed as a deduction from the income of that taxpayer so derived any amount paid by way of a lump sum during the year of assessment by that taxpayer—

(a)to any former employee of the taxpayer who has retired from the taxpayer’s employ on grounds of old age, ill health or infirmity or to any dependant of that former employee; or

(b)under any policy of insurance taken out with an insurer solely in respect of one or more former employees or dependants contemplated in paragraph (a),

but only to the extent that the amount is paid for the purposes of making any contribution, in respect of any former employee or dependant contemplated in paragraph (a), to any medical scheme or fund contemplated in section 6A(2)(a)(i) or (ii): Provided that no deduction may be allowed in terms of this section if the taxpayer making the payment, or a connected person in relation to that taxpayer, retains any further obligation, whether actual or contingent, relating to the mortality risk of any former employee or dependant contemplated in paragraph (a).

12N. Deductions in respect of improvements not owned by taxpayer

(1)If a taxpayer—

(a)holds a right of use or occupation of land or a building;

(b)effects an improvement on the land or to the building in terms of—

(i)a Public Private Partnership;

(ii)an agreement in terms of which the right of use or occupation is granted, if the land or building is owned by—

(aa)the government of the Republic in the national, provincial or local sphere; or

(bb)any entity of which the receipts and accruals are exempt from tax in terms of section 10(1)(cA) or (t); or

(iii)the Independent Power Producer Procurement Programme administered by the Department of Energy;

(c)incurs expenditure to effect the improvement contemplated in paragraph (b); and

(e)uses or occupies the land or building for the production of income or derives income from the land or building,

the taxpayer must for the purposes of any deduction contemplated in section 11D, 12B, 12BA, 12C, 12D, 12F, 12I, 12S, 13, 13ter, 13quat, 13quin, 13sex, or 36, and for the purposes of the Eighth Schedule, be deemed to be the owner of the improvement so completed.[words following paragraph (e) substituted by section 30 of Act 23 of 2018, and by section 18(1) of Act 17 of 2023; effective date deemed to have been 1 March 2023, applies in respect of assets brought into use on or after that date]

(2)

(a)When the right of use or occupation terminates, the taxpayer must be deemed to have disposed of the improvement to the owner of the land or building on the later of the date when—

(i)the right of use or occupation terminated; or

(ii)the use or occupation ended.

(b)If the right of use or occupation terminates and the taxpayer—

(i)continues to use or occupy the land or building; or

(ii)renews the right of use or occupation,

the renewed right of use or occupation must be deemed to be the same right of use or occupation as the right of use or occupation previously held by the taxpayer.

(3)This section does not apply if the taxpayer—

(a)is a person carrying on any banking, financial services or insurance business; or

(b)enters into an agreement whereby the right of use or occupation of the land or building is granted to any other person, unless—

(i)the land or building is occupied by that other person and that other person is a company that is a member of the same group of companies as that taxpayer in terms of such an agreement;

(ii)the cost of maintaining the land or building and of carrying out repairs thereto required in consequence of normal wear and tear is borne by the taxpayer; and

(iii)subject to any claim that the taxpayer may have against the other person by reason of the other person’s failure to take proper care of the land or building, the risk of destruction or loss of or other disadvantage to the land or building is not assumed by that other person.

12NA. Deductions in respect of improvements on property in respect of which government holds a right of use or occupation

(1)There shall be allowed to be deducted from the income of a person, expenditure actually incurred by that person to effect an improvement to land or to a building in terms of an obligation to effect those improvements to that land or to that building in terms of a Public Private Partnership if the government of the Republic in the national, provincial or local sphere holds the right of use or occupation of that land or building.

(2)The amount allowed to be deducted in terms of this section in respect of any year of assessment shall be equal to the amount of expenditure contemplated in subsection (1) that has not been allowed to be deducted in terms of this section, divided by the number of years (including that year of assessment) for which the taxpayer will derive income in respect of the Public Private Partnership in terms of the agreement or 25 years, whichever is the lesser.

(3)Where any amount as contemplated in section (10)(1)(zI) is received by or accrues to a person from the government of the Republic in the national, provincial or local sphere for the purpose of effecting an improvement to land or a building or in respect of the defraying of the cost of any improvements in terms of the Public Private Partnership contemplated in subsection (1), the expenditure to be deducted in terms of this section shall be reduced in an amount equal to an amount that is exempt in terms of that section.

(4)This section shall not apply if the person effecting an improvement to land or to a building is a person carrying on any banking, financial services or insurance business.

12O. Exemption in respect of films

(1)For the purposes of this section—“completion date” means the date on which a qualifying film is for the first time in a form in which it can be regarded as ready for copies of it to be made and distributed, for presentation to the general public;“exploitation rights” means the right to any receipts and accruals in respect of—

(a)the use of;

(b)the right of use of; or

(c)the granting of permission to use,

any film to the extent that those receipts and accruals are wholly dependent on profits and losses in respect of the film;“film” means—

(a)a feature film;

(b)a documentary or documentary series; or

(c)an animation,

conforming to the requirements stipulated by the Department of Trade and Industry in the Programme Guidelines for the South African Film and Television Production and Co-production Incentive;“National Film and Video Foundation” means the National Film and Video Foundation established by the National Film and Video Foundation Act, 1997 (Act No. 73 of 1997); and“special purpose corporate vehicle” means a company responsible for the production of a film as required by the Department of Trade and Industry in terms of the Programme Guidelines for the South African Film and Television Production and Co-production Incentive.

(2)There must be exempt from normal tax the receipts and accruals in respect of income derived from the exploitation rights of a film—

(a)if the National Film and Video Foundation has approved the film in terms of section 3(c) read with section 4(1) of the National Film and Video Foundation Act, 1997 (Act No. 73 of 1997), as a local production or co-production whereby a film is co-produced in terms of an international co-production agreement between the government of the Republic and the government of another country, which agreement must be subject to the Constitution;

(b)if income is derived from the exploitation rights of the film—

(i)by a person who acquired the exploitation rights in respect of that film prior to the date that the principal photography of that film commenced; or

(ii)by a person who acquired the exploitation rights in respect of that film after the date that principal photography of that film commenced but before the completion date of that film if consideration for those exploitation rights was not directly or indirectly paid or applied for the benefit of a person contemplated in subparagraph (i); and

(c)to the extent that the income is received or accrues within a period of 10 years after the completion date of that film.

(3)No exemption shall be allowed under this section to a person that is a broadcaster as defined in section 1 of the Broadcasting Act, 1999 (Act No. 4 of 1999), or any person that is a connected person in relation to that broadcaster.

(4)

(a)Any—

(i)special purpose corporate vehicle; or

(ii)collection account manager that—

(aa)manages exploitation rights under a collection account management agreement; and

(bb)is approved by the Minister for the purpose of this section by notice in the Gazette,

must provide a report to the National Film and Video Foundation containing such information, within such time and in such manner as is prescribed by the Minister when income arising from exploitation rights of a film is distributed to a person within a period of 10 years commencing from the completion date of the film.

(b)The National Film and Video Foundation must provide a report annually to the Minister in respect of all films approved in terms of subsection (2)(a) containing such information, within such time and in such manner as is prescribed by the Minister for a period of 10 years commencing from the completion date of a film if—

(i)any income is received or accrues in respect of the film; and

(ii)the income is eligible for the exemption under subsection (2).

(5)

(a)Notwithstanding section 23(f), a taxpayer may deduct from the income of the taxpayer an amount in respect of any expenditure incurred to acquire exploitation rights in respect of a film in accordance with paragraph (b).

(b)The amount of the deduction contemplated in paragraph (a) is equal to the amount of any expenditure incurred as contemplated in that paragraph less any amount received or accrued during any year of assessment in respect of that film.

(c)No deduction may be made under this subsection to the extent that the expenditure was funded from a loan, credit or similar financing.

(d)The deduction contemplated in paragraph (a) may only be made in any year of assessment commencing at least two years after the completion date of the film to the extent that the amount of expenditure incurred exceeds the total amount received by or accrued to that taxpayer in respect of the exploitation rights.

(e)Subsection (2) and paragraph (a) of this subsection cease to apply to any income derived from a film in any year of assessment subsequent to the date of a deduction made under paragraph (a) in respect of that film.

(6)

(a)In addition to the exemption under subsection (2), any amount received by or accrued to a special purpose corporate vehicle by way of a grant payable by the State under the South African Film and Television Production and Co-production Incentive administered by the Department of Trade and Industry shall be exempt from normal tax subject to section 8(4).

(b)Where a special purpose corporate vehicle that received a grant contemplated in paragraph (a), or to whom such grant has accrued, pays the whole or any portion of the amount of the grant to another person pursuant to any exploitation rights in respect of that film, the exemption under this paragraph must also apply to the amount received by or accrued to that other person to the extent that the amount does not exceed any amount that the other person contributed to the production of the film.

12P. Exemption of amounts received or accrued in respect of government grants

(1)For the purposes of this section—“allowance asset” means an asset as defined in paragraph 1 of the Eighth Schedule, other than trading stock, in respect of which a deduction or allowance is allowable in terms of this Act for purposes other than the determination of any capital gain or capital loss;“base cost” means base cost as defined in paragraph 1 of the Eighth Schedule;“government grant” means a grant-in-aid, subsidy or contribution by the government of the Republic in the national, provincial or local sphere.

(2)There must be exempt from normal tax any amount received by or accrued to a person as a beneficiary of a government grant if that government grant—

(a)is listed in the Eleventh Schedule; or

(b)is identified by the Minister by notice in the Gazette for the purpose of exempting that government grant with effect from a date specified by the Minister in that notice (including any date that precedes the date of that notice), after having regard to—

(i)the implications of the exemption for the National Revenue Fund; and

(ii)whether the tax implications were taken into account in allocating that grant.

(2A)Notwithstanding subsection (2), there must be exempt from normal tax any amount received by or accrued to or in favour of any person from the Government in the national, provincial or local sphere, where—

(a)that amount is granted for the performance by that person of its obligations pursuant to a Public Private Partnership; and

(b)that person is required in terms of that Public Private Partnership to expend an amount at least equal to that amount in respect of any improvements on land or to buildings owned by any sphere of government or over which any sphere of government holds a servitude.

(3)Where during any year of assessment any amount is received by or accrues to a person by way of a government grant as contemplated in subsection (2) or 2(A), other than a government grant in kind, for the acquisition, creation or improvement, or as a reimbursement for expenditure incurred in respect of the acquisition, creation or improvement of—

(a)trading stock—

(i)any expenditure incurred in respect of that trading stock allowed as a deduction in terms of section 11(a); or

(ii)any amount taken into account in respect of the value of trading stock as contemplated in section 22(1) or (2); or

(b)an allowance asset, the base cost of that allowance asset,

must be reduced to the extent that the amount of that government grant is applied for that purpose.

(4)Where any amount is received by or accrues to a person by way of a government grant as contemplated in subsection (2) or 2A for the acquisition, creation or improvement of an allowance asset or as a reimbursement for expenditure incurred in respect of that acquisition, creation or improvement, the aggregate amount of the deductions or allowances allowable to that person in respect of that allowance asset may not exceed an amount equal to the aggregate of the expenditure incurred in the acquisition, creation or improvement of that allowance asset, reduced by an amount equal to the sum of—

(a)the amount of the government grant; and

(b)the aggregate amount of all deductions and allowances previously allowed to that person in respect of that allowance asset:

Provided that where a person referred to in this subsection qualifies for a deduction under section 12BA in respect of an allowance asset, the aggregate amount of the deductions or allowances allowable to that person in respect of that allowance asset may not exceed an amount equal to 125 per cent of the aggregate amount otherwise determined in terms of this subsection.[proviso added by section 19(1) of Act 17 of 2023; effective date deemed to have been 1 March 2023, applies in respect of assets brought into use on or after that date]

(5)Where during any year of assessment any amount is received by or accrues to a person by way of a government grant as contemplated in subsection (2) or (2A), other than a government grant in kind—

(a)for the purpose of the acquisition, creation or improvement of an asset other than an asset contemplated in subsection (3) or (4); or

(b)as a reimbursement for expenditure incurred for the acquisition, creation or improvement of an asset other than an asset contemplated in subsection (3) or (4),

the base cost of that asset must be reduced to the extent that the amount of the government grant is applied for that acquisition, creation or improvement.

(6)

(a)Where during any year of assessment—

(i)any amount is received by or accrues to a person by way of a government grant as contemplated in subsection (2) or (2A), other than a government grant in kind; and

(ii)subsection (3), (4) or (5) does not apply to that amount,

any amount allowed to be deducted from that person’s income in terms of section 11 for that year of assessment must be reduced to the extent of the amount of that government grant.

(b)To the extent that the amount received or accrued by way of a government grant exceeds the amount allowed to be deducted as contemplated in paragraph (a), that excess is deemed to be an amount received or accrued in respect of that government grant during the following year of assessment for the purposes of paragraph (a).

12Q. Exemption of income in respect of ships used in international shipping

(1)For the purposes of this section—“international shipping” means the conveyance for compensation of passengers or goods by means of the operation of a South African ship mainly engaged in international traffic;“international shipping company” means a company that is a resident that operates one or more South African ships that are utilised in international shipping;“international shipping income” means the receipts and accruals of a person derived from international shipping mainly from the operation of one or more ships contemplated in paragraph (a) of the definition of “South African ship”;[definition of “international shipping income” substituted by section 31(1)(a) of Act 23 of 2018; effective date 1 April 2019, applicable in respect of years of assessment commencing on or after that date]“South African ship” means a ship—

(a)which is registered in the Republic in accordance with Part 1 of Chapter 4 of the Ship Registration Act, 1998 (Act No. 58 of 1998); or

(b)another ship or ships used temporarily in lieu of the ship contemplated in paragraph (a) by virtue of that ship being subject to repair or maintenance.

[definition of “South African ship” substituted by section 31(1)(b) of Act 23 of 2018; effective date 1 April 2019, applicable in respect of years of assessment commencing on or after that date]

(2)

(a)There must be exempt from normal tax any international shipping income of any international shipping company.

(b)Any capital gain or capital loss in respect of any year of assessment of any international shipping company determined in respect of a South African ship engaged in international shipping must be disregarded in determining the aggregate capital gain or aggregate capital loss of that international shipping company.

(3)The rate of dividends tax contemplated in section 64E that is paid by an international shipping company on the amount of any dividend derived from international shipping income must not exceed zero per cent of the amount of that dividend.

(4)There must be exempt from the withholding tax on interest any amount of interest if that amount is paid to any foreign person, as defined in section 50A, by an international shipping company in respect of debt utilised to fund the acquisition, construction or improvement of a South African ship utilised for international shipping.

12R. Special economic zones

(1)For the purposes of this section—“qualifying company” means a company—

(a)

(i)incorporated by or under any law in force in the Republic or in any part thereof; or

(ii)that has its place of effective management in the Republic;

(b)that carries on a trade in a special economic zone designated by the Minister of Trade and Industry in terms of the Special Economic Zones Act and approved by the Minister of Finance after consultation with the Minister of Trade and Industry for the purposes of this section by notice in the Gazette;

(c)if the trade contemplated in paragraph (b) is carried on from a fixed place of business situated within a special economic zone;

(d)if not less than 90 per cent of the income of that company is derived from the carrying on of a trade within one or more special economic zones; and

(e)that—

(i)was carrying on any trade before 1 January 2013 in a location that is subsequently approved for the purpose of this section as a zone in terms of subsection (3);

(ii)commenced, on or after 1 January 2013, the carrying on, in a location that is approved or subsequently approved for the purpose of this section as a zone in terms of subsection (3), of any trade not previously carried on by that company or any connected person in relation to that company in the Republic; or

(iii)commenced, on or after 1 January 2013, the carrying on, in a location that is approved or subsequently approved for the purpose of this section as a zone in terms of subsection (3), of any trade and that trade—

(aa)comprises of the production of goods not previously produced by that company or any connected person in relation to that company in the Republic;

(bb)utilises the use of new technology in that company’s production processes; or

(cc)represents an increase in the production capacity of that company in the Republic;

[paragraph (e) added by section 20(1) of Act 34 of 2019; effective date 1 January 2019, applicable in respect of years of assessment ending on or after that date]

“SIC Code” means version 7 of the Standard Industrial Classification Code issued by Statistics South Africa;“special economic zone” means a special economic zone as defined in the Special Economic Zones Act that is approved for the purposes of this section by the Minister of Finance under subsection (3);“Special Economic Zones Act” means the Special Economic Zones Act, 2014 (Act No. 16 of 2014).

(3)The Minister of Finance must approve a special economic zone for purposes of this section after taking into account the financial implications for the State should a special economic zone be approved under this section.

(4)Notwithstanding a qualifying company being located in a special economic zone—

(a)a company is not a qualifying company if that company conducts any of the following activities classified under “Section C: Manufacturing” in the “SIC Code”.

(i)Distilling, rectifying and blending of spirits (SIC Code 1101);

(ii)Manufacture of wines (SIC Code 1102);

(iii)Manufacture of malt liquors and malt (SIC Code 103);

(iv)Manufacture of tobacco products (SIC Code 12);

(v)Manufacture of weapons and ammunition (SIC Code 252);

(vi)Manufacture of bio-fuels if that manufacture negatively impacts on food security in the Republic;

(b)a company that conducts any activity classified in the SIC Code, which the Minister of Finance may designate by notice in the Gazette is not a qualifying company; or

(c)a company is not a qualifying company if—

(i)more than 20 per cent of expenditure that is deductible under this Act is incurred; or

(ii)more than 20 per cent of the income of that company is received or accrued,

in respect of transactions with any connected person in relation to that company if that connected person—

(aa)is a resident; or

(bb)is not a resident and those transactions are attributable to a permanent establishment of that connected person in the Republic.

(5)This provision ceases to apply in respect of any year of assessment commencing on or after 1 January 2031.[subsection (5) substituted by section 18(1) of Act 23 of 2020; effective date 9 February 2016]

12S. Deduction in respect of buildings in special economic zones

(1)For the purposes of this section, “qualifying company” means a qualifying company as defined in section 12R, notwithstanding section 12R(4).

(2)A qualifying company may deduct from the income of that qualifying company an allowance equal to ten per cent of the cost to the qualifying company of any new and unused building owned by the qualifying company, or any new and unused improvement to any building owned by the qualifying company, if that building or improvement is wholly or mainly used by the qualifying company during the year of assessment for purposes of producing income within a special economic zone, as defined in section 12R(1), in the course of the taxpayer’s trade, other than the provision of residential accommodation.

(3)If a qualifying company completes an improvement as contemplated in section 12N, the expenditure incurred by the qualifying company to complete the improvement must be deemed to be the cost to the qualifying company of any new and unused building or of any new and unused improvement to a building contemplated in subsection (2).

(4)For the purposes of this section the cost to a qualifying company of any building or improvement must be deemed to be the lesser of the actual cost to the qualifying company or the cost which a person would, if that person had acquired, erected or improved the building under a cash transaction concluded at arm’s length on the date on which the transaction for the acquisition, erection or improvement of the building was in fact concluded, have incurred in respect of the direct cost of the acquisition, erection or improvement of the building.

(5)No deduction may be allowed under this subsection in respect of any building that has been disposed of by the qualifying company during any previous year of assessment.

(6)A deduction may not be allowed under any other section of this Act in respect of the cost of a building or improvement if any of that cost has qualified or will qualify for deduction from the qualifying company’s income as a deduction of expenditure or an allowance in respect of expenditure under this section.

(7)The deductions which may be allowed or deemed to have been allowed in terms of this section and any other provision of this Act in respect of the cost of any building or improvement may not in the aggregate exceed the amount of such cost.

(8)The Commissioner may, notwithstanding the provisions of sections 99 and 100 of the Tax Administration Act disallow all deductions otherwise provided for under this section if a qualifying company is guilty of fraud or misrepresentation or non-disclosure of material facts with regard to any tax, duty or levy administered by the Commissioner.

(9)The Commissioner may, notwithstanding the provisions of sections 99 and 100 of the Tax Administration Act, raise an additional assessment for any year of assessment where a deduction that has been allowed in any previous year must be disallowed in terms of subsection (8).

(10)This provision ceases to apply in respect of expenditure incurred during any year of assessment commencing on or after 1 January 2031.[subsection (10) substituted by section 19(1) of Act 23 of 2020; effective date 9 February 2016]

12T. Exemption of amounts received or accrued in respect of tax free investments

(1)For the purposes of this section—“tax free investment” means any financial instrument or policy as defined in section 29A—

(a)administered by a person or entity designated by notice by the Minister in the Gazette;

(b)owned by—

(i)a natural person; or

(ii)the deceased estate or insolvent estate of a natural person that is deemed to be one and the same person as that natural person in respect of the contributions made by that person; and

(c)that complies with the requirements of the Regulations contemplated in subsection (8).

(2)There shall be exempt from normal tax any amount received by or accrued to a natural person or deceased estate or insolvent estate of that person in respect of a tax free investment.

(3)In determining the aggregate capital gain or aggregate capital loss of a person in respect of any year of assessment, any capital gain or capital loss in respect of the disposal of a tax free investment shall be disregarded.

(4)Contributions in respect of tax free investments shall be—

(a)limited to an amount of R36 000 in aggregate during any year of assessment;[paragraph (a) substituted by section 7(1)(a) of Act 22 of 2020; effective date 1 March 2020, applicable in respect of years of assessment commencing on or after that date]

(b)an amount in cash; and

(c)limited to an amount of R500 000 in aggregate.

(5)Any amount contemplated in subsection (2) shall not be taken into account in determining whether a person contributed in excess in respect of the amounts contemplated in subsections (4)(a) and (c).

(6)Any—

(a)transfer of an amount in respect of a tax free investment of a person to another tax free investment of that person; or

(b)amount received by or accrued in respect of a tax free investment,

shall not be taken into account in determining whether that person contributed in excess of the amounts contemplated in subsections (4)(a) and (c) as a contribution in respect of that other tax free investment.

(7)

(a)If during any year of assessment any person contributes in excess of the amount of R36 000 in respect of tax free investments, an amount equal to 40 per cent of that excess is deemed to be an amount of normal tax payable by the person contemplated in subsection (1)(b) in respect of that year of assessment.[paragraph (a) substituted by section 7(1)(b) of Act 22 of 2020; effective date 1 March 2020, applicable in respect of years of assessment commencing on or after that date]

(b)If any person contributes in excess of R500 000 in aggregate in respect of tax free investments, an amount equal to 40 per cent of so much of that excess as has not previously been taken into account in terms of this subsection shall be deemed to be an amount of normal tax payable by the person contemplated in subsection 1(b) in respect of the year of assessment in which that excess is contributed.

(8)The Minister shall make regulations prescribing the requirements—

(a)to which any financial instrument or policy as defined in section 29A shall conform for the purposes of constituting a tax free investment;

(b)that must be complied with when a tax free investment is transferred; and

(c)in respect of disclosure by any person contemplated in paragraph (a) of the definition of “tax free investment” in subsection (1) in respect of a tax free investment.

(9)

(a)The Financial Sector Conduct Authority shall be responsible for supervising and enforcing compliance with any regulations made by the Minister in terms of subsection (8).

(b)The supervising and enforcing compliance contemplated in paragraph (a) shall form part of the legislative mandate of the Financial Sector Conduct Authority.

(c)The Financial Sector Conduct Authority, acting through the Registrar, as defined in section 1 of the Financial Institutions (Protection of Funds) Act, 2001 (Act No. 28 of 2001), in supervising and enforcing compliance as contemplated in paragraph (a), shall exercise any power afforded to the Registrar as defined in section 1 of that Act and in any of the Acts contemplated in the definition of “law” in section 1 of that Act.

[subsection (9) substituted by section 32(1) of Act 23 of 2018; effective date 1 April 2018, applicable in respect of years of assessment commencing on or after that date]

12U. Additional deduction in respect of roads and fences in respect of production of renewable energy

(1)There must be allowed to be deducted by a person any amount actually incurred during the year of assessment in which that expenditure is incurred, subject to subsection (3), in respect of—

(a)the construction of any road or the erecting of any fence and a foundation or supporting structure designed for such a fence for the purpose of trade of that person of generation of electricity which exceeds 5 megawatts from—

(i)wind power;

(ii)solar energy;

(iii)hydropower to produce electricity of not more than 30 megawatts; or

(iv)biomass comprising organic wastes, landfill gas or plant material; or

(b)improvements (other than repairs) to—

(i)any road or fence contemplated in paragraph (a); or

(ii)foundation or supporting structure designed for such a fence,

subject to subsection (2).

(2)For the purpose of any deduction under subsection (1)—

(a)the foundation or supporting structure designed for a fence must be constructed in such manner that the foundation or supporting structure is or should be regarded as being integrated with that fence; and

(b)the useful life of the foundation or supporting structure is or will be limited to the useful life of that fence.

(3)For purposes of deduction under subsection (1) any expenditure—

(a)actually incurred by that person prior to the commencement of and in preparation for carrying on that trade;

(b)which would have been allowed as a deduction in terms of subsection (1) had the expenditure been incurred after that person commenced carrying on that trade; and

(c)which was not allowed as a deduction in any previous year of assessment,

shall be allowed as a deduction in terms of this section.

13. Deductions in respect of buildings used in a process of manufacture

(1)Notwithstanding anything to the contrary contained in paragraph (ii) of the proviso to section 11(e), there shall be allowed to be deducted from the income of the taxpayer an allowance equal to two per cent of the cost (after the deduction of any amount referred to in subsection (3) or (7) or the corresponding provisions of any previous Income Tax Act) to the taxpayer of—

(b)any building the erection of which was commenced by the taxpayer on or after the fifteenth day of March, 1961, if such building was wholly or mainly used by the taxpayer during the year of assessment for the purpose of carrying on therein in the course of his trade (other than mining or farming) any process of manufacture, research and development or any other process which is of a similar nature, or such building was let by the taxpayer and was wholly or mainly used by a tenant or subtenant for the purpose of carrying on therein any process as aforesaid in the course of any trade (other than mining or farming); or

(d)any building the erection of which was commenced on or after the fifteenth day of March, 1961, if such building has been acquired by the taxpayer by purchase from any other person who was entitled to an allowance in respect thereof under paragraph (b) or this paragraph or the corresponding provisions of any previous Income Tax Act, and such building was wholly or mainly used during the year of assessment by the taxpayer for the purpose of carrying on therein in the course of his trade (other than mining or farming) a process of manufacture, research and development or any other process which is of a similar nature, or such building was let by the taxpayer and was wholly or mainly used by a tenant or subtenant for the purpose of carrying on therein in the course of any trade (other than mining or farming) any process as aforesaid; or

(dA)any building that has never been used, if such building has been acquired by the taxpayer by purchase from any other person and such building was wholly or mainly used during the year of assessment by the taxpayer for the purpose of carrying on therein in the course of his trade (other than mining or farming) a process of manufacture, research and development or any other process which is of a similar nature, or such building was let by the taxpayer and was wholly or mainly used by a tenant or subtenant for the purpose of carrying on therein in the course of any trade (other than mining or farming) any process as aforesaid; or

(e)any improvements (other than repairs) to any building referred to in paragraph (a), (b), (c) or (d) which is during the year of assessment used as contemplated in that paragraph, if such improvements were commenced not later than the thirty-first day of March, 1971; or

(f)any improvements (other than repairs) to any building, if such improvements were commenced on or after the first day of April, 1971, and such building was wholly or mainly used by the taxpayer during the year of assessment for the purpose of carrying on therein in the course of his trade (other than mining or farming) any process of manufacture or any other process which is of a similar nature, or such building was let by the taxpayer and was wholly or mainly used by a tenant or subtenant for the purpose of carrying on therein any process as aforesaid in the course of any trade (other than mining or farming):

Provided that—

(a)no allowance shall be made under this subsection in respect of such portion of the cost of any building the erection of which was commenced on or after 1 July 1961, or any improvements effected thereto as has been taken into account in the calculation of any allowance to the taxpayer under section 11(g) whether in the current or any previous year of assessment;

(b)in the case of any such building the erection of which has or is commenced on or after 1 January 1989 and any such improvements which have or are commenced on or after that date, other than any building or improvements in respect of which the increased allowance contemplated in paragraph (c) of this proviso applies, the allowance under this subsection shall be increased to 5 per cent of the cost (after the deduction of any amount as provided in subsection (3)) to the taxpayer of such building or improvements; and

(d)in the case of an improvement completed by a taxpayer as contemplated in section 12N, the expenditure incurred by the taxpayer to complete the improvement shall for the purposes of this section be deemed to be the cost to the taxpayer of any building or improvement contemplated in this subsection.

(1A)Where any building in respect of which any deduction of an allowance is claimed in terms of this section was during any previous financial year or years used by the taxpayer for the purposes of any trade carried on by such taxpayer, the receipts and accruals of which were not included in the income of such taxpayer during such year or years, any deduction which could have been allowed during such previous year or years in terms of this section shall for the purposes of this section be deemed to have been allowed during such previous year or years as if the receipts and accruals of such trade had been included in the income of such taxpayer.

(2)The aggregate of the allowances allowed under subsection (1) or the corresponding provisions of any previous Income Tax Act, or deemed to have been allowed in terms of subsection (1A), in respect of any building or improvements shall not exceed the cost (after the deduction of any amount referred to in subsection (3) or the corresponding provisions of any previous Income Tax Act) of such building or improvements, as the case may be, less the aggregate of any allowances made to the taxpayer in respect of such building or improvements, as the case may be, under subsection (7) or section 11(g) or the corresponding provisions of any previous Income Tax Act.

(3)If in any year of assessment there falls to be included in a taxpayer’s income in terms of paragraph (a) of section 8(4) an amount which has been recovered or recouped in respect of any allowance made under subsection (1) or the corresponding provisions of any previous Income Tax Act in respect of any building or improvements, such portion of the amount so recovered or recouped as is set off against the cost of a further building as hereinafter provided shall, notwithstanding the provisions of the said paragraph, at the option of the taxpayer and provided the taxpayer purchases or erects within twelve months or such further period as the Commissioner may allow from the date on which the event giving rise to the recovery or recoupment occurred, any other building to which the provisions of subsection (1) apply, not be included in the taxpayer’s income for that year of assessment, but shall be set off against so much of the cost to the taxpayer of that further building purchased or erected by the taxpayer as remains after the deduction of any portion of such cost in respect of which an allowance has been granted to the taxpayer under section 11(g), whether in the current or any previous year of assessment.

(8)The provisions of this section shall mutatis mutandis apply with reference to any permanent shipbuilding structure the erection of which was commenced by the taxpayer on or after the first day of January, 1966, and the cost of improvements (other than repairs) effected thereto if such structure was wholly or mainly used during the year of assessment for the purposes of the shipbuilding trade, and for the purposes of this subsection any reference in the said provisions to a building shall be construed as a reference to a shipbuilding structure and any reference therein to improvements to a building shall be construed as a reference to improvements to a shipbuilding structure.

(9)For the purposes of this section—“improvements”, in relation to any improvements commenced on or after the first day of April, 1971, means any extension, addition or improvements (other than repairs) to a building which is or are effected for the purpose of increasing or improving the industrial capacity of the building;“shipbuilding structure” means any launching way, fitting-out quay or craneway which is not part of a building.

13bis. Deductions in respect of buildings used by hotel keepers

(1)Notwithstanding anything to the contrary contained in paragraph (ii) of the proviso to paragraph (e) of section eleven, there shall be allowed to be deducted from the income of any taxpayer for any year of assessment ending on or after the first day of January, 1964, an allowance equal to two per cent. of the cost (after the set-off of any amount as provided in subsection (6)) to the taxpayer—

(c)of any building the erection of which was commenced by the taxpayer on or after the first day of January, 1964, and of any improvements (other than repairs) thereto commenced not later than the thirtieth day of June, 1965, if such building—

(i)was brought into use not later than the thirtieth day of June, 1965; and

(ii)was during the year of assessment wholly or mainly used by the taxpayer for the purpose of carrying on therein his trade of hotel keeper or was during such year let by the taxpayer and wholly or mainly used by the lessee for the purpose of carrying on therein the lessee’s trade of hotel keeper;

(d)of such portion—

(i)of any building (other than a building in respect of the cost of which an allowance under the preceding provisions of this subsection is or was deductible from the income of the taxpayer for the current or any previous year of assessment) the erection of which was commenced by the taxpayer on or after the first day of January, 1964; or

(ii)of any improvements (other than repairs) to any building referred to in this paragraph, if such improvements were commenced on or after the first day of January, 1964; or

(iii)of any improvements (other than repairs) to any building referred to in paragraph (c), if such improvements were commenced on or after the first day of July, 1965,

as—

(aa)was during the year of assessment used by the taxpayer for the purpose of carrying on therein his trade of hotel keeper; or

(bb)was during such year let by the taxpayer and used by the lessee for the purpose of carrying on therein the lessee’s trade of hotel keeper; or

(e)of such portion of any building improvements (other than repairs and other than improvements in respect of the cost of which, or of any portion thereof, an allowance under the preceding provisions of this subsection is or was deductible from the income of the taxpayer for the current or any previous year of assessment) commenced on or after 1 January 1964, as was during the year of assessment in question used by the taxpayer for the purposes of the taxpayer’s trade of hotel keeper or was during the year of assessment in question let by the taxpayer and used by the lessee for the purposes of the lessee’s trade of hotel keeper:[paragraph (e) substituted by section 33(a) of Act 23 of 2018; effective date 17 January 2019, date of promulgation of that Act]

Provided that no allowance shall be made under this subsection in respect of such portion of the cost of any building the erection of which was commenced on or after the first day of July, 1961, or any improvements effected thereto, as has been taken into account in the calculation of any allowance to the taxpayer under paragraph (g) of section eleven, whether in the current or any previous year of assessment: Provided further that in the case of any such building the erection of which has or is commenced on or after 4 June 1988 and any such improvements which have or are commenced on or after that date the allowance under this subsection shall be increased to 5 per cent of the cost (after the set-off of any amount as provided in subsection (6)) to the taxpayer of such building or improvements: Provided further that to the extent to which any portion of any such improvements which have or are commenced on or after 17 March 1993 does not extend the existing exterior framework of the building, the allowance under this subsection shall be increased to 20 percent of the cost of such portion.[first further proviso substituted by section 21 of Act 34 of 2019; effective date 15 January 2020, date of promulgation of that Act]

(1A)[subsection (1A) deleted by section 33(b) of Act 23 of 2018; effective date 17 January 2019, date of promulgation of that Act]

(2)In addition to any allowance under subsection (1), there shall be allowed to be deducted from the income of the taxpayer an allowance in respect of the cost (after the set-off of any amount as provided in subsection (6)) of any building or improvements referred to in paragraph (c) of subsection (1) or of any portion of any building or improvements referred to in paragraph (d) or (e) of subsection (1), provided such building (or a portion thereof), or the building (or a portion thereof) to which such improvements were effected, as the case may be, was during the year of assessment in question registered as an hotel under the Hotels Act, 1965, and such hotel was on the last day of such year graded by the board established under that Act: Provided that no allowance shall be made under this subsection in respect of such portion of the cost of any building or any improvements as has been taken into account in the calculation of any allowance to the taxpayer under paragraph (g) of section eleven, whether in the current or any previous year of assessment.

(3)The allowance under subsection (2) in respect of the cost (as reduced in terms of that subsection) of any building (or portion thereof) or of any improvements (or a portion thereof) shall be such percentage of such cost as may be fixed by the Minister of Finance by regulation under subsection (4) for the grade of hotel which is, in terms of a determination of the board referred to in subsection (2), applicable in respect of the hotel in question on the last day of the year of assessment: Provided that where such hotel is graded by the said board for the first time during any year of assessment (hereinafter referred to as the subsequent year) subsequent to any year of assessment (hereinafter referred to as the earlier year) during which such building (or the relevant portion thereof) or such improvements (or the relevant portion thereof) was or were used in carrying on the trade of hotel keeper, and the taxpayer is entitled to the said allowance in respect of the subsequent year, the allowance for the subsequent year (as determined in accordance with the said regulation) shall, if—[words preceding paragraph (a) substituted by section 33(c) of Act 23 of 2018; effective date 17 January 2019, date of promulgation of that Act]

(a)such building (or the relevant portion thereof) or such improvements (or the relevant portion thereof), as the case may be, is or are completed not later than the thirty-first day of December, 1969; and

(b)where such hotel was not during the earlier year registered under the Hotels Act, 1965, it became so registered during the period ending on the thirty-first day of December, 1969, or the period of twelve months reckoned from the date of completion of such building (or the relevant portion thereof) or of such improvements (or the relevant portion thereof), as the case may be, whatever period ends later,

be increased by an amount equal to the allowance to which the taxpayer would have been entitled under the said regulation in respect of the said cost if such regulation had at all relevant times been in force and the grading of such hotel by the said board which was applicable on the last day of the subsequent year had also applied on the last day of the earlier year.

(3A)Where any building in respect of which any deduction of an allowance is claimed in terms of this section was during any previous financial year or years used by the taxpayer for the purposes of any trade carried on by such taxpayer, the receipts and accruals of which were not included in the income of such taxpayer during such year or years, any deduction which could have been allowed during such previous year or years in terms of this section shall for the purposes of this section be deemed to have been allowed during such previous year or years as if the receipts and accruals of such trade had been included in the income of such taxpayer.

(4)The Minister of Finance may make regulations prescribing the rates of the allowances under subsection (2) in respect of the various grades of hotels determined under the provisions of subsection (1) of section fifteen of the Hotels Act, 1965, and may in such regulations prescribe rates which vary according to the grade of hotel or the year of assessment for which any such allowance may be made: Provided that any rate so prescribed in respect of any year of assessment in respect of any grade of hotel shall not exceed eight per cent of the cost or portion thereof on which the relevant allowance is to be calculated.

(5)The deductions which may be allowed or deemed to have been allowed in terms of this section and any other provision of this Act in respect of the cost of any building or improvement shall not in the aggregate exceed the amount of such cost.

(6)

(a)If in any year of assessment there falls to be included in a taxpayer’s income in terms of paragraph (a) of subsection (4) of section eight an amount which has been recovered or recouped in respect of any allowance made under the preceding provisions of this section or the provisions of subsection (1) of section thirteen, as applied by subsection (4) of that section, or the corresponding provisions of any previous Income Tax Act, in respect of any building or portion thereof or any improvements or portion thereof, so much of the amount so recovered or recouped as is set off against the cost of a further building as hereinafter provided shall, notwithstanding the provisions of the said paragraph, at the option of the taxpayer and provided the taxpayer erects within twelve months or such further period as the Commissioner may allow from the date on which the event giving rise to the recovery or recoupment occurred, any other building in respect of the cost of which an allowance is made under the preceding provisions of this section, not be included in the taxpayer’s income for that year of assessment, but shall be set off against so much of the cost to the taxpayer of such further building erected by the taxpayer as remains after the deduction of any portion of that cost in respect of which an allowance has been granted to the taxpayer under paragraph (g) of section eleven, whether in the current or any previous year of assessment.

(b)Where any allowance has been made under the provisions of subsection (1) of section thirteen, as applied by subsection (4) of that section, in respect of the cost of any building, any amount which has in terms of subsection (3) of that section been set off against such cost, shall be set off against such cost in the calculation of any allowance made in respect thereof under the preceding provisions of this section.

(9)The allowance under subsection (2) shall not be granted in respect of—

(a)any building the erection of which has or is commenced on or after 4 June 1988; and

(b)any improvements which have or are commenced on or after that date.

13ter. Deductions in respect of residential buildings

(1)For the purposes of this section—“housing project” means any project for the erection of a building or buildings in the Republic consisting of or including at least five residential units;“residential unit” means any self-contained residential accommodation consisting of more than one room (but excluding any hostel, hotel or similar accommodation), the erection of which was commenced by the taxpayer on or after 1 April 1982 and before 21 October 2008 and which was erected under a housing project of the taxpayer—

(a)in order to be let to a tenant for the purpose of deriving a profit for the taxpayer; or

(b)in order to be occupied by a bona fide full-time employee of the taxpayer.

(2)Notwithstanding anything to the contrary contained in paragraph (ii) of the proviso to section 11(e), there shall, subject to the provisions of this section, be allowed to be deducted from the income of the taxpayer for the year of assessment referred to in subsection (6) of this section and each succeeding year of assessment, an allowance, to be known as the residential building annual allowance, equal to two per cent of the cost to the taxpayer of any residential unit erected by the taxpayer under a housing project of the taxpayer.

(2A)For the purposes of this section where a taxpayer completes an improvement as contemplated in section 12N, the expenditure incurred by the taxpayer to complete the improvement shall be deemed to be the cost to the taxpayer of a residential unit contemplated in subsection (2).

(3)In addition to the deduction provided for in subsection (2), there shall, subject to the provisions of this section, be allowed to be deducted from the income of the taxpayer for the year of assessment referred to in subsection (5), an allowance, to be known as the residential building initial allowance, equal to ten per cent of the cost to the taxpayer of the residential unit referred to in subsection (2).

(4)The allowances under this section shall not be made in respect of any portion of the cost of any residential unit on any premises not owned by the taxpayer, unless the taxpayer, at the date on which the erection of such residential unit is commenced, is entitled to the occupation of such premises for a period ending not less than ten years after such date.

(5)The residential building initial allowance in relation to any residential unit shall be made for the year of assessment during which such residential unit is for the first time let or occupied as contemplated in the definition of “residential unit” in subsection (1): Provided that if at the end of such year of assessment less than five of the residential units of the relevant housing project have for the first time been let or occupied as contemplated in the definition of “residential unit” in subsection (1), the residential building initial allowance relating to such residential unit shall not be made for that year of assessment but shall be made for the first succeeding year of assessment in which at least five of the residential units in that housing project have been so let or occupied for the first time.

(6)The residential building annual allowance relating to any residential unit shall be made for the first time for the year of assessment in which the residential building initial allowance is made in respect of that residential unit.

(6A)Where any building in respect of which any deduction of an allowance is claimed in terms of this section was during any previous financial year or years used by the taxpayer for the purposes of any trade carried on by him the receipts and accruals of which were not included in the income of such taxpayer during such year or years, any deduction which could have been allowed during such previous year or years in terms of this section shall for the purposes of this section (excluding the provisions of subsection (7)(a)) be deemed to have been allowed during such previous year or years as if the receipts and accruals of such trade had been included in the income of such taxpayer.

(7)If in any year of assessment any residential unit in respect of the cost of which any allowance has been made to the taxpayer under the provisions of this section, whether in the current or any previous year of assessment, is so used or dealt with by the taxpayer that it ceases to be available either for letting to a tenant or for occupation by an employee as contemplated in the definition of “residential unit” in subsection (1)—

(a)there shall be included in the income of the taxpayer for the year of assessment in which such residential unit is so used or dealt with, the amount of the residential building initial allowance made to him in respect of the cost of such residential unit, less one-tenth of such amount for each completed period of one year, but not exceeding ten years, from the date on which such residential unit was first let or occupied as contemplated in the definition of “residential unit” in subsection (1) until the date on which such residential unit was used or dealt with as aforesaid; and

(b)the residential building annual allowance shall not be made in respect of the cost of the said residential unit for the year of assessment during which such residential unit was used or dealt with as aforesaid nor in respect of any succeeding year of assessment during which it continued to be unavailable for the letting or occupation contemplated in the definition of “residential unit” in subsection (1).

(8)The provisions of sections 8(4)(a) and 11(o) shall not apply to so much of the amount of any residential building initial allowance as has been included in the taxpayer’s income under the provisions of subsection (7)(a) of this section, whether in the current or any previous year of assessment.

(9)No allowance shall be made under this section in respect of so much of the cost of any residential unit as has qualified or will qualify for deduction from the taxpayer’s income by way of a deduction of expenditure or an allowance in respect of expenditure under any other provision of this Act, whether for the current or any preceding or subsequent year of assessment.

(10)The aggregate of the allowances allowed or deemed to have been allowed under the preceding provisions of this section in respect of the cost of any residential unit shall not exceed such cost or, if such allowances have been calculated on a portion of such cost, such portion.

(11)Where any company is mainly engaged in the provision of housing facilities for the employees of the sole or principal holder of shares in that company or for the employees of any other company the shares in which are held wholly by the sole or principal holder of shares in such first-mentioned company, the employees of such holder of shares or such other company, as the case may be, shall for the purposes of this section be deemed to be the employees also of such first-mentioned company.

13quat. Deductions in respect of erection or improvement of buildings in urban development zones

(1)For the purposes of this section—“cost” means the costs (other than borrowing or finance costs) actually incurred in erecting or extending, adding to or improving a building or part thereof and includes any costs incurred—

(a)in demolishing any existing building or part thereof;

(b)in excavating the land for purposes of that erection, extension, addition or improvement; and

(c)in respect of structures or works directly adjoining the building or part so erected, extended, added to or improved, for purposes of providing—

(i)water, power or parking with respect to that building or part;

(ii)drainage or security for that building or part;

(iii)means of waste disposal for that building or part; or

(iv)access to that building or part, including the frontage thereof;

“developer” means a person who erects, extends, adds to or improves a building or part of a building—

(a)with the purpose of disposing of that building or part thereof immediately after completion of that erection, extension, addition or improvement; and

(b)disposes of the building or part of a building within three years after completion of that erection, extension, addition or improvement;

“purchase price” in relation to any building or part of a building purchased by the taxpayer means the lesser of—

(a)the actual cost to the taxpayer to purchase that building or part; or

(b)the cost which a person would have incurred had that person purchased that building or part under a cash transaction concluded at arm’s length on the date on which that taxpayer purchased that building or part;

“urban development zone” means an area demarcated by a municipality in terms of subsection (6), the particulars of which were published in the Gazette in terms of subsection (8);

(2)There must be allowed to be deducted from the income of the taxpayer an allowance determined in terms of subsection (3) or (3A), in respect of the cost of the erection, extension, addition or improvement of any commercial or residential building or part of a building which is owned by the taxpayer and is used solely for purposes of that taxpayer’s trade, if—

(a)that building is situated within an urban development zone;

(b)the erection, extension, addition or improvement was commenced by the taxpayer or the developer, as the case may be, on or after the date of publication of the notice contemplated in subsection (8) in respect of that urban development zone, in terms of a contract formally and finally signed by all parties thereto on or after that date;

(c)the erection, extension, addition to or improvement by the taxpayer or developer covers either the entire building or a floor area of at least 1 000 m² of that building; and

(d)in the case where the taxpayer purchased that building or part from a developer—

(i)the agreement to purchase was concluded on or after 8 November 2005;

(ii)that developer has not claimed any allowance under this section in respect of that building or part; and

(iii)if the developer improved the building or part as contemplated in subsection (3)(b) or (3A)(b), that developer has incurred expenditure in respect of those improvements which is equal to at least 20 per cent of the purchase price paid by the taxpayer in respect of that building or part.

(2A)For the purposes of this section, if a taxpayer completes an improvement as contemplated in section 12N, the expenditure incurred by the taxpayer to complete the improvement shall be deemed to be the cost of the erection, extension, addition or improvement contemplated in subsection (2).

(3)The amount of the allowance contemplated in subsection (2)—

(a)in the case of the erection of any new building or the extension of or addition to any building (other than a building in respect of which paragraph (b) applies), is equal to—

(i)20 per cent of the cost to the taxpayer of the erection or extension of or addition to that building, which is deductible in the year of assessment during which that building is brought into use by that taxpayer solely for the purposes of that taxpayer’s trade; and

(ii)eight per cent of that cost in each of the 10 succeeding years of assessment;

(b)in the case of the improvement of any existing building or part of a building (including any extension or addition which is incidental to that improvement) where the existing structural or exterior framework thereof is preserved, is equal to—

(i)20 percent of the cost to the taxpayer of the improvement, extension or addition which is deductible in the year of assessment during which the part of the building so improved, extended or added is brought into use by the taxpayer solely for the purposes of that taxpayer’s trade; and

(ii)20 per cent of that cost in each of the four succeeding years of assessment.

(3A)The amount of the allowance contemplated in subsection (2)—

(a)in the case of the erection of any new building or the extension of or addition to any building, to the extent that it relates to a low-cost residential unit, (other than any improvement in respect of which paragraph (b) applies) is equal to—

(i)25 per cent of the cost to the taxpayer of the erection or extension of or addition to that building, which is deductible in the year of assessment during which that building is brought into use by that taxpayer;

(ii)13 per cent of that cost in each of the five succeeding years of assessment; and

(iii)10 per cent of that cost in the year of assessment following the last year contemplated in subparagraph (ii);

(b)in the case of the improvement of any existing building or part of a building, to the extent that it relates to a low-cost residential unit, (including any extension or addition which is incidental to that improvement) where the existing structural or exterior framework thereof is preserved, is equal to—

(i)25 per cent of the cost to the taxpayer of the improvement, which is deductible in the year of assessment during which the part of the building so improved, is brought into use by the taxpayer; and

(ii)25 per cent of that cost in each of the three succeeding years of assessment.

(3B)For purposes of subsection (3) or (3A), where the taxpayer purchased a building or part of a building from a developer—

(a)55 per cent of the purchase price of that building or part of a building, in the case of a new building erected, extended or added to by that developer as contemplated in subsection (3)(a) or (3A)(a); and

(b)30 per cent of the purchase price of that building or part of a building, in the case of a building improved by that developer as contemplated in subsection (3)(b) or (3A)(b),

is deemed to be costs incurred by that taxpayer in respect of the erection, extension, addition to or improvement of that building or part of a building.

(4)No deduction shall be allowed under this section, unless the taxpayer has obtained or determined the following for submission to the Commissioner in such form and within such time as may be prescribed by the Commissioner—

(a)a certificate issued by the municipality to the taxpayer confirming that the building is located within an urban development zone within that municipality;

(b)the total amount of the costs to the taxpayer (other than a taxpayer contemplated in paragraph (d)) of the erection, extension, addition or improvement and the extent that those costs relate to any portion of a building;

(c)particulars as to whether the costs referred to paragraph (b) were incurred in respect of the erection or extension of or addition to a building as contemplated in subsection (3)(a) or the improvement of a building as contemplated in subsection (3)(b); and

(d)in the case of a taxpayer who purchased the building or part of a building from a developer—

(i)the purchase price of that building or part;

(ii)the amount of the purchase price deemed to be a cost incurred by the taxpayer in terms of subsection (3A); and

(iii)a certificate from the developer in the form prescribed by the Commissioner confirming that the requirements in subsection (2)(b), (c) and (d) have been met.

(5)No deduction shall be allowed under this section in respect of any building or part of a building—

(a)where that taxpayer ceased to use that building, or part solely for purposes of that taxpayer’s trade during any previous year of assessment in or prior to which an allowance contemplated in subsection (2) was claimed;

(b)which has been disposed of by the taxpayer during any previous year of assessment; or

(c)which is brought into use by the taxpayer after 31 March 2025.[paragraph (c) substituted by section 20 of Act 23 of 2020; effective date 20 January 2021, by section 16(1) of Act 20 of 2021; effective date 1 April 2021, and by section 21(1) of Act 17 of 2023; effective date deemed to have been 1 April 2021, applies in respect of any building, part thereof or improvement that is brought into use on or after that date]

(6)For the purposes of this section, one area may be demarcated by a municipality where—

(a)

(i)that area is a developed urban location with the municipality of Buffalo City, Cape Town, Ekurhuleni, Emalahleni, Emfuleni, eThekwini, Johannesburg, Mahikeng, Mangaung, Matjhabeng, Mbombela, Msunduzi, Nelson Mandela, Polokwane, Sol Plaatje or Tshwane;

(ii)that area is demarcated through formal resolution by the relevant municipal council;

(iii)that area is prioritised in that municipality’s integrated development plan adopted and undertaken in terms of Chapter 5 of the Local Government: Municipal Systems Act, 2000 (Act No. 32 of 2000) as a priority area for further investments to promote business or industrial activity or residential settlements to support such activity;

(iv)that area proportionately contributes or previously contributed a significant portion of the total revenue collections for all areas located within the current boundaries of that municipality, as measured in the form of—

(aa)property rates; or

(bb)assessed property values,

and where the contribution from that area is undergoing a sustained real or nominal decline; and

(v)significant fiscal measures have been implemented by that municipality to support the regeneration of that area, including—

(aa)the appropriation of significant funds for developing the area in the annual budget of the municipality;

(bb)special tariffs for categories of residential, commercial or industrial users; or

(cc)partnership arrangements with the business community for the promotion of urban development within that area; or

(b)that area is approved by the Minister by notice in the Gazette, after application by a municipality in the form and manner and at the place and time that the Minister prescribes, if the area complies with criteria as the Minister must prescribe by regulation.

(7)

(a)Subject to paragraph (d), the area demarcated in terms of subsection (6) may not exceed—

(i)where that municipality has a population of not more than 500 000 persons, a total area of 150 hectares; or

(ii)where that municipality has a population of more than 500 000 persons, 150 hectares plus 20 hectares for each additional 100 000 persons included in that population.

(b)Where that municipality has a population of 1 million persons or more, the municipal council may demarcate two areas in lieu of the one area demarcated in terms of subsection (6): Provided that—

(i)the two areas do not in total exceed the one area contemplated in paragraph (a)(ii); and

(ii)each area otherwise satisfies the requirements of subsection (6).

(bA)Where a municipality has a population of less than 1 million persons, the Minister may by notice in the Gazette approve that municipality for the purposes of paragraph (b) in terms of subsection (6)(b).[paragraph (bA) substituted by section 34 of Act 23 of 2018; effective date 17 January 2019, date of promulgation of that Act]

(c)For purposes of this subsection, the population of a municipality shall be the population figures as determined by Statistics South Africa in the Census for 2011 and the total population of that municipality must be rounded to the nearest multiple of 100 000.

(d)The area demarcated in terms of subsection (6) may exceed the limits contemplated in paragraph (a) where—

(i)the municipality proves to the Minister that the excess area is integrally related to the area within the limitation contemplated in paragraph (a);

(ii)the municipality can prove to the Minister that sound economic reasons exist for demarcating a larger area; and

(iv)the Minister is satisfied that the demarcation of the excess area would fall within Government’s affordability constraints.

(8)The Minister must publish by notice in the Gazette particulars of an area demarcated by a municipality after that municipality has proved to the Minister that the area so demarcated complies with the provisions of subsection (6).

(9)Every municipality must provide a report annually to the Commissioner and the Minister in respect of each urban development zone located within that municipality containing such information, within such time and in such manner as is prescribed by the Minister.

(10)Where—

(a)a municipality does not provide an annual report as contemplated in subsection (9) or the Commissioner reports to the Minister that the municipality has issued a certificate contemplated in subsection (4)(a) in respect of a building that is located outside an urban development zone; and

(b)corrective steps are not taken by that municipality within a period specified by the Minister,

the Minister may withdraw the notice contemplated in subsection (8) for that municipality in respect of contracts formally and finally signed by all parties thereto on or after the date of withdrawal.

(10A)Every developer who erects, extends, adds to or improves any building within an urban development zone must, if the estimated cost of that erection, extension, addition or improvement is likely to exceed R5 million—

(a)inform the Commissioner within 30 days after commencement of the erection, extension, addition or improvement of the estimated costs thereof in respect of the building or the parts which the developer intends to sell and the estimated selling price of that building or those parts; and

(b)inform the Commissioner within 30 days after sale of the building or all anticipated sales of any parts of the building have been concluded of the actual costs incurred in respect of that building or parts and the actual selling price of that building or parts thereof.

(10B)If the Commissioner has reason to believe that the information provided in the certificate by a developer as contemplated in subsection (4)(d)(iii) is not correct, the Commissioner must disallow any deduction claimed under this section, unless sufficient information is provided to the Commissioner to prove that the information contained in that certificate is correct.

(11)The Commissioner must on an annual basis submit a report to the Minister containing information relating to—

(a)the number of taxpayers which have during the relevant year claimed an allowance in terms of this section;

(b)the total amount of the deductions by taxpayers allowed in that year in terms of this section; and

(c)the total amount of the costs to those taxpayers which are or will be allowable as a deduction in terms of this section.

13quin. Deduction in respect of commercial buildings

(1)There shall be allowed to be deducted from the income of the taxpayer an allowance equal to five per cent of the cost to the taxpayer of any new and unused building owned by the taxpayer, or any new and unused improvement to any building owned by the taxpayer, if that building or improvement is wholly or mainly used by the taxpayer during the year of assessment for purposes of producing income in the course of the taxpayer’s trade, other than the provision of residential accommodation.

(1A)For the purposes of this section, if a taxpayer completes an improvement as contemplated in section 12N, the expenditure incurred by the taxpayer to complete the improvement shall be deemed to be the cost to the taxpayer of any new and unused building or of any new and unused improvement to a building contemplated in subsection (1).

(2)For the purposes of this section the cost to a taxpayer of any building or improvement shall be deemed to be the lesser of the actual cost to the taxpayer or the cost which a person would, if he had acquired, erected or improved the building under a cash transaction concluded at arm’s length on the date on which the transaction for the acquisition, erection or improvement of the building was in fact concluded, have incurred in respect of the direct cost of the acquisition, erection or improvement of the building.

(3)Where any building or improvement in respect of which any deduction is claimed in terms of this section was during any previous financial year brought into use for the first time by the taxpayer for the purposes of any trade carried on by such taxpayer, the receipts and accruals of which were not included in the income of such taxpayer during such year, any deduction which could have been allowed in terms of this section during such year or any subsequent year in which such asset was used by the taxpayer shall for the purposes of this section be deemed to have been allowed during such previous year or years as if the receipts and accruals of such trade had been included in the income of such taxpayer.

(4)No deduction shall be allowed under this section in respect of any building that has been disposed of by the taxpayer during any previous year of assessment.

(5)No deduction shall be allowed under this section in respect of the cost of a building or improvement if any of that cost has qualified or will qualify for deduction from the taxpayer’s income as a deduction of expenditure or an allowance in respect of expenditure under any other section of this Act.

(6)The deductions which may be allowed or deemed to have been allowed in terms of this section and any other provision of this Act in respect of the cost of any building or improvement shall not in the aggregate exceed the amount of such cost.

(7)For the purposes of subsection (1), to the extent that the taxpayer acquires a part of a building without erecting or constructing that part—

(a)55 per cent of the acquisition price, in the case of a part being acquired; and

(b)30 per cent of the acquisition price, in the case of an improvement being acquired,

is deemed to be the cost incurred by that taxpayer in respect of that part or improvement, as the case may be.

13sex. Deduction in respect of certain residential units

(1)Subject to section 36, there must be allowed to be deducted from the income of a taxpayer an allowance equal to five per cent of the cost to the taxpayer of any new and unused residential unit (or of any new and unused improvement to a residential unit) owned by the taxpayer if—

(a)that unit or improvement is used by the taxpayer solely for the purposes of a trade carried on by the taxpayer;

(b)that unit is situated within the Republic; and

(c)the taxpayer owns at least five residential units within the Republic, which are used by the taxpayer for the purposes of a trade carried on by the taxpayer:

Provided that if a taxpayer completes an improvement as contemplated in section 12N, the expenditure incurred by the taxpayer to complete the improvement shall be deemed to be the cost to the taxpayer of any new and unused residential unit (or of any new and unused improvement to a residential unit), for the purposes of this section.

(2)There shall be allowed to be deducted from the income of the taxpayer an additional allowance of five per cent of the cost of a low-cost residential unit of a taxpayer for a year of assessment if deductions are allowable to that taxpayer in respect of that unit in terms of subsection (1) during that year of assessment.

(3)For the purposes of this section, the cost to the taxpayer of a residential unit (or an improvement thereto) shall be deemed to be the lesser of the actual cost to the taxpayer or the cost which a person would, if that person had acquired or improved the residential unit under a cash transaction concluded at arm’s length on the date on which the transaction for the acquisition of the new and unused residential unit (or of the new and unused improvement to the residential unit) was in fact concluded, have incurred in respect of the direct cost of the acquisition or erection of the residential unit or improvement.

(4)Where any residential unit (or an improvement to the residential unit) in respect of which any deduction is claimed in terms of this section was during any year of assessment used by the taxpayer for the purpose of any trade carried on by that taxpayer, the receipt and accruals of which were not included in the income of that taxpayer during that year, any deduction which could have been allowed in terms of this section during that year or any subsequent year in which that residential unit (or an improvement to the residential unit) was used by the taxpayer shall for the purposes of this section be deemed to have been allowed during that previous year or those years as if the receipts and accruals of that trade had been included in the income of that taxpayer.

(5)No deduction shall be allowed under this section in respect of the cost of any residential unit (or an improvement to a residential unit) that has been disposed of by the taxpayer during any previous year of assessment.

(6)No deduction shall be allowed under this section in respect of the cost of a residential unit (or an improvement to a residential unit) if any of the cost has qualified or will qualify for deduction from the taxpayer’s income as a deduction of expenditure or an allowance in respect of expenditure under any other section of this Act.

(7)The deductions which may be allowed or deemed to have been allowed in terms of this section and any other provision of this Act in respect of the cost of any residential unit (or any improvement to a residential unit) shall not in the aggregate exceed the amount of such cost.

(8)For the purposes of this section, to the extent that the taxpayer acquires a residential unit (or improvement to a residential unit) representing only a part of a building without erecting or constructing that unit or improvement—

(a)55 per cent of the acquisition price, in the case of the unit being acquired; and

(b)30 per cent of the acquisition price, in the case of the improvement being acquired,

is deemed to be the cost incurred by that taxpayer in respect of that unit or improvement, as the case may be.

13sept. Deduction in respect of sale of low-cost residential units on loan account

(1)Subject to section 36, there must be allowed as a deduction from the income of the taxpayer, in respect of any year of assessment ending on or before 28 February 2022, an amount determined in terms of subsection (2) in respect of the disposal of any low-cost residential unit by the taxpayer to an employee of the taxpayer (or an associated institution as defined in the Seventh Schedule in relation to the taxpayer).[subsection (1) substituted by section 21 of Act 23 of 2020; effective date 20 January 2021, date of promulgation of that Act]

(2)The deduction contemplated in subsection (1) is an amount equal to 10 per cent of any amount owing to the taxpayer by the employee in respect of the unit at the end of the taxpayer’s year of assessment: Provided that no such deduction shall be allowed in the eleventh and subsequent years of assessment after the disposal of that low-cost residential unit, as contemplated in subsection (1).

(3)No deduction is allowed in terms of this section in respect of any disposal by the taxpayer if—

(a)the disposal is subject to any condition other than a condition in terms of which the employee is required—

(i)on termination of employment; or

(ii)in the case of consistent failure for a period of three months on the part of the employee to pay an amount owing to the taxpayer (or an associated institution, as defined in the Seventh Schedule, in relation to the taxpayer) in respect of a low-cost residential unit,

to dispose of the low-cost residential unit to the taxpayer (or an associated institution, as defined in the Seventh Schedule, in relation to the taxpayer) for an amount equal to the actual cost (other than borrowing or finance costs) to the employee of the unit and the land on which the unit is erected;

(b)the employee must pay interest to the taxpayer in respect of the amount owing to the taxpayer by the employee in respect of the unit; or

(c)the disposal is for an amount that exceeds the actual cost (other than borrowing or finance costs) to the taxpayer of the unit and the land on which the unit is erected.

(4)If the amount owing contemplated in subsection (2) or any part thereof is paid to the taxpayer, the taxpayer is deemed to have recovered or recouped an amount equal to the lesser of—

(a)the amount so paid; or

(b)the amount allowed as a deduction in terms of this section in the current and any previous year of assessment.

15. Deductions from income derived from mining operations

There shall be allowed to be deducted from the income derived by the taxpayer from mining operations—

(a)an amount to be ascertained under the provisions of section 36, in lieu of the allowances in sections 11(e), (f), (gA), (gC), (o), 12B, 12BA, 12D, 12DA, 12F and 13quin;[paragraph (a) substituted by section 22(1) of Act 17 of 2023; effective date deemed to have been 1 March 2023, applies in respect of assets brought into use on or after that date]

(b)any expenditure incurred by the taxpayer during the year of assessment on prospecting operations (including surveys, boreholes, trenches, pits and other prospecting work preliminary to the establishment of a mine) in respect of any area within the Republic together with any other expenditure which is incidental to such operations: Provided that—

(i)except in the case of any person who derives income from mining for diamonds in the Republic, any expenditure referred to in this paragraph shall be deducted in a series of annual instalments, so that only a portion of such expenditure is deducted in the year of assessment in which it is incurred, and the residue in such subsequent years of assessment and in such proportions as may be determined by public notice issued by the Commissioner, until the expenditure is extinguished;

(ii)in the case of any company which derives income from different classes of mining operations, the deduction under this paragraph shall be made from the income derived from such class or classes of mining operations and in such proportions as may be determined by public notice issued by the Commissioner;

(iii)any expenditure which has been allowed to be deducted from the income of any person in terms of this paragraph shall not be included in such person’s capital expenditure as defined in subsection (11) of section thirty-six.

15A. Amounts to be taken into account in respect of trading stock derived from mining operations

For the purposes of section 22, trading stock related to mining operations—

(a)includes anything that is—

(i)won or in any other manner acquired during the course of mining operations by a taxpayer for the purposes of extraction, processing, separation, refining, beneficiation, manufacture, sale or exchange by the taxpayer or on the taxpayer’s behalf; and

(ii)taken into account as inventory in terms of South African Generally Accepted Accounting Practice; and

(b)must not be valued at an amount less than the amount so taken into account.

17A. Expenditure incurred by a lessor of land let for farming purposes, in respect of soil erosion works

(1)Subject to the provisions of subsection (2), there shall be allowed to be deducted from the income derived by any taxpayer from letting any land on which bona fide pastoral, agricultural or other farming operations were carried on during the year of assessment, the expenditure incurred by him during such year in respect of the construction of soil erosion works, provided a certificate by the Executive Officer designated under section 4 of the Conservation of Agricultural Resources Act, 1983 (Act No. 43 of 1983), or his assignee is produced to the effect that such works have been approved under the provisions of the said Act.

(2)Where expenditure incurred by the taxpayer during any year of assessment and ranking for deduction from income under subsection (1) exceeds the taxable income (as calculated before allowing any deduction under that subsection) derived by the taxpayer from letting land on which bona fide pastoral, agricultural or other farming operations were carried on during such year, the amount allowed to be deducted under subsection (1) in respect of the said year shall be limited to an amount equal to such taxable income (calculated as aforesaid), and the excess shall be carried forward and be deemed for the purposes of this section to be expenditure incurred by the taxpayer during the next succeeding year of assessment in respect of the construction of soil erosion works.

18A. Deduction of donations to certain organisations

(1)Notwithstanding the provisions of section 23, there shall be allowed to be deducted in the determination of the taxable income of any taxpayer so much of the sum of any bona fide donations by that taxpayer in cash or of property made in kind, which was actually paid or transferred during the year of assessment to—[words preceding paragraph (a) substituted by section 22 of Act 34 of 2019; effective date 15 January 2020, date of promulgation of that Act]

(a)any—

(i)public benefit organisation contemplated in paragraph (a)(i) of the definition of “public benefit organisation” in section 30(1) approved by the Commissioner under section 30; or

(ii)institution, board or body contemplated in section 10(1)(cA)(i),

which—

(aa)carries on in the Republic any public benefit activity contemplated in Part II of the Ninth Schedule, or any other activity determined from time to time by the Minister by notice in the Gazette for the purposes of this section;

(bb)complies with the requirements contemplated in subsection (1C), if applicable, and any additional requirements prescribed by the Minister in terms of subsection (1A); and

(cc)has been approved by the Commissioner for the purposes of this section;

(b)any public benefit organisation contemplated in paragraph (a)(i) of the definition of “public benefit organisation” in section 30(1) approved by the Commissioner under section 30, which provides funds or assets to any public benefit organisation, institution, board or body contemplated in paragraph (a) and which has been approved by the Commissioner for the purposes of this section; or

(bA)

(i)any agency contemplated in the definition of “specialized agencies” in section 1 of the Convention on the Privileges and Immunities of the Specialized Agencies, 1947, set out in Schedule 4 to the Diplomatic Immunities and Privileges Act, 2001 (Act No. 37 of 2001);

(ii)the United Nations Development Programme (UNDP);

(iii)the United Nations Children’s Fund (UNICEF);

(iv)the United Nations High Commissioner for Refugees (UNHCR);

(v)the United Nations Population Fund (UNFPA);

(vi)the United Nations Office on Drugs and Crime (UNODC);

(vii)the United Nations Environmental Programme (UNEP);

(viii)the United Nations Entity for Gender, Equality and the Empowerment of Women (UN Women);

(ix)the International Organisation for Migration (IOM);

(x)the Joint United Nations Programme on HIV/AIDS (UNAIDS);

(xi)the Office of the High Commissioner for Human Rights (OHCHR); or

(xii)the United Nations Office for the Coordination of Humanitarian Affairs (OCHA),

if that agency, programme, fund, High Commissioner, office, entity or organisation—

(bb)furnishes the Commissioner with a written undertaking that such agency will comply with the provisions of this section; and

(cc)waives diplomatic immunity for the purposes of subsection (5)(i); or

(c)any department of government of the Republic in the national, provincial or local sphere as contemplated in section 10(1)(a), which has been approved by the Commissioner for the purposes of this section, to be used for purpose of any activity contemplated in Part II of the Ninth Schedule,

as does not exceed—

(A)where the taxpayer is a portfolio of a collective investment scheme, an amount determined in accordance with the following formula:A = B × 0,005in which formula:

(AA)“A” represents the amount to be determined;

(BB)“B” represents the average value of the aggregate of all of the participatory interests held by investors in the portfolio for the year of assessment, determined by using the aggregate value of all of the participatory interests in the portfolio at the end of each day during that year; or

(B)in any other case, ten per cent of the taxable income (excluding any retirement fund lump sum benefit, retirement fund lump sum withdrawal benefit and severance benefit) of the taxpayer as calculated before allowing any deduction under this section or section 6quat(1C):[paragraph (B) substituted by section 35(1)(a) of Act 23 of 2018; effective date 1 March 2018]Provided that any amount of a donation made as contemplated in this subsection and which has been disallowed solely by reason of the fact that it exceeds the amount of the deduction allowable in respect of the year of assessment shall be carried forward and shall, for the purposes of this section, be deemed to be a donation actually paid or transferred in the next succeeding year of assessment.

(1A)The Minister may, by regulation, prescribe additional requirements with which a public benefit organisation, institution, board or body or the department carrying on any specific public benefit activity identified by the Minister in the regulations, must comply before any donation made to that public benefit organisation, institution, board or body or the department shall be allowed as a deduction under subsection (1).

(1B)Any activity determined by the Minister in terms of subsection (1)(a) or any requirements prescribed by the Minister in terms of subsection (1A), must be tabled in Parliament within a period of 12 months after the date of publication by the Minister of that activity or those requirements, as the case may be, in the Gazette, for incorporation into this Act.

(1C)The constitution or founding document of a public benefit organisation carrying on the activity contemplated in paragraph 4(d) of Part II of the Ninth Schedule, must expressly provide that the organisation—

(a)may not issue any receipt contemplated in subsection (2) in respect of any donation made by a person to that public benefit organisation, unless—

(i)that donation is made by that person on or after 1 August 2002; and

(ii)that person (in the case of a company, together with any other company in the same group of companies as that company) has during the relevant year of assessment of that person donated an amount of at least R1 million to that organisation;

(b)must ensure that every donation contemplated in paragraph (a), in respect of which such a receipt has been issued, will be matched by a donation to that organisation of the same amount made by a person who is not a resident and which is made from funds generated and held outside the Republic; and

(c)must utilise the amount of—

(i)all donations contemplated in paragraph (a), in respect of which such a receipt has been issued, and all income derived therefrom, in the Republic in carrying on that activity; and

(ii)all donations contemplated in paragraph (b), either in the Republic in carrying on that activity, or in respect of a transfrontier conservation area of which the Republic forms part.

(2)Any claim for a deduction in respect of any donation under subsection (1) shall not be allowed unless supported by—

(a)a receipt issued by the public benefit organisation, institution, board, body or agency, programme, fund, High Commissioner, office, entity or organisation or the department concerned containing—[words preceding subparagraph (i) substituted by section 35(1)(b) of Act 23 of 2018; effective date 1 March 2017]

(i)the reference number of the public benefit organisation, institution, board, body or agency, programme, fund, High Commissioner, office, entity or organisation or the department issued by the Commissioner for the purposes of this section;[subparagraph (i) substituted by section 35(1)(c) of Act 23 of 2018; effective date 17 January 2019, date of promulgation of that Act]

(ii)the date of the receipt of the donation;

(iii)the name of the public benefit organisation, institution, board, body or agency, programme, fund, High Commissioner, office, entity or organisation or the department which received the donation, together with an address to which enquiries may be directed in connection therewith;[subparagraph (iii) substituted by section 35(1)(c) of Act 23 of 2018; effective date 17 January 2019, date of promulgation of that Act]

(iv)the name and address of the donor;

(v)the amount of the donation or the nature of the donation (if not made in cash);

(vi)a certification to the effect that the receipt is issued for the purposes of section 18A of the Income Tax Act, 1962, and that the donation has been or will be used exclusively for the object of the public benefit organisation, institution, board, body or agency, programme, fund, High Commissioner, office, entity or organisation concerned or, in the case of the department in carrying on the relevant public benefit activity; and[subparagraph (vi) substituted by section 35(1)(c) of Act 23 of 2018; effective date 17 January 2019, date of promulgation of that Act]

(vii)such further information as the Commissioner may prescribe by public notice; or[item (vii) added by section 2 of Act 21 of 2021; effective date 19 January 2022, date of promulgation of that Act]

(b)an employees’ tax certificate as defined in the Fourth Schedule on which the amount of donations contemplated in paragraph 2(4)(f) of that Schedule, for which the employer has received a receipt contemplated in paragraph (a), is given.

(2A)A public benefit organisation, institution, board, body or department may only issue a receipt contemplated in subsection (2) in respect of any donation to the extent that—

(a)in the case of a public benefit organisation, institution, board or body contemplated in subsection (1)(a) which carries on activities contemplated in Parts I and II of the Ninth Schedule, that donation will be utilised solely in carrying on activities contemplated in Part II of the Ninth Schedule;

(b)in the case of a public benefit organisation contemplated in subsection (1)(b)—

(i)that organisation will within 12 months after the end of the relevant year of assessment distribute or incur the obligation to distribute at least 50 per cent of all funds received by way of donation during that year in respect of which receipts were issued: Provided that the Commissioner may, upon good cause shown and subject to such conditions as he or she may determine, either generally or in a particular instance, waive, defer or reduce the obligation to distribute any funds, having regard to the public interest and the purpose for which the relevant organisation wishes to accumulate those funds; and

(ii)if that public benefit organisation provides funds to public benefit organisations, institutions, boards or bodies that carry on public benefit activities contemplated in Part II of the Ninth Schedule and to other entities, that donation will be utilised solely to provide funds to a public benefit organisation, institution, board or body contemplated in subsection (1)(a), which will utilise those funds solely in carrying on activities contemplated in Part II of the Ninth Schedule; or

(c)in the case of a department, that donation will be utilised solely in carrying on activities contemplated in Part II of the Ninth Schedule.

(2B)A public benefit organisation, institution, board or body contemplated in subsection (2A), must obtain and retain an audit certificate confirming that all donations received or accrued in that year in respect of which receipts were issued in terms of subsection (2), were utilised in the manner contemplated in subsection (2A).

(2C)The accounting officer or accounting authority contemplated in the Public Finance Management Act or an accounting officer contemplated in the Local Government: Municipal Finance Management Act, 2003 (Act No. 56 of 2003), as the case may be, for the department which issued any receipts in terms of subsection (2), must on an annual basis submit an audit certificate to the Commissioner confirming that all donations received or accrued in the year in respect of which receipts were so issued were utilised in the manner contemplated in subsection (2A).[subsection (2C) substituted by section 2 of Act 33 of 2019; effective date 15 January 2020, date of promulgation of that Act]

(2D)Any public benefit organisation contemplated in subsection (1)(b), in respect of any amount that is not distributed referred to in subsection (2A)(b)(i), shall distribute or incur the obligation to distribute all amounts received in respect of investment assets held by it, other than amounts received in respect of disposals of those investment assets to any public benefit organisation, institution, board or body contemplated in subsection (1)(a), no later than six months after—

(a)every five years from the date on which the Commissioner issued a reference number referred to in subsection (2)(a)(i) to that public benefit organisation referred to in subsection (1)(b), if that public benefit organisation is incorporated, formed or established on or after 1 March 2015; or

(b)every five years from 1 March 2015, if that public benefit organisation referred to in subsection (1)(b) was incorporated, formed or established and issued with a reference number referred to in subsection (2)(a)(i) prior to 1 March 2015.

(3)If any deduction is claimed by any taxpayer under the provisions of subsection (1) in respect of any donation of property in kind, other than immovable property of a capital nature where the lower of market value or municipal value exceeds cost, the amount of such deduction shall be deemed to be an amount equal to—

(a)where such property constitutes—

(i)a financial instrument which is trading stock of the taxpayer, the lower of fair market value of that financial instrument on the date of that donation or the amount which has been taken into account for the purposes of section 22(8)(C); or

(ii)any other trading stock of the taxpayer (including any livestock or produce in respect of which the provisions of paragraph 11 of the First Schedule are applicable), the amount which has been taken into account for the purposes of section 22(8)(C) or, in the case of such livestock or produce, the said paragraph 11, in relation to the donation of such property; or

(b)where such property (other than trading stock) constitutes an asset used by the taxpayer for the purposes of his trade, the lower of—

(i)the fair market value of that property on the date of that donation; or

(ii)the cost to the taxpayer of such property less any allowance (other than any investment allowance) allowed to be deducted from the income of the taxpayer under the provisions of this Act in respect of that asset; or

(c)where such property does not constitute trading stock of the taxpayer or an asset used by him for the purposes of his trade, the lower of—

(i)the fair market value of that property on the date of that donation; or

(ii)the cost to the taxpayer of such asset, less, in the case of a movable asset which has deteriorated in condition by reason of use or other causes, a depreciation allowance calculated in the manner contemplated in section 8(5)(bB)(i); or

(d)where such property is purchased, manufactured, erected, assembled, installed or constructed by or on behalf of the taxpayer in order to form the subject of the said donation, the lower of—

(i)the fair market value of that property on the date of that donation; or

(ii)the cost to the taxpayer of such property.

(3A)If any deduction is claimed by any taxpayer under the provisions of subsection (1) in respect of any donation of immovable property of a capital nature where the lower of market value or municipal value exceeds cost, the amount of such deduction shall be determined in accordance with the formula:A = B + (C × D)in which formula:

(a)“A” represents the amount deductible in respect of subsection (1);

(b)“B” represents the cost of the immovable property being donated;

(c)“C” represents the amount of a capital gain (if any), that would have been determined in terms of the Eighth Schedule had the immovable property been disposed of for an amount equal to the lower of market value or municipal value on the day the donation is made; and[paragraph (c) substituted by section 22 of Act 23 of 2020; effective date 20 January 2021, date of promulgation of that Act]

(d)“D” represents 60 per cent in the case of a natural person or special trust or 20 per cent in any other case.[paragraph (d) substituted by section 35(1)(d) of Act 23 of 2018; effective date 17 January 2019, date of promulgation of that Act]

(3B)No deduction shall be allowed under this section in respect of the donation of any property in kind which constitutes, or is subject to any fiduciary right, usufruct or other similar right, or which constitutes an intangible asset or financial instrument, unless that financial instrument is—

(a)a share in a listed company; or

(b)issued by an eligible financial institution as defined in section 1 of the Financial Sector Regulation Act.[paragraph (b) substituted by section 35(1)(e) of Act 23 of 2018; effective date 1 April 2018]

(4)The provisions of section 30(10) shall apply mutatis mutandis in respect of any institution, board or body contemplated in subsection (1)(a).

(5)If the Commissioner has reasonable grounds for believing that any person who is in a fiduciary capacity responsible for the management or control of the income or assets of any public benefit organisation, institution, board, body or agency, programme, fund, High Commissioner, office, entity or organisation (other than an institution, board or body in respect of which subsection (5B) applies) has—

(a)in any material way failed to ensure that the objects for which the public benefit organisation, institution, board, body or agency, programme, fund, High Commissioner, office, entity or organisation was established are carried out or has expended moneys belonging to the public benefit organisation, institution, board, body or agency, programme, fund, High Commissioner, office, entity or organisation for purposes not covered by such objects;

(b)issued or allowed a receipt to be issued to any taxpayer for the purposes of this section in respect of any fees or other emoluments payable to that organisation, institution, board, body or agency, programme, fund, High Commissioner, office, entity or organisation by that taxpayer; or

(c)issued or allowed a receipt to be issued in contravention of subsection (2A) or utilised a donation in respect of which a receipt was issued for any purpose other than the purpose contemplated in that subsection,

the Commissioner may by notice in writing addressed to that person direct that—

(i)any donation in respect of which a receipt was issued by that public benefit organisation, institution, board, body or agency, programme, fund, High Commissioner, office, entity or organisation during any year of assessment specified in that notice, will be deemed to be taxable income of that public benefit organisation, institution, board, body or agency, programme, fund, High Commissioner, office, entity or organisation in that year; and

(ii)if corrective steps are not taken by that public benefit organisation, institution, board, body or agency, programme, fund, High Commissioner, office, entity or organisation within a period stated by the Commissioner in that notice, any receipt issued by that public benefit organisation, institution, board, body or agency, programme, fund, High Commissioner, office, entity or organisation in respect of any donation made on or after the date specified in that notice shall not qualify as a valid receipt for purposes of subsection (2).

[subsection (5) substituted by section 35(1)(f) of Act 23 of 2018; effective date 17 January 2019, date of promulgation of that Act]

(5A)If the Commissioner has reasonable grounds for believing that any regulating or co-ordinating body of a group of public benefit organisations, institutions, boards or bodies contemplated in section 30(3A) or subsection (6) fails to—

(a)take any steps contemplated in section 30(3A) or subsection (6), to exercise control over any public benefit organisation, institution, board or body in that group; or

(b)notify the Commissioner where it becomes aware of any material failure by any public benefit organisation, institution, board or body over which it exercises control to comply with any provision of this section,

the Commissioner may by notice in writing addressed to that regulating or co-ordinating body direct that if corrective steps are not taken by that regulating or co-ordinating body within a period stated by the Commissioner in that notice, any receipt issued by public benefit organisations, institutions, boards or bodies in that group in respect of any donation made on or after the date specified in that notice shall not qualify as a valid receipt for purposes of subsection (2).

(5B)If the Commissioner has reasonable grounds for believing that any accounting officer or accounting authority contemplated in the Public Finance Management Act or an accounting officer contemplated in the Local Government: Municipal Finance Management Act, 2003 (Act No. 56 of 2003), as the case may be, for any institution in respect of which that Act applies, has issued or allowed a receipt to be issued in contravention of subsection (2A) or utilised a donation in respect of which a receipt was issued for any purpose other than the purpose contemplated in that subsection, the Commissioner—

(a)must notify the National Treasury and the Provincial Treasury (if applicable) of the contravention; and

(b)may by notice in writing addressed to that accounting officer or accounting authority direct that, if corrective steps are not taken by that accounting officer or accounting authority within a period stated by the Commissioner in that notice, any receipt issued by that institution in respect of any donation made on or after the date specified in that notice shall not qualify as a valid receipt for purposes of subsection (2).

(5C)If any public benefit organisation contemplated in subsection (1)(b), has not distributed amounts as contemplated in subsection (2D), or has not incurred the obligation to distribute those amounts received in respect of investment assets held by it, those amounts shall be deemed to be taxable income of that public benefit organisation in that year of assessment.

(6)The Commissioner may, for the purposes of this section, approve a group of institutions, boards or bodies contemplated in subsection (1)(a)(ii), sharing a common purpose which carry on any public benefit activity under the direction or supervision of a regulating or co-ordinating body, where that body takes such steps, as prescribed by the Commissioner, to exercise control over those institutions, boards or bodies in order to ensure that they comply with the provisions of this section.

(7)Any person who is—

(i)in a fiduciary capacity responsible for the management or control of the income and assets of any public benefit organisation, institution, board or body contemplated in this section; or

(ii)the accounting officer or accounting authority contemplated in the Public Finance Management Act or the Local Government: Municipal Finance Management Act, 2003 (Act No. 56 of 2003), as the case may be, for any institution in respect of which that Act applies,

who intentionally fails to comply with any provisions of this section, or a provision of the constitution, will or other written instrument under which such organisation is established to the extent that it relates to the provisions of this section, shall be guilty of an offence and liable on conviction to a fine or to imprisonment for a period not exceeding 24 months.

19. Concession or compromise in respect of a debt

(1)For the purposes of this section—“allowance asset” means a capital asset in respect of which a deduction or allowance is allowable in terms of this Act for purposes other than the determination of any capital gain or capital loss;“capital asset” means an asset as defined in paragraph 1 of the Eighth Schedule that is not trading stock;“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 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;

[definition of “concession or compromise” substituted by section 36(1)(a) of Act 23 of 2018; effective date 1 January 2018, applicable in respect of years of assessment commencing on or after that date]“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;[definition of “debt” substituted by section 36(1)(b) of Act 23 of 2018; effective date 1 January 2018, applicable in respect of years of assessment commencing on or after that date]“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 did not hold 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 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 any 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;

[definition of “debt benefit” substituted by section 36(1)(c) of Act 23 of 2018; effective date 1 January 2018, applicable in respect of years of assessment commencing on or after that date]“group of companies” means a group of companies as defined in section 41; and[definition of “group of companies” amended by section 17(1)(a) of Act 20 of 2021; effective date 19 January 2022, date of promulgation of that Act]“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.[definition of “market value” inserted by section 36(1)(d) of Act 23 of 2018; effective date 1 January 2018, applicable in respect of years of assessment commencing on or after that date]

(2)Subject to subsection (8), this section 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[paragraph (a) substituted by section 36(1)(e) of Act 23 of 2018; effective date 1 January 2018, applicable in respect of years of assessment commencing on or after that date]

(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 in respect of which a deduction or allowance was granted in terms of this Act.[paragraph (b) substituted by section 36(1)(e) of Act 23 of 2018; effective date 1 January 2018, applicable in respect of years of assessment commencing on or after that date]

(3)Where—

(a)a debt benefit arises in respect of a debt owed by a person as contemplated in subsection (2); and

(b)the amount of that debt is owed in respect of or was used as contemplated in paragraph (b) of that subsection to fund expenditure incurred in respect of trading stock that is held and not disposed of by that person at the time the debt benefit arises,[paragraph (b) substituted by section 36(1)(f) of Act 23 of 2018; effective date 1 January 2018, applicable in respect of years of assessment commencing on or after that date]

the debt benefit in respect of that debt must, to the extent that an amount is taken into account by that person in respect of that trading stock in terms of section 11(a) or 22(1) or (2) for the year of assessment in which the debt benefit arises, be applied to reduce the amount so taken into account in respect of that trading stock.

(4)Where—

(a)a debt benefit arises in respect of a debt owed by a person as contemplated in subsection (2);

(b)the amount of that debt is owed in respect of or was used as contemplated in paragraph (b) of that subsection to fund expenditure incurred in respect of trading stock that is held and not disposed of by that person at the time the debt benefit arises; and[paragraph (b) substituted by section 36(1)(f) of Act 23 of 2018; effective date 1 January 2018, applicable in respect of years of assessment commencing on or after that date]

(c)subsection (3) has been applied to reduce an amount taken into account by that person in respect of trading stock as contemplated in that subsection to the full extent of that amount so taken into account,

the debt benefit in respect of that debt, less any amount of that debt benefit that has been applied to reduce an amount as contemplated in subsection (3) must, to the extent that a deduction or allowance was granted in terms of this Act to that person in respect of that expenditure, be deemed, for the purposes of section 8(4)(a), to be an amount that has been recovered or recouped by that person for the year of assessment in which the debt benefit arises.

(5)Where—

(a)a debt benefit arises in respect of a debt owed by a person as contemplated in subsection (2); and

(b)the amount of that debt is owed in respect of or was used as contemplated in paragraph (b) of that subsection to fund any expenditure other than expenditure incurred—[paragraph (b) (words preceding subparagraph (i)) substituted by section 36(1)(g) of Act 23 of 2018; effective date 1 January 2018, applicable in respect of years of assessment commencing on or after that date]

(i)in respect of trading stock that is held and not disposed of by that person at the time the debt benefit arises; or

(ii)in respect of an allowance asset,

the debt benefit in respect of that debt must, to the extent that a deduction or allowance was granted in terms of this Act to that person in respect of that expenditure, be deemed, for the purposes of section 8(4)(a), to be an amount that has been recovered or recouped by that person for the year of assessment in which the debt benefit arises.

(6)Where—

(a)a debt benefit arises in respect of a debt owed by a person as contemplated in subsection (2); and

(b)the amount of that debt is owed in respect of or was used as contemplated in paragraph (b) of that subsection to fund expenditure incurred in respect of an allowance asset that was not disposed of in a year of assessment prior to that in which that debt benefit arises,[paragraph (b) substituted by section 36(1)(h) of Act 23 of 2018; effective date 1 January 2018, applicable in respect of years of assessment commencing on or after that date]

the debt benefit in respect of that debt must, to the extent that—

(i)a deduction or allowance was granted in terms of this Act to that person in respect of that expenditure; and

(ii)the debt benefit has not been applied as contemplated in paragraph 12A of the Eighth Schedule to reduce the amount of expenditure as contemplated in paragraph 20 of that Schedule in respect of that allowance asset,

be deemed, for the purposes of section 8(4)(a), to be an amount that has been recovered or recouped by that person for the year of assessment in which the debt benefit arises.

(6A)Where—

(a)a debt benefit arises during any year of assessment in respect of a debt owed by a person as contemplated in subsection (2); and

that person must treat the debt benefit in respect of that debt to the extent that—

(i)a deduction or allowance was granted in terms of this Act to that person in respect of that expenditure; and

(ii)that debt benefit has not been applied as contemplated in paragraph 12A of the Eighth Schedule to reduce the amount of expenditure as contemplated in paragraph 20 of that Schedule in respect of the allowance asset,

less any amount, if any, previously determined in respect of that disposal as a recovery or recoupment of a deduction or allowance, as an amount recovered or recouped for purposes of section 8(4)(a) in the year of assessment in which that debt benefit arises.[subsection (6A) inserted by section 36(1)(i) of Act 23 of 2018 and substituted by section 10(1) of Act 20 of 2022; effective date 1 January 2023, applies in respect of years of assessment commencing on or after that date]

(7)Where a debt benefit arises in respect of a debt owed by a person that was used to fund expenditure incurred in respect of an allowance asset, the aggregate amount of the deductions and allowances allowable to that person in respect of that allowance asset may not exceed an amount equal to the aggregate of the expenditure incurred in the acquisition of that allowance asset, reduced by an amount equal to the sum of—

(a)the debt benefit in respect of that debt; and

(b)the aggregate amount of all deductions and allowances previously allowed to that person in respect of that allowance asset.

(8)This section 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—

(i)a donation as defined in section 55(1); or

(ii)any transaction to which section 58 applies,

in respect of which donations tax is payable;[words following subparagraph (ii) substituted by section 17(1)(b) of Act 20 of 2021; effective date 19 January 2022, date of promulgation of that Act][paragraph (b) substituted by section 36(1)(j) of Act 23 of 2018; effective date 1 January 2019, applicable in respect of years of assessment commencing on or after that date]

(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 in which that debt benefit arises as well as during the immediately preceding year of assessment: Provided that this paragraph 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)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 paragraph 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 that company reduces or settles that debt, directly or indirectly, by means of shares issued by that company; or

(f)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.

[item (ii) substituted by section 17(1)(c) of Act 20 of 2021; effective date 1 January 2022, applicable in respect of years of assessment commencing on or after that date][paragraph (f) added by section 36(1)(k) of Act 23 of 2018; effective date 1 January 2018, applicable in respect of years of assessment commencing on or after that date]

20. Set-off of assessed losses

(1)For the purpose of determining the taxable income derived by any person from carrying on any trade, there shall, subject to section 20A, be set off against the income so derived by such person—

(a)

(i)that is a company, other than a company referred to in subparagraph (ii), any balance of assessed loss incurred by that person in any previous year which has been carried forward from the preceding year of assessment, to the extent that the amount of such set-off does not exceed the higher of R1 million and 80 per cent of the amount of taxable income determined before taking into account the application of this section;

(ii)that is a company carrying on mining operations as contemplated in section 15, any balance of assessed loss incurred by that person in any previous year which has been carried forward from the preceding year of assessment, to the extent that the amount of such set-off does not exceed the higher of R1 million and 80 per cent of the amount of taxable income determined before taking into account the application of—

(A)this section; and

(B)the provisions of section 36(7C); or

(iii)that is not a company, any balance of assessed loss incurred by that person in any previous year which has been carried forward from the preceding year of assessment: Provided that no person whose estate has been voluntarily or compulsorily sequestrated shall be entitled to carry forward any assessed loss incurred prior to the date of sequestration, unless the order of sequestration has been set aside, in which case the amount to be carried forward shall be reduced by an amount which was allowed to be set off against the income of the insolvent estate of such person from the carrying on of any trade;

[paragraph (a) substituted by section 18(1) of Act 20 of 2021, as retroactively substituted by section 42(1) of Act 20 of 2022; effective date, amended by section 9 of Act 19 of 2022 to 31 March 2023, applies in respect of years of assessment ending on or after that date]

(b)any assessed loss incurred by a person during the same year of assessment in carrying on any other trade either alone or in partnership with others, otherwise than as a member of a company the capital whereof is divided into shares:

Provided that there shall not be set off against any amount—

(b)derived by any person from a source within the Republic, any—

(i)assessed loss incurred by such person during such year; or

(ii)any balance of assessed loss incurred in any previous year of assessment,

in carrying on any trade outside the Republic; or

(c)that is a retirement fund lump sum benefit, retirement fund lump sum withdrawal benefit or severance benefit included in taxable income, any—

(i)balance of assessed loss;

(ii)“assessed loss” as defined in subsection (2) incurred in such year before taking into account that retirement fund lump sum benefit or retirement fund lump sum withdrawal benefit.

(2)For the purposes of this section “assessed loss” means any amount by which the deductions admissible under section 11 exceeded the income in respect of which they are so admissible.

(2A)In the case of any person other than a company—

(a)the provisions of subsections (1) and (2) shall mutatis mutandis apply for the purpose of determining the taxable income derived by such person otherwise than from carrying on any trade, the reference in subsection (1) to “taxable income derived by any person from carrying on any trade” and the reference in that subsection to “the income so derived” being respectively construed as including a reference to taxable income derived by that person otherwise than from carrying on any trade and a reference to income so derived; and

(b)the said person shall, subject to the provisos to subsection (1), not be prevented from carrying forward a balance of assessed loss merely by reason of the fact that he has not derived any income during any year of assessment.

20A. Ring-fencing of assessed losses of certain trades

(1)Subject to subsection (3), where the circumstances in subsection (2) apply during any year of assessment in respect of any trade carried on by a natural person, any assessed loss incurred during that year in carrying on that trade may not be set off against any income of that person derived during that year otherwise than from carrying on that trade, notwithstanding section 20(1)(b).

(2)Subsection (1) applies where the sum of the taxable income of a person for a year of assessment (determined without having regard to the other provisions of this section) and any assessed loss and balance of assessed loss which were set off in terms of section 20 in determining that taxable income, equals or exceeds the amount at which the maximum marginal rate of tax chargeable in respect of the taxable income of individuals becomes applicable, and where—

(a)that person has, during the five year period ending on the last day of that year of assessment, incurred an assessed loss in at least three years of assessment in carrying on the trade contemplated in subsection (1) (before taking into account any balance of assessed loss carried forward); or

(b)the trade contemplated in subsection (1), in respect of which the assessed loss was incurred constitutes—

(i)any sport practised by that person or any relative;

(ii)any dealing in collectibles by that person or any relative;

(iii)the rental of residential accommodation, unless at least 80 per cent of the residential accommodation is used by persons who are not relatives of that person for at least half of the year of assessment;

(iv)the rental of vehicles, aircraft or boats as defined in the Eighth Schedule, unless at least 80 per cent of the vehicles, aircraft or boats are used by persons who are not relatives of that person for at least half of the year of assessment;

(v)animal showing by that person or any relative;

(vi)farming or animal breeding, unless that person carries on farming, animal breeding or activities of a similar nature on a full-time basis;

(vii)any form of performing or creative arts practised by that person or any relative;

(viii)any form of gambling or betting practised by that person or any relative; or

(ix)the acquisition or disposal of any crypto asset.[subparagraph (ix) added by section 37 of Act 23 of 2018; effective date 17 January 2019, and substituted by section 23 of Act 23 of 2020; effective date 20 January 2021, date of promulgation of that Act]

(3)The provisions of subsection (1) do not apply in respect of an assessed loss incurred by a person during any year of assessment from carrying on any trade contemplated in subsection (2)(a) or (b), where that trade constitutes a business in respect of which there is a reasonable prospect of deriving taxable income (other than taxable capital gain) within a reasonable period having special regard to—

(a)the proportion of the gross income derived from that trade in that year of assessment in relation to the amount of the allowable deductions incurred in carrying on that trade during that year;

(b)the level of activities carried on by that person or the amount of expenses incurred by that person in respect of advertising, promoting or selling in carrying on that trade;

(c)whether that trade is carried on in a commercial manner, taking into account—

(i)the number of full-time employees appointed for purposes of that trade (other than persons partly or wholly employed to provide services of a domestic or private nature);

(ii)the commercial setting of the premises where the trade is carried on;

(iii)the extent of the equipment used exclusively for purposes of carrying on that trade; and

(iv)the time that the person spends at the premises conducting that business;

(d)the number of years of assessment during which assessed losses were incurred in carrying on that trade in relation to the period from the date when that person commenced carrying on that trade and taking into account—

(i)any unexpected events giving rise to any of those assessed losses; and

(ii)the nature of the business involved;

(e)the business plans of that person and any changes thereto to ensure that taxable income is derived in future from carrying on that trade; and

(f)the extent to which any asset attributable to that trade is used, or is available for use, by that person or any relative of that person for recreational purposes or personal consumption.

(4)Subsection (3) does not apply in respect of a trade contemplated in subsection (2)(b) (other than farming) carried on by a person during any year of assessment where that person has, during the ten year period ending on the last day of that year of assessment, incurred an assessed loss in at least six years of assessment in carrying on that trade (before taking into account any balance of assessed loss carried forward).[subsection (4) substituted by section 23 of Act 34 of 2019; effective date 15 January 2020, date of promulgation of that Act]

(5)Notwithstanding section 20(1)(a), any balance of assessed loss carried forward from the preceding year of assessment, which is attributable to an assessed loss in respect of which subsection (1) applied in that preceding year or any prior year of assessment, may not be set off against any income derived by that person otherwise than from carrying on the trade contemplated in subsection (1).

(6)For the purposes of this section and section 20, the income derived from any trade referred to in subsections (1) or (5), includes any amount—

(a)which is included in the income of that person in terms of section 8 in respect of an amount deducted in any year of assessment in carrying on that trade; or

(b)derived from the disposal after cessation of that trade of any assets used in carrying on that trade.

(7)Notwithstanding anything to the contrary contained in this Act, all farming activities carried on by a person shall be deemed to constitute a single trade carried on by that person for the purposes of this section.

(8)Where the provisions of subsection (2) apply during any year of assessment in respect of any trade carried on by a person, that person must indicate the nature of the business in his or her return contemplated in section 66 for that year of assessment.

(9)For the purposes of subsections (2)(a) and (4), any assessed loss incurred in any year of assessment ending on or before 29 February 2004 shall not be taken into account.

(10)For the purposes of this section—

(a)“assessed loss” means “assessed loss” as defined in section 20(2); and

(b)“relative” in relation to a person means a spouse, parent, child, stepchild, brother, sister, grandchild or grandparent of that person.

20B. Limitation of losses from disposal of certain assets

(1)Any deduction which is allowable during any year of assessment under section 11(o) in respect of the disposal by a person during that year of any asset the full consideration of which will not accrue to that person during that year, must be disregarded in that year.

(2)So much of any amount disregarded in terms of subsection (1), which has not otherwise been allowed as a deduction, may be deducted from the income of that person in any subsequent year of assessment to the extent that any consideration which is received by or accrued to that person in that subsequent year from that disposal is included in the income of that person.

(3)If during any year of assessment a person contemplated in subsection (1) proves that no further consideration will accrue to him or her in that year and any subsequent year as contemplated in subsection (2), so much of the amount which was disregarded in terms of subsection (1) as has not been allowed as a deduction in any year, must be allowed as a deduction from the income of that person in that year of assessment.

20C. Ring-fencing of interest and royalties incurred by headquarter companies

(1)For the purposes of this section—“financial assistance” means financial assistance contemplated in section 31(1); and“royalty” means any amount that is, before taking into account section 49D(c), subject to the withholding tax on royalties in terms of Part IVA.

(2)Where a headquarter company has during any year of assessment incurred any interest in respect of any financial assistance granted to that headquarter company by a person—

(a)that is not a resident; and

(b)if that person is a company, that directly or indirectly (and whether alone or together with any other company forming part of the same group of companies as that person) holds at least 10 per cent of the equity shares and voting rights in that headquarter company,

the amount of that interest in respect of which a deduction is allowable to that headquarter company in that year of assessment is limited to so much of the amount of interest received by or accrued to the headquarter company as relates to any portion of that financial assistance that is directly applied as financial assistance to any foreign company in which the headquarter company directly or indirectly (whether alone or together with any other company forming part of the same group of companies as that headquarter company) holds at least 10 per cent of the equity shares and voting rights.

(2A)Where a headquarter company has during any year of assessment incurred any amount that constitutes a royalty payable to a person—

(a)that is not a resident; and

the amount of that royalty in respect of which a deduction is allowable to that headquarter company in that year of assessment is limited to so much of any amounts received by or accrued to the headquarter company in respect of—

(i)the use or right of use of or permission to use any intellectual property as defined in section 23I; or

(ii)the imparting of or the undertaking to impart any scientific, technical, industrial or commercial knowledge or information, or the rendering of or the undertaking to render, any assistance or service in connection with the application or utilisation of such knowledge or information,

from any foreign company in which the headquarter company directly or indirectly (whether alone or together with any other company forming part of the same group of companies as that headquarter company) holds at least 10 per cent of the equity shares and voting rights.

(3)Any amount that is disallowed as a deduction in any year of assessment of a headquarter company in terms of subsection (2) or (2A) must—

(a)be carried forward to the immediately succeeding year of assessment of the headquarter company; and

(b)where that amount is disallowed as a deduction—

(i)in terms of subsection (2), be deemed to be an amount of interest actually incurred by the headquarter company during that succeeding year in respect of financial assistance granted to that headquarter company by a person that is not a resident; or

(ii)in terms of subsection (2A), be deemed to be an amount actually incurred by the headquarter company during that succeeding year that constitutes a royalty payable to a person that is not a resident.

21. Deduction of alimony, allowance or maintenance

The taxpayer shall have his taxable income reduced by so much of any amount payable by him to or on behalf of his spouse or former spouse under any order of divorce or judicial separation granted in consequence of proceedings instituted not later than the twenty-first day of March, 1962, or under any written agreement of separation entered into not later than that date, by way of alimony or allowance or maintenance of his spouse or former spouse and any children, as the Commissioner is satisfied has been or will in respect of the year or period of assessment in question be paid out of the taxable income of the taxpayer: Provided that for the purposes of this section any order of divorce or judicial separation (hereinafter referred to as the subsequent order) which in effect supersedes any such first-mentioned order of judicial separation or written agreement of separation and does not vary the amount of alimony, allowance or maintenance payable thereunder, shall not affect the rights which any person may have under this section, and in the case of any such person and the spouse or former spouse of such person the subsequent order shall, for the purposes of this section and the provisions of section 10(1)(u), be deemed to have been granted in consequence of proceedings instituted on or before the said date.

22. Amounts to be taken into account in respect of values of trading stocks

(1)The amount which shall, in the determination of the taxable income derived by any person during any year of assessment from carrying on any trade (other than farming), be taken into account in respect of the value of any trading stock held and not disposed of by him at the end of such year of assessment, shall be—

(a)in the case of trading stock other than trading stock contemplated in paragraph (b), the cost price to such person of such trading stock, less such amount as the Commissioner may think just and reasonable as representing the amount by which the value of such trading stock, not being any financial instrument, has been diminished by reason of damage, deterioration, change of fashion, decrease in the market value or for any other reason satisfactory to the Commissioner: Provided that for the purposes of this subsection—

(i)the amount of trading stock must be taken into account in determining taxable income by including such amount in gross income; and

(ii)in determining any diminution in the value of trading stock, no account must be taken of the fact that the value of some items of trading stock held and not disposed of by the taxpayer may exceed their cost price; and

[proviso to paragraph (a) added by section 24 of Act 34 of 2019; effective date 1 January 2020, applicable in respect of years of assessment commencing on or after that date]

(b)in the case of any trading stock which consists of any instrument, interest rate agreement or option contract in respect of which a company has made an election which has taken effect as contemplated in section 24J(9), the market value of such trading stock as contemplated in such section.

(1A)Where in respect of any year of assessment ending after the commencement date defined in section 1 of the Value-Added Tax Act any amount of sales tax referred to in section 23C(2) which was included in the cost price to the taxpayer of any trading stock is deemed by that section to have been recovered or recouped for the purposes of section 8(4)(a), the cost of such trading stock held and not disposed of by the taxpayer at the end of such year shall be deemed to have been reduced by the said amount.

(2)The amount which shall in the determination of the taxable income derived by any person during any year of assessment from carrying on any trade (other than farming), be taken into account in respect of the value of any trading stock held and not disposed of by him at the beginning of any year of assessment, shall—

(a)if such trading stock formed part of the trading stock of such person at the end of the immediately preceding year of assessment be the amount which was, in the determination of the taxable income of such person for such preceding year of assessment, taken into account in respect of the value of such trading stock at the end of such preceding year of assessment; or

(b)if such trading stock did not form part of the trading stock of such person at the end of the immediately preceding year of assessment, be the cost price to such person of such trading stock.

(2A)

(a)Where any person carries on any construction, building, engineering or other trade in the course of which improvements are effected by him to fixed property owned by any other person, any such improvements effected by him and any materials delivered by him to such fixed property which are no longer owned by him shall, until the contract under which such improvements are effected has been completed, be deemed for the purposes of this section to be trading stock held and not disposed of by him.

(b)For the purposes of paragraph (a), a contract shall be deemed to have been completed when the taxpayer has carried out all the obligations imposed upon him under the contract and has become entitled to claim payment of all amounts due to him under the contract.

(3)

(a)For the purposes of this section the cost price at any date of any trading stock in relation to any person shall—

(i)subject to subparagraphs (iA) and (ii), be the cost incurred by such person, whether in the current or any previous year of assessment in acquiring such trading stock, plus any further costs incurred by such person, in terms of IFRS (in the case of a company), up to and including the said date in getting such trading stock into its then existing condition and location, but excluding any exchange difference as defined in section 24I(1) relating to the acquisition of such trading stock;

(iA)include an amount that has been included in that person’s income in terms of section 8(5), which was applied in reduction or towards settlement of the purchase price of that trading stock;

(ii)in the case of any trading stock which is in terms of paragraph 12(2)(c) of the Eighth Schedule treated as having been acquired at a cost equal to the market value, be that market value; or

(iii)in the case of—

(aa)a right in a controlled foreign company held directly by a resident, include an amount equal to the proportional amount of the net income (without having regard to the percentage adjustments contemplated in paragraph 10 of the Eighth Schedule) 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, include an amount equal to the proportional amount of the net income (without having regard to the percentage adjustments contemplated in paragraph 10 of the Eighth Schedule) of that first-mentioned controlled foreign company and of any other controlled foreign company in which both the firstand 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;

(3A)For the purposes of this section the cost price of trading stock referred to in subsection (2A) shall be the sum of the cost to the taxpayer of material used by the taxpayer in effecting the relevant improvements, and such further costs incurred by the taxpayer as in accordance with IFRS are to be regarded as having been incurred directly in connection with the relevant contract, and such portion of any other costs incurred by the taxpayer in connection with the relevant contract and other contracts as in accordance with IFRS are to be regarded as having been incurred in connection with the relevant contract, less a deduction of so much of—

(a)any income received by or accrued to the taxpayer in respect of the relevant contract;

(b)any portion of an amount payable to the taxpayer under the relevant contract (but not exceeding 15 per cent of the total amount payable to him under such contract) the payment of which has been withheld as a retention; and

(c)any of the said costs included under this subsection as exceed that portion of the contract price which relates to the improvements actually effected by him,

as does not exceed the said sum.

(4)If any trading stock has been acquired by any person for no consideration or for a consideration which is not measurable in terms of money, other than a government grant in kind, such person shall for the purposes of subsection (3), unless subsection (3)(a)(iA) applies, be deemed to have acquired such trading stock at a cost equal to the current market price of such trading stock on the date on which it was acquired by such person.

(4A)For the purposes of subsection (4), where—

(a)any security has been lent by a lender to a borrower in terms of a securities lending arrangement, such security shall be deemed not to have been acquired by such borrower; or

(b)another security that is an identical security has been returned by such borrower to such lender, such other security shall be deemed not to have been acquired by such lender.

(4B)For the purposes of subsection (4), where—

(a)any share has been transferred by a transferor to a transferee in terms of a collateral arrangement, that share shall be deemed not to have been acquired by that transferee; or

(b)a share that is an identical share to the share contemplated in paragraph (a) has been returned by that transferee to that transferor in terms of that collateral arrangement, the share so returned shall be deemed not to have been acquired by that transferor.

(5)No person may for the purpose of determining the cost price of any trading stock, adopt the basis of trading stock valuation whereunder the last item of any class of trading stock acquired by him on any date is deemed to be the first item of that class of trading stock disposed of by him on or after that date.

(6)Any reference in this section to the beginning or end of a year of assessment includes—

(a)where the period assessed is less than twelve months, a reference to the beginning or end, as the case may be, of the period assessed;

(b)where accounts are accepted under section 66(13A) or (13C) to a date agreed to by the Commissioner, a reference to the beginning or end, as the case may be, of the period covered by the accounts.

(8)If during any year of assessment—

(a)any taxpayer has applied trading stock to his private or domestic use or consumption; or

(b)any—

(i)taxpayer has applied trading stock for the purpose of making any donation thereof;

(ii)taxpayer has disposed of trading stock, other than in the ordinary course of his or her trade for a consideration less than the market value thereof;

(iii)trading stock of any company has on or after 21 June 1993 been distributed in specie to any holder of shares in that company;

(iv)taxpayer has applied any trading stock for any other purpose other than the disposal thereof in the ordinary course of his trade and under circumstances other than those contemplated in paragraph (a) or subparagraph (i), (ii) or (iii) of this paragraph; or

(v)assets which were held as trading stock by any taxpayer cease to be held as trading stock by such taxpayer,

and the cost price of such trading stock has been taken into account in the determination of the taxable income of the taxpayer for any year of assessment, the taxpayer shall be deemed to have recovered or recouped—

(A)where such trading stock has been applied in a manner contemplated in paragraph (a), an amount equal to the cost price to him of such trading stock (less any sum which has been deducted therefrom under the provisions of subsection (1)) or where the cost price cannot be readily determined, the market value of such trading stock; or

(B)where such trading stock has been applied, disposed of or distributed in a manner contemplated in paragraph (b) (otherwise than in the manner contemplated in paragraph (C)) or ceases to be held as trading stock, an amount equal to the market value of such trading stock; or;

(C)where such trading stock has been applied for the purpose of making a donation in respect of which the provisions of section 18A apply, an amount equal to the amount which was taken into account for that year of assessment in respect of the value of that trading stock,

and such amount shall be included in the income of the taxpayer for the year of assessment during which such trading stock was so applied, disposed of, distributed or ceased to be held as trading stock: Provided that where—

(a)an asset consisting of trading stock so applied is used or consumed by the taxpayer in carrying on his trade, the amount included in his income under this subsection shall for the purposes of this Act be deemed to be expenditure incurred in respect of the acquisition by him of such asset;

(b)the provisions of paragraph (b)(ii) apply and any consideration contemplated in that paragraph has been received by or accrued to the taxpayer, the amount included in his income in terms of this subsection shall be reduced by such consideration;

(c)such trading stock consists of livestock or produce in respect of which the provisions of paragraph 11 of the First Schedule are applicable, the provisions of this subsection shall not apply; or

(d)such trading stock consists of assets in respect of which any amount received or accrued from the disposal thereof is or will be included in the gross income of the taxpayer in terms of paragraph (jA) of the definition of “gross income”, the provisions of paragraph (b)(iv) shall not apply.

(9)Where—

(a)

(i)the trading stock of any person during any year of assessment includes any—

(aa)security or any bond issued by the government of the Republic in the national or local sphere; or

(bb)bond issued by any sphere of government of any country other than the Republic,

if that bond is listed on a recognised exchange as defined in paragraph 1 of the Eighth Schedule;

(ii)such person has, during such year of assessment, lent such security or such bond to a borrower in terms of a securities lending arrangement; and

(iii)a security or a bond that is an identical security or such same bond has not been returned by the borrower to such person at the end of such year of assessment,

such security or such bond shall, for the purposes of this section, be deemed to be trading stock held and not disposed of by such person at the end of such year of assessment;

(b)

(i)the trading stock of any other person during any year of assessment includes any—

(aa)security or any bond issued by the government of the Republic in the national or local sphere; or

(bb)bond issued by any sphere of government of any country other than the Republic,

if that bond is listed on a recognised exchange as defined in paragraph 1 of the Eighth Schedule;

(ii)such other person has, during such year of assessment, borrowed such security or such bond from a lender in terms of a securities lending arrangement; and

(iii)a security that is an identical security or that same bond has not been returned by such other person to such lender at the end of such year of assessment,

such security or such bond shall, for the purposes of this section, be deemed not to be trading stock held and not disposed of, by such other person at the end of such year of assessment; or

(c)

(i)the trading stock of any person during any year of assessment includes any—

(aa)share or any bond issued by the government of the Republic in the national or local sphere; or

(bb)bond issued by any sphere of government of any country other than the Republic,

if that bond is listed on a recognised exchange as defined in paragraph 1 of the Eighth Schedule;

(ii)that person has, during that year of assessment, transferred that share or that bond to a transferee in terms of a collateral arrangement; and

(iii)a share that is an identical share to the share contemplated in subparagraph (ii) or that same bond has not been returned by the transferee to that person at the end of that year of assessment,

such share or such bond shall, for the purposes of this section, be deemed to be trading stock held and not disposed of by that person at the end of that year of assessment; or

(d)

(i)the trading stock of any transferee during any year of assessment includes any—

(aa)share or any bond issued by the government of the Republic in the national or local sphere; or

(bb)bond issued by any sphere of government of any country other than the Republic,

if that bond is listed on a recognised exchange as defined in paragraph 1 of the Eighth Schedule;

(ii)that transferee has, during such year of assessment, acquired such share or such bond from a transferor in terms of a collateral arrangement; and

(iii)a share that is an identical share to the share contemplated in subparagraph (ii) or that same bond has not been returned by such transferee to such transferor at the end of such year of assessment,

such share or such bond shall, for the purposes of this section, be deemed not to be trading stock held and not disposed of, by such transferee at the end of such year of assessment.

22A. Schemes of arrangement involving trading stock

(1)If, under any scheme of arrangement or reconstruction of any company or its affairs (including any scheme for the amalgamation of two or more companies and any other scheme) which is sanctioned by any order of court on or after the first day of April, 1971, any company (hereinafter referred to as the transferee company) has before 1 October 2001, acquired from any other company (hereinafter referred to as the transferor company) any asset which was trading stock of the transferor company, and in respect of such acquisition—

(a)no consideration measurable in terms of money accrued from the transferee company to the transferor company; or

(b)a consideration accrued from the transferee company to the transferor company the money value of which was less than the market value of such asset on the date on which the transferee company acquired such asset,

such asset shall for the purposes of this Act be deemed to be trading stock of the transferee company, and, where paragraph (a) is applicable—

(i)the transferee company shall be deemed to have acquired such asset at a price equal to the cost price thereof to the transferor company; and

(ii)notwithstanding the provisions of section 22(2), no deduction shall, in the determination of the taxable income of the transferor company for the year of assessment of that company during which the transferee company acquired such asset, be made in respect of the value of such asset as trading stock.

(2)Any amount which is received by or accrues to the transferee company from the disposal of the said asset (or of any interest therein) shall be included in that company’s income, whether such amount is derived in carrying on any trade or otherwise or is derived from a source within or outside the Republic.

22B. Dividends treated as income on disposal of certain shares

(1)For the purposes of this section—“deferral transaction” means a transaction in respect of which the provisions of Part III of this Chapter were applied;[definition of “deferral transaction” inserted by section 38(1)(a) of Act 23 of 2018; effective date 1 January 2019, applicable in respect of disposals on or after that date]“exempt dividend” means any dividend or foreign dividend to the extent that the dividend or foreign dividend is—

(a)not subject to tax under Part VIII of Chapter II; and

(b)exempt from normal tax in terms of section 10(1)(k)(i) or section 10B(2)(a) or (b);

“extraordinary dividend” means, in relation to—

(a)a preference share, 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 that amount 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;[paragraph (a) substituted by section 38(1)(b) of Act 23 of 2018; effective date 19 July 2017, applicable in respect of disposals on or after that date]

(b)any other share, 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);[proviso added by section 25(1)(a) of Act 34 of 2019; effective date 30 October 2019, applicable in respect of dividends received or accrued on or after that date]“preference share” means a preference share as defined in section 8EA(1); and[definition of “preference share” inserted by section 38(1)(c) of Act 23 of 2018; effective date 19 July 2017, applicable in respect of disposals on or after that date, and amended by section 25(1)(b) of Act 34 of 2019; effective date 15 January 2020, date of promulgation of that Act]“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 subsection (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—[words preceding paragraph (a) substituted by section 38(1)(d) of Act 23 of 2018; effective date 1 January 2019, applicable in respect of disposals on or after that date, and by section 25(1)(c) of Act 34 of 2019; effective date 15 January 2020, date of promulgation of that Act]

(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 trading stock,

be included in the income of that company in the year of assessment in which those shares are 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 subsection (4), the amount of any extraordinary dividend in respect of those shares must be included in the income of that company only to the extent to which it has not previously been included in the income of that company in terms of this subsection.[proviso added to subsection (2) by section 25(1)(d) of Act 34 of 2019; effective date 20 February 2019, applicable in respect of shares held by a company in a target company if the effective interest held by that company in the shares of that target company is reduced on or after that date]

(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—[words preceding paragraph (a) substituted by section 25(1)(e) of Act 34 of 2019; effective date 15 January, date of promulgation of that Act]

(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,

that dividend must for purposes of this section 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 by that company of the new shares, that dividend must for purposes of this section be treated as an amount that accrued to or was received by that company as an exempt dividend in respect of the new shares.

[subsection (3) added by section 38(1)(e) of Act 23 of 2018; effective date 1 January 2019, applicable in respect of disposals on or after that date]

(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 section 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 subsection be treated as equity shares.[subsection (4) added by section 25(1)(f) of Act 34 of 2019; effective date 20 February 2019, applicable in respect of shares held by a company in a target company if the effective interest held by that company in the shares of that target company is reduced on or after that date]

23. Deductions not allowed in determination of taxable income

No deductions shall in any case be made in respect of the following matters, namely—

(a)the cost incurred in the maintenance of any taxpayer, his family or establishment;

(b)domestic or private expenses, including the rent of or cost of repairs of or expenses in connection with any premises not occupied for the purposes of trade or of any dwelling-house or domestic premises except in respect of such part as may be occupied for the purposes of trade: Provided that—

(a)such part shall not be deemed to have been occupied for the purposes of trade, unless such part is specifically equipped for purposes of the taxpayer’s trade and regularly and exclusively used for such purposes; and

(b)no deduction shall in any event be granted where the taxpayer’s trade constitutes any employment or office unless—

(i)his income from such employment or office is derived mainly from commission or other variable payments which are based on the taxpayer’s work performance and his duties are mainly performed otherwise than in an office which is provided to him by his employer; or

(ii)his duties are mainly performed in such part;

(c)any loss or expense, the deduction of which would otherwise be allowable, to the extent to which it is recoverable under any contract of insurance, guarantee, security or indemnity, except where section 23L(3) applies;[paragraph (c) substituted by section 24(1) of Act 23 of 2020; effective date 1 January 2021, applicable in respect of years of assessment commencing on or after that date]

(d)any tax imposed under this Act or any interest or penalty imposed under any other Act administered by the Commissioner;

(e)income carried to any reserve fund or capitalized in any way;

(f)any expenses incurred in respect of any amounts received or accrued which do not constitute income as defined in section one;

(g)any moneys, claimed as a deduction from income derived from trade, to the extent to which such moneys were not laid out or expended for the purposes of trade;

(h)interest which might have been made on any capital employed in trade;

(i)any expenditure, loss or allowance to the extent to which it is claimed as a deduction from any retirement fund lump sum benefit or retirement fund lump sum withdrawal benefit;

(k)any expense incurred by—

(i)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 the said Schedule; or

(ii)a personal service provider as defined in the said Schedule,

other than any expense which constitutes an amount paid or payable to any employee of such labour broker or personal service provider for services rendered by such employee, which is or will be taken into account in the determination of the taxable income of such employee and, in the case of such personal service provider, any expense, deduction or contribution contemplated in paragraphs (c), (i), (l), (nA) or (nB) of section 11, expenses in respect of premises, finance charges, insurance, repairs and fuel and maintenance in respect of assets, if such premises or assets are used wholly and exclusively for purposes of trade;

(l)any expense incurred in respect of the payment of any restraint of trade, except as provided for in section 11(cA);

(m)subject to paragraph (k), any expenditure, loss or allowance, contemplated in section 11, which relates to any employment of, or office held by, any person (other than an agent or representative whose remuneration is normally derived mainly in the form of commissions based on his or her sales or the turnover attributable to him or her) in respect of which he or she derives any remuneration, as defined in paragraph 1 of the Fourth Schedule, other than—

(i)any contributions to a pension fund, provident fund or retirement annuity fund as may be deducted from the income of that person in terms of section 11F;

(ii)any allowance or expense which may be deducted from the income of that person in terms of section 11(c), (e), (i) or (j);

(iiA)any deduction which is allowable under section 11(nA) or (nB); and

(iv)any deduction which is allowable under section 11(a) or (d) in respect of any rent of, cost of repairs of or expenses in connection with any dwelling house or domestic premises, to the extent that the deduction is not prohibited under paragraph (b);

(n)any deduction or allowance in respect of any asset or expenditure to the extent that amount—

(i)is granted or paid to the taxpayer and is exempt from tax in terms of section 10(1)(yA); and

(ii)is so granted or paid for purposes of the acquisition of that asset or funding of that expenditure;

(o)any expenditure incurred—

(i)where the payment of that expenditure or the agreement or offer to make that payment constitutes an activity contemplated in Chapter 2 of the Prevention and Combating of Corrupt Activities Act, 2004 (Act No. 12 of 2004);

(ii)which constitutes a fine charged or penalty imposed as a result of an unlawful activity carried out in the Republic or in any other country if that activity would be unlawful had it been carried out in the Republic; or

(iii)which constitutes fruitless and wasteful expenditure as defined in section 1 of the Public Finance Management Act and determined in accordance with that Act;[subparagraph (iii) added by section 39(1) of Act 23 of 2018 and substituted by section 11 of Act 20 of 2022; effective date 5 January 2023, date of promulgation of that Act]

(p)the value in respect of any cession of a policy of insurance ceded by a taxpayer to—

(i)any—

(aa)employee (or former employee);

(bb)director (or former director); or

(cc)dependant or nominee of the employee (or former employee) or director (or former director),

of the taxpayer; or

(ii)any pension fund, pension preservation fund, provident fund, provident preservation fund or retirement annuity fund for the benefit of any—

(aa)employee (or former employee);

(bb)director (or former director); or

(cc)dependant or nominee of the employee (or former employee) or director (or former director),

of the taxpayer;

(q)any expenditure incurred in the production of income in the form of foreign dividends; or

(r)any deduction in respect of any premium paid by a person in terms of an insurance policy if that insurance policy covers that person against illness, injury, disability, unemployment or death of that person.

23A. Limitation of allowances granted to lessors of certain assets

(1)For the purposes of this section—“affected asset” means any machinery, plant, implement, utensil, article, aircraft or ship which has been let and in respect of which the lessor is or was entitled to an allowance under section 11(e), 12B, 12BA, 12C, 12DA or 37B(2)(a), whether in the current or a previous year of assessment, but excluding any such asset let by the lessor under an operating lease or any such asset which was during the year of assessment mainly used by the taxpayer in the course of any trade carried on by the taxpayer, other than the letting of any such asset;[definition of “affected asset” substituted by section 25(a) of Act 23 of 2020, and by section 24(1)(a) of Act 17 of 2023; effective date deemed to have been 1 March 2023, applies in respect of assets brought into use on or after that date]“operating lease” means a lease of movable property concluded by a lessor in the ordinary course of a business (not being a banking, financial services or insurance business) of letting such property, if—(a)such property may be hired by members of the general public directly from that lessor in terms of such a lease, for a period of less than one month;(b)the cost of maintaining such property and of carrying out repairs thereto required in consequence of normal wear and tear, is borne by the lessor; and(c)subject to any claim that the lessor may have against the lessee by reason of the lessee’s failure to take proper care of the property, the risk of destruction or loss of or other disadvantage to such property is not assumed by the lessee;“rental income” means income derived by way of rent from the letting of any affected asset in respect of which an allowance has been granted to the lessor under section 11(e), 12B, 12BA, 12C, 12DA or 37B(2)(a), whether in the current or any previous year of assessment, and includes any amount—(a)which is included in the income of that person in terms of section 8(4) in respect of an amount deducted in any year of assessment in respect of any affected asset; and(b)derived from the disposal of any affected asset.[definition of “rental income” substituted by section 24(1)(b) of Act 17 of 2023; effective date deemed to have been 1 March 2023, applies in respect of assets brought into use on or after that date]

(2)Notwithstanding the provisions of sections 11(e) and (o), 12B, 12BA, 12C, 12DA, and 37B(2)(a) the sum of the deduction which may be allowed to any taxpayer in any year of assessment under those provisions in respect of any affected assets let by the taxpayer shall not exceed the taxable income (as determined before making the said deductions) derived by the taxpayer during such year from rental income.[subsection (2) substituted by section 25(b) of Act 23 of 2020, and by section 24(1)(c) of Act 17 of 2023; effective date deemed to have been 1 March 2023, applies in respect of assets brought into use on or after that date]

(3)For the purposes of subsection (2), where the taxpayer is entitled to any deduction which relates to rental income and other income derived by the taxpayer, an appropriate portion of such deduction shall be taken into account in the determination of the taxable income derived by the taxpayer from rental income.[subsection (3) substituted by section 24(1)(d) of Act 17 of 2023; effective date deemed to have been 1 March 2023, applies in respect of assets brought into use on or after that date]

(4)Any deduction which is disallowed under the provisions of subsection (2) shall be carried forward to the succeeding year of assessment and shall, subject to the provisions of this section as applicable in relation to that year, be deemed to be a deduction to which the taxpayer is entitled in that year.

23B. Prohibition of double deductions

(1)Where, but for the provisions of this subsection, an amount—

(a)qualifies or has qualified for a deduction or an allowance; or

(b)is otherwise taken into account in determining the taxable income of any person,

under more than one provision of this Act, that amount or any portion thereof, shall not be allowed or taken into account more than once in the determination of the taxable income of any person.

(2)The provisions of subsection (1) shall not apply to expenditure in respect of which a deduction or an allowance has been determined, if any section under which such deduction or allowance is allowed, expressly requires such expenditure to be deductible under any other section as a prerequisite for a deduction under such section.

(3)No deduction shall be allowed under section 11(a) in respect of any expenditure or loss of a type for which a deduction or allowance may be granted under any other provision of this Act, notwithstanding that—

(a)such other provision may impose any limitation on the amount of such deduction or allowance; or

(b)that deduction or allowance in terms of that other provision may be granted in a different year of assessment.

(5)No deduction shall be allowed under section 11(a) in respect of any expenditure incurred by a person in respect of any premium paid under a policy of insurance, where the policy relates to death, disablement or illness of an employee or director, or former employee or director, of the person that is the policyholder (other than a policy that relates to death, disablement or illness arising solely out of and in the course of employment of the employee or director).

23C. Reduction of cost or market value of certain assets

(1)Notwithstanding the Seventh Schedule, where regard is to be had to the cost to the taxpayer or the market value of any asset acquired by him or her or to the amount of any expenditure incurred by him or her, and—[words preceding paragraph (a) substituted by section 26 of Act 34 of 2019; effective date 15 January 2020, date of promulgation of that Act]

(a)the taxpayer is a vendor as defined in section 1 of the Value-Added Tax Act; and

(b)the taxpayer is or was in any previous year of assessment entitled under section 16(3) of the last-mentioned Act to a deduction of input tax as defined in section 1 of that Act,

the amount of such input tax shall be excluded from the cost or the market value of such asset or the amount of such expenditure: Provided that in the case of any lease as contemplated in paragraph (b) of the definition of “instalment credit agreement” in section 1 of that Act, there shall be excluded by the lessee from each rental payment made by him in respect of such lease, an amount which bears to such input tax the same ratio as such rental payment bears to the sum of all rental payments in connection with such lease.

(2)Where a taxpayer (being a vendor as defined in section 1 of the Value-Added Tax Act) has in respect of any tax period applicable to the vendor under that Act which has ended during the vendor’s year of assessment, included in input tax deducted by the vendor under section 16(3) of that Act an amount of sales tax, as permitted by section 78 of that Act so to be included—

(a)that amount shall, if it was included in capital expenditure taken into account for the purposes of any deduction in respect of any mine under section 15(a) of this Act, be deemed for the purposes of paragraph (j) of the definition of “gross income” in section 1 of this Act to be an amount received by or accrued to the taxpayer during the said year of assessment in respect of a disposal of assets referred to in the said paragraph; or

(b)that amount (not being an amount accounted for under paragraph (a)), shall for the purposes of section 8(4)(a) of this Act be deemed to be an amount which has been recovered or recouped by the taxpayer during the said year of assessment.

23D. Limitation of allowances granted in respect of certain assets

(2)Where any depreciable asset which is let or licensed by a taxpayer to a lessee or licensee was held within a period of two years preceding the commencement of the lease or licence—

(a)by the lessee or licensee, or by any sublessee or sublicensee in relation to the asset; or

(b)by a person who was at any time during that period a connected person in relation to the lessee, licensee, sublessee or sublicensee,

the cost or value of the depreciable asset for the purpose of this section and any deduction or allowance claimed by the taxpayer in respect of the asset shall not exceed the amount determined in accordance with subsection (2A).

(2A)The amount to be determined for purposes of subsection (2) is the sum of—

(a)the cost of the asset to the most recent lessee, licensee, sublessee, sublicensee or connected person contemplated in subsection (2) that previously held that asset, less the sum of—

(i)all deductions which have been allowed to the lessee, licensee, sublessee, sublicensee or connected person in respect of the asset; and

(ii)all deductions that are deemed to have been allowed to the lessee, licensee, sublessee, sublicensee or connected person in respect of the asset in terms of section 11(e)(ix), 12B(4B), 12C(4A), 12D(3A), 12DA(4), 12F(3A), 13(1A), 13bis(3A), 13ter(6A), 13quin(3) or 37B(4);

(b)any amount contemplated in paragraph (n) of the definition of “gross income” in section 1 that is required to be included in the income of the lessee, licensee, sublessee, sublicensee or connected person that arises as a result of the disposal of the asset; and

(c)the applicable percentage in paragraph 10 of the Eighth Schedule, of the capital gain of the lessee, licensee, sublessee, sublicensee, or connected person that arises as a result of the disposal.

23F. Acquisition or disposal of trading stock

(1)Where any taxpayer has during any year of assessment incurred expenditure for the acquisition of trading stock which was neither disposed of by him during such year nor held by him at the end of such year, any deduction which may be allowed to him under the provisions of section 11(a) in respect of such expenditure shall not be allowed in such year, but such expenditure shall for the purposes of such provisions be deemed to have been incurred by him in the first subsequent year of assessment in which—

(a)such trading stock is disposed of by him;

(b)the value of such trading stock falls to be included in his income under the provisions of section 22(1); or

(c)it is shown by him that by reason of the loss or destruction of such trading stock or the termination of the agreement in terms of which such trading stock was acquired by him or for any other reason, such trading stock will neither be disposed of nor held by him, to the extent that such expenditure was actually paid.

(2)Where a taxpayer has during any year of assessment disposed of any trading stock in the ordinary course of his or her trade for any consideration the full amount of which will not accrue to him or her during that year of assessment and any expenditure incurred in respect of the acquisition of that trading stock was allowed as a deduction under the provisions of section 11(a) during that year or any previous year of assessment, any amount which would otherwise be deducted must, to the extent that it exceeds any amount received or accrued from the disposal of that trading stock be disregarded during that year of assessment.

(2A)So much of any amount disregarded in terms of subsection (2) may be deducted from the income of that person in any subsequent year of assessment to the extent that any amount which is received by or accrued to that person in that subsequent year from that disposal is included in the income of that person.

(2B)If during any year of assessment a person contemplated in subsection (2) proves that no further amounts will accrue to him or her in that year and any subsequent year as contemplated in subsection (2A), so much of the amount which was disregarded in terms of subsection (2) as has not been allowed as a deduction in any year, must be allowed as a deduction from the income of that person in that year of assessment.

(3)Where—

(a)any taxpayer has during any year of assessment in the ordinary course of his trade disposed of any right or interest in any asset which constitutes trading stock which has the effect that the remaining right or interest in such asset held and not disposed of will not be included in trading stock at the end of such year; and

(b)any expenditure incurred in respect of the acquisition of such asset was allowed as a deduction under the provisions of section 11(a) or was otherwise taken into account during such year or any previous year of assessment,

there shall be deemed to have been recovered or recouped by such taxpayer and be included in the income of such taxpayer for such year of assessment, so much of such expenditure as relates to the remaining right or interest contemplated in paragraph (a).

23G. Sale and leaseback arrangements

(1)For the purposes of this section—“asset” means any asset, whether movable or immovable, or corporeal or incorporeal;“sale and leaseback arrangement” means any arrangement whereby—

(a)any person disposes of any asset (whether directly or indirectly) to any other person; and

(b)such person or any connected person in relation to such person leases (whether directly or indirectly) such asset from such other person.

(2)Where the receipts or accruals of any person, who is a lessee or sublessee in relation to a sale and leaseback arrangement, do not for the purposes of this Act constitute income of such person—

(a)any amount which is received by or accrues to any lessor in relation to such sale and leaseback arrangement, shall be limited to an amount which constitutes interest as contemplated in section 24J; and

(b)such lessor shall, notwithstanding the provisions of this Act, not be entitled to any deduction in terms of section 11(e), (f), (gA) or (gC) or sections 12B, 12BA, 12C, 12DA, 13 or 13quin in respect of an asset which is the subject matter of such sale and leaseback arrangement.[paragraph (b) substituted by section 40 of Act 23 of 2018, and by section 25(1) of Act 17 of 2023; effective date deemed to have been 1 March 2023, applies in respect of assets brought into use on or after that date]

(3)Where the receipts or accruals of any person, who is a lessor in relation to a sale and leaseback arrangement, arising from such arrangement do not for the purposes of this Act constitute income of such person, any deduction to which a lessee or sublessee in relation to such sale and leaseback arrangement is entitled under the provisions of this Act shall, subject to the provisions of section 11(f), be limited to an amount which constitutes interest as contemplated in section 24J.

(4)The provisions of subsection (2)(a) shall not apply to any person who is both a lessor and a lessee in relation to the same sale and leaseback arrangement during any year of assessment.

23H. Limitation of certain deductions

(1)Where any person has during any year of assessment actually incurred any expenditure (other than expenditure incurred in respect of the acquisition of any trading stock)—

(a)which is allowable as a deduction in terms of the provisions of section 11(a), (c), (d), (w), or section 11A; and

(b)in respect of—

(i)goods or services, all of which will not be supplied or rendered to such person, during such year of assessment; or

(ii)any other benefit, the period to which the expenditure relates extends beyond such year of assessment,

the amount of the expenditure in respect of which a deduction shall be allowable in terms of such section in the said year and any subsequent year of assessment, shall be limited to, in the case of expenditure incurred in respect of—

(i)goods to be supplied, so much of the expenditure as relates to the goods actually supplied to such person in such year of assessment; or

(ii)services to be rendered, an amount which bears to the total amount of such expenditure the same ratio as the number of months in such year during which such services are rendered bears to the total number of months during which such services will be rendered or, where the period during which such services will be rendered is not determinable, such period during which the services are likely to be rendered; or

(iii)any other benefit to which such expenditure relates, an amount which bears to the total amount of such expenditure the same ratio as the number of months in such year during which such person will enjoy such benefit bears to the total number of months during which such person will enjoy such benefit or where the period of such benefit is not determinable, such period over which the benefit is likely to be enjoyed:

Provided that the provisions of this section shall not apply—

(aa)where all the goods or services are to be supplied or rendered within six months after the end of the year of assessment during which the expenditure was incurred, or such person will have the full enjoyment of such benefit in respect of which the expenditure was incurred within such period, unless the expenditure is allowable as a deduction in terms of section 11D(2); or

(bb)where the aggregate of all amounts of expenditure incurred by such person, which would otherwise be limited by this section, does not exceed R100 000; or

(cc)to any expenditure to which the provisions of section 24K or 24L apply; or

(dd)to any expenditure actually paid in respect of any unconditional liability to pay an amount imposed by legislation.

(2)If in any case the apportionment of the expenditure in accordance with subsection (1) does not reasonably represent a fair apportionment of such expenditure in respect of the goods, services or benefits to which it relates, such apportionment must be made in such other manner as is fair and reasonable.

(3)Notwithstanding the provisions of subsections (1) and (2), where it is during any year of assessment shown by any person that—

(a)the goods or services in respect of which the expenditure is incurred will never be received by or be rendered to such person; or

(b)such person will never enjoy such other benefit in respect of which any expenditure is incurred,

such expenditure shall be allowed in such year, to the extent that such expenditure has been actually paid by such person.

23I. Prohibition of deductions in respect of certain intellectual property

(1)For the purposes of this section—“end user” means a taxable person or a person with a permanent establishment within the Republic that uses intellectual property or any corresponding invention during a year of assessment to derive income, other than a person that derives income mainly by virtue of the grant of use or right of use or permission to use intellectual property or any corresponding invention;“intellectual property” means any—

(a)patent as defined in the Patents Act including any application for a patent in terms of that Act;

(b)design as defined in the Designs Act;

(c)trade mark as defined in the Trade Marks Act;

(d)copyright as defined in the Copyright Act;

(e)patent, design, trade mark or copyright defined or described in any similar law to that in paragraph (a), (b), (c) or (d) of a country other than the Republic;

(f)property or right of a similar nature to that in paragraph (a), (b), (c), (d) or (e); and

(g)knowledge connected to the use of such patent, design, trade mark, copyright, property or right;

“tainted intellectual property” means intellectual property—

(a)which was the property of the end user or of a taxable person that is or was a connected person, as defined in section 31(4), in relation to the end user;

(b)which is the property of a taxable person;

(c)a material part of which was used by a taxable person in carrying on a business while that property was the property of a taxable person and the end user of that property acquired that business or a material part thereof as a going concern; or

(d)which was discovered, devised, developed, created or produced by the end user of that property, or by a taxable person that is a connected person, as defined in section 31(4), in relation to the end user, if that end user, together with any taxable person that is a connected person in relation to that end user, holds at least 20 per cent of the participation rights, as defined in section 9D, in a person by or to whom an amount is received or accrues—

(i)by virtue of the grant of use or right of use or permission to use that property; or

(ii)where that receipt, accrual or amount is determined directly or indirectly with reference to expenditure incurred for the use or right of use or permission to use that property;

“taxable person” means any person other than—

(a)a person that is not a resident;

(b)the government of the Republic in the national, provincial or local sphere contemplated in section 10(1)(a);

(c)an institution, board or body contemplated in section 10(1)(cA);

(d)any public benefit organisation as defined in section 30 that has been approved by the Commissioner in terms of that section;

(e)any recreational club as defined in section 30A that has been approved by the Commissioner in terms of that section;

(f)any company or trust contemplated in section 37A;

(g)any fund contemplated in section 10(1)(d)(i) or (ii); or

(h)any person contemplated in section 10(1)(t).

(2)Other than a deduction allowed in terms of section 11(gC) or a deduction allowed in respect of trading stock, a deduction is not allowed in respect of—

(a)any amount of expenditure incurred for the use or right of use of or permission to use tainted intellectual property; or

(b)expenditure the incurral or amount of which is determined directly or indirectly with reference to expenditure incurred for the use or, right of use of or permission to use tainted intellectual property,

to the extent that the amount of expenditure does not constitute income received by or accrued to any other person or to the extent that the amount of expenditure does not constitute a proportional amount of net income of a controlled foreign company an amount equal to which is included in the income of any resident in terms of section 9D.

(3)Notwithstanding any provision of subsection (2) to the contrary, an amount equal to—

(a)one third of any expenditure contemplated in subsection (2) must be allowed to be deducted if withholding tax on royalties contemplated inPart IVA is payable in respect of that amount at a rate of10 per cent; or

(b)one half of any expenditure contemplated in subsection (2) must be allowed to be deducted if withholding tax on royalties contemplated in Part IVA is payable in respect of that amount at a rate of 15 per cent.

(4)Subsection (2) must not apply where the aggregate amount of taxes on income payable to all spheres of government of any country other than the Republic by a controlled foreign company contemplated in that subsection in respect of the foreign tax year of that controlled foreign company is at least 67,5 per cent of the amount of normal tax that would have been payable in respect of any taxable income of the controlled foreign company had the controlled foreign company been a resident for that foreign tax year: Provided that the aggregate amount of tax payable by a controlled foreign company in respect of a foreign tax year of that controlled foreign company must be determined—[words preceding paragraph (a) substituted by section 27(1) of Act 34 of 2019; effective date 1 January 2020, applicable in respect of years of assessment ending on or after that date]

(a)after taking into account any applicable agreement for the prevention of double taxation and any credit, rebate or other right of recovery of tax from any sphere of government of any country other than the Republic; and

(b)after disregarding any loss in respect of a year other than that foreign tax year or from a company other than that controlled foreign company.

23K. Limitation of deductions in respect of reorganisation and acquisition transactions

(1)For the purposes of this section—“acquiring company” means—

(a)a transferee company contemplated in the definition of “intra-group transaction” in section 45(1);

(b)a holding company contemplated in the definition of “liquidation distribution” in section 47(1); or

(c)a company that acquires an equity share in another company in terms of an acquisition transaction;

“acquisition transaction” means an acquisition transaction as defined in section 24O(1) to which section 24O applies;“interest” means interest as defined in section 24J;“reorganisation transaction” means—

(a)an intra-group transaction as defined in section 45(1) to which section 45 applies; or

(b)a liquidation distribution as defined in section 47(1) to which section 47 applies.

(2)Subject to subsections (3), (9) and (10), no deduction is allowed in respect of any amount of interest incurred by an acquiring company in terms of—

(a)a debtif that debtwas issued, assumed or used directly or indirectly—

(i)for the purpose of procuring, enabling, facilitating or funding the acquisition by that acquiring company of any asset in terms of a reorganisation transaction; or

(ii)in substitution for any debtissued, assumed or used as contemplated in subparagraph (i); or

(b)a debt if that debt was issued, assumed or used—

(i)for the purpose of financing the acquisition of an equity share in a company in terms of an acquisition transaction; or

(ii)in substitution for any other debt issued, assumed or used as contemplated in subparagraph (i).

(3)Subject to subsection (5), the Commissioner may, on application by an acquiring company, issue a directive that subsection (2) does not apply in respect of an amount of interest incurred as contemplated in that subsection.

(4)In considering an application for a directive contemplated in subsection (3), the Commissioner—

(a)must take into account—

(i)the amount of interest incurred as contemplated in subsection (2) by an acquiring company in terms of a debtcontemplated in that subsection; and

(ii)all amounts of interest incurred, received or accrued in respect of alldebts issued, assumed or used directly or indirectly to fund a debtin respect of which any amount of interest is incurred by an acquiring company as contemplated in subsection (2); and

(b)may only issue a directive contemplated in subsection (3) if and to the extent that the Commissioner is, having regard to the criteria prescribed by the Regulations contemplated in subsection (7), satisfied that the issuing of that directive will not lead nor be likely to lead to a significant reduction of the aggregate taxable income of all parties who incur, receive or accrue interest—

(i)in respect of; and

(ii)for all periods during which any amounts are outstanding in terms of,

any debt contemplated in subparagraphs (i) and (ii) of paragraph (a):

Provided that in determining whether a reduction of taxable income is significant for the purpose of this subsection, the Commissioner must have regard to the criteria prescribed by the regulations contemplated in subsection (7).

(5)Any directive issued by the Commissioner in terms of subsection (3) may be made subject to such conditions and limitations as may be determined by the Commissioner.

(6)A directive issued by the Commissioner in terms of subsection (3) in respect of an amount of interest incurred in terms of a debtmust be effective from—

(a)the date on which that debtwas issued or assumed if the application for that directive is made—

(i)on or before 31 December 2011, where that debtwas issued or assumed before 25 October 2011; or

(ii)within 60 days of the date of issue of that debt, where that debtis issued or assumed on or after 25 October 2011; or

(b)the date on which the application for that directive is made if—

(i)that debtwas issued or assumed before 25 October 2011 and that application is made after 31 December 2011; or

(ii)that debtis issued or assumed on or after 25 October 2011 and that application is made later than 60 days after the date of issue or assumption of that debt.

(7)The Minister must make regulations that prescribe criteria that the Commissioner must, in terms of subsection (4)(b), have regard to in considering any application made in terms of subsection (3) by an acquiring company in respect of any amount of interest incurred by such an acquiring company in terms of any debt, which criteria must relate to—

(a)all amounts of debt in relation to total equity of such an acquiring company;

(b)total amounts of interest to be incurred by such an acquiring company in relation to total income of such an acquiring company;

(c)terms of such a debt, including the economic effect of such a debt, having regard to any debt or equity features of such a debt;

(d)the direct or indirect holding of shares in such an acquiring company by any holder (or any company that forms part of the same group of companies as the holder) of such a debt; and

(e)any other factor prescribed by the Minister.

(8)

(a)If, subsequent to the date on which a directive is issued by the Commissioner pursuant to an application made by an acquiring company in terms of subsection (3)—

(i)there is any material change in respect of any fact or circumstance which influenced any decision of the Commissioner relating to the issuing of that directive; and

(ii)that change would, had the change been anticipated by the Commissioner at the time of issuing the directive, have resulted in the Commissioner not issuing the directive or issuing the directive on terms that are less favourable to that acquiring company,

the directive will cease to apply with effect from the date on which that change takes effect.

(b)Where any decision relating to the issuing of a directive by the Commissioner in terms of subsection (3) was made by the Commissioner as a direct or indirect result of fraud, misrepresentation or non-disclosure of material facts, that directive will cease to apply with effect from the date that the directive took effect.

(9)The Minister may make regulations prescribing circumstances in which subsection (2) does not apply.

(10)Subsection (2) does not apply in respect of any amount of interest incurred by an acquiring company—

(a)in terms of a debt if that debt was issued, assumed or used directly or indirectly for the purpose of—

(i)procuring, enabling, facilitating or funding the acquisition by that acquiring company of any asset in terms of a reorganisation transaction entered into on or after 1 April 2014; or

(ii)redeeming, refinancing, substituting or settling, on or after 1 April 2014, a debt issued, assumed or used directly or indirectly for the purpose of procuring, enabling, facilitating or funding the acquisition by that acquiring company of any asset in terms of a reorganisation transaction entered into on or after 3 June 2011 and on or before 31 March 2014; or

(b)in terms of a debt—

(i)issued, assumed or used in terms of an acquisition transaction entered into on or after 1 April 2014; or

(ii)issued, assumed or used, on or after 1April 2014, directly or indirectly for the purpose of redeeming, refinancing, substituting or settling a debt that was issued, assumed or used in terms of an acquisition transaction entered into on or after 1 January 2013 and on or before 31 March 2014.

23L. Limitation of deductions in respect of certain short-term insurance policies

(1)For the purposes of this section—“policy” means a policy of insurance or reinsurance other than a long-term policy as defined in section 1 of the Long-term Insurance Act;“policy benefits” means any amount, in cash or otherwise, received or accrued under a policy;“premium” means the consideration given or to be given in return for an undertaking to provide policy benefits.

(2)No deduction is allowed in respect of any premium incurred by a person in terms of a policy to the extent that the premium is not taken into account as an expense for the purposes of financial reporting pursuant to IFRS in either the current year of assessment or a future year of assessment.

(3)Where policy benefits are received by or accrue to a person in terms of a policy during a year of assessment, and where that person has been denied, whether in the current or any previous year of assessment, a deduction in terms of section 23L(2) for any premiums paid under such policy, there must be included in the gross income of that person an amount equal to the aggregate amount of all policy benefits received by or accrued to that person during that year of assessment and previous years of assessment in respect of that policy, less—[words preceding paragraph (a) substituted by section 26(1) of Act 23 of 2020; effective date 1 January 2021, applicable in respect of years of assessment commencing on or after that date]

(a)the aggregate amount of premiums incurred in terms of that policy that were not deductible in terms of subsection (2); and

(b)the aggregate amount of policy benefits in respect of that policy that were included in the gross income of that person during previous years of assessment.

23M. Limitation of interest deductions in respect of debts owed to persons not subject to tax

(1)For the purposes of this section—“adjusted taxable income” means taxable income calculated before applying this section—(a)reduced by—(i)any amount of interest received or accrued that forms part of taxable income;(ii)any amount included in the income of a person as contemplated in section 9D(2);(iii)any amount recovered or recouped in respect of an allowance contemplated in this Act in respect of a capital asset as defined in section 19; and(b)with the addition of—(i)any amount of interest incurred that has been allowed as a deduction from income;(ii)any amount allowed as a deduction in terms of this Act in respect of a capital asset as defined in section 19 for purposes other than the determination of any capital gain or capital loss;(iii)any assessed loss or balance of assessed loss allowed to be set off against income in terms of section 20, before applying this section; and(iv)any qualifying distribution as defined in section 25BB that is deductible under subsection (2) of that section;[definition of “adjusted taxable income” amended by section 41 of Act 23 of 2018 and substituted by section 19(1)(a) of Act 20 of 2021; effective date, amended by section 10 of Act 19 of 2022 to 31 March 2023, applies in respect of years of assessment ending on or after that date]“average repo rate” [definition of “average repo rate” deleted by section 19(1)(b) of Act 20 of 2021; effective date, amended by section 10 of Act 19 of 2022 to 31 March 2023, applies in respect of years of assessment ending on or after that date];“controlling relationship” means a relationship where—(a)a person, whether alone or together with any one or more persons that are connected persons in relation to that person; or(b)persons that are connected persons in relation to that person,directly or indirectly hold at least 50 per cent of the equity shares or can exercise at least 50 per cent of the voting rights or participation rights, in a company;[definition of “controlling relationship” substituted by section 19(1)(c) of Act 20 of 2021; effective date, amended by section 10 of Act 19 of 2022 to 31 March 2023, applies in respect of years of assessment ending on or after that date]“debt” includes any amount in respect of which interest is determined or incurred, and such amount must be regarded as owed, but does not include a tax debt as defined in section 1(1) of the Tax Administration Act;[definition of “debt” inserted by section 19(1)(d) of Act 20 of 2021; effective date, amended by section 10 of Act 19 of 2022 to 31 March 2023, applies in respect of years of assessment ending on or after that date]“debtor” means a person that incurs an amount of interest and—(a)is a resident; or(b)in the case of a person that is not a resident, owes a debt that is effectively connected with a permanent establishment of that person in the Republic;[definition of “debtor” substituted by section 19(1)(e) of Act 20 of 2021; effective date, amended by section 10 of Act 19 of 2022 to 31 March 2023, applies in respect of years of assessment ending on or after that date]“interest” means interest as defined in section 24J, and includes—(a)amounts incurred or accrued under any “interest rate agreement” as defined in section 24K(1);(b)any finance cost element recognised for purposes of IFRS in respect of any lease arrangement that constitutes a finance lease as defined in IFRS16;(c)amounts taken into account in determining taxable income in terms of section 24I(3) and (10A); and(d)any amount deemed to be interest under section 24JA,but excludes any amount that is deemed to be a dividend in specie as contemplated in sections 8F and 8FA;[definition of “interest” substituted by section 19(1)(f) of Act 20 of 2021; effective date, amended by section 10 of Act 19 of 2022 to 31 March 2023, applies in respect of years of assessment ending on or after that date]“lending institution” means a foreign bank which is comparable to a bank contemplated in the Banks Act;“participation rights” means—(a)the right to participate in all or part of the benefits of the rights (other than voting rights) attaching to a share, or any interest of a similar nature, in a company; or(b)in the case where no person has any right in that company as contemplated in paragraph (a) or no such rights can be determined for any person, the right to exercise any voting rights in that company;[definition of “participation rights” inserted by section 19(1)(g) of Act 20 of 2021; effective date, amended by section 10 of Act 19 of 2022 to 31 March 2023, applies in respect of years of assessment ending on or after that date]“repo rate” [definition of “repo rate” deleted by section 19(1)(h) of Act 20 of 2021; effective date, amended by section 10 of Act 19 of 2022 to 31 March 2023, applies in respect of years of assessment ending on or after that date].

(2)Where an amount of interest is incurred by a debtor during a year of assessment in respect of a debt owed to—

(a)a creditor that is in a controlling relationship with that debtor;

(b)a creditor that is not in a controlling relationship with that debtor, if that creditor obtained the funding for the debt advanced to the debtor from a person that is in a controlling relationship with that debtor;

(c)a creditor that is not in a controlling relationship with that debtor, if that creditor forms part of the same group of companies as that debtor if the expression “at least 70 per cent of the equity shares in” in paragraphs (a) and (b) of the definition of “group of companies” in section 1 were replaced by the expression “more than 50 per cent of the equity shares or voting rights in”; or[paragraph (c) added by section 19(1)(i) of Act 20 of 2021; effective date, amended by section 10 of Act 19 of 2022 to 31 March 2023, applies in respect of years of assessment ending on or after that date]

(d)a creditor that is in a controlling relationship with that debtor, if that creditor, directly or indirectly through another creditor that is in a controlling relationship with that creditor, obtained the funding for the debt advanced to the debtor from a person that is in a controlling relationship with that creditor or that other creditor,[paragraph (d) added by section 19(1)(i) of Act 20 of 2021; effective date, amended by section 10 of Act 19 of 2022 to 31 March 2023, applies in respect of years of assessment ending on or after that date]

and the amount of interest so incurred or related interest is not during that year of assessment—[words preceding paragraph (i) substituted by section 19(1)(j) of Act 20 of 2021; effective date, amended by section 10 of Act 19 of 2022 to 31 March 2023, applies in respect of years of assessment ending on or after that date]

(i)

(aa)subject to tax in the hands of the person, creditor or other creditor referred to in paragraphs (a), (b), (c) and (d), to which the interest or related interest accrues; or[item (aa) substituted by section 19(1)(k) of Act 20 of 2021; effective date, amended by section 10 of Act 19 of 2022 to 31 March 2023, applies in respect of years of assessment ending on or after that date]

(bb)included in the net income of a controlled foreign company as contemplated in section 9D in the foreign tax year of the controlled foreign company commencing or ending within that year of assessment; and

(ii)disallowed under section 23N,

the amount of interest allowed to be deducted may not exceed the amount determined in accordance with subsection (3):Provided that where any amount of interest incurred or related interest is not included in the income of the person referred to in paragraph (i)(aa), the amount of interest to be regarded as not subject to tax as contemplated in paragraph (i)(aa) will be determined in accordance with the formula:A = B × ((C–D)/C)in which formula—

(i)“A” represents the amount to be determined;

(ii)“B” represents the aggregate of any amount of interest incurred or paid in respect to which the provisions of Part IVB of this Chapter are or will be applicable;

(iii)“C” represents the number 15; and

(iv)“D” represents the rate at which withholding tax on interest has been or will be levied on such amount of interest under the provisions of Part IVB of this Chapter, multiplied by the number 100.

[proviso added by section 19(1)(l) of Act 20 of 2021; effective date, amended by section 10 of Act 19 of 2022 to 31 March 2023, applies in respect of years of assessment ending on or after that date]

(3)The amount of interest allowed to be deducted in respect of all debts owed as contemplated in subsection (2), in respect of any year of assessment must not exceed the sum of—

(a)the amount of interest received by or accrued to the debtor; and

(b)an amount determined by multiplying the adjusted taxable income of that debtor for that year of assessment by 0,3,

reduced by so much of any amount of interest incurred by the debtor in respect of debts other than debts contemplated in subsection (2) as exceeds any amount not allowed to be deducted in terms of section 23N.[subsection (3) amended by section 28 of Act 34 of 2019 and substituted by section 19(1)(m) of Act 20 of 2021; effective date, amended by section 10 of Act 19 of 2022 to 31 March 2023, applies in respect of years of assessment ending on or after that date]

(4)So much of any amount of interest as exceeds the amount determined in terms of subsection (3) may be carried forward to the immediately succeeding year of assessment and, subject to subsection (2), must be deemed to be an amount of interest incurred in that succeeding year of assessment.

(5)Where an amount of interest is to be taken into account in terms of this section and in terms of section 23N, that amount of interest shall only be taken into account in terms of this section after section 23N has been applied.

(6)

(a)This section does not apply to so much of the interest as is incurred by a debtor in respect of a debt owed to a creditor as contemplated in subsection (2) where—

(i)that creditor funded that debt amount advanced to that debtor with funding granted by a lending institution that is not in a controlling relationship with that debtor; and

(ii)that interest is determined with reference to a rate of interest that does not exceed the official rate of interest plus 100 basis points.[subparagraph (ii) substituted by section 39(c) of Act 17 of 2017 (retroactively deleted by section 76(1) of Act 23 of 2020), and by section 41(d) of Act 23 of 2018; effective date 17 January 2019, date of promulgation of that Act]

(b)to any interest incurred by a debtor in respect of any linked unit that is held by a creditor as contemplated in subsection (2) where that creditor is a long-term insurer as defined in the Long-term Insurance Act, a pension fund or a provident fund, if—

(i)the long-term insurer, pension fund or provident fund holds at least 20 per cent of the linked units in that debtor;

(ii)the long-term insurer, pension fund or provident fund acquired those linked units before 1 January 2013; and

(iii)at the end of the previous year of assessment 80 per cent or more of the value of the assets of that debtor, reflected in the annual financial statements prepared in accordance with the Companies Act for the previous year of assessment, is directly or indirectly attributable to immovable property.

(6A)This section does not apply to interest incurred on a loan utilised for mining purposes during any period prior to the commencement of production or during any period of non-production, as contemplated in paragraph (b) of the definition of “capital expenditure” in section 36(11).[subsection (6A) inserted by section 12(1) of Act 20 of 2022; effective date 31 March 2023, applies in respect of years of assessment ending on or after that date]

(7)For purposes of this section any exchange difference deducted from the income of a person as contemplated in section 24I(3) or (10A) is deemed to have been incurred by the person.[subsection (7) added by section 19(1)(n) of Act 20 of 2021; effective date, amended by section 10 of Act 19 of 2022 to 31 March 2023, applies in respect of years of assessment ending on or after that date]

23N. Limitation of interest deductions in respect of reorganisation and acquisition transactions

(1)For the purposes of this section—“acquired company” means—

(a)a transferor company or a liquidating company that disposes of assets pursuant to a reorganisation transaction; or

(b)a company in which equity shares are acquired by another company in terms of an acquisition transaction;

“acquiring company” means—

(a)a transferee company contemplated in the definition of “intra-group transaction” in section 45(1);

(b)a holding company contemplated in the definition of “liquidation distribution” in section 47(1); or

(c)a company that acquires an equity share in another company in terms of an acquisition transaction;

“acquisition transaction” means any transaction—

(a)in terms of which an acquiring company acquires an equity share in an acquired company that isa company ascontemplated in paragraph (a) or (b) of the definition of “acquisition transaction” in section24O(1); and

(b)as a result of which that acquiring company, as at theend of the day of that transaction, becomes a controlling group company in relation to thatacquired company;

“adjusted taxable income” means taxable income calculated before applying this section—[words preceding paragraph (a) substituted by section 42(1)(a) of Act 23 of 2018; effective date 17 January 2019, date of promulgation of that Act]

(a)reduced by—

(i)any amount of interest received or accrued that forms part of taxable income;[subparagraph (i) substituted by section 42(1)(b) of Act 23 of 2018; effective date 17 January 2019, date of promulgation of that Act]

(ii)any amount included in the income of a person as contemplated in section 9D(2);

(iii)any amount recovered or recouped in respect of an allowance contemplated in this Act in respect of a capital asset as defined in section 19; and

(b)with the addition of—

(i)any amount of interest incurred that has been allowed as a deduction from income;[subparagraph (i) substituted by section 42(1)(c) of Act 23 of 2018; effective date 17 January 2019, date of promulgation of that Act]

(ii)any amount allowed as a deduction in terms of this Act in respect of a capital asset as defined in section 19 for purposes other than the determination of any capital gain or capital loss;

(iii)75 per cent of the receipts or accruals derived from the letting of any immovable property; and

(iv)any assessed loss or balance of assessed loss allowed to be set off against income in terms of section 20;

“average repo rate” in relation to a year of assessment means the average of all ruling repo rates determined by using the daily repo rates during that year of assessment;“interest” means interest as defined in section 24J;“issue” in relation to a debt, means the creation of a liability to pay or of a right to receive an amount in terms of that debt;“reorganisation transaction” means—

(a)an intra-group transaction as defined in section 45(1) to which section 45 applies; or

(b)a liquidation distribution as defined in section 47(1) to which section 47 applies;

“repo rate” means the interest rate at which the South African Reserve Bank enters into a repurchase agreement contemplated in section 10(1)(j) of the South African Reserve Bank Act.

(2)Where an amount of interest is incurred by an acquiring company in terms of a debt—

(a)directly or indirectly assumed or applied for the purpose of procuring, enabling, facilitating or funding the acquisition by that acquiring company of any asset in terms of a reorganisation transaction;

(b)used directly or indirectly for the purpose of redeeming, refinancing or settling the debt contemplated in paragraph (a);

(c)issued, assumed or used in terms of an acquisition transaction; or

(d)used directly or indirectly for the purpose of redeeming, refinancing or settling the debt contemplated in paragraph (c),

the amount of interest allowed to be deducted must not exceed the amount determined in terms of subsection (3).

(3)The amount of interest allowed to be deducted in terms of all debts owed as contemplated in subsection (2), in respect of any year of assessment in which the acquisition transaction or reorganisation transaction is entered into and in respect of five years of assessment immediately following that year of assessment, must not exceed the sum of—

(a)the amount of interest received by or accrued to the acquiring company; and

(b)the highest of the amounts determined by multiplying the percentage determined under subsection (4) by the adjusted taxable income of the acquiring company for each of the years of assessment—

(i)in which the acquisition transaction or reorganisation transaction is entered into;

(ii)in which the amount of interest is incurred by that acquiring company; or

(iii)immediately prior to the year of assessment contemplated in subparagraph (i),

reduced by any amount of interest incurred by the acquiring company in respect of debtsother than debts contemplated in subsection (2).

(4)The percentage contemplated in subsection (3)(b) must be determined in accordance with the formula—

in which formula—

(a)“A” represents the percentage to be determined;

(b)“B” represents the number 40;

(c)“C” represents the average repo rate plus 400 basis points; and

(d)“D” represents the number 10,

but not exceeding 60 per cent of the adjusted taxable income of that acquiring company.

(5)[subsection (5) deleted by section 42(1)(d) of Act 23 of 2018; effective date 1 January 2019, applicable in respect of amounts incurred on or after that date]

23O. Limitation of deductions by small, medium or micro-sized enterprises in respect of amounts received or accrued from small business funding entities

(2)Where during any year of assessment any amount is received by or accrues to a small, medium or micro-sized enterprise from a small business funding entity for the acquisition, creation or improvement, or as a reimbursement for expenditure incurred in respect of the acquisition, creation or improvement of trading stock, any expenditure incurred in respect of that trading stock allowed as a deduction in terms of section 11(a) or any amount taken into account in respect of the value of trading stock as contemplated in section 22(1) or (2) must be reduced to the extent that the amount is received or accrued from the small business funding entity for that purpose.[subsection (2) substituted by section 29(a) of Act 34 of 2019; effective date 15 January 2020, date of promulgation of that Act]

(3)Where during any year of assessment any amount is received by or accrues to a small, medium or micro-sized enterprise from a small business funding entity for the acquisition, creation or improvement, or as a reimbursement for expenditure incurred in respect of the acquisition, creation or improvement of an allowance asset, the base cost of that allowance asset must be reduced to the extent that the amount is received or accrued from the small business funding entity for that purpose.[subsection (3) substituted by section 29(a) of Act 34 of 2019; effective date 15 January 2020, date of promulgation of that Act]

(4)Where during any year of assessment any amount is received by or accrues to a small, medium or micro-sized enterprise from a small business funding entity for the acquisition, creation or improvement of an allowance asset or as a reimbursement for expenditure incurred in respect of that acquisition, creation or improvement, the aggregate amount of the deductions or allowances allowable to that person in respect of that allowance asset may not exceed an amount equal to the aggregate of the expenditure incurred in the acquisition, creation or improvement of that allowance asset, reduced by an amount equal to the sum of—

(a)the amount is received or accrued for that purpose; and[paragraph (a) substituted by section 29(b) of Act 34 of 2019; effective date 15 January 2020, date of promulgation of that Act]

(b)the aggregate amount of all deductions and allowances previously allowed to that person in respect of that allowance asset.

(5)Where during any year of assessment any amount is received by or accrues to a small, medium or micro-sized enterprise from a small business funding entity—

(a)for the purpose of the acquisition, creation or improvement of an asset other than an asset contemplated in subsection (2) or (3); or

(b)as a reimbursement for expenditure incurred for the acquisition, creation or improvement of an asset other than an asset contemplated in subsection (2) or (3),

the base cost of that asset must be reduced to the extent that the amount is received by or accrued from the small business funding entity for that acquisition, creation or improvement.[words following paragraph (b) substituted by section 29(c) of Act 34 of 2019; effective date 15 January 2020, date of promulgation of that Act]

(6)

(a)Where during any year of assessment—

(i)any amount is received by or accrues to a small, medium or micro-sized enterprise from a small business funding entity; and

(ii)subsection (2), (3), (4) or (5) does not apply to that amount,

any amount allowed to be deducted from the income of that small, medium or micro-sized enterprise in terms of section 11 for that year of assessment must be reduced to the extent of the amount received or accrued from a small business funding entity.

(b)To the extent that the amount received or accrued from a small business funding entity exceeds the amount allowed to be deducted as contemplated in paragraph (a), that excess is deemed to be an amount received or accrued from a small business funding entity during the following year of assessment for the purposes of paragraph (a).

24. Credit agreements and debtors allowance

(1)Subject to the provisions of section 24J, if any taxpayer has entered into any agreement with any other person in respect of any property the effect of which is that, in the case of movable property, the ownership shall pass or, in the case of immovable property, transfer shall be passed from the taxpayer to that other person, upon or after the receipt by the taxpayer of the whole or a certain portion of the amount payable to the taxpayer under the agreement, the whole of that amount shall for the purposes of this Act be deemed to have accrued to the taxpayer on the day on which the agreement was entered into.

(2)In the case of such an agreement, other than a lay-by agreement as contemplated in subsection (2A), in terms of which at least 25 per cent of the said amount payable only becomes due and payable on or after the expiry of a period of not less than 12 months after the date of the said agreement, taking into consideration any allowance made under section 11(j), there shall be made such further allowance as under the special circumstances of the trade of the taxpayer, as set out in a public notice issued by the Commissioner, is reasonable, in respect of all amounts which are deemed to have accrued under such agreements but which have not been received at the close of the taxpayer’s accounting period: Provided that any allowance so made shall be included as income in the taxpayer’s returns for the following year of assessment and shall form part of the taxpayer’s income.[subsection (2) substituted by section 13(1)(a) of Act 20 of 2022, as retroactively substituted by section 68(1) of Act 17 of 2023; effective date 1 January 2023, applies in respect of years of assessment ending on or after that date]

(2A)In the case of a lay-by agreement as contemplated in section 62 of the Consumer Protection Act, 2008 (Act No. 68 of 2008), the Commissioner may make an allowance in respect of all amounts which are deemed to have accrued under such agreement but which have not been received by the end of the taxpayer’s year of assessment.[subsection (2A) inserted by section 13(1)(b) of Act 20 of 2022; effective date 1 January 2023, applies in respect of years of assessment ending on or after that date]

(2B)Any allowance made under subsection (2A) shall be included in the income of that taxpayer in the immediately following year of assessment.[subsection (2B) inserted by section 13(1)(b) of Act 20 of 2022; effective date 1 January 2023, applies in respect of years of assessment ending on or after that date]

24A. Transactions whereby fixed property is or company shares are exchanged for shares

(1)If, under any transaction entered into before 1 October 2001 for the disposal by any person (hereinafter referred to as the trader) of any trading stock consisting of fixed property or any shares in any company, the consideration received by or accrued to the trader for such trading stock in effect consists of or includes—

(a)shares in a public company; or

(b)company shares quoted by a recognized stock exchange at the time of such transaction or within six months thereafter; or

(c)shares in any other company, if such shares are, under a scheme for the consolidation or merger of the interests of two or more persons, issued or transferred to the trader,

the value of the shares which constitute or are included in such consideration shall, if the trader and the Commissioner agree thereto, be excluded from the trader’s income for the year of assessment during which such consideration is received by or accrues to him.

(2)For the purposes of this Act—

(a)the shares which constitute or are included in the said consideration and any capitalization shares issued in respect of such shares (which shares and capitalization shares are hereinafter referred to as new trading stock) shall be deemed to be trading stock of the trader; and

(b)the cost price to the trader of the shares which constitute or are included in the said consideration shall be deemed to be the cost to him of the trading stock referred to in subsection (1) or, if such last-mentioned trading stock was held by him and had not been disposed of by him at the beginning of the year of assessment, the amount taken into account under section 22(2) as the value thereof, less an amount which bears to the said cost or the amount so taken into account, as the case may be, the same ratio as the value of such portion (if any) of the said consideration as does not consist of the said shares bears to the total value of the said consideration (including the said shares).

(3)Any amount (including the value of any benefit or advantage) which is received by or accrues to the trader from the disposal of new trading stock (or a portion thereof) shall be included in the trader’s income, whether such amount is derived in carrying on any trade or otherwise or is derived from a source within or outside the Republic: Provided that the provisions of this subsection shall not be construed so as to prevent the provisions of subsection (1) being applied in respect of such amount.

(4)If on or after the date of promulgation of the Income Tax Act, 1971, the trader disposes of or ceases to be the owner of new trading stock for any reason other than his death or insolvency or, in the case of a company, the winding-up or liquidation thereof and no consideration accrues to him in respect of such new trading stock or a consideration accrues to him in respect of such new trading stock which in whole or part is not measurable in terms of money (the part of the consideration which is so measurable being less in value than the market value of such new trading stock at the date on which it was disposed of or on which the trader ceased to be the owner thereof), he shall for the purposes of this Act be deemed to have disposed of such new trading stock for a consideration equal to the market value thereof at the date on which it was disposed of or on which the trader ceased to be the owner thereof) or the market value thereof on the date of the transaction referred to in subsection (1), whichever value is the lower, reduced by the amount (if any) included in the trader’s income under subsection (3) in respect of the disposal, and such value, as so reduced, shall be included in his income: Provided that the foregoing provisions of this subsection shall not apply where the trader disposes of or ceases to be the owner of new trading stock by reason of the carrying out of any scheme referred to in section 22A and the trader is a transferor company as contemplated in that section.

(5)Where the trader has until his death or the prior sequestration of his estate or, in the case of a company, the commencement of the winding-up or liquidation thereof, continued to hold new trading stock, the trader shall for the purposes of this Act be deemed to have disposed of such new trading stock on the day preceding the date of his death or the sequestration of his estate (whichever first occurs) or, in the case of a company the date on which the winding-up or liquidation thereof commenced, for a consideration equal to the market value on the said day of such new trading stock or the market value thereof on the date of the transaction referred to in subsection (1), whichever value is the lower, and such value shall be included in his income for the period of assessment within which the said day falls.

(6)For the purposes of this section—

(a)“fixed property” means property as defined in section 1 of the Transfer Duty Act, 1949 (Act No. 40 of 1949); and

(b)a company which has not yet been recognized under the provisions of this Act as a public company, may at the request of the taxpayer, be deemed to be a public company, if the Commissioner is satisfied that such company will be so recognized.

24BA. Transactions where assets are acquired as consideration for shares issued

(1)For the purposes of this section, “asset” means an asset as defined in paragraph 1 of the Eighth Schedule or a number of such assets.

(2)Subject to subsection (4), this section applies where—

(a)in terms of any transaction, a company, for consideration, acquires an asset from a person in exchange for the issue by that company to that person of shares in that company; and

(b)the consideration contemplated in paragraph (a) is (before taking into account any other transaction, operation, scheme, agreement or understanding that directly or indirectly affects that consideration) different from the consideration that would have applied had that asset been acquired in exchange for the issue of those shares in terms of a transaction between independent persons dealing at arm’s length.

(3)Notwithstanding paragraph 11(2)(b) of the Eighth Schedule, where a company acquires an asset from a person in exchange for the issue by that company to that person of shares in that company as contemplated in subsection (2) and the market value of—

(a)that asset immediately before that disposal exceeds the market value of the shares immediately after that issue, the amount of the excess must—

(i)be deemed to be a capital gain in respect of a disposal by that company of the shares; and

(ii)where those shares are acquired by that person as—

(aa)a capital asset, be applied to reduce any amount of expenditure incurred by that person in acquiring those shares that is allowable in terms of paragraph 20 of the Eighth Schedule; or

(bb)trading stock, be applied to reduce any amount that must be taken into account by the person in respect of the shares in terms of section 11(a) or 22(1) or (2); or

(b)the shares immediately after that issue exceeds the market value of that asset immediately before the disposal, the amount of the excess must, for the purposes of Part VIII, be deemed to be a dividend as defined in section 64D that—

(i)consists of a distribution of an asset in specie; and

(ii)is paid by the company on the date of that issue.

(4)This section must not apply where a company acquires an asset from a person as contemplated in subsection (2)(a) if—

(a)

(i)that company and that person form part of the same group of companies immediately after that company acquires that asset; or

(ii)that person holds all the shares in that company immediately after that company acquires that asset; or

(b)paragraph 38 of the Eighth Schedule applies.

24C. Allowance in respect of future expenditure on contracts

(1)For the purposes of this section, “future expenditure” in relation to any year of assessment means an amount of expenditure which will be incurred after the end of such year—

(a)in such manner that such amount will be allowed as a deduction from income in a subsequent year of assessment; or

(b)in respect of the acquisition of any asset in respect of which any deduction will be admissible under the provisions of this Act.

(2)If the income of any taxpayer in any year of assessment includes or consists of an amount received by or accrued to him in terms of any contract andsuch amount will be utilised in whole or in part to finance future expenditure which will be incurred by the taxpayer in the performance of the taxpayer’s obligations under such contract, there shall be deducted in the determination of the taxpayer’s taxable income for such year such allowance (not exceeding the said amount) in respect of so much of such future expenditure asrelates to the said amount.

(3)The amount of any allowance deducted under subsection (2) in any year of assessment shall be deemed to be income received by or accrued to the taxpayer in the following year of assessment.

24D. Deduction of certain expenditure incurred in respect of any National Key Point or specified important place or area

(1)There shall be allowed to be deducted from the income of any taxpayer for any year of assessment so much of any expenditure actually incurred by the taxpayer during such year—

(a)directly in the performance of any act ordered, performed or executed under the provisions of the National Key Points Act, 1980 (Act No. 102 of 1980), in respect of any National Key Point or Key Point as defined in section 1 of that Act; or

(b)directly in providing efficient security against loss, damage, disruption or immobilization of any place or area as defined in section 1 of the said Act which, although not declared a National Key Point under the provisions of the said Act, has been evaluated and approved by the Minister of Defence or any person or committee appointed by him as such a place or area in respect of which measures for the efficient security thereof ought to be taken by such taxpayer.

(2)The amount of any expenditure allowed to be deducted under the provisions of subsection (1) shall be restricted to expenditure—

(a)actually incurred by the taxpayer on or after 1 September 1978; and

(b)which was or is not otherwise allowable as a deduction under the provisions of this Act,

and no expenditure shall be deducted under the provisions of this section unlessthe Minister of Defence or any person or committee appointed by that Ministerhas confirmed in writing that it was deemed necessary or expedient that the expenditure in question be incurred by the taxpayer concerned.

(3)Where an amount has been paid by the State to a taxpayer in respect of expenditure incurred by him prior to 1 July 1983 which has qualified for deduction from his income under subsection (1) and the Minister, person or committee referred to in subsection (2) confirms that such amount was paid as a supplement to the benefit which the taxpayer has enjoyed or will enjoy by way of the said deduction, the provisions of section 8(4)(a) shall not apply in respect of the said amount.

24E. Allowance in respect of future expenditure by sporting bodies

(1)If income is received by or accrued to a taxpayer contemplated in section 11E in respect of an event that will not recur in the following year of assessment, the taxpayer may for the purposes of determining taxable income deduct so much of that income as will be required to fund expenditure contemplated in section 11E that will be incurred in a future year of assessment.

(2)Any amount allowed to be deducted in terms of subsection (1) in any year of assessment must be deemed to be income received by or accrued to the taxpayer in the following year of assessment.

24F. Allowance in respect of films

(1)In this section—“completion date”, in relation to—

(a)the production of a film, means the date on which it is first in a form in which it can be regarded as ready for copies of it to be made and distributed, for presentation to the general public; or

(b)the acquisition of a film, means the date it was acquired;

“film” means a recording of moving visual images and sound by means of cinematographic film, video tape, video disc or otherwise, including any copy of the film and any right therein;“film owner” means any person who owns, whether solely or jointly, a film;“post-production cost”, in relation to a film, means any expenditure of the nature referred to in the definition of “production cost” which is incurred after the completion date, but excluding any print cost in relation to such film;“print cost”, in relation to a film, means any expenditure incurred by the film owner in the making of copies of the film;“production cost”, in relation to a film, means the total expenditure incurred by a film owner in respect of the acquisition or production of such film, excluding expenditure incurred in the erection, construction or acquisition of any buildings or other structures or works of a permanent nature, but including, without in any way limiting the scope of this definition—

(a)any remuneration, salary, legal, accounting or other fee, commission or other amount paid or payable to any person for the purposes of or in connection with the production of the film;

(b)the cost of acquiring the story rights, script, screenplay, copyright or other rights in relation to the film;

(c)insurance premiums in respect of insurance against injury to or death of persons, or loss of or damage to property employed or used, as the case may be, in the production of the film;

(d)premiums or commission payable in order to secure a guarantee that the cost of the film will not exceed a specified amount;

(e)interest, finance charges and raising fees incurred for the purposes of or in connection with the production of the film;

(f)the cost of acquiring or creating music, sound and other effects which will form part of the film;

(g)any allowance which but for the provisions of this section would be allowed under section 11(e) or (o) or 12C in respect of any machinery, implements, utensils or articles used in the production of a film:Provided that—

(i)any such allowance shall be deemed to be an amount of expenditure incurred;

(ii)an amount equal to the total amount of any such allowance which may be granted in respect of any year of assessment divided by the number of days in that year shall be deemed to have been incurred on each day of that year;

(iii)such expenditure shall be deemed to have been incurred in the country in which the asset in respect of which the allowance may be granted was acquired; and

(iv)no deduction or allowance shall be granted in respect of the cost of acquisition of any such machinery, implements, utensils or articles otherwise than as provided in this paragraph or paragraph (h); and

(h)expenditure incurred in respect of—

(i)the purchase, hire or construction of sets; and

(ii)the hire of any machinery, implements, utensils or articles used in the production of the film,

but excluding any such expenditure incurred after the completion date and any expenditure incurred in the marketing or promotion of, or soliciting of orders for, the film:

Provided that where a film owner acquired the film directly or indirectly from a connected person the total expenditure incurred by the film owner in respect of the acquisition of the film must be limited to the total expenditure incurred by the connected person in respect of the acquisition thereof or production cost to that connected person in respect of the production of the film;

(2)

(a)There must be allowed as a deduction from the income of any film owner—

(i)the total amount of all production costs or post-production costs actually incurred by that film owner in connection with any film used by that film owner in the production of income, if at least 75 per cent of the total amount of those production costs and post-production costs incurred is paid or payable in the Republic in respect of services rendered or goods supplied in the Republic;

(ii)the total amount of all production costs or post-production costs actually incurred by that film owner in connection with any film used by that film owner in the production of income where the film is approved as a co-production in terms of an agreement on audiovisual or film co-production between the South African Government and any other government; or

(iii)in any other case, so much of any production costs or post-production costs actually incurred by that film owner in connection with any film used by that film owner in the production of income, as is paid or payable by that film owner in the Republic in respect of services rendered or goods supplied in the Republic.

(b)There must be allowed as a deduction from the income of a film owner any production costs or post-production costs actually incurred by that film owner in connection with any film used by that film owner in the production of income and which are not allowed under paragraph (a): Provided that the deduction must be limited to 10 per cent of the amount of those costs in the year of assessment in which the completion date of the film falls and 10 per cent in each of the nine following years of assessment.

(c)The deductions in terms of paragraphs (a) and (b) which may be granted in respect of any film may not in the aggregate exceed the production cost and post-production cost thereof and shall be in lieu of any deduction or allowance in respect of such production cost or postproduction cost which may otherwise be allowable in terms of the provisions of this Act.

(d)No deduction shall be allowed under this section in respect of any expenditure incurred in respect of—

(i)any film of which principal photography commences on or after 1 January 2012; or

(ii)any film after 31 December 2012.

(3)Subject to the provisions of subsections (4) and (5), the amount of the film allowance which may be granted in terms of subsection (2), in respect of any one film, is the sum of—

(a)in the year of assessment in which the completion date of such film falls, the production cost of such film and any post-production cost of such film incurred during such year; and

(b)in any subsequent year of assessment, any post-production cost of such film incurred during such year and the amount of any film allowance disallowed in the preceding year of assessment under the provisions of subsection (4).

(4)The film allowance which may be granted in respect of any one film in any year of assessment must, together with the total film allowances granted in respect of that film in any preceding years of assessment, not exceed the sum of—

(a)the amounts of production cost and post-production cost in respect of the film which have been paid by the film owner: Provided that where any loan or credit has been used by the film owner for the payment or financing of the whole or any portion of such production cost or post-production cost and any portion of such loan or credit is owed by the film owner on the last day of the year of assessment, the amount which may be taken into account under this paragraph must be reduced by any portion of such loan or credit so owed by the film owner for which the film owner is not under the provisions of subsection (8) deemed to be at risk on the last day of the year of assessment; and

(b)the amounts of any production cost and post-production cost which have been actually incurred but have not been paid by the film owner and for which he or she is under the provisions of subsection (8) deemed to be at risk on the last day of the year of assessment.

(5)An amount actually incurred in respect of production costs or postproduction costs of a film shall not be allowed as a deduction in terms of this section unless there is a binding, unconditional obligation to pay that amount within a period of 18 months from the completion date of that film.

(8)For the purposes of subsection (4), a film owner shall be deemed to be at risk to the extent that the payment of the production cost or post-production cost actually incurred by the film owner, or the repayment of any loan or credit used by the film owner for the payment or financing of any such production cost or post-production cost would (having regard to any transaction, agreement, arrangement, understanding or scheme entered into before or after such production cost or post-production cost is incurred) result in an economic loss to the film owner were no income to be received by or accrue to the film owner in future years from the exploitation by the film owner of the film: Provided that where the full amount of the loan or credit is not repayable within a period of ten years from the completion date, the film owner is deemed not to be at risk for purposes of this section to the extent the loan or credit is not repayable within a period of ten years from the completion date of the film.

24G. Taxable income of toll road operators

(1)For the purposes of this section—“agreement” means an agreement concluded by the taxpayer in terms of which the taxpayer is entitled to operate a toll road;“ancillary service” in relation to a toll road, means any—

(a)vehicle service station, breakdown or repair facility;

(b)shop or restaurant;

(c)park, recreation or rest area;

(d)emergency medical or first-aid facility;

(e)hotel or other accommodation; or

(f)entertainment facility,

or other service or facility to which persons or vehicles may gain access from the toll road;“permanent work” means—

(a)any earthwork, tunnel, bridge, or structure forming part of a toll road, including any building erected for the purpose of housing toll equipment, but excluding any such work constructed or erected solely for the purposes of the repair or maintenance of a toll road; and

(b)the reimbursement for the cost of acquisition or expropriation of land required for the purposes of the toll road; and

(c)any payment made to the South African National Roads Agency Limited in respect of the acquisition of the right to operate a toll road;

“road pavement” means the road surface, road shoulders, sub base, base course, wearing courses, road signage, road markings, lighting, guard rails, tolling equipment, emergency telephone systems, emergency telephone repeater stations, access roads to emergency telephone repeater station sites and other parts and road furniture of a toll road, excluding any permanent work or ancillary service;“single toll road” means—

(a)a single continuous toll road or portion thereof, or two or more toll roads or portions thereof which are not contiguous but which the Minister of Transport Affairs, after consultation with the Minister of Finance, considers should be regarded as a single toll road; or

(b)two or more toll roads or portions thereof in respect of which a single agreement has been concluded with the South African National Roads Agency Limited;

“South African National Roads Agency Limited” means the South African National Road Agency Limited incorporated in terms of section 3 of the South African National Roads Agency Limited and National Roads Act, 1998 (Act No. 7 of 1998);“tolling period”, in relation to a toll road, means the initial period during which the South African National Roads Agency Limited has granted to the taxpayer or any other person the right to operate such toll road, including any period in respect of which such right was so granted in terms of an interim agreement concluded by the South African National Roads Agency Limited, but excluding any extension of such first-mentioned period in respect of which a right of renewal may be exercised;“toll road” means a road or section thereof, including any access road, crossroad or ramp constituting a necessary adjunct to such road or section, in respect of which the taxpayer derives or will derive income through the imposition of a toll or the exploitation of the right to impose a toll.

(2)Subject to the provisions of subsection (5), there shall be deducted in the determination of the taxable income derived by the taxpayer during any year of assessment—

(a)the sum of any annual allowances determined under subsection (3) in relation to expenditure incurred during the current or any previous year of assessment in respect of any permanent work, road pavement, major rehabilitation of the road pavement or erection or construction of ancillary services in relation to a toll road;

(b)any expenditure incurred during the year of assessment in respect of the repair or maintenance of a toll road or any ancillary service in relation to such toll road, other than expenditure incurred on major rehabilitation of the road pavement;

(c)any interest (other than interest which is deductible under section 11(a)) incurred by the taxpayer during the year of assessment in respect of any loan utilized for the purpose of financing any expenditure contemplated in paragraph (a) or (b); and

(d)any amount which has been disallowed in the preceding year of assessment under the provisions of subsection (5):

Provided that the aggregate of the allowances which may be granted under paragraph (a) shall not exceed the total expenditure incurred by the taxpayer on such permanent work, road pavement, major rehabilitation of road pavement or erection or construction of ancillary services.

(3)For the purposes of subsection (2), an annual allowance shall be calculated in respect of expenditure incurred by the taxpayer on permanent works, road pavements, major rehabilitation of road pavements or the erection, construction, installation or provision of ancillary services during any year of assessment, such allowance to be equal to the expenditure so incurred during the year divided by the lesser of the number of years reckoned from the commencement of that year until the end of the tolling period (for which purpose a portion of a year shall be regarded as a year) and—

(a)in the case of expenditure incurred on permanent works or the erection or construction of ancillary services, 25 years; and

(b)in the case of such expenditure incurred on road pavements or major rehabilitation of road pavements, 8 years.

(4)No deduction or allowance shall be granted under this Act in respect of expenditure contemplated in subsection (2) otherwise than as provided in that subsection.

(5)The allowances which may be granted under subsection (2)(a), (b) and (d) in any year of assessment in respect of any single toll road shall not in the aggregate exceed the taxable income (as determined before the deduction of the said allowances) derived by the taxpayer during such year from—

(a)the exploitation of such toll road or any ancillary service in relation to such toll road; and

(b)any interest derived in the ordinary course of such exploitation and the financing of any expenditure contemplated in subsection (3) which relates to such toll road.

24H. Persons carrying on trade or business in partnership

(1)For the purposes of this section, “limited partner” means any member of a partnership en commandite, an anonymous partnership, any similar partnership or a foreign partnership, if such member’s liability towards a creditor of the partnership is limited to the amount which the member has contributed or undertaken to contribute to the partnership or is in any other way limited.

(2)Where any trade or business is carried on in partnership, each member of such partnership shall, notwithstanding the fact that he may be a limited partner, be deemed for the purposes of this Act to be carrying on such trade or business.

(3)Notwithstanding anything to the contrary in this Act contained, the amount of any allowance or deduction which may be granted to any taxpayer under any provision of this Act in respect of or in connection with any trade or business carried on by him in a partnership in relation to which he is a limited partner shall not in the aggregate exceed the sum of—

(a)the amount, whether it consists of the taxpayer’s contribution to the partnership or of any other amount, for which the taxpayer is or may be held liable to any creditor of the partnership; and

(b)any income received by or accrued to the taxpayer from such trade or business.

(4)Any allowance or deduction which has been disallowed under the provisions of subsection (3) shall be carried forward and be deemed to be an allowance or deduction to which the taxpayer is entitled in the succeeding year of assessment.

(5)

(a)Where any income has in common been received by or accrued to the members of any partnership or foreign partnership, a portion (determined in accordance with any agreement between such members as to the ratio in which the profits or losses of the partnership are to be shared) of such income shall, notwithstanding anything to the contrary contained in any law or the relevant agreement of partnership, be deemed to have been received by or to have accrued to each such member individually on the date upon which such income was received by or accrued to them in common.

(b)Where a portion of any income is under the provisions of paragraph (a) deemed to have been received by or to have accrued to a taxpayer, a portion (determined as aforesaid) of any deduction or allowance which may be granted under the provisions of this Act in the determination of the taxable income derived from such income shall be granted in the determination of the taxpayer’s taxable income so derived.

24I. Gains or losses on foreign exchange transactions

(1)For the purposes of this section—“acquisition rate” means the exchange rate in respect of an exchange item obtained by dividing the amount of the expenditure incurred for the acquisition of such exchange item by the foreign currency amount in respect of such exchange item;“affected contract” means any foreign currency option contract or forward exchange contract to the extent that the foreign currency option contract or forward exchange contract has been entered into by any person during any year of assessment to serve as a hedge in respect of a debt, where—

(a)that debt—

(i)is to be utilised by that person for the purposes of acquiring any asset or for financing any expenditure; or

(ii)will arise from the sale of any asset or supply of any services,

in terms of an agreement entered into by that person in the ordinary course of the person’s trade prior to the end of the current year of assessment; and

(b)that debt has not yet been incurred by such person or the amount payable in respect of such debt has not yet accrued during that current year of assessment;

“disposal rate” means the exchange rate in respect of an exchange item obtained by dividing the amount received or accrued in respect of the disposal of such exchange item by the foreign currency amount in respect of such exchange item;“exchange difference” means the foreign exchange gain or foreign exchange loss in respect of an exchange item during any year of assessment determined by multiplying such exchange item by the difference between—

(a)the ruling exchange rate on transaction date in respect of such exchange item during that year of assessment, and—

(i)the ruling exchange rate at which such exchange item is realised during that year of assessment; or

(ii)the ruling exchange rate at which such exchange item is translated at the end of that year of assessment; or

(b)the ruling exchange rate at which such exchange item was translated at the end of the immediately preceding year of assessment or at which it would have been translated had this section been applicable at the end of that immediately preceding year of assessment, and—

(i)the ruling exchange rate at which such exchange item is realised during that year of assessment; or

(ii)the ruling exchange rate at which such exchange item is translated at the end of that year of assessment;

“exchange item” of or in relation to a person means an amount in a foreign currency—

(a)which constitutes any unit of currency acquired and not disposed of by that person;

(b)owing by or to that person in respect of adebt incurred by or payable to such person;

(c)owed by or to that person in respect of a forward exchange contract; or

(d)where that person has the right or contingent obligation to buy or sell that amount in terms of a foreign currency option contract;

“foreign currency” in relation to any exchange item of a person, means any currency which is not local currency;“foreign currency option contract” means any agreement in terms of which any person acquires or grants the right to buy from or to sell to any other person a certain amount of a nominated foreign currency on or before a future expiry date at a specified exchange rate;“forward exchange contract” means any agreement in terms of which any person agrees with another person to exchange an amount of currency for another currency at some future date at a specified exchange rate;“forward rate” means the specified exchange rate as referred to in the definition of “forward exchange contract”;“intrinsic value”, in relation to a foreign currency option contract, means the value for the holder or writer thereof, as the case may be, determined by applying the difference between—

(a)the spot rate on translation date or the date on which the foreign currency option contract is realised, as the case may be; and

(b)the option strike rate,

to the amount of foreign currency as specified in such foreign currency option contract: Provided that such foreign currency option contract shall have a nil value for the holder or writer thereof if such holder thereof would have sustained a loss had he exercised his right in terms of such foreign currency option contract on such translation date or date realised due to the unfavourable difference between the option strike rate and the spot rate on such translation date or date realised;“local currency” means in relation to—

(a)any person in respect of an exchange item which is attributable to any permanent establishment outside the Republic, the functional currency of that permanent establishment: Provided that for purposes of this paragraph any exchange item shall be deemed not to be attributable to any such permanent establishment if the functional currency of that permanent establishment is the currency of a country which has an official rate of inflation of 100 per cent or more throughout the relevant year of assessment;

(b)any resident, other than a headquarter company, a domestic treasury management company and an international shipping company as defined in section 12Q(1), in respect of an exchange item which is not attributable to a permanent establishment outside the Republic, the currency of the Republic;[paragraph (b) substituted by section 30 of Act 34 of 2019; effective date 15 January 2020, date of promulgation of that Act]

(c)any person that is not a resident in respect of any exchange item which is attributable to a permanent establishment in the Republic, the currency of the Republic;

(d)any headquarter company in respect of an exchange item which is not attributable to a permanent establishment outside the Republic, the functional currency of that headquarter company;

(e)any domestic treasury management company in respect of an exchange item which is not attributable to a permanent establishment outside the Republic, the functional currency of that domestic treasury management company;

(f)any international shipping company defined in section 12Q, in respect of an amount which is not attributable to a permanent establishment outside the Republic, the functional currency of that international shipping company;

“market value”, in relation to a foreign currency option contract, means—

(a)in the case of a person who for accounting purposes uses a market-related valuation method in terms of a practice consistently applied by him to determine the value of all his foreign currency option contracts, the market-related value so determined; or

(b)in the case of any other person, the intrinsic value of such foreign currency option contract;

“option strike rate” means the specified exchange rate as referred to in the definition of “foreign currency option contract”;“realised” means, in relation to an exchange item, where such exchange item is—

(a)a debt in any foreign currency, when and to the extent to which payment is received or made in respect of such debt, or when and to the extent to which such debt is settled or disposed of in any other manner;

(b)a forward exchange contract, when payment is received or made in respect of such forward exchange contract;

(c)a foreign currency option contract, when payment is received or made in respect of the right in terms of such foreign currency option contract having been exercised, or when such foreign currency option contract expires without such right having been exercised, or when such foreign currency option contract is disposed of; or

(d)an amount which constitutes a unit of currency, when that amount is disposed of;

“ruling exchange rate” means, in relation to an exchange item, where such exchange item is—

(a)a debt in a foreign currency on—

(i)transaction date, the spot rate on such date;

(ii)the date it is translated, the spot rate on such date; or

(iii)the date it is realised, the spot rate on such date:

Provided that where the rate prescribed in respect of a debt in terms of this definition is the spot rate on transaction date or the spot rate on the date on which such debt is realised, and any consideration paid or incurred or received or accrued in respect of the acquisition or disposal of such debt was determined by applying a rate other than such spot rate on transaction date or date realised, such spot rate shall be deemed to be the acquisition rate or disposal rate, as the case may be;

(b)a forward exchange contract on—

(i)transaction date, the forward rate in terms of such forward exchange contract;

(ii)the date it is translated, the market-related forward rate available for the remaining period of such forward exchange contract or in respect of a forward exchange contract which is an affected contract, the forward rate in terms of such forward exchange contract;

(iii)the date it is realised, the spot rate on such date; or

(c)a foreign currency option contract on—

(i)transaction date, a nil rate;

(ii)the date it is translated—

(aa)in relation to a foreign currency option contract which is not an affected contract, the rate obtained by dividing the market value of such foreign currency option contract on that date by the foreign currency amount as specified in such foreign currency option contract; or

(bb)in relation to a foreign currency option contract which is an affected contract, the rate obtained by dividing any amount included or deducted, as the case may be, in terms of subsection (3)(b) by the foreign currency amount, as specified in such affected contract;

(iii)the date it is realised, the rate obtained by dividing the market value of such foreign currency option contract on that date by the foreign currency amount as specified in such foreign currency option contract: Provided that where such foreign currency option contract is realised by the disposal thereof, the rate shall be obtained by dividing the amount received or accrued as a result of the disposal of such foreign currency option contract, by the foreign currency amount as specified in such foreign currency option contract;

(d)an amount which constitutes a unit of currency, on—

(i)transaction date, the spot rate on that date;

(ii)the date it is translated, the spot rate on that date; or

(iii)the date it is realised, the spot rate on that date:

Provided that the Commissioner may, having regard to the particular circumstances of the case, prescribe an alternative rate to any of the aforementioned prescribed rates to be applied by a person in such particular circumstances, if such alternative rate is usedfor the purposes of financial reporting pursuant to IFRS;“transaction date” means, in relation to—

(b)a debt owing by a person, the date on which such debt was actually incurred;

(d)a debt owing to a person, the date on which the amount payable in respect of such debt accrued to such person or the date on which such debt was acquired by such person in any other manner;

(e)a forward exchange contract, the date on which such contract was entered into;

(f)a foreign currency option contract, the date on which such contract was entered into or acquired; and

(g)an amount which constitutes a unit of currency, the date on which that amount was acquired;

“translate” means the restatement of an exchange item in the local currency at the end of any year of assessment, by applying the ruling exchange rate to such exchange item.

(2)The provisions of this section shall apply in respect of any—

(a)company;

(b)trust carrying on any trade;

(c)natural person who holds any amount contemplated in paragraph (a) or (b) of the definition of “exchange item” as trading stock; and

(d)natural person or trust in respect of any amount contemplated in paragraph (c) or (d) of the definition of “exchange item”.

Provided that this section does not apply in respect of any exchange item of a person who is not a resident (other than a controlled foreign company), unless that exchange item is attributable to a permanent establishment of that person in the Republic.

(3)In determining the taxable income of any person contemplated in subsection (2), there shall be included in or deducted from the income, as the case may be, of that person—

(a)any exchange difference in respect of an exchange item of or in relation to that person, subject to subsection (10A); and

(b)

(i)any premium or like consideration received by, or paid by, such person in terms of a foreign currency option contract entered into by such person; or

(ii)any consideration paid by such person in respect of a foreign currency option contract acquired by such person.

(4)Subject to section 11, in determining the taxable income of any person contemplated in subsection (2) in respect of a debt owing to that person as referred to in paragraph (b) of the definition of “exchange item”—

(a)to the extent that on realisation the debt was irrecoverable by reason of becoming bad; or

(b)the realisation of the debt resulted in a loss determined in the foreign currency due to a decline in the market value of that debt,

the amount of—

(i)any foreign exchange gain, relating to the debt as described in paragraph (a) or (b), that is or was included in the income of that person in the current or any previous year of assessment must be deducted from the income of that person; and

(ii)the amount of any foreign exchange loss, relating to the debt as described in paragraph (a) or (b), that is or was deducted from the income of that person in the current or any previous year of assessment must be included in the income of that person.

[subsection (4) substituted by section 43(1)(a) of Act 23 of 2018; effective date 1 January 2019, applicable in respect of years of assessment commencing on or after that date]

(6)Any inclusion in or deduction from income in terms of this section shall be in lieu of any deduction or inclusion which may otherwise be allowed or included under any other provision of this Act.

(7)Notwithstanding the provisions of subsection (3), but subject to the provisions of section 36—

(a)any exchange difference arising from a debt having been utilised by a person in respect of—

(i)the acquisition, installation, erection or construction of any machinery, plant, implement, utensil, building or improvements to any building, as the case may be; or

(ii)the devising, developing, creation, production, acquisition or restoration of any invention, patent, design, trade mark, copyright or other similar property or knowledge contemplated in section 11(gC);[subparagraph (ii) substituted by section 43(1)(b) of Act 23 of 2018; effective date 17 January 2019, date of promulgation of that Act]

(b)any exchange difference arising from a forward exchange contract or a foreign currency option contract which has been entered into by a person contemplated in paragraph (a), to the extent to which such forward exchange contract or foreign currency option contract is entered into to serve as a hedge in respect of a debt incurred or to be incurred for the utilisation thereof as contemplated in paragraph (a); and

(c)any premium or other consideration paid or payable in respect of or in terms of a foreign currency option contract entered into or acquired by a person contemplated in paragraph (a), to the extent to which such foreign currency option contract is entered into or obtained in order to serve as a hedge in respect of a debt incurred or to be incurred for the utilisation thereof as contemplated in paragraph (a),

shall, where such exchange difference arose or such premium or other consideration was paid or became payable in a year of assessment prior to the year of assessment during which such machinery, plant, implement, utensil, building, improvements to any building, invention, patent, design, trade mark, copyright or other similar property or knowledge was or is brought into use for the purposes of such person’s trade, be carried forward and be taken into account in the determination of the taxable income of such person in the year of assessment during which such machinery, plant, implement, utensil, building, improvements to any building, invention, patent, design, trade mark, copyright or other similar property or knowledge was or is so brought into use for the purposes of such person’s trade: Provided that where during any year of assessment subsequent to the year of assessment during which such exchange difference arose or such premium or other consideration was paid or became payable—

(a)the debt to be incurred as contemplated in paragraph (b) or (c) of this subsection will no longer be so incur;

(b)such debt has not been utilised as contemplated in paragraph (a); or

(c)any such asset, property or knowledge will no longer be brought into use for the purpose of such person’s trade,

such exchange difference or premium or other consideration shall no longer be carried forward, but shall be taken into account in the determination of such person’s taxable income in such subsequent year of assessment.

(8)Any foreign exchange loss sustained in respect of a transaction entered into by a person, or any premium or other consideration paid in respect of or in terms of a foreign currency option contract entered into or acquired by a person, shall not be allowed as a deduction from such person’s income under subsection (3), if such transaction was entered into or such foreign currency option contract was entered into or acquired solely or mainly to enjoy a reduction in tax by way of a deduction from income.

(10A)

(a)Subject to paragraph (b), no exchange difference arising during any year of assessment in respect of an exchange item contemplated in paragraph (b) of the definition of “exchange item” shall be included in or deducted from the income of a person in terms of this section—

(i)if, at the end of that year of assessment—

(aa)that person and the other party to the contractual provisions of that exchange item—

(A)form part of the same group of companies; or

(B)are connected persons in relation to each other; and

(bb)no forward exchange contract and no foreign currency option contract has been entered into by that person to serve as a hedge in respect of that exchange item; and

(ii)that exchange item—

(aa)or any portion thereof does not represent for that person a current asset or a current liability for the purposes of financial reporting pursuant to IFRS; and

(bb)is not directly or indirectly funded by any debt owed to any person that—

(A)does not form part of the same group of companies as; or

(B)is not a connected person in relation to,

that person or the other party to the contractual provisions of that exchange item.

(b)Where paragraph (a) was applied during any year of assessment to any exchange difference in respect of an exchange item and—

(i)that exchange difference was not included in nor deducted from the income of a person in that year of assessment; and

(ii)during any year of assessment—

(aa)subsequent to that year of assessment, paragraph (a) no longer applies to that exchange difference; or

(bb)that exchange item is realised,

an amount in respect of that exchange item must be included in or deducted from the income of that person in that subsequent year of assessment or in the year of assessment during which the exchange item is realised which amount shall be determined by multiplying that exchange item by the difference between the ruling exchange rate on the last day of the year of assessment immediately preceding that subsequent year of assessment and the ruling exchange rate on transaction date, less any amount of the exchange differences included in or deducted from the income of that person in terms of this section in respect of that exchange item for all years of assessment preceding that subsequent year of assessment during which the person was a party to the contractual provisions of the exchange item.

(12)Where a person holds any exchange item and the provisions of this section at any time during a year of assessment—

(a)become applicable to that person, that exchange item shall be deemed to have been acquired at that time for the purposes of this section; or

(b)cease to apply to that person, that exchange item shall be deemed to have been realised at that time for the purposes of this section.

24J. Incurral and accrual of interest

(1)For the purposes of this section, unless the context otherwise indicates—“accrual amount”, in relation to an accrual period, means an amount determined in accordance with the following formula:A = B × Cin which formula—

(a)“A” represents the amount to be determined;

(b)“B” represents the yield to maturity; and

(c)“C” represents the adjusted initial amount:

Provided that—

(i)where the commencement or end of any year of assessment falls within an accrual period, the amount so determined shall be apportioned on a day to day basis over the term of such accrual period in order to determine the relevant portion of such amount relating to that part of such accrual period falling within the year of assessment so commencing or ending, as the case may be;

(ii)where an instrument is transferred on a date other than at the end of an accrual period, the amount so determined shall be apportioned on a day to day basis over the term of such accrual period in order to determine the relevant portion of such amount relating to the relevant transferor or transferee, as the case may be, in relation to such instrument; and

(iii)the amount so determined shall be appropriately adjusted by taking into account amounts received or payments made other than at the end of an accrual period;

“accrual period”, in relation to an instrument, means—

(a)where in terms of such instrument regular payments at intervals of equal length and not exceeding 12 months per interval are to be made throughout the term of such instrument, the period between such regular payments; or

(b)any period not exceeding 12 months elected by the holder or issuer, as the case may be,

which period shall be applied consistently throughout the term of such instrument;“adjusted gain on transfer or redemption of an instrument” means—

(a)in relation to the holder of any income instrument, where—

(i)an alternative method has not been applied, the amount by which the sum of the transfer price or redemption payment of such income instrument in relation to such holder and any payments received by such holder in terms of such income instrument during the accrual period in which such income instrument is transferred or redeemed, exceeds the sum of the adjusted initial amount in relation to such income instrument and the accrual amount in relation to such accrual period and any payments made by such holder in terms of such income instrument during such accrual period; or

(ii)an alternate method has been applied, the amount by which the sum of the transfer price or redemption payment of such income instrument in relation to such holder and any payments received by such holder in terms of such income instrument during the period from acquisition until transfer or redemption of such income instrument by such holder, exceeds the sum of the initial amount and all amounts determined in accordance with such alternative method and any other payments made by such holder in terms of such income instrument during the period from acquisition until transfer or redemption of such income instrument by such holder; or

(b)in relation to the issuer of any instrument, where—

(i)an alternative method has not been applied, the amount by which the sum of the adjusted initial amount in relation to such instrument and the accrual amount in relation to the accrual period during which such instrument is transferred or redeemed and any payments received by such issuer in terms of such instrument during the accrual period, exceeds the sum of the transfer price or redemption payment in relation to such instrument in relation to such issuer and any payments made by such issuer in terms of such instrument during such accrual period; or

(ii)an alternative method has been applied, the amount by which the sum of the initial amount and all amounts determined in accordance with such alternative method and any other payments received by such issuer in terms of such instrument during the period from issue or acquisition until transfer or redemption of such instrument by such issuer, exceeds the sum of the transfer price or redemption payment in relation to such instrument in relation to such issuer and any payments made by such issuer in terms of such instrument during the period from issue or acquisition until transfer or redemption of such instrument by such issuer;

“adjusted initial amount” means—

(a)in relation to the holder of an income instrument with regard to a particular accrual period, the sum of the initial amount and the accrual amounts in relation to all previous accrual periods and any other payments made by such holder during all such previous accrual periods less any payments received by such holder during all such previous accrual periods, in terms of such income instrument; or

(b)in relation to the issuer of an instrument with regard to a particular accrual period, the sum of the initial amount and the accrual amounts in relation to all previous accrual periods and any other payments received by such issuer during all such previous accrual periods less any payments made by such issuer during all such previous accrualperiods, in terms of such instrument: Provided that where that instrument forms part of any transaction, operation or scheme—

(i)any payments made by the issuer to any other person pursuant to that transaction, operation or scheme with a purpose or with the probable effect of making payment directly or indirectly to the holder or a connected person in relation to the holder, must be deducted for purposes of this paragraph; and

(ii)in the case where any party to that transaction, operation or scheme is a connected person in relation to that issuer, any payments made by that connected person to any other person pursuant to that transaction, operation or scheme with a purpose or with the probable effect of making payment directly or indirectly to the holder or a connected person in relation to the holder, must be deducted for purposes of this paragraph;

“adjusted loss on transfer or redemption of an instrument” means—

(a)in relation to the holder of any income instrument, where—

(i)an alternative method has not been applied, the amount by which the sum of the adjusted initial amount in relation to such income instrument and the accrual amount in relation to the accrual period during which such income instrument is transferred or redeemed andany payments made by such holder in terms of such income instrument during such accrual period, exceeds the sum of the transfer price or redemption payment in relation to such income instrument in relation to such holder and any payments received by such holder in terms of such income instrument during such accrual period; or

(ii)an alternative method has been applied, the amount by which the sum of the initial amount and all amounts determined in accordance with such alternative method and any other payments made by such holder in terms of such income instrument during the period from acquisition until transfer or redemption of such income instrument by such holder, exceeds the sum of the transfer price or redemption payment in relation to such income instrument in relation to such holder and any payments received by such holder in terms of such income instrument during the period from acquisition until transfer or redemption of such income instrument by such holder; or

(b)in relation to the issuer of any instrument, where—

(i)an alternative method has not been applied, the amount by which thesum of the transfer price or redemption payment of such instrument in relation to such issuer and any payments made by such issuer in terms of such instrument during the accrual period during which such instrument is transferred or redeemed, exceeds the sum of the adjusted initial amount in relation to such instrument and the accrual amount in relation to such accrual period and any payments received by such issuer in terms of such instrument during such accrual period; or

(ii)an alternative method has been applied, the amount by which the sum of the transfer price or redemption payment of such instrument in relation to such issuer and any payments made by such issuer in terms of such instrument during the period from issue or acquisition until transfer or redemption of such instrument by such issuer, exceeds the sum of the initial amount and all amounts determined in accordance with such alternative method and any other payments received by such issuer in terms of such instrument during the period from issue or acquisition until transfer or redemption of such instrument by such issuer;

“alternative method” means a method of calculating interest in relation to any class of instruments which—

(a)is in accordance with IFRS;

(b)isconsistently applied in respect of all such instruments for all financial reporting purposes; and

(c)method achieves a result in so far as the timing of the accrual and incurral of interest is concerned which produces substantially the same result achieved by the application of the provisions of subsections (2)(a) and (3)(a);

“date of redemption”, in relation to an instrument, means—

(a)where—

(i)the terms of that instrument specify a date on which all liability to pay all amounts in terms of that instrument will be discharged; and

(ii)the date so specified is not, in terms of the instrument, subject to change, whether as a result of any right, fixed or contingent, of the holder of that instrument or otherwise,

that date; or

(b)where—

(i)the terms of that instrument do not specify a date as contemplated in paragraph (a)(i); or

(ii)that date, if so specified, is subject to change as contemplated in paragraph (a)(ii),

the date on which, on a balance of probabilities, all liability to pay all amounts in terms of that instrument is likely to be discharged;

“deferred interest” includes—

(a)any interest where such interest (or any portion thereof), calculated in respect of any accrual period falling within the term of any instrument by applying a constant interest rate throughout the term of such instrument, is not payable or receivable in terms of such instrument within one year from the date of the commencement of such accrual period; and

(b)any interest payable or receivable in terms of any instrument where such interest is not calculated by applying a constant interest rate throughout the term of such instrument;

“fixed rate instrument” means an instrument in terms of which the amount or amounts payable or receivable is or are or consists of or consist of—

(a)a specified amount or specified amounts;

(b)an amount or amounts the method of calculation of which does not involve the application of a variable rate; or

(c)any combination of amounts referred to in paragraph (a) or (b);

“holder”, in relation to an income instrument—

(a)means any person who has become entitled to any interest or amount receivable in terms of suchincome instrument; or

(b)at any particular time, means any person who, if any interest payable in terms of such income instrument was due and payable at that time, would be entitled to receive payment of such interest;

“income instrument” means—

(a)in the case of any person other than a company, any instrument—

(i)the term of which will, or is reasonably likely to, exceed one year; and

(ii)which is issued or acquired at a discount or premium or bears deferred interest; and

(b)in the case of any company, any instrument;

“initial amount” means the issue price or transfer price, as the case may be, in relation to an instrument;“instrument” means—

(c)any interest-bearing arrangement or debt;

(d)any acquisition or disposal of any right to receive interest or the obligation to pay any interest, as the case may be, in terms of any other interest-bearing arrangement; or

(e)any repurchase agreement or resale agreement,

which was—

(i)issued or deemed to have been issued after 15 March 1995;

(ii)issued on or before 15 March 1995 and transferred on or after 19 July 1995; or

(iii)in so far as it relates to the holder thereof, issued on or before 15 March 1995 and was unredeemed on 14 March 1996 (excluding any arrangement contemplated in subparagraphs (i) and (ii)),

but excluding any lease agreement (other than a sale and leaseback arrangement as contemplated in section 23G) or any policy issued by an insurer as defined in section 29A;“interest” includes the—

(a)gross amount of any interest or similar finance charges, discount or premium payable or receivable in terms of or in respect of a financial arrangement;

(b)amount (or portion thereof) payable by a borrower to the lender in terms of any lending arrangement as represents compensation for any amount to which the lender would, but for such lending arrangement, have been entitled; and

(c)absolute value of the difference between all amounts receivable and payable by a person in terms of a sale and leaseback arrangement as contemplated in section 23G throughout the full term of such arrangement, to which such person is a party,

irrespective of whether such amount is—

(i)calculated with reference to a fixed rate of interest or a variable rate of interest; or

(ii)payable or receivable as a lump sum or in unequal instalments during the term of the financial arrangement;

“interest rate agreement” means an interest rate agreement as defined in section 24K;“issue”, in relation to an instrument, means the creation of the liability to pay or the right to receive an amount or amounts in terms of such instrument;“issue price”, in relation to an instrument, means the market value of the consideration given or received, as the case may be, for the issue of the instrument as determined on the date on which that instrument is issued;“issuer”, in relation to any instrument—

(a)means any person who has incurred any interest or has any obligation to repay any amount in terms of such instrument; or

(b)at any particular time, means any person who, if any interest payable in terms of such instrument was due and payable at that time, would be liable to pay such interest;

“lending arrangement” means any arrangement or agreement in terms of which—

(a)a person (in this section referred to as the lender) lends any instrument to another person (in this section referred to as the borrower); and

(b)the borrower in return undertakes to return any instrument of the same kind and of the same or equivalent quantity and quality to the lender;

“redemption”, in relation to an instrument, means the discharging of all liability to pay all amounts in terms of such instrument;“redemption payment”, in relation to an instrument, means any payment made or received which has the effect of redeeming such instrument;“repurchase agreement” means the obtaining of money (which money shall for the purposes of this section be deemed to have been so obtained by way of a loan) through the disposal of an asset by any person to any other person subject to an agreement in terms of which such person undertakes to acquire from such other person at a future date the asset so disposed of or any other asset issued by the issuer of, and which has been so issued subject to the same conditions regarding term, interest rate and price as, the asset so disposed of;“resale agreement” means the provision of money (which money shall for the purposes of this section be deemed to have been so provided in the form of a loan) through the acquisition of an asset by any person from any other person subject to an agreement in terms of which such person undertakes to dispose of to such other person at a future date the asset so acquired or any other asset issued by the issuer of, and which has been so issued subject to the same conditions regarding term, interest rate and price as, the asset so acquired;“short selling” means the sale of any instrument by a person who is not the owner of such instrument, and in respect of which such person has the obligation to deliver such instrument at a future date;“term”, in relation to an instrument, means the period commencing on the date of issue or transfer of that instrument and ending on the date of redemption of that instrument;“transfer”, in relation to an instrument, includes—

(a)the transfer, sale, assignment or disposal in any other manner of such instrument by the holder or issuer thereof, as the case may be; or

(b)the acquisition of such instrument by the holder or issuer thereof, as the case may be, by way of a transfer, sale, assignment or disposal in any other manner,

but does not include the redemption of such instrument;“transfer price”, in relation to the transfer of an instrument, means the market value of the consideration payable or receivable, as the case may be, for the transfer of such instrument as determined on the date on which that instrument is transferred;“variable rate” means a rate determined with reference to an interest or indexation rate or other similar factor, being a rate or factor that varies or may vary during the term of the instrument;“variable rate instrument” means an instrument which is not a fixed rate instrument; and“yield to maturity” means the rate of compound interest per accrual period at which the present value of all amounts payable or receivable in terms of any instrument in relation to a holder or an issuer, as the case may be, of such instrument during the term of such instrument equals the initial amount in relation to such holder or issuer of such instrument: Provided that where—

(a)such instrument is a variable rate instrument, such rate of compound interest shall be calculated with reference to the variable rate applicable on the date such rate of compound interest is to be calculated to determine all amounts payable or receivable after such date;

(b)in the case of a variable rate instrument the variable rate in relation to such instrument changes, the rate of compound interest shall be redetermined in relation to such variable rate instrument with reference to—

(i)the appropriate adjusted initial amount in relation to such variable rate instrument determined before such change in the rate; and

(ii)such changed variable rate applicable on the date such rate of compound interest is to be redetermined to determine all amounts payable or receivable after such date;

(c)any variation in the terms or conditions of such instrument takes place or any variation in any amount payable or receivable in terms of such instrument takes place which will result in a change in such rate of compound interest in relation to such instrument, the rate of compound interest shall be redetermined in relation to such instrument with reference to the appropriate adjusted initial amount in relation to such instrument determined before such variation;

(d)there is a variation or alteration—

(i)of the rights or interests of a holder in relation to an income instrument in respect of any amounts receivable in terms of such income instrument, the rate of compound interest in relation to such income instrument shall be redetermined in respect of such holder with reference to the appropriate adjusted initial amount in relation to such income instrument determined before such variation or alteration; or

(ii)in the obligations of an issuer in relation to an instrument in respect of any amounts payable in terms of such instrument, the rate of compound interest in relation to such instrument shall be redetermined in respect of such issuer with reference to the appropriate adjusted initial amount in relation to such instrument determined before such variation or alteration; or

(e)in the case of an instrument of which the date of redemption is subject to change during a year of assessment, the rate of compound interest shall be redetermined in relation to such instrument with reference to—

(i)the appropriate adjusted initial amount in relation to such instrument; and

(ii)the changed date of redemption:

Provided further that where that instrument forms part of any transaction, operation or scheme—

(a)any payments made by the issuer to any other person pursuant to that transaction, operation or scheme with a purpose or with the probable effect of making payment directly or indirectly to the holder or a connected person in relation to the holder; and

(b)in the case where any party to that transaction, operation or scheme is a connected person in relation to that issuer, any payments made by that connected person to any other person pursuant to that transaction, operation or scheme with a purpose or with the probable effect of making payment directly or indirectly to the holder or a connected person in relation to the holder,

must be taken into account as a reduction of amounts payable by that issuer for purposes of determining that rate of compound interest: Provided further that where the calculated rate of compound interest per accrual period results in a negative rate of interest, the rate of compound interest per accrual period must be treated to be zero.

(2)Where any person is the issuer in relation to an instrument during any year of assessment, such person shall for the purposes of this Act be deemed to have incurred an amount of interest during such year of assessment, which is equal to—

(a)the sum of all accrual amounts in relation to all accrual periods falling, whether in whole or in part, within such year of assessment in respect of such instrument; or

(b)an amount determined in accordance with an alternative method in relation to such year of assessment in respect of such instrument,

which must be deducted from the income of that person derived from carrying on any trade, if that amount is incurred in the production of the income.

(3)Where any person is the holder in relation to an income instrument during any year of assessment, there shall for the purposes of this Act be deemed to have accrued to that person and must be included in the gross income of that person during that year of assessment (whether or not that amount constitutes a receipt or accrual of a capital nature), an amount of interest which is equal to—

(a)the sum of all accrual amounts in relation to all accrual periods falling, whether in part or in whole, within such year of assessment in respect of such income instrument; or

(b)an amount determined in accordance with an alternative method in relation to such year of assessment in respect of such income instrument.

(3A)Where any person is the holder of an income instrument which is an instrument as contemplated in paragraph (iii) of the definition of “instrument”, the amount by which the sum of all accrual amounts in relation to all accrual periods falling within the period from the date of acquisition (whether by way of issue or transfer, as the case may be) of such income instrument by such person until 13 March 1996, exceeds the sum of all interest received by or accrued to such person during such period had the provisions of this section not been applicable during such period in respect of such income instrument, shall for the purposes of this Act be deemed to have accrued to such person in the year of assessment during which such income instrument is transferred by such holder or redeemed (whichever is the earlier): Provided that the provisions of this subsection shall not apply in so far as any interest in relation to such income instrument was assessed to tax in the hands of such person under an assessment raised with a date of assessment before the date of promulgation of this Act.

(4)Any—

(a)adjusted gain on transfer or redemption of an instrument calculated in relation to the transfer or redemption, as the case may be, of such instrument by a person during any year of assessment shall for the purposes of this Act be deemed to have accrued to such person in such year of assessment; and

(b)adjusted loss on transfer or redemption of an instrument calculated in relation to the transfer or redemption, as the case may be, of such instrument by a person during any year of assessment, shall for the purposes of this Act be deemed to have been incurred by such person in such year of assessment.

(4A)Where in the case of any—

(a)holder of an income instrument any adjusted loss on transfer or redemption of such income instrument which has been deemed to have been incurred by such holder in terms of subsection (4)(b) during any year of assessment, includes an amount in relation to such income instrument representing an—

(i)accrual amount; or

(ii)amount determined in accordance with an alternative method,

which amount has been included in the income of the holder during such year of assessment or any previous year of assessment, such amount shall be allowed as a deduction from the income of such holder during such year of assessment; or

(b)issuer of an instrument any adjusted gain on transfer or redemption which has been deemed to have been accrued to such issuer in terms of subsection (4)(a) during any year of assessment, includes an amount in relation to such instrument representing an—

(i)accrual amount; or

(ii)amount determined in accordance with an alternative method,

which amount has been allowed as a deduction from the income of such issuer during such year of assessment or any previous year of assessment, to the extent that such amount is not taken into account in terms of section 19, such amount shall be included in the income of such issuer during such year of assessment.

(5)Where any amount actually—

(a)paid by any person in terms of an instrument is to be taken into account in the determination of any accrual amount in relation to that instrument or any other amount determined in accordance with an alternative method in relation to that instrument which accrual amount or other amount is to be dealt with in terms of the provisions of subsection (2), no account shall for the purposes of section 11 be taken of any such amount so actually paid, save by way of the operation of such subsection; or

(b)received by any person in terms of an income instrument is to be taken into account in the determination of any accrual amount in relation to that income instrument or any other amount determined in accordance with an alternative method in relation to that income instrument which accrual amount or other amount is to be dealt with in terms of the provisions of subsection (3), no account shall for the purposes of the definition of “gross income” in section 1 be taken of any such amount so actually received, save by way of the operation of such subsection.

(5A)Any amount which has been deemed to have been incurred by or accrued to a person, as the case may be, in respect of an instrument in terms of the provisions of this section, shall for the purposes of this Act not be deducted from or included in, as the case may be, the income of such person more than once by reason of the application of this section.

(6)Where the term of an instrument issued on or before 15 March 1995 is extended or the terms or conditions of such instrument are materially varied after the said date, such instrument shall be deemed to have been issued after the said date and the provisions of this section shall apply to both the issuer and the holder in relation to such instrument as from the date of such extension or material variation.

(7)Where there is more than one—

(a)holder in relation to an income instrument and any accrual amount in relation to an accrual period with regard to any one of the holders in relation to such income instrument is to be determined, such accrual amount shall be so determined without taking into account any consideration or any amount or amounts paid or payable or received or receivable by any other holder in terms of such income instrument; and

(b)issuer in relation to an instrument and any accrual amount in relation to an accrual period with regard to any one of the issuers in relation to such instrument is to be determined, such accrual amount shall be sodetermined without taking into account any consideration or any amount or amounts paid or payable or received or receivable by any other issuer in terms of such instrument.

(8)Where in relation to an instrument any person is entitled to any interest in terms of such instrument and also liable to pay any interest in terms of such instrument, such person shall for the purposes of this section—

(a)where the interest which he is entitled to receive in terms of such instrument exceeds the interest which he is liable to pay in terms of such instrument, be deemed not to be an issuer in relation to such instrument; and

(b)where the interest which he is liable to pay in terms of such instrument exceeds the interest which he is entitled to receive in terms of such instrument, be deemed not to be a holder in relation to such instrument.

(9)

(a)Any company whose business comprises the dealing in instruments (including the short selling of instruments), interest rate agreements or option contracts may elect that the provisions of subsections (2) to (8), inclusive, section 24K and section 24L shall not apply to all such instruments, interest rate agreements or option contracts in respect of which it so deals in.

(b)Any election referred to in paragraph (a) shall—

(i)be made in writing;

(ii)be accompanied by a statement setting forth full details of the methodology to be applied by the company to determine the market value as contemplated in paragraph (c) in relation to all instruments, interest rate agreements or option contracts contemplated in paragraph (a);

(iii)not take effect unless the Commissioner has, subject to such conditions as he may deem necessary, approved—

(A)the methodology to be applied by such company to determine the market value as contemplated in paragraph (c) in respect of such instruments, interest rate agreements or option contracts; and

(B)the manner in which such market value in relation to such instruments, interest rate agreements or option contracts is to be taken into account in the determination of the taxable income of such company during any year of assessment; and

(iv)subject to the provisions of paragraphs (e) and (f), be binding upon such company in respect of all such instruments, interest rate agreements and option contracts during the year of assessment in which it took effect and every succeeding year of assessment.

(c)The market value in relation to all instruments, interest rate agreements and option contracts contemplated in paragraph (a) of a company which made an election as contemplated in such paragraph shall be determined in accordance with commercially accepted practice which is applied by such company consistently in respect of all such instruments, interest rate agreements and option contracts for financial reporting purposes to its shareholders.

(d)Any instrument, interest rate agreement or option contract contemplated in paragraph (a) which as a result of an election made in terms of such paragraph is to be dealt with on a market value basis as contemplated in the aforegoing provisions of this subsection shall (subject to the provisions of paragraphs (e) and (f)) be so dealt with until the date of redemption or transfer of such instrument, interest rate agreement or option contract.

(e)Where the Commissioner is satisfied that the approval granted by him in terms of paragraph (b)(iii) was obtained by fraud or in consequence of any misrepresentation or failure to disclose any material fact by the company which made the election in terms of paragraph (a), he shall, if he is satisfied that in the light of the full facts the approval should not have been granted, withdraw such approval as from the date such approval was granted by him.

(f)Where any company during any year of assessment no longer complies with the provisions of this subsection—

(i)the approval granted by the Commissioner in terms of paragraph (b)(iii) shall be deemed to have been withdrawn by the Commissioner as from such year of assessment; and

(ii)an appropriate adjustment shall be made to the taxable income of such company during such year of assessment in relation to all instruments, interest rate agreements or option contracts contemplated in paragraph (a) of the company held and not disposed of or not redeemed by it, as the case may be, as at the end of such year of assessment, having regard to all interest or amounts which would have been deemed to have been incurred by or accrued to such company had the provisions of this subsection not been applicable during all years of assessment before such year of assessment and all amounts which have been included in or deducted from the income of such company during such years of assessment: Provided that the provisions of this paragraph shall not have the effect that an amount be included in or deducted from the income of such company more than once.

(g)This subsection shall not apply—

(i)in respect of a company that is a covered person as defined in section 24JB, during any year of assessment ending on or after 1 January 2014; and

(ii)in respect of any other company, during any year of assessment commencing on or after 1 April 2014.

(9A)

(a)Any company that made an election contemplated in subsection (9) and in respect of which the Commissioner granted an approval as contemplated in that subsection is deemed to have—

(i)disposed of all instruments, interest rate agreements or option contracts contemplated in subsection (9); and

(ii)reacquired the instruments, interest rate agreements or option contracts,

held and not disposed of at the end of the year of assessment for an amount equal to the market value, as contemplated in subsection (9)(c), on the last day of that year of assessment.

(b)Paragraph (a) applies—

(i)in the case of a company that is a covered person as defined in section 24JB, in respect of the year of assessment of that covered person immediately preceding the year of assessment ending on or after 1 January 2014; and

(ii)in the case of any other company, in respect of the year of assessment of the company immediately preceding the year of assessment commencing on or after 1 April 2014.

(10)Any reference in this section to any payment made or an amount paid or payable, consideration given or received or any payment received or an amount received or receivable, as the case may be, shall be construed as including a payment or an amount or consideration otherwise than in cash.

(12)This section must not apply to an instrument if—

(a)the holder of that instrument has, throughout any period during a year of assessment during which that holder holds that instrument, a right to require the redemption of that instrument at any time during that period; and

(b)that instrument does not provide for the payment of any deferred interest.

24JA. Sharia compliant financing arrangements

(1)For the purposes of this section—“bank” means any—

(a)bank as defined in section 1 of the Banks Act;

(b)mutual bank as defined in section 1 of the Mutual Banks Act, 1993 (Act No. 124 of 1993); or

(c)co-operative bank as defined in section 1 of the Co-operative Banks Act, 2007 (Act No. 40 of 2007);

“diminishing musharaka” means a sharia arrangement between a bank and a client of that bank whereby—

(a)

(i)the bank and the client jointly acquire an asset from a third party (the seller); or

(ii)the bank acquires an interest in an asset from the client;

(b)the client will acquire the bank’s interest in the asset after the acquisition of the asset by the bank as contemplated in paragraph (a); and

(c)the amount of consideration payable by the client to the bank for the acquisition of the interest of the bank in the asset will be paid over a period of time as agreed between the client and the bank;

“listed company” means a listed company as contemplated in paragraph (a) of the definition of “listed company” in section 1(1);“mudaraba” means a sharia arrangement between a bank and a client of that bank whereby—

(a)funds are deposited with the bank by the client;

(b)the anticipated return in respect of the sharia arrangement is dependent on the amount deposited by the client in combination with the duration of the period for which the funds are deposited;

(c)the bank invests the funds deposited by the client in other sharia arrangements;

(d)the client bears the risk of the loss in respect of the sharia arrangements contemplated in paragraph (c); and

(e)the return in respect of the sharia arrangements contemplated in paragraph (c) is divided between the client and the bank as agreed at the time that the client deposits the funds with the bank;

“murabaha” means a sharia arrangement between a financier and a client of that financier, one of which is a bank or a listed company, whereby—

(a)the financier will acquire an asset from a third party (the seller) for the benefit of the client on such terms and conditions as are agreed upon between the client and the seller;

(b)the client—

(i)will acquire the asset from the financier within 180 days after the acquisition of the asset by the financier contemplated in paragraph (a); and

(ii)agrees to pay to the financier a total amount that—

(aa)exceeds the amount payable by the financier to the seller as consideration to acquire the asset;

(bb)is calculated with reference to the consideration payable by the financier to the seller in combination with the duration of the sharia arrangement; and

(cc)may not exceed the amount agreed upon between the financier and the client when the sharia arrangement is entered into; and

(c)no amount is received by or accrues to the financier in respect of that asset other than an amount contemplated in paragraph (b)(ii);

“sharia arrangement” means an arrangement that is—

(a)open for participation by members of the general public; and

(b)presented as compliant with sharia law when the members of the general public are invited to participate therein;

“sukuk” means a sharia arrangement whereby—

(a)the government of the Republic or any public entity that is listed in Schedule 2 to the Public Finance Management Act or a listed company disposes of an interest in an asset to a trust; and

(b)the disposal of the interest in the asset to the trust by the government, the public entity or the listed company contemplated in paragraph (a) is subject to an agreement in terms of which the government, that public entity or that listed company undertakes to reacquire on a future date from that trust the interest in the asset disposed of at a cost equal to the cost paid by the trust to the government, to that public entity or to that listed company to obtain the asset.

(2)Any amount received by or accrued to a client in terms of a mudaraba is deemed to be interest as contemplated in paragraph (a) of the definition of “interest” in section 24J(1).

(3)Where any murabaha is entered into between a financier and a client of that financier as contemplated in paragraph (a) of the definition of “murabaha”—

(a)the financier is deemed not to have acquired or disposed of the asset under the sharia arrangement;

(b)the client is deemed to have acquired the asset from the seller—

(i)for consideration equal to the amount paid by the financier to the seller; and

(ii)at such time as the financier acquired the asset from the seller by virtue of the transaction between the seller and the financier;

(c)the murabaha is deemed to be an instrument for the purposes of section 24J;

(d)the difference between the amount of consideration paid for the asset by the financier to the seller and the consideration payable to the financier by the client to acquire the asset as contemplated in paragraph (b)(ii) of the definition of “murabaha” is deemed to be a premiumpayable or receivable contemplated in paragraph (a) of the definition of “interest” in section 24J(1); and

(e)the amount of consideration paid by the financier to acquire the asset as contemplated in paragraph (a) of the definition of “murabaha” is deemed to be an issue price for the purposes of section 24J.

(5)For the purposes of determining the tax on income of the client in respect of a diminishing musharaka—

(a)where the bank and the client jointly acquire an asset, the client is deemed to have acquired the bank’s interest in the asset—

(i)for an amount equal to the amount paid by the bank in respect of its interest in the asset; and

(ii)at the time that the seller of the asset was divested of its interest in the asset by virtue of the transaction between the seller and the bank; or

(b)where the bank acquires an interest in an asset from the client, the client is deemed not to have disposed of the interest in the asset or to have acquired that interest from the bank.

(6)

(a)For the purposes of subsection (5), where an instalment is paid by the client to the bank, a portion of that instalment, the amount of which must be determined in accordance with paragraph (b), is deemed to be interest as defined in section 24J(1).

(b)The amount contemplated in paragraph (a) must be determined in accordance with the formula—X = A – Bin which formula—

(i)“X” represents the amount to be determined;

(ii)“A” represents the total amount of the instalment payable by the client to the bank;

(iii)“B” represents the expenditure incurred by the bank to acquire the portion of the interest in the asset transferred to the client in exchange for the instalment payable by the client to the bank.

(7)Where any sukuk is entered into—

(a)the trust is deemed not to have acquired the asset from the government of the Republic or the public entity that is listed in Schedule 2 to the Public Finance Management Act or the listed company under the sharia arrangement;

(b)the government, that public entity or that listed company is deemed not to have disposed of or reacquired the asset; and

(c)any consideration paid by the government, that public entity or that listed company in respect of the use of the asset held by the trust is deemed to be interest ascontemplated in paragraph (a) of the definition of “interest” in section 24J(1).

24JB. Taxation in respect of financial assets and liabilities of certain persons

(1)For the purposes of this section—“covered person” means—

(a)any authorised user as defined in section 1 of the Financial Markets Act that is a company, other than any company of which the principal trading activities constitute the activities of a treasury operation;

(b)the South African Reserve Bank;

(c)any—

(i)bank;

(ii)branch;

(iii)branch of a bank; or

(iv)controlling company,

as defined in section 1 of the Banks Act;

(d)any company or trust that forms part of a banking group as defined in section 1 of the Banks Act, excluding—

(i)a company that is a long-term insurer as defined in section 1 of the Long-term Insurance Act;

(ii)a company that is a short-term insurer as defined in section 1 of the Short-term Insurance Act;

(iii)a company of which more than 50 per cent of the shares are directly or indirectly held by a company contemplated in subparagraph (i) or (ii) if that company does not form part of the same group of companies as a bank;

(iv)any subsidiary, as defined in section 1 of the Companies Act, of a company contemplated in subparagraph (i) or (ii);

“derivative” means a derivative as defined in and within the scope of IFRS9;“financial asset” means—

(a)a financial asset defined in and within the scope of International Accounting Standard 32 of IFRS or any other International Accounting Standard that replaces International Accounting Standard 32; and

(b)a commodity taken into account in terms of IFRS at fair value less cost to sell in profit or loss in the statement of comprehensive income;

“financial liability” means a financial liability defined in and within the scope of International Accounting Standard 32 of IFRS or any International Accounting Standard that replaces International Accounting Standard 32;“financial reporting value”, in relation to a financial asset or a financial liability, means the value, as determined for the purposes of financial reporting pursuant to IFRS, of that financial asset or financial liability;“post-realisation years”, in relation to a covered person, means—

(a)the year of assessment immediately succeeding the realisation year;

(b)the year of assessment immediately succeeding the year of assessment contemplated in paragraph (a); and

(c)the year of assessment immediately succeeding the year of assessment contemplated in paragraph (b);

“realisation year”, in relation to a person, means—

(a)where that person is a covered person, the year of assessment of that person immediately preceding the year of assessment ending on or after 1 January 2014; or

(b)where that person becomes a covered person during any year of assessment ending after 1 January 2014, the year of assessment of that person that precedes the first year of assessment of that person in which that person becomes a covered person;

“tax base” means tax base as defined in International Accounting Standard 12 of IFRS or any International Accounting Standard replacing International Accounting Standard 12.

(2)Subject to sections 8F, 8FA and subsection (4), there must be included in or deducted from the income, as the case may be, of any covered person for any year of assessment all amounts in respect of financial assets and financial liabilities of that covered person that are recognised in profit or loss in the statement of comprehensive income in respect of financial assets and finanical liabilities of that covered person that are measured at fair value in profit or loss in terms of IFRS 9 or, in the case of commodities, at fair value less cost to sell in profit or loss in terms of IFRS for that year of assessment, excluding any amount in respect of—

(a)a financial asset that is—

(i)a share;

(ii)an endowment policy;

(iii)an interest held in a portfolio of a collective investment scheme;

(iv)an interest in a trust; or

(v)an interest in a partnership,

if that financial asset does not constitute trading stock; or

(b)a dividend or foreign dividend received by or accrued to a covered person; or

(c)a dividend distributed.[paragraph (c) added by section 27(1) of Act 23 of 2020; effective date 1 January 2021, applicable to dividends declared on or after that date]

(2A)A covered person must include in or deduct from income for a year of assessment a realised gain or realised loss that is recognised in a statement of other comprehensive income as contemplated in IFRS 9 if that realised gain or realised loss is attributable to a change in the credit risk of the financial liability as contemplated in IFRS 9 and that instrument was issued in any year of assessment commencing on or after 1 January 2018.[subsection (2A) substituted by section 44(1) of Act 23 of 2018; effective date 1 January 2018, applicable in respect of years of assessment commencing on or after that date]

(2B)Where a covered person has, during any year of assessment preceding the year of assessment commencing on or after 1 January 2018, included in or deducted from income any amount attributable to a change in the credit risk of a financial liability issued by that covered person measured at fair value through profit or loss in terms of subsection (2), such covered person must include in or deduct from income, as the case may be, any amount in respect of a change in credit risk of that financial liability recognised in other comprehensive income during any year of assessment commencing on or after 1 January 2018.

(3)Any amount required to be taken into account in determining the taxable income in terms of any provision of Part I of Chapter II, or in determining any assessed capital loss of a covered person in respect of a financial asset or a financial liability contemplated in subsection (2) must only be taken into account in terms of this section.

(4)Subsection (2) does not apply to any amount in respect of a financial asset or a financial liability of a covered person where—

(a)a covered person and another person that is not a covered person, are parties to an agreement in respect of a financial asset or financial liability; and

(b)the agreement contemplated in paragraph (a) was entered into solely or mainly for the purpose of a reduction, postponement or avoidance of liability for tax, which, but for that agreement, would have been or would become payable by the covered person.

(5)In addition to any amount included in or deducted from the income of any person in terms of subsection (2), there must be included in or deducted from the income, as the case may be, of any person for the post-realisation years of that person an amount determined in terms of subsection (6).

(6)For the purposes of subsection (5)—

(a)if—

(i)the financial reporting values of all financial assets of a nature as described in subsection (2) held by that person as at the end of the realisation year of that person exceed the tax base amount attributed to those financial assets as at the end of the realisation year of that person; or

(ii)the tax base amount attributed to all financial liabilities of a nature as described in subsection (2) held by that person as at the end of the realisation year of that person exceeds the financial reporting values of those financial liabilities as at the end of the realisation year of that person,

one-third of the excess must be included in the income of that person;

(b)if—

(i)the tax base amount attributed to all financial assets of a nature as described in subsection (2) held by that person as at the end of the realisation year of that person exceeds the financial reporting values of those financial assets as at the end of the realisation year of that person; or

(ii)the financial reporting values of all financial liabilities of a nature as described in subsection (2) held by that person as at the end of the realisation year of that person exceed the tax base amount attributed to those financial liabilities as at the end of the realisation year of that person,

one-third of the excess must be deducted from the income of that person.

(7)If a person ceases to be a covered person before the expiry of the post-realisation years of that person, the amounts determined in terms of subsection (6) which have not been included in or deducted from, as the case may be, the income of that person, must be included in or deducted from the income of that person in the year of assessment that it ceases to be a covered person.

(8)Where a person ceases to be a covered person, that person is deemed to have—

(a)disposed of its financial assets and redeemed its financial liabilities that were subject to tax in terms of subsection (2); and

(b)immediately reacquired those financial assets and incurred those financial liabilities,

at an amount equal to the market value of those financial assets on the last day of the year of assessment of that person before that person ceased to be a covered person.

(9)Where a financial asset held by or financial liability owed by a covered person at the end of the year of assessment immediately preceding the year of assessment commencing on or after 1 January 2018 would have ceased to be subject to tax or would have become subject to tax in terms of subsection (2), had IFRS 9 applied on the last day of that immediately preceding year of assessment, that covered person is deemed to have—

(a)disposed of that financial asset or redeemed that financial liability; and

(b)immediately reacquired that financial asset or incurred that financial liability,

for an amount equal to the market value of that financial asset or financial liability on that day.

24K. Incurral and accrual of amounts in respect of interest rate agreements

(1)For the purposes of this section “interest rate agreement” means any agreement in terms of which any person—

(a)acquires the right to receive—

(i)an amount calculated by applying any rate of interest to a notional principal amount specified or referred to in such agreement; or

(ii)an amount calculated with reference to the difference between any combination of rates of interest applied to a notional principal amount specified or referred to in such agreement; or

(iii)a fixed amount specified or referred to in such agreement as consideration in terms of such agreement whereunder the obligation is imposed to pay any other amount as contemplated in paragraph (b)(i) in terms of such agreement or an amount equal to the difference between such fixed amount and such other amount; or

(b)becomes liable to pay—

(i)an amount calculated by applying any rate of interest to a notional principal amount specified or referred to in such agreement; or

(ii)an amount calculated with reference to the difference between any combination of rates of interest applied to a notional principal amount specified or referred to in such agreement; or

(iii)a fixed amount specified or referred to in such agreement as consideration in terms of such agreement whereunder the right is acquired to receive any other amount as contemplated in paragraph (a)(i) in terms of such agreement or an amount equal to the difference between such fixed amount and such other amount.

(2)Any amount contemplated in the definition of “interest rate agreement” in subsection (1) shall for the purposes of this Act be deemed to have been incurred by or accrued to, as the case may be, a person contemplated in such definition on a day to day basis during the period in respect of which it is calculated.

(3)Where any amount contemplated in subsection (2) is to be calculated with reference to a variable rate for the purposes of such subsection, such amount shall be calculated with reference to the variable rate applicable on the date such amount is to be calculated to determine all amounts payable or receivable after such date.

24L. Incurral and accrual of amounts in respect of option contracts

(1)For the purposes of this section—“intrinsic value”, in relation to an option contract, means an amount equal to the difference between the market price or value of an asset, index, currency, rate of interest or any other factor, as provided for in the option contract, on the date of acquisition of the option contract and the pre-arranged price or value provided for in the option contract; and“option contract” means an agreement the effect of which is that any person acquires the

Income Tax Act, 1962

Act 58 of 1962

Income Tax Act, 1962

Collections

Related documents

Income Tax Act, 1962

Act 58 of 1962

Preliminary

1. Interpretation

Chapter IAdministration

2. Administration of Act

3. Exercise of powers and performance of duties

4A. Exercise of powers and performance of duties by Minister

Chapter IIThe taxes

Part I – Normal tax

5. Levy of normal tax and rates thereof

6. Normal tax rebates

6A. Medical scheme fees tax credit

6B. Additional medical expenses tax credit

6C. Solar energy tax credit

6quat. Rebate or deduction in respect of foreign taxes on income

6quin. Rebate in respect of foreign taxes on income from source within Republic

7. When income is deemed to have accrued or to have been received

7A. Date of receipt or accrual of antedated salaries or pensions and of certain retirement gratuities

7B. Timing of accrual and incurral of variable remuneration

7C. Loan, advance or credit granted to trust by connected person

7D. Calculation of amount of interest

7E. Time of accrual of interest payable by SARS

7F. Deduction of interest repaid to SARS

8. Certain amounts to be included in income or taxable income

8A. Gains made by directors of companies or by employees in respect of rights to acquire marketable securities

8B. Taxation of amounts derived from broad-based employee share plan

8C. Taxation of directors and employees on vesting of equity instruments

8E. Dividends derived from certain shares and equity instruments deemed to be income in relation to recipients thereof

8EA. Dividends on third-party backed shares deemed to be income in relation to recipients thereof

8F. Interest on hybrid debt instruments deemed to be dividends in specie

8FA. Hybrid interest deemed to be dividends in specie

8G. Determination of contributed tax capital in respect of shares issued to a group company

9. Source of income

9A. Blocked foreign funds

9C. Circumstances in which certain amounts received or accrued from disposal of shares are deemed to be of a capital nature

9D. Net income of controlled foreign companies

9H. Change of residence, ceasing to be controlled foreign company or becoming headquarter company

9HA. Disposal by deceased person

9HB. Transfer of asset between spouses

9I. Headquarter companies

9J. Interest of non-resident persons in immovable property

9K. Listing of security on exchange outside Republic

10. Exemptions

10A. Exemption of capital element of purchased annuities

10B. Exemption of foreign dividends and dividends paid or declared by headquarter companies

10C. Exemption of non-deductible element of qualifying annuities

11. General deductions allowed in determination of taxable income

11A. Deductions in respect of expenditure and losses incurred prior to commencement of trade

11D. Deductions in respect of scientific or technological research and development

11E. Deduction of certain expenditure incurred by sporting bodies

11F. Deduction in respect of contributions to retirement funds

11sex. Deduction of compensation for railway operating losses

12B. Deduction in respect of certain machinery, plant, implements, utensils and articles used in farming or production of renewable energy

12BA. Enhanced deduction in respect of certain machinery, plant, implements, utensils and articles used in production of renewable energy

12C. Deduction in respect of assets used by manufacturers or hotel keepers and in respect of aircraft and ships, and in respect of assets used for storage and packing of agricultural products

12D. Deduction in respect of certain pipelines, transmission lines and railway lines

12DA. Deduction in respect of rolling stock

12E. Deductions in respect of small business corporations

12F. Deduction in respect of airport and port assets

12H. Additional deduction in respect of learnership agreements

12I. Additional investment and training allowances in respect of industrial policy projects

12J. Deductions in respect of expenditure incurred in exchange for issue of venture capital company shares

12K. ***

12L. Deduction in respect of energy efficiency savings

12M. Deduction of medical lump sum payments

12N. Deductions in respect of improvements not owned by taxpayer

12NA. Deductions in respect of improvements on property in respect of which government holds a right of use or occupation

12O. Exemption in respect of films

12P. Exemption of amounts received or accrued in respect of government grants

12Q. Exemption of income in respect of ships used in international shipping

12R. Special economic zones

12S. Deduction in respect of buildings in special economic zones

12T. Exemption of amounts received or accrued in respect of tax free investments

12U. Additional deduction in respect of roads and fences in respect of production of renewable energy

Chapter I
Administration

Chapter II
The taxes