(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 8 of Act 43 of 2014, substituted by section 16(1)(e) of Act 15 of 2016 and by section 11 of Act 17 of 2017, amended by section 14(1) of Act 23 of 2018 and substituted by section 8(1) of Act 20 of 2021 effective on the date of promulgation of that Act, 19 January, 2022 and 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;
[Paragraph (c) amended by section 16(1)(f) of Act 15 of 2016 effective on 1 January, 2017 and applicable in respect of years of assessment commencing on or after that date]
(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
[Paragraph (e) added by section 16 of Act 15 of 2016 effective on 1 January 2017, applies in respect of years of assessment commencing on or after that date]
(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.
[Paragraph (f) added by section 16 of Act 15 of 2016 effective on 1 January 2016, applies in respect of years of assessment commencing on or after that date]