Author: admin_kmos

“Equity share” definition of section 9C of ITA

Posted on by admin_kmos

“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 of Act 23 of 2018 effective on 17 January 2019]

(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;

[Definition of “equity share” inserted by section 24 of Act 24 of 2011 and substituted by section 18 of Act 31 of 2013 and section 12 of Act 25 of 2015 effective on 1 January 2016]

“Connected person” definition of section 9C of ITA

Posted on by admin_kmos

(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;

Section 9A (ITA) – Blocked foreign funds

Posted on by admin_kmos

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.


9B.    ………

Subsection 2, 3 and 4 of section 9 of ITA

Posted on by admin_kmos

(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 utilization 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;

 [Words preceding the proviso substituted by section 10 of Act 43 of 2014 and section 18 of Act 15 of 2016 effective on 1 March 2017, applies in respect of years of assessment commencing on or after that date]

(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 to a permanent establishment of that person which is situated outside the Republic; and

(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 to a permanent establishment of that person which is situated in the Republic; or

[Paragraph (k) amended by section 16 of Act 23 of 2018 and by section 5 of Act 23 of 2020 and substituted by section 6(a) of Act 17 of 2023]

(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 effectively connected 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 effectively connected to a permanent establishment of that person which is situated in the Republic.

[Paragraph (l) substituted by section 6(b) of Act 17 of 2023]

(3)       ……….

[Subsection (3) substituted by section 16 of Act 31 of 2013 and section 10 of Act 43 of 2014 and deleted by section 18 of Act 15 of 2016 effective on 1 March 2017, applies in respect of years of assessment commencing on or after that date]

(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);

[Paragraph (b) substituted by section 11 of Act 25 of 2015 effective on 8 January 2016]

(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).

Subsection 2 and 3 of section 8FA of ITA

Posted on by admin_kmos

(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—

(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 9(1) of Act 43 of 2014, substituted by section 17(1)(b) of Act 15 of 2016 and by section 12 of Act 17 of 2017, amended by section 15(1) of Act 23 of 2018 and substituted by section 9(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 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;

(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

[Subparagraph (i) substituted by section 17(1)(c) of Act 15 of 2016 effective on 1 January, 2017 and applicable in respect of years of assessment commencing on or after that date]

(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;

[Subparagraph (ii) substituted by section 17(1)(c) of Act 15 of 2016 effective on 1 January, 2017 and applicable in respect of years of assessment commencing on or after that date]

[Paragraph (c) amended by section 8(1)(a) of Act 5 of 2026 effective on 1 January, 2026]

(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

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

[Paragraph (e) added by section 17(1)(d) of Act 15 of 2016 and amended by section 8(1)(b) of Act 5 of 2026 effective on 1 January, 2026]

(f)      an instrument that constitutes a FLAC instrument issued-

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

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

[Paragraph (f) added by section 8(1)(c) of Act 5 of 2026 effective on 1 January, 2026]

[Section 8FA inserted by section 14(1) of Act 31 of 2013 effective on 1 April, 2014 and applicable in respect of amounts incurred on or after that date]