Author: admin_kmos

Section 11(cA) of ITA

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(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;

Section 11(a) of ITA – general deduction formula

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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;

 

(b)     ……….

Subsection 2 of section 10C of ITA

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(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-

(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.

[Subsection (2) amended by section 26(1) of Act 31 of 2013, by section 18(1) of Act 17 of 2017, by section 24(1) of Act 23 of 2018, by section 14(1)(c) of Act 34 of 2019 and by section 12(1)(d) of Act 23 of 2020 effective on 1 March, 2021]

[Section 10C inserted by section 21(1) of Act 22 of 2012 and amended by section 14(1)(a) of Act 34 of 2019 effective on 1 March, 2020 and 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]

“Compulsory annuity” definition of section 10C of ITA

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(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”;

[Paragraph (c) amended by section 12(1)(a) of Act 23 of 2020 effective on 1 March, 2021]

(d)     as contemplated in paragraph (ii)(dd) of the proviso to the definition of “provident fund” in section 1(1);

[Paragraph (d) substituted by section 12(1)(b) of Act 23 of 2020, by section 7(1) of Act 20 of 2022 and by section 2(1)(a) of Act 12 of 2024 effective on 1 September, 2024 (effective date in section 2(2) of Act 12 of 2024 as substituted by section 3 of Act 6 of 2025)]

(e)     as contemplated in paragraph (e) of the definition of “provident preservation fund” in section 1(1); or

[Paragraph (e) added by section 12(1)(c) of Act 23 of 2020 and substituted by section 2(1)(b) of Act 12 of 2024 effective on 1 September, 2024 (effective date in section 2(2) of Act 12 of 2024 as substituted by section 3 of Act 6 of 2025)]

(f)      as contemplated in paragraph (ii) of the further proviso to the definition of “pension fund” in section 1(1);

[Paragraph (f) added by section 2(1)(c) of Act 12 of 2024 effective on 1 September, 2024 (effective date in section 2(2) of Act 12 of 2024 as substituted by section 3 of Act 6 of 2025)]

(g)     as contemplated in paragraph (d) of the definition of “retirement component” in section 1(1); or

[Paragraph (g) added by section 2(1)(c) of Act 12 of 2024 effective on 1 September, 2024 (effective date in section 2(2) of Act 12 of 2024 as substituted by section 3 of Act 6 of 2025)]

(h)     as contemplated in paragraph (ii) of the further proviso to the definition of “provident fund” in section 1(1).

[Paragraph (h) added by section 2(1)(c) of Act 12 of 2024 effective on 1 September, 2024 (effective date in section 2(2) of Act 12 of 2024 as substituted by section 3 of Act 6 of 2025)]

[Definition of “qualifying annuity”, previously definition of “compulsory annuity” amended by section 16(1) of Act 43 of 2014 and substituted by section 14(1)(b) of Act 34 of 2019 effective on 1 March, 2020 and 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]

Subsections 2, 3, 4, 5 and 6 of section 10B of ITA

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

(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 × C

in 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;

[Item (aa) substituted by section 6 of Act 13 of 2015 and section 8 of Act 14 of 2017 effective on 1 March 2017, applies in respect of years of assessment commencing on or after that date]

(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,

[Subitem (B) substituted by section 15 of Act 43 of 2014 effective on 1 January 2016]

the ratio of the number 7 to the number 27; or

[Item (bb) amended by section 8(1)(b) of Act 14 of 2017 and by section 10(1)(a) of Act 17 of 2023 effective on 31 March, 2023 and applicable 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

[Item (cc) substituted by section 8 of Act 14 of 2017 effective on 1 March 2017, applies in respect of years of assessment commencing on or after that date]

(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), (2)(b), (2)(d) and (3) do not apply in respect of any foreign dividend received by or accrued to any person if-

(a)

(i)      any amount of that foreign dividend is determined directly or indirectly with reference to; or

(ii)     that foreign dividend arises directly or indirectly from any amount paid or payable by any person to any other person; and

(b)     the amount so paid or payable is deductible from the income of the person by whom it is paid or payable and-

(i)      is not subject to normal tax in the hands of the other person contemplated in subparagraph (i); and

(ii)     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 the foreign dividend is declared from profits where less than 20 per cent of the profits were generated from transactions with persons that deducted the amount so paid or payable from income.

[Subsection (4) amended by section 20(1)(e) and (f) of Act 22 of 2012 and substituted by section 10(1)(b) of Act 17 of 2023 with effect from 1 January, 2024 and applicable in respect of dividends or foreign dividends received or accrued on or after that date]

(4A)  Subsection (2)(a) and (b) do not apply in respect of any foreign dividend received by or accrued to any person from any portfolio contemplated in paragraph (e)(ii) of the definition of ‘company’ in section 1.

[Subsection (4A) inserted by section 10(1)(c) of Act 17 of 2023 with effect from 1 January, 2024 and applicable in respect of dividends or foreign dividends received or accrued on or after that date]

(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.

[Subsection (5) substituted by section 20 of Act 22 of 2012 effective on 1 March 2012 where it applies to any person that is a natural person, deceased estate, insolvent estate or trust, and effective on 1 April 2012 where it applies to any person that is a person other than a natural person, deceased estate, insolvent estate or trust, and by section 17 of Act 17 of 2017 effective on 18 December 2017]

(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.

[Subparagraph (ii) substituted by section 17 of Act 17 of 2017 effective on 18 December 2017]

[Subsection (6) added by section 25 of Act 31 of 2013 and substituted by section 25 of Act 15 of 2016 effective on 1 March 2017, applies in respect of amounts received or accrued after that date]

(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) inserted by section 11(1) of Act 23 of 2020 effective on 1 January, 2021 and 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, effective on 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 deemed effective on 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 of Act 23 of 2018 effective on 17 January 2019]

Subsections 2, 3, 4, 5, 6, 7, 8, 10 and 11 of section 10A of ITA

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(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

             Y   =      A      x   C

                          B

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

Z   =      1      x   A

             N

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 formula

X   =   A – D

in 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.

[Paragraph (c) added by section 24 of Act 15 of 2016 effective on 8 January 2016] 

(8)     ……….

[Subsection (8) deleted by section 17 of Act 25 of 2015 effective on 8 January 2016]

(9)     ……….

(10)   ……….

[Subsection (10) substituted by section 271 of Act 28 of 2011 and deleted by section 24 of Act 15 of 2016 effective on 19 January 2017]

(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.