Author: admin_kmos

“Investment income” definition of section 12E of ITA

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(b)     ‘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)(ff)), 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;

(c)     ………

“Small business corporation” definition of section 12E of ITA

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(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-

[Words preceding subparagraph (i) substituted by section 23 of Act 7 of 2010, section 35 of Act 31 of 2013 and section 29 of Act 15 of 2016 effective on 1 May 2011, applies in respect of years of assessment ending on or after that date]

(i)      the gross income for the year of assessment does not exceed and 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;

[Proviso to paragraph (i) substituted by section 26 of Act 17 of 2017 effective on 18 December 2017]

(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-

[Words preceding item (aa) substituted by section 20 of Act 43 of 2014 effective on 20 January 2015]

(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;

Section 12E (ITA) – Deduction in respect of small business corporations

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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-

[Words preceding paragraph (a) substituted by section 35 of Act 31 of 2013 effective 12 December 2013]

(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.

[Subsection (1) amended by section 21 of Act 31 of 2005 and substituted by section 21 of Act 25 of 2015 effective on 8 January 2016]

(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 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 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.

[Subsection (2) substituted by section 21 of Act 31 of 2005 and section 26 of Act 17 of 2017 effective on 18 December 2017]

(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 deemed to have come into operation on 1 March, 2023 and applicable in respect of assets brought into use on or after that date]

Section 12DA (ITA) – Deduction in respect of rolling stock

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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 34 of Act 31 of 2013, by section 15 of Act 23 of 2020 and by section 12 of Act 20 of 2021]

(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 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 rolling stock was in fact concluded, have incurred in respect of the direct cost of acquisition or improvement of the rolling stock.

[Subsection (3) substituted by section 25 of Act 17 of 2017 effective on 18 December 2017]

(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.

Subsections 2, 2A, 3, 3A, 5, and 6 of section 12D of ITA

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(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 –

[Words preceding paragraph (a) substituted by section 19 of Act 43 of 2014 effective on 1 April 2015]

(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;

[Paragraph (a) substituted by section 23 of Act 35 of 2007, section 12 of Act 3 of 2008 and section 19 of Act 43 of 2014 effective on1 April 2015]

(b)     the asset as contemplated in paragraph (a) which is used directly by such taxpayer for purposes contemplated in the definition of ‘affected asset’,

[Paragraph (b) substituted by section 12 of Act 3 of 2008 and section 19 of Act 43 of 2014 effective on 1 April 2015]

(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”;

[Paragraph (a) amended by section 19 of Act 43 of 2014 effective on 1 April 2015]

(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

[Paragrpah (b) substituted by section 12 of Act 3 of 2008 and seciton 19 of Act 43 of 2014 effective on 1 April 2015]

(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) added by section 19 of Act 43 of 2014 and substituted by section 28 of Act 23 of 2018 effective on 1 April 2019, applies 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).

[Subsection (4) amended by section 23 of Act 35 of 2007 and substituted by section 24 of Act 17 of 2017 effective on 18 December 2017]

(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.

“Affected asset” definition of section 12D of ITA

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(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;

Section 12C (ITA) – Deduction in respect of assets used by manufacturers or hotelkeepers and in respect of aircraft and ships, and in respect of assets used for storage and packing of agricultural products

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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 20 of Act 31 of 2005 and section 27 of Act 23 of 2018 effective on 17 January 2019]

 

(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;

[Paragraph (a) substituted by section 11 of Act 19 of 2001, section 8 of Act 9 of 2005, section 20 of Act 31 of 2005, section 32 of Act 31 of 2013 and section 20 of Act 25 of 2015 effective on 8 January 2016]

 

(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;

[Paragraph (b) substituted by section 20 of Act 31 of 2005, sectiion 32 of Act 31 of 2013 and section 20 of Act 25 of 2015 effective on 8 January 2016]

 

(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) inserted by section 20(1)(b) of Act 25 of 2015 and substituted by section 14 of Act 23 of 2020]

 

(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 20 of Act 31 of 2005, section 32 of Act 31 of 2013 and section 27 of Act 23 of 2018 effective on 17 January 2019]

 

(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 20 of Act 31 of 2005, section 32 of Act 31 of 2013 and section 27 of Act 23 of 2018 effective on 17 January 2019]

 

(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 mainly engaged in international traffic as contemplated in section 12Q(1));

[Paragraph (g) added by section 13(1)(b) of Act 21 of 1995 and substituted by section 20(b) of Act 31 of 2005, by section 32(1)(a) of Act 31 of 2013, by section 32(1)(b) of Act 31 of 2013 and by section 14 of Act 5 of 2026]

 

(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 –

 

(a)     ……….

 

(b)     ……….

 

(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 parry 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),

 [Paragraph (c) added by section 15 of Act 30 of 2002, amended by section 30 of Act 45 of 2003 and section 20 of Act 31 of 2005 and substituted by section 20 of Act 25 of 2015 effective on 8 January 2016]

 

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 –

 

(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; and

 

(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,

 

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 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 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.

[Subsection (2) substituted by section 20 of Act 31 of 2005 and section 23 of Act 17 of 2017 effective on 18 December 2017]

 

(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;

 

(b)     ……….

 

(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;

[Paragraph (d) added by section 8(c) of Act 9 of 2005, amended by section 32(1)(g) of Act 31 of 2013 and substituted by section 10(1)(a) of Act 42 of 2024 effective on 1 March, 2026 and applicable in respect of assets brought into use on or after that date]

 

(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; or

[Paragraph (e) added by section 20(g) of Act 31 of 2005 and substituted by section 32(1)(h) of Act 31 of 2013 and by section 10(1)(a) of Act 42 of 2024 effective on 1 March, 2026 and applicable in respect of assets brought into use on or after that date]

 

(f)      any asset in respect of which a deduction has been granted to the taxpayer under section 12V.

[Paragraph (f) added by section 10(1)(b) of Act 42 of 2024 effective on 1 March, 2026 and applicable in respect of assets brought into use on or after that date]

 

(4)     ……….

 

(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.

Section 12B (ITA) – Deduction in respect of certain machinery, plant, implements, utensils and articles used in farming or production of renewable energy

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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 –

(a)     ……….

(b)     ……….

(c)     ……….

(d)     ……….

(e)     ……….

(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;

[Subparagraph (ii) substituted by section 19 of Act 25 of 2015 effective on 1 January 2016]

 

(iii)    hydropower to produce electricity of not more than 30 megawatts; or

[Sub­paragraph (iii) amended by section 16 of Act 34 of 2019]

 

(iv)    biomass comprising organic wastes, landfill gas or plant material; or

(i)      improvements (other than repairs) to-

(i)      any machinery, plant, implement, utensil or article referred to in paragraph (f), (g) or (h); and

 

(ii)     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 (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-

[Words preceding paragraph (a) substituted by section 22 of Act 17 of 2017 effective on 18 December 2017]

(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;

[Paragraph (a) substituted by section 19 of Act 25 of 2015 effective on 1 January 2016]

(b)     in the case of an asset contemplated in subsection (1)(h)(ii)(bb), 100 per cent of such cost

[Paragraph (b) substituted by section 19 of Act 25 of 2015 effective on 1 January 2016]

 

(c)     ……….

[Paragraph (c) deleted by section 28 of Act 15 of 2016 effective on 1 January 2016, applies in respect of years of assessment commencing on or after that date]

(3)     For 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 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.

[Subsection (3) substituted by section 19 of Act 31 of 2005 and section 22 of Act 17 of 2017 effective on 18 December 2017]

(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;

 

(b)     ……….

 

(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;

[Paragraph (c) amended by section 7 of Act 9 of 2005 and substituted by section 19 of Act 25 of 2015 effective on 8 January 2016]

 

(d)     any asset which has been disposed of by the taxpayer during any previous year of assessment;

 

(e)     ……….

 

(f)      any asset in respect of which an allowance has been granted to the taxpayer under section 12E;

[Paragraph (f) added by section 7(b) of Act 9 of 2005, amended by section 19(g) of Act 31 of 2005 and substituted by section 15(1)(a) of Act 17 of 2023 effective on 1 March, 2023]

(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

[Paragraph (g) added by section 19(h) of Act 31 of 2005 and substituted by section 31(c) of Act 31 of 2013 and by section 15(1)(a) of Act 17 of 2023 effective on 1 March, 2023]

(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 on 1 March, 2023]

(4A)  ……….

(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.

[Subsection (6) substituted by section 19 of Act 31 of 2005 and section 19 of Act 25 of 2015 effective on 8 January 2016]