Author: admin_kmos

Section 11sex (ITA) – Deduction of compensation for railway operating losses

Posted on by admin_kmos

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.

 

12.      ……….

 

12A.    ……….

Section 11E (ITA) – Deduction of certain expenditure incurred by sporting bodies

Posted on by admin_kmos

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.

Subsections 2, 4, 5, 6, 7, 9, 10, 11, 12, 13, 14, 15, 16, 17, 18 and 19 of section 11D of ITA

Posted on by admin_kmos

(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 scientific or technological research and development in the Republic if-

[Words preceding subparagraph (i) substituted by section 18 of Act 43 of 2014 effective on 1 January 2014]

(i)      that expenditure is incurred in the production of income;

(ii)     that expenditure is incurred in the carrying on of any trade;

(iii)    that scientific or technological research and development is approved in terms of subsection (9); and

[Subparagraph (iii) substituted by section 12(1)(j) of Act 17 of 2023 with effect from 1 January, 2024 and applicable in respect of applications received and expenditure incurred on or after that date]

(iv)    that expenditure is incurred within six months prior to or on or after the date of receipt of the application by the Department of Science and Innovation for approval of that scientific or technological research and development in terms of subsection (9).

[Subparagraph (iv) substituted by section 12(1)(k) of Act 17 of 2023 with effect from 1 January, 2024 and applicable in respect of applications received and expenditure incurred on or after that date]

[Paragraph (a) amended by section 18(1)(e) of Act 43 of 2014 (effective date in section 18(4) of Act 43 of 2014 as substituted section 64(1) of Act 17 of 2023) and by section 12(1)(i) of Act 17 of 2023 with effect from 1 January, 2024 and applicable in respect of applications received and expenditure incurred on or after that date]

(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 scientific or technological research and development and that prototype or pilot plant is not intended to be utilised or is not utilised for production purposes after that scientific or technological research and development is completed;

[Subparagraph (i) substituted by section 12(1)(l) of Act 17 of 2023 with effect from 1 January, 2024 and applicable in respect of applications received and expenditure incurred on or after that date]

(ii)     financing, administration, compliance and similar costs.

[Subsection (2) substituted by section 13(1)(b) of Act 8 of 2007, amended by section 11(a), (b) and (c) of Act 3 of 2008 and substituted by section 16 of Act 17 of 2009, by section 32(1) of Act 24 of 2011 (effective date in section 32(2) of Act 24 of 2011 as substituted section 168(1) of Act 22 of 2012 and by section 57(1) of Act 17 of 2023) and by section 29(1)(a) of Act 31 of 2013 with effect from 1 January, 2014 and applicable in respect of expenditure incurred in respect of research and development on or after that date (effective date in section 29(2) of Act 31 of 2013 as substituted section 62(1) of Act 17 of 2023)]

(3)       ……….

[Subsection (3) substituted by section 13(1)(b) of Act 8 of 2007, amended by section 19(1)(b) and (c) of Act 35 of 2007, substituted by section 16 of Act 17 of 2009, by section 32(1) of Act 24 of 2011 (effective date in section 32(2) of Act 24 of 2011 as substituted section 168(1) of Act 22 of 2012 and by section 57(1) of Act 17 of 2023) and deleted by section 29(1)(b) of Act 31 of 2013 with effect from 1 January, 2014 and applicable in respect of expenditure incurred in respect of research and development on or after that date (effective date in section 29(2) of Act 31 of 2013 as substituted section 62(1) of Act 17 of 2023)]

(4)     Where any amount of expenditure is incurred by a taxpayer to fund expenditure of another person carrying on scientific or technological research and development on behalf of that taxpayer, the taxpayer may deduct an amount contemplated in subsection (2)—

(a)     if that scientific or technological research and development is approved by the Minister of Higher Education, Science and Innovation in terms of subsection (9);

[Paragraph (a) substituted by section 12(1)(n) of Act 17 of 2023 with effect from 1 January, 2024 and applicable in respect of applications received and expenditure incurred on or after that date]

(b)     if that expenditure is incurred in respect of scientific or technological research and development;

[Paragraph (b) substituted by section 12(1)(o) of Act 17 of 2023 and by section 12 of Act 5 of 2026]

(c)     to the extent that the other person carrying on the scientific or technological 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 scientific or technological research and development does not claim a deduction under subsection (2); and

[Paragraph (c) amended by section 29(1)(d) of Act 31 of 2013 (effective date in section 29(2) of Act 31 of 2013 as substituted section 62(1) of Act 17 of 2023) and substituted by section 12(1)(p) of Act 17 of 2023 with effect from 1 January, 2024 and applicable in respect of applications received and expenditure incurred on or after that date]

(d)     if that expenditure is incurred within six months prior to or on or after the date of receipt of the application by the Department of Science and Innovation for approval of that scientific or technological research and development in terms of subsection (9).

[Paragraph (d) substituted by section 12(1)(q) of Act 17 of 2023 with effect from 1 January, 2024 and applicable in respect of applications received and expenditure incurred on or after that date]

[Subsection (4) substituted by section 16 of Act 17 of 2009, by section 32(1) of Act 24 of 2011 (effective date in section 32(2) of Act 24 of 2011 as substituted section 168(1) of Act 22 of 2012 and by section 57(1) of Act 17 of 2023), amended by section 29(1)(c) of Act 31 of 2013 (effective date in section 29(2) of Act 31 of 2013 as substituted section 62(1) of Act 17 of 2023) and by section 12(1)(m) of Act 17 of 2023 with effect from 1 January, 2024 and applicable in respect of applications received and expenditure incurred on or after that date]

(5)     Where a company funds expenditure incurred by another company 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 scientific or technological research and development carried on by the other company that is being funded.

[Subsection (5) amended by section 13(1)(c) of Act 8 of 2007 and substituted by section 32(1) of Act 24 of 2011 (effective date in section 32(2) of Act 24 of 2011 as substituted section 168(1) of Act 22 of 2012 and by section 57(1) of Act 17 of 2023), by section 18(1)(f) of Act 43 of 2014 (effective date in section 18(4) of Act 43 of 2014 as substituted section 64(1) of Act 17 of 2023) and by section 12(1)(r) of Act 17 of 2023 with effect from 1 January, 2024 and applicable in respect of applications received and expenditure incurred on or after that date]

(6)     For the purposes of subsections (2) and (4)-

(a)     a person carries on scientific or technological research and development if that person may determine or alter the methodology of the research;

(b)     notwithstanding paragraph (a), certain categories of scientific or technological research and development designated by the Minister in Regulation 343 of 23 April 2015 or by notice in the Gazette are deemed to constitute the carrying on of scientific or technological research and development.

[Subsection (6) substituted by section 13(1)(e) of Act 8 of 2007, by section 32(1) of Act 24 of 2011 (effective date in section 32(2) of Act 24 of 2011 as substituted section 168(1) of Act 22 of 2012 and by section 57(1) of Act 17 of 2023) and by section 29(1)(e) of Act 31 of 2013 (effective date in section 29(2) of Act 31 of 2013 as substituted section 62(1) of Act 17 of 2023), amended by section 18(1)(g) of Act 43 of 2014 (effective date in section 18(3) of Act 43 of 2014 as substituted section 64(1) of Act 17 of 2023) and substituted by section 12(1)(s) of Act 17 of 2023 with effect from 1 January, 2024 and applicable in respect of applications received and expenditure incurred on or after that date]

(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 32 of 2000),

to fund expenditure in respect of any scientific or technological 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).

[Subsection (7) substituted by section 11(d) of Act 3 of 2008, by section 32(1) of Act 24 of 2011 2011 (effective date in section 32(2) of Act 24 of 2011 as substituted section 168(1) of Act 22 of 2012 and by section 57(1) of Act 17 of 2023), by section 29(1)(f) of Act 31 of 2013 (effective date in section 29(2) of Act 31 of 2013 as substituted section 62(1) of Act 17 of 2023) and by section 12(1)(t) of Act 17 of 2023 with effect from 1 January, 2024 and applicable in respect of applications received and expenditure incurred on or after that date]

(8)      . . . . . .

[Subsection (8) substituted by section 32(1) of Act 24 of 2011 (effective date in section 32(2) of Act 24 of 2011 as substituted section 168(1) of Act 22 of 2012 and by section 57(1) of Act 17 of 2023) and deleted by section 29(1)(g) of Act 31 of 2013 with effect from 1 January, 2014 and applicable in respect of expenditure incurred in respect of research and development on or after that date (effective date in section 29(2) of Act 31 of 2013 as substituted section 62(1) of Act 17 of 2023)]

(9)     The Minister of Higher Education, Science and Innovation or a person appointed by the Minister of Higher Education, Science and Innovation must approve any scientific or technological 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 scientific or technological research and development in respect of which the approval is sought complies with the criteria contemplated in the definition of “scientific or technological research and development” in subsection (1)(j),

(b)     . . . . . .

(c)     such other criteria as the Minister of Finance in consultation with the Minister of Higher Education, Science and Innovation may prescribe by regulation; and

(d)     the application for approval of the project being submitted by the taxpayer and received by the Minister of Higher Education, Science and Innovation in such form and containing such information as the Minister of Higher Education, Science and Innovation may prescribe.

[Subsection (9) substituted by section 13(1)(f) of Act 8 of 2007 and by section 32(1) of Act 24 of 2011 2011 (effective date in section 32(2) of Act 24 of 2011 as substituted section 168(1) of Act 22 of 2012 and by section 57(1) of Act 17 of 2023), amended by section 29(1)(h), (i), (j) and (k) of Act 31 of 2013 (effective date in section 29(2) of Act 31 of 2013 as substituted section 62(1) of Act 17 of 2023) and substituted by section 12(1)(u) of Act 17 of 2023 with effect from 1 January, 2024 and applicable in respect of applications received and expenditure incurred on or after that date]

(10)   If scientific or technological 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 Higher Education, Science and Innovation at the time of granting approval;

(b)     the taxpayer carrying on that scientific or technological research and development fails to submit a report to the committee as required by subsection (13); or

(c)     the taxpayer carrying on that scientific or technological 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 Higher Education, Science and Innovation may, after taking into account the recommendations of the committee, withdraw the approval granted in respect of that scientific or technological research and development with effect from a date specified by that Minister.

[Subsection (10) substituted by section 32(1) of Act 24 of 2011 2011 (effective date in section 32(2) of Act 24 of 2011 as substituted section 168(1) of Act 22 of 2012 and by section 57(1) of Act 17 of 2023), amended by section 29(1)(l), (m) and (n) of Act 31 of 2013 (effective date in section 29(2) of Act 31 of 2013 as substituted section 62(1) of Act 17 of 2023) and substituted by section 12(1)(v) of Act 17 of 2023 with effect from 1 January, 2024 and applicable in respect of applications received and expenditure incurred on or after that date]

(11)

(a)     A committee must be appointed for the purposes of approving scientific or technological research and development under subsection (9) consisting of-

(i)      three persons employed by the Department of Science and Innovation appointed by the Minister of Higher Education, Science and Innovation;

(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 Higher Education, Science and Innovation 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 (b), that person may perform the function of any other person from the Department of Science and Innovation, or the South African Revenue Service in respect of which institution that person is appointed as alternative.

[Subsection (11) substituted by section 3(1)(a) of Act 9 of 2007, by section 1(1) of Act 25 of 2011 (effective date in section 1(2) of Act 25 of 2011 as substituted by section 35(1) of Act 21 of 2012, by section 34(1) of Act 20 of 2022 and by section 58(1) of Act 17 of 2023), amended by section 18(1)(h) of Act 43 of 2014 (effective date in section 18(2) of Act 43 of 2014 as substituted section 64(1) of Act 17 of 2023) and substituted by section 12(1)(w) of Act 17 of 2023 with effect from 1 January, 2024 and applicable in respect of applications received and expenditure incurred on or after that date]

(12)

(a)     The committee appointed in terms of subsection (11) must perform its function 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 Higher Education, Science and Innovation for purposes of the approval of scientific or technological research and development approved under subsection (9);

(iii)    investigate or cause to be investigated scientific or technological research and development approved under subsection (9);

(iv)    monitor all scientific or technological 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 Minister of Higher Education, Science and Innovation 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 scientific or technological research and development in terms of subsection (9), to furnish any information or documents necessary for the Minister of Higher Education, Science and Innovation and the committee to perform their functions in terms of this section.

[Subsection (12) substituted by section 1(1) of Act 25 of 2011 (effective date in section 1(2) of Act 25 of 2011 as substituted by section 35(1) of Act 21 of 2012, by section 34(1) of Act 20 of 2022 and by section 58(1) of Act 17 of 2023) and by section 12(1)(x) of Act 17 of 2023 with effect from 1 January, 2024 and applicable in respect of applications received and expenditure incurred on or after that date]

(13)   A taxpayer carrying on scientific or technological research and development approved under subsection (9) must report to the committee annually with respect to-

(a)     the purposes of that scientific or technological research and development; and

(b)     the extent to which that scientific or technological 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 Higher Education, Science and Innovation may prescribe.

[Subsection (13) substituted by section 1(1) of Act 25 of 2011 (effective date in section 1(2) of Act 25 of 2011 as substituted by section 35(1) of Act 21 of 2012, by section 34(1) of Act 20 of 2022 and by section 58(1) of Act 17 of 2023), by section 29(1)(o) of Act 31 of 2013 (effective date in section 29(2) of Act 31 of 2013 as substituted section 62(1) of Act 17 of 2023) and by section 12(1)(y) of Act 17 of 2023 with effect from 1 January, 2024 and applicable in respect of applications received and expenditure incurred on or after that date]

(14)   Notwithstanding Chapter 6 of the Tax Administration Act, the Commissioner may disclose to the Minister of Higher Education, Science and Innovation information in relation to scientific or technological 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);

(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); and

(c)     as may be required to fulfil the duties as contemplated in subsection (12)(iv).

[Subsection (14) substituted by section 1(1) of Act 25 of 2011 (effective date in section 1(2) of Act 25 of 2011 as substituted by section 35(1) of Act 21 of 2012, by section 34(1) of Act 20 of 2022 and by section 58(1) of Act 17 of 2023), by section 271 read with paragraph 34(a) of Schedule 1 of Act 28 of 2011, by section 29(1)(p) of Act 31 of 2013 (effective date in section 29(2) of Act 31 of 2013 as substituted section 62(1) of Act 17 of 2023) and by section 12(1)(z) of Act 17 of 2023 with effect from 1 January, 2024 and applicable in respect of applications received and expenditure incurred on or after that date]

(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.

[Subsection (15) substituted by section 1(1) of Act 25 of 2011 with effect from 1 October 2012 and applicable in respect of research and development on or after 1 October 2012 (effective date in section 1(2) of Act 25 of 2011 as substituted by section 35(1) of Act 21 of 2012, by section 34(1) of Act 20 of 2022 and by section 58(1) of Act 17 of 2023)]

(16)   The Minister of Higher Education, Science and Innovation or the person appointed by the Minister of Higher Education, Science and Innovation contemplated in subsection (9) must—

(a)     provide written reasons for any decision to grant or deny any application for approval of any scientific or technological 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 scientific or technological 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.

[Subsection (16) substituted by section 3(1)(a) of Act 9 of 2007, by section 1(1) of Act 25 of 2011 (effective date in section 1(2) of Act 25 of 2011 as substituted by section 35(1) of Act 21 of 2012, by section 34(1) of Act 20 of 2022 and by section 58(1) of Act 17 of 2023), amended by section 29(1)(q) and (r) of Act 31 of 2013 (effective date in section 29(2) of Act 31 of 2013 as substituted section 62(1) of Act 17 of 2023) and substituted by section 12(1)(zA) of Act 17 of 2023 with effect from 1 January, 2024 and applicable in respect of applications received and expenditure incurred on or after that date]

(17)   The Minister of Higher Education, Science and Innovation must annually submit a report to Parliament advising Parliament of the direct benefits of the scientific or technological 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.

[Subsection (17) substituted by section 3(1)(a) of Act 9 of 2007, by section 1(1) of Act 25 of 2011 (effective date in section 1(2) of Act 25 of 2011 as substituted by section 35(1) of Act 21 of 2012, by section 34(1) of Act 20 of 2022 and by section 58(1) of Act 17 of 2023) and by section 12(1)(zB) of Act 17 of 2023 with effect from 1 January, 2024 and applicable in respect of applications received and expenditure incurred on or after that date]

(18)   Every employee of the Department of Science and Innovation, 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 Innovation or committee except in terms of the law or an order of court.

[Subsection (18) added by section 3(1)(b) of Act 9 of 2007, substituted by section 1(1) of Act 25 of 2011 (effective date in section 1(2) of Act 25 of 2011 as substituted by section 35(1) of Act 21 of 2012, by section 34(1) of Act 20 of 2022 and by section 58(1) of Act 17 of 2023), amended by section 29(1)(s) of Act 31 of 2013 (effective date in section 29(2) of Act 31 of 2013 as substituted section 62(1) of Act 17 of 2023) and substituted by section 12(1)(zC) of Act 17 of 2023 with effect from 1 January, 2024 and applicable in respect of applications received and expenditure incurred on or after that date]

(19)   The Commissioner may, notwithstanding the provisions of sections 99(1) and 100 of the Tax Administration Act, raise an additional assessment for any year of assessment with respect to a deduction in respect of scientific or technological research and development which has been allowed, where approval has been withdrawn in terms of subsection (10).

[Subsection (19) added by section 271 read with paragraph 34(b) of Schedule 1 of Act 28 of 2011 and substituted by section 5(1) of Act 21 of 2012 (effective date in section 5(2) of Act 21 of 2012 as substituted by section 59(1) of Act 17 of 2023), by section 4(a) of Act 18 of 2023 and by section 12(1)(zD) of Act 17 of 2023(as substituted by section 66(1)(b) of Act 42 of 2024) effective on 1 January, 2024 and applicable in respect of applications received and expenditure incurred on or after that date]

(20)

(a)     A taxpayer may, notwithstanding the provisions of sections 93, 99(1) and 100 of the Tax Administration Act, apply to the Commissioner to allow all deductions provided for under this section in respect of scientific or technological research and development if-

(i)      expenditure in respect of that scientific or technological research and development was incurred within six months prior to or on or after the date of receipt of an application by the Department of Science, Technology and Innovation for the approval of that scientific or technological 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 scientific or technological research and development under subsection (9); and

(iii)    that scientific or technological research and development is approved in terms of subsection (9) after that year of assessment.

(b)     The Commissioner may, notwithstanding the provisions of sections 93, 99(1) 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 scientific or technological 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.

[Subsection (20) added by section 27(1) of Act 15 of 2016(effective date in section 27(2) of Act 15 of 2016 as substituted by section 65(1) of Act 17 of 2023), amended by section 4(b) and (c) of Act 18 of 2023 and substituted by section 12(1)(zE) of Act 17 of 2023(as substituted by section 66(1)(b) of Act 42 of 2024) effective on 1 January, 2024 and applicable in respect of applications received and expenditure incurred on or after that date]

(21)   Any person who contravenes the provisions of subsection (18) is guilty of an offence and liable on conviction to a fine or to imprisonment for a period not exceeding two years.

[Subsection (21) added by section 12(1)(zF) of Act 17 of 2023 with effect from 1 January, 2024 and applicable in respect of applications received and expenditure incurred on or after that date]

(22)   No deduction shall be allowed under this section in respect of applications received after 31 December 2033.

[Subsection (22) added by section 12(1)(zF) of Act 17 of 2023 with effect from 1 January, 2024 and applicable in respect of applications received and expenditure incurred on or after that date]

[Section 11D inserted by section 13(1) of Act 20 of 2006 and amended by section 12(1)(a) of Act 17 of 2023 with effect from 1 January, 2024 and applicable in respect of applications received and expenditure incurred on or after that date]

“Research and development” definition of section 11D of ITA

Posted on by admin_kmos

(1)     For the purposes of this section “scientific or technological research and development” means systematic investigative or systematic experimental activities aimed at resolving scientific or technological uncertainty and the resolution of which is not readily deducible by a person skilled in the relevant scientific or technological field for the purpose of—

(a)     discovering new scientific or technological knowledge;

[Paragraph (a) substituted by section 12(1)(b) of Act 17 of 2023 with effect from 1 January, 2024 and applicable in respect of applications received and expenditure incurred on or after that date]

(b)     creating or developing new or significantly improved products, processes or services;

[Paragraph (b) amended by section 18(1)(a) of Act 43 of 2014 and substituted by section 12(1)(c) of Act 17 of 2023 with effect from 1 January, 2024 and applicable in respect of applications received and expenditure incurred on or after that date]

(c)     . . . . . .

[Paragraph (c) amended by section 18(1)(b) of Act 43 of 2014(effective date in section 18(3) of Act 43 of 2014 as substituted section 64(1) of Act 17 of 2023) and deleted by section 12(1)(d) of Act 17 of 2023 with effect from 1 January, 2024 and applicable in respect of applications received and expenditure incurred on or after that date]

(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 Regulation 344 of 23 April 2015 and any requirements as must be prescribed by regulations made by the Minister after consultation with the Minister of Higher Education, Science and Innovation; or

[Paragraph (d) inserted by section 18(1)(c) of Act 43 of 2014(effective date in section 18(3) of Act 43 of 2014 as substituted section 64(1) of Act 17 of 2023) and substituted by section 12(1)(e) of Act 17 of 2023 with effect from 1 January, 2024 and applicable in respect of applications received and expenditure incurred on or after that date]

(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 Regulation 346 of 23 April 2015 and any requirements as must be prescribed by regulations made by the Minister after consultation with the Minister of Higher Education, Science and Innovation;

[Paragraph (e) inserted by section 18(1)(c) of Act 43 of 2014 and substituted by section 12(1)(f) of Act 17 of 2023 with effect from 1 January, 2024 and applicable in respect of applications received and expenditure incurred on or after that date]

Provided that for the purposes of this definition, “scientific or technological 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)     . . . . . .

[Paragraph (b) amended by section 18(1)(a) of Act 43 of 2014(effective date in section 18(2) of Act 43 of 2014 as substituted section 64(1) of Act 17 of 2023) and substituted by section 18(1)(d) of Act 43 of 2014 and deleted by section 12(1)(h) of Act 17 of 2023 with effect from 1 January, 2024 and applicable in respect of applications received and expenditure incurred on or after that date]

(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).

[Subsection (1) substituted by section 13(1)(a) of Act 8 of 2007, amended by section 19(1)(a) of Act 35 of 2007 and by section 19(1) of Act 60 of 2008, substituted by section 32(1) of Act 24 of 2011(effective date in section 32(2) of Act 24 of 2011 as substituted section 168(1) of Act 22 of 2012 and by section 57(1) of Act 17 of 2023) and by section 29(1)(a) of Act 31 of 2013(effective date in section 29(2) of Act 31 of 2013 as substituted section 62(1) of Act 17 of 2023) and amended by section 12(1)(g) of Act 17 of 2023 with effect from 1 January, 2024 and applicable in respect of applications received and expenditure incurred on or after that date]

Section 11A (ITA) – Deductions in respect of expenditure and losses incurred prior to commencement of trade

Posted on by admin_kmos

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)), 11D or 24J had the expenditure or losses been incurred after that person commenced carrying on that trade; and

[Paragraph (b) substituted by section 15 of Act 17 of 2009 and section 20 of Act 17 of 2017 effective on 18 December 2017]

 

(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).

 

11B. ………

 

11C. ………

Section 11(w) of ITA

Posted on by admin_kmos

(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-

[Words preceding subparagraph (i) substituted by section 22 of Act 22 of 2012 and section 19 of Act 17 of 2017 effective on 18 December 2017]

(i)

(aa)   the policy relates to the death, disablement or illness of an employee or director of the taxpayer; and

[Item (aa) substituted by section 19 of Act 17 of 2017 effective on 18 December 2017]

(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;

[Item (aa) substituted by section 19 of Act 17 of 2017 effective on 18 December 2017]

(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;

 [Paragraph (cc) substituted by section 17 of Act 43 of 2014 effective on 1 March 2015]

(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;

Section 11(o) of ITA

Posted on by admin_kmos

(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 11(1)(o) of Act 8 of 2007, by section 17(1)(d) of Act 35 of 2007, by section 25(1)(i) of Act 23 of 2018 and by section 11(1)(b) of Act 17 of 2023 effective on 1 March, 2023 and applicable in respect of assets brought into use on or after 1 March, 2023]

(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);

[Paragraph (aa) substituted by section 9 of Act 16 of 2004 and section 18 of Act 25 of 2015 effective on 8 January 2016]

(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);

(cc)    ……….

[Paragraph (cc) deleted by section 18 of Act 25 of 2015 effecive on 8 January 2016]

(dd)   ……….

[Paragraph (dd) amended by section 17 of Act 35 of 2007 and deleted by section 18 of Act 25 of 2015 effective on 8 January 2016]

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;

(p)     ……….

(q)     ……….

(r)      ……….

(s)     ……….

(t)      ……….

(u)     ……….

(v)     ……….