Author: admin_kmos

“End user” definition of section 23I of ITA

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(1)     For the purposes of this section-

“end user” means a taxable person or a person with a permanent establishment within the Republic that uses intellectual property or any corresponding invention during a year of assessment to derive income, other than a person that derives income mainly by virtue of the grant of use or right of use or permission to use intellectual property or any corresponding invention;

[Definition of “end user” substituted by section 36 of Act 43 of 2014 effective on 20 January 2015]

Section 23H (ITA) – Limitations of certain deductions

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23H.    Limitation of certain deductions

(1)     Where any person has during any year of assessment actually incurred any expenditure (other than expenditure incurred in respect of the acquisition of any trading stock) –

(a)     which is allowable as a deduction in terms of the provisions of section 11(a), (c), (d) or (w), or section 11A; and

[Paragraph (a) substituted by section 29 of Act 59 of 2000, section 36 of Act 35 of 2007, section 19 of Act 3 of 2008, section 43 of Act 7 of 2010, section 46 of Act 22 of 2012 and section 35 of Act 43 of 2014 effective on 1 October 2012]

(b)     in respect of-

(i)      goods or services, all of which will not be supplied or rendered to such person, during such year of assessment; or,

(ii)     any other benefit, the period to which the expenditure relates extends beyond such year of assessment,

the amount of the expenditure in respect of which a deduction shall be allowable in terms of such section in the said year and any subsequent year of assessment, shall be limited to, in the case of expenditure incurred in respect of –

(i)      goods to be supplied, so much of the expenditure as relates to the goods actually supplied to such person in such year of assessment; or

(ii)     services to be rendered, an amount which bears to the total amount of such expenditure the same ratio as the number of months in such year during which such services are rendered bears to the total number of months during which such services will be rendered or, where the period during which such services will be rendered is not determinable, such period during which the services are likely to be rendered; or

(iii)    any other benefit to which such expenditure relates, an amount which bears to the total amount of such expenditure the same ratio as the number of months in such year during which such person will enjoy such benefit bears to the total number of months during which such person will enjoy such benefit or where the period of such benefit is not determinable, such period over which the benefit is likely to be enjoyed:

Provided that the provisions of this section shall not apply –

(aa)   where all the goods or services are to be supplied or rendered within six months after the end of the year of assessment during which the expenditure was incurred, or such person will have the full enjoyment of such benefit in respect of which the expenditure was incurred within such period, unless the expenditure is allowable as a deduction in terms of section 11D(2); or

[Paragraph (aa) substituted by section 34 of Act 60 of 2001, section 36 of Act 35 of 2007 and section 37 of Act 17 of 2017 effective on 18 December 2017]

(bb)   where the aggregate of all amounts of expenditure incurred by such person, which would otherwise be limited by this section, does not exceed R100000; or

(cc)   to any expenditure to which the provisions of 24K or 24L apply; or

(dd)   to any expenditure actually paid in respect of any unconditional liability to pay an amount imposed by legislation.

(2)     If in any case the apportionment of the expenditure in accordance with subsection (1) does not reasonably represent a fair apportionment of such expenditure in respect of the goods, services or benefits to which it relates, such apportionment must be made in such other manner as is fair and reasonable.

[Subsection (2) substituted by section 38 of Act 25 of 2015 effective on 8 January 2016]

(3)     Notwithstanding the provisions of subsections (1) and (2), where it is during any year of assessment shown by any person that –

(a)     the goods or services in respect of which the expenditure is incurred will never be received by or be rendered to such person; or

(b)     such person will never enjoy such other benefit in respect of which any expenditure is incurred,

such expenditure shall be allowed in such year, to the extent that such expenditure has been actually paid by such person.

Subsections 2, 3 and 4 of section 23G of ITA

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(2)     Where the receipts or accruals of any person, who is a lessee or sublessee in relation to a sale and leaseback arrangement, do not for the purposes of this Act constitute income of such person –

(a)     any amount which is received by or accrues to any lessor in relation to such sale and leaseback arrangement, shall be limited to an amount which constitutes interest as contemplated in section 24J; and

(b)     such lessor shall, notwithstanding the provisions of this Act, not be entitled to any deduction in terms of section 11(e), (f), (gA) or (gC) or sections 12B, 12BA, 12C, 12DA, 13 or 13quin in respect of an asset which is the subject matter of such sale and leaseback arrangement.

[Paragraph (b) substituted by section 30 of Act 31 of 2005, by section 35 of Act 35 of 2007, by section 40 of Act 23 of 2018 and by section 25(1) of Act 17 of 2023 effective on 1 March, 2023 and applicable in respect of assets brought into use on or after that date]

(3)     Where the receipts or accruals of any person, who is a lessor in relation to a sale and leaseback arrangement, arising from such arrangement do not for the purposes of this Act constitute income of such person, any deduction to which a lessee or sublessee in relation to such sale and leaseback arrangement is entitled under the provisions of this Act shall, subject to the provisions of section 11(f), be limited to an amount which constitutes interest as contemplated in section 24J.

(4)     The provisions of subsection (2)(a) shall not apply to any person who is both a lessor and a lessee in relation to the same sale and leaseback arrangement during any year of assessment.

“Sale and leaseback arrangement” definition of section 23G of ITA

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“sale and leaseback arrangement” means any arrangement whereby –

 

(a)     any person disposes of any asset (whether directly or indirectly) to any other person; and

 

(b)     such person or any connected person in relation to such person leases (whether directly or indirectly) such asset from such other person.

“Resale agreement” definition of section 24J of ITA

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“resale agreement” means the provision of money (which money shall for the purposes of this section be deemed to have been so provided in the form of a loan) through the acquisition of an asset by any person from any other person subject to an agreement in terms of which such person undertakes to dispose of to such other person at a future date the asset so acquired or any other asset issued by the issuer of, and which has been so issued subject to the same conditions regarding term, interest rate and price as, the asset so acquired;

“Repurchase agreement” definition of section 24J of ITA

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“repurchase agreement” means the obtaining of money (which money shall for the purposes of this section be deemed to have been so obtained by way of a loan) through the disposal of an asset by any person to any other person subject to an agreement in terms of which such person undertakes to acquire from such other person at a future date the asset so disposed of or any other asset issued by the issuer of, and which has been so issued subject to the same conditions regarding term, interest rate and price as, the asset so disposed of;