Author: admin_kmos

Section 25A (ITA) – Determination of taxable income of permanently separated spouses

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25A.    Determination of taxable incomes of permanently separated spouses

Where during any period of assessment any taxpayer who is married in community of property has lived apart from his or her spouse in circumstances which indicate that the separation is likely to be permanent, his or her taxable income for such period shall be determined at the amount at which such taxpayer’s taxable income would have been determined under the provisions of this Act if such taxpayer had not been married in community of property.

 [Section 25A inserted by section 21 of Act 55 of 1966, amended by section 271 of Act 28 of 2011 and substituted by section 49 of Act 25 of 2015 effective on 8 January 2016]

Section 25 (ITA) – Taxation of deceased estates

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25.    Taxation of deceased estates

(1)     Any-

(a)     income received by or accrued to or in favour of any person in his or her capacity as the executor of the estate of a deceased person; and

(b)     amount received or accrued as contemplated in paragraph (a) which would have been income in the hands of that deceased person had that amount been received by or accrued to or in favour of that deceased person during his or her lifetime,

must be treated as income of the deceased estate of that deceased person.

(2)     Where the deceased estate of a person acquires an asset from that person, that deceased estate must, if that asset is an asset-

(a)     other than an asset contemplated in section 9HA(2), be treated as having acquired that asset for an amount of expenditure incurred equal to the amount contemplated in section 9HA(1); and

[Paragraph (a) substituted by section 47 of Act 15 of 2016 effective on 1 March 2016, applies in respect of a person who dies on or after that date]

(b)     contemplated in section 9HA(2), be treated as having acquired that asset for an amount of expenditure incurred equal to the amount contemplated in section 9HA(2)(b).

(3)     Where the deceased estate of a person disposes of an asset to an heir or legatee of that person-

(a)     that deceased estate must be treated as having disposed of that asset for an amount received or accrued equal to the amount of expenditure incurred by the deceased estate in respect of that asset;

[Paragraph (a) amended by section 20(1) of Act 20 of 2021 effective on 1 March, 2022 and applicable in respect of liquidation and distribution accounts finalised on or after that date]

(b)     the heir or legatee must be treated as having acquired that asset for an amount of expenditure incurred equal to the expenditure incurred by the deceased estate in respect of that asset; and

[Paragraph (b) amended by section 20(1) of Act 20 of 2021 effective on 1 March, 2022 and applicable in respect of liquidation and distribution accounts finalised on or after that date]

(c)     that deceased estate must be treated as having disposed of that asset on the earlier of the date on which that asset is disposed of or on which the liquidation and distribution account becomes final.

[Paragraph (c) added by section 20(1) of Act 20 of 2021 effective on 1 March, 2022 and applicable in respect of liquidation and distribution accounts finalised on or after that date]

(4)

(a)     This subsection must be applied in respect of an asset acquired by a surviving spouse of a deceased person as contemplated in section 9HA(2) for purposes of determining the amount of any-

(i)      allowance or deduction to which that spouse may be entitled or that is to be recovered or recouped by or included in the income of that spouse in respect of that asset; or

(ii)     the amount of any capital gain or capital loss in respect of a disposal of that asset by that spouse.

(b)     The surviving spouse contemplated in paragraph (a) must be treated as one and the same person as the deceased person and deceased estate with respect to-

(i)      the date of acquisition of that asset by that deceased person;

(ii)     any valuation of that asset effected by that deceased person as contemplated in paragraph 29(4) of the Eighth Schedule;

(iii)    the amount of any expenditure and the date on which and the currency in which that expenditure was incurred in respect of that asset-

(aa)   by that deceased person as contemplated in section 9HA(2)(b); and

(bb)   by that deceased estate, other than the expenditure contemplated in section 9HA(2)(b);

(iv)    the manner in which that asset had been used by the deceased person and the deceased estate; and

(v)     any allowance or deduction allowable in respect of that asset to the deceased person and the deceased estate.

[Subsection (4) substituted by section 47 of Act 15 of 2016 effective on 1 March 2016, applies in respect of a person who dies on or after that date]

(5)     A deceased estate must-

(a)     other than for the purposes of section 6, section 6A, section 6B and section 6C, be treated as if that estate were a natural person; and

[Paragraph (a) substituted by section 28(1)(a) of Act 17 of 2023 effective on 1 March, 2023 and applicable in respect of years of assessment commencing on or after that date]

(b)     if the deceased person at the time of his or her death was—

(i)      a resident, be treated as if that estate were a resident; and

(ii)     a non-resident, be treated as if that estate were a non-resident.

[Subsection (5) substituted by section 47 of Act 23 of 2018. Paragraph (b) substituted by section 28(1)(b) of Act 17 of 2023]

(6)    Where-

(a)     the tax determined in terms of this Act, which relates to the taxable capital gain derived by a deceased person from assets disposed of by that person as contemplated in section 9HA, exceeds 50 per cent of the net value of the estate of that person, as determined in terms of section 4 of the Estate Duty Act for purposes of that Act, before taking into account the amount of that tax so determined; and

(b)     the executor of the estate is required to dispose of any asset of the estate for purposes of paying the amount of the tax contemplated in paragraph (a),

any heir or legatee of the estate who would have been entitled to that asset contemplated in paragraph (b) had there been no liability for tax, may elect that that asset be distributed to that heir or legatee if the amount of tax which exceeds 50 per cent of that net value be paid by that heir or legatee within a period of three years after the date that the estate has become distributable in terms of section 35(12) of the Administration of Estates Act, 1965 (Act No. 66 of 1965).

(7)     Any amount of tax payable by an heir or legatee as contemplated in subsection (6), becomes a debt due to the state and must be treated as an amount of tax chargeable in terms of this Act which is due by that person.

[Section 25 substituted by section 22 of Act 113 of 1993 and section 48 of Act 25 of 2015 effective on 1 March 2016]

Subsection 2 and 3 of section 24O of ITA

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(2)     Subject to subsection (3), where during any year of assessment any interest is incurred by a company in respect of a debt issued, assumed or used by that company-

(a)     for the purpose of financing the acquisition by that company, in terms of an acquisition transaction, of an equity share; or

(b)     in substitution for a debt issued, assumed or used as contemplated in paragraph (a),

the interest incurred by that company in respect of that debt must, to the extent to which the amount thereof relates to a period during which-

(i)      that company held that equity share; and

(ii)     that equity share constituted a qualifying interest in an operating company, as determined-

(aa)   in the case of an equity share held by that company at the end of that year, at the date on which that year ends; or

(bb)   if that equity share was disposed of by that company during that year, at the date of that disposal,

be deemed to have been so incurred in the production of the income of that company and laid out or expended by that company for the purposes of trade.

[Subsection (2) substituted by section 46 of Act 23 of 2018 effective on 1 January 2019, applies in respect of years of assessment ending on or after that date]

(3)     An equity share in a company constitutes a qualifying interest in an operating company if that equity share is an equity share on the date referred to in subsection (2) in-

(a)     a company that qualified as an operating company in its latest year of assessment that ended prior to or on the date referred to in subsection (2); or

(b)     any other company, to the extent that the value of that equity share is derived from an equity share or equity shares held by that company in a company or companies described in paragraph (a)-

(i)      in relation to which that company is a controlling group company; and


(ii)     that form part, with that company, of a group of companies, as defined in section 41(1):

Provided that if at least 90 per cent of the value of that equity share is so derived, that equity share must be treated as an equity share in an operating company.

[Sub­section (3) amended by section 46(1) of Act 23 of 2018 and substituted by section 31(1)(b) of Act 34 of 2019 deemed effective on 1 January, 2019 and applicable in respect of years of assessment ending on or after that date]

(4)       ……….

[Subsection (4) deleted by section 46 of Act 23 of 2018 effective on 1 January 2019, applies in respect of years of assessment ending on or after that date]

(5)     Where a company that acquired equity shares in a controlling group company in relation to an operating company as contemplated in paragraph (b) of the definition of “acquisition transaction” acquires the equity shares held by that controlling group company in that operating company in terms of-

(a)     an unbundling transaction as defined in section 46(1)(a) in respect of which section 46 was applied; or

(b)     a liquidation distribution as defined in section 47(1)(a) in respect of which section 47 was applied, those equity shares must for purposes of subsection (2) be treated-

(i)      as having been acquired by that company in terms of paragraph (a) of the definition of “acquisition transaction”; and


(ii)     as constituting a qualifying interest in an operating company to the extent to which the value of the equity shares in the controlling group company from which the equity shares in the operating company were acquired was derived from the value of the equity shares in the operating company so acquired.

[Sub­section (5) added by section 31(1)(c) of Act 34 of 2019 deemed to have come into operation on 1 January, 2019 and applicable in respect of years of assessment ending on or after that date]

[Section 24O inserted by section 57 of Act 22 of 2012, amended by section 72 of Act 31 of 2013 and substituted by section 46 of Act 25 of 2015 effective on 1 January 2016]

“Operating company” definition of section 24O of ITA

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“operating company” means a company of which-

(a)     at least 80 per cent of the aggregate amount received by or that accrued to that company during a year of assessment constitutes income in the hands of that company; and

[Paragraph (a) substituted by section 46 of Act 23 of 2018 effective on 1 January 2019, applies in respect of years of assessment ending on or after that date]

(b)     the income contemplated in paragraph (a) is derived-

(i)      from a business carried on continuously by that company; and

(ii)     in the course or furtherance of which goods or services are provided or rendered by that company for consideration.

[Subparagraph (ii) substituted by section 46 of Act 23 of 2018 effective on 1 January 2019, applies in respect of years of assessment ending on or after that date]

“Acquisition transaction” definition of sectoin 24O of ITA

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(1)       For the purposes of this section-

“acquisition transaction” means any transaction in terms of which a company acquires an equity share in another company from a person that does not form part of the same group of companies as that company, if-

(a)     that other company is-

(i)  an operating company on the date of acquisition of that share; and

(ii) as a result of which, at the end of the day of that transaction-

(aa)   that company is a controlling group company in relation to that other company; and

(bb)   that company and that other company form part of the same group of companies as defined in section 41(1); or

(b)      that other company is-

(i)  a controlling group company in relation to a company that is an operating company on the date of acquisition of that share and that forms part of the same group of companies, as defined in section 41(1), as that controlling group company; and

(ii) as a result of which, at the end of the day of that transaction-

(aa)   that company is a controlling group company in relation to that other controlling group company; and

(bb)   that company and that other controlling group company form part of the same group of companies as defined in section 41(1);

[Definition of “acquisition transaction” substituted by section 31(1)(a) of Act 34 of 2019 deemed effective on 1 January, 2019 and applicable in respect of years of assessment ending on or after that date]

Section 24N (ITA) – Incurral and accrual of amounts in respect of disposal or acquisition of equity shares

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24N.  Incurral and accrual of amounts in respect of disposal or acquisition of equity shares

(1)     Where a person (hereinafter referred to as ‘the seller’) during a year of assessment disposes of equity shares to any other person (hereinafter referred to as ‘the purchaser’) in the circumstances contemplated in subsection (2), any quantified or quantifiable amount payable by the purchaser to the seller must –

(a)     to the extent that it is not due and payable to the seller during that year, be deemed for purposes of this Act –

(i)      not to have been accrued to the seller in that year; and

(ii)     not to have been incurred by the purchaser during that year; and

(b)     to the extent that it becomes due and payable to the seller in any subsequent year of assessment, be deemed for purposes of this Act –

(i)      to have been accrued to the seller during that subsequent year; and

(ii)     to have been incurred by the purchaser during that subsequent year.

(2)     Subsection (1) applies in respect of the disposal by a seller to a purchaser of any equity shares in a company where –

(a)     more than 25 per cent of the amount payable for those shares becomes due and payable by the purchaser after the end of the year of assessment of the seller and the amount payable is based on the future profits of that company;

(b)     the value of the equity shares in that company which have in aggregate been disposed of during that year and in respect of which the provisions of this section apply, exceeds 25 per cent of the total value of equity shares in that company;

(c)     the purchaser and seller are not connected persons in relation to each other after that disposal;

(d)     the purchaser is obliged to return the equity shares to the seller in the event of failure by the purchaser to pay any amount when due; and

(e)     the amount is not payable by the purchaser to the seller in terms of a financial instrument which is payable on demand and which is readily tradeable in the open market.

Section 24M (ITA) – Incurral and accrual of amounts in respect of assets acquired or disposed of for unquantified amount

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24M. Incurral and accrual of amounts in respect of assets acquired or disposed of for unquantified amount

(1)     If a person during any year of assessment disposes of an asset for consideration which consists of or includes an amount which cannot be quantified in that year of assessment, so much of that consideration as –

(a)     cannot be quantified in that year must for purposes of this Act be deemed not to have accrued to that person in that year; and

(b)     becomes quantifiable during any subsequent year of assessment must for purposes of mis Act be deemed to have been accrued to that person from that disposal in that subsequent year.

(2)     If a person during any year of assessment acquires an asset for consideration which consists of or includes an amount which cannot be quantified in that year of assessment, so much of that consideration as –

(a)     cannot be quantified in that year must for purposes of this Act be deemed not to have been incurred by that person in that year; and

(b)     becomes quantifiable during any subsequent year of assessment must for purposes of this Act be deemed to have been incurred by that person in respect of the acquisition of that asset in that subsequent year.

(3)     The amount of any recovery or recoupment by a person of any amount allowed as a deduction in respect of any asset contemplated in subsection (1) must, for purposes of section 8(4), be determined with reference to the amounts received by or accrued to that taxpayer in terms of this section.

(4)     If an asset which was acquired by a person during any year of assessment as contemplated in subsection (2) –

(a)     constitutes a depreciable asset; and

(b)     any amount is in terms of subsection (2)(b) deemed to have been actually incurred by that person in any subsequent year of assessment which has not been taken into account in determining the amount of any allowance in respect of that depreciable asset in any previous year and would have been so taken into account had that amount been actually incurred by that person,

so much of the amount as would have been so allowed as an allowance in any previous year must be allowed in that subsequent year of assessment.

Subsections 2 and 3 of section 24L of ITA

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(2)     The amount of –

(a)     any premium or like consideration paid or payable by a person in terms of an option contract; or

(b)     any consideration paid or payable by a person in respect of the acquisition of an option contract by such person,

shall for purposes of this Act be deemed to have been incurred by such person on a day to day basis during the term of such option contract: Provided that –

(i)      where such option contract is exercised, terminated or is disposed of, the portion of the amount attributable to the period from the date of exercise, termination or disposal until the end of the original term of the option contract shall be deemed to have been incurred by such person on the date of exercise, termination or disposal of the option contract;

(ii)     the provisions of this section shall not be applied to an option contract held by a person as trading stock;

(iii)    where such amount includes an amount representing the intrinsic value in relation to an option contract, so much of such amount so representing the intrinsic value shall for the purposes of this Act be deemed to have been incurred by such person on the date of exercise, termination or disposal of the option contract.

(3)     The amount of any premium or like consideration received or receivable by a person in terms of an option contract, other than an amount of a capital nature, shall for the purposes of this Act be deemed to have accrued to such person on a day to day basis during the term of such option contract: Provided that where such option contract is exercised, terminated or disposed of, the portion of the amount attributable to the period from the date of exercise, termination or disposal of such option contract until the end of the original term of the option contract shall be deemed to have accrued to such person on the date of exercise, termination or disposal of the option contract.

[Words preceding the proviso substituted by section 45 of Act 23 of 2018 effective on 1 January 2019, applies in respect of years of assessment commencing on or after that date]

“Option contract” definition of section 24L of ITA

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“option contract” means an agreement the effect of which is that any person acquires the option (excluding a foreign currency option contract as defined in section 24I(1)) –

 

(a)     to buy from or to sell to another person a certain quantity of corporeal or incorporeal things before or on a future date at a pre–arranged price; or

 

(b)     that an amount of money will be paid to or received from another person before or on a future date depending on whether the value or price of an asset, index, currency, rate of interest or any other factor is higher or lower before or on that future date than a pre–arranged value or price.