‘financial instrument’……….
[Definition of “financial instrument” deleted by section 43 of Act 43 of 2014 effective on 1 January 2014]
Author: admin_kmos
“Financial asset” definition of section 24JB of ITA
‘financial asset’ means-
(a) a financial asset defined in and within the scope of International Accounting Standard 32 of IFRS or any other International Accounting Standard that replaces International Accounting Standard 32; and
(b) a commodity taken into account in terms of IFRS at fair value less cost to sell in profit or loss in the statement of comprehensive income;
“Derivative” definition of section 24JB of ITA
“derivative” means a derivative as defined in and within the scope of IFRS 9;
[Definition of “derivative” substituted by section 44 of Act 17 of 2017 effective on 1 January 2018, applies in respect of years of assessment commencing on or after that date]
“Covered person” definition of section 24JB of ITA
(1) For the purposes of this section-
‘covered person’ means-
(a) any authorised user as defined in section 1 of the Financial Markets Act that is a company, other than any company of which the principal trading activities constitute the activities of a treasury operation;
[Paragraph (a) substituted by section 46 of Act 15 of 2016 effective on 1 January 2017, applies in respect of years of assessment ending on or after that date]
(b) the South African Reserve Bank;
(c) any-
(i) bank;
(ii) branch;
(iii) branch of a bank; or
(iv) controlling company,
as defined in section 1 of the Banks Act;
(d) any company or trust that forms part of a banking group as defined in section 1 of the Banks Act, excluding-
(i) a company that is a long-term insurer as defined in section 1 of the Long-term Insurance Act;
(ii) a company that is a short-term insurer as defined in section 1 of the Short-term Insurance Act;
(iii) a company of which more than 50 per cent of the shares are directly or indirectly held by a company contemplated in subparagraph (i) or (ii) if that company does not form part of the same group of companies as a bank;
(iv) any subsidiary, as defined in section 1 of the Companies Act, of a company contemplated in subparagraph (i) or (ii);
[Subparagraph (iv) added by section 44 of Act 17 of 2017 effective on 1 January 2018, applies in respect of years of assessment commencing on or after that date]
Section 24JB (ITA) – Taxation in respect of financial assets and liabilities of certain persons
24JB. Taxation in respect of financial assets and liabilities of certain persons
[Heading of section 24JB substituted by section 43 of Act 43 of 2014 effective on 1 January 2014]
Subsections 2, 3, 5, 6 and 7 of section 24JA of ITA
(2) Any amount received by or accrued to a client in terms of a mudaraba is deemed to be interest as contemplated in paragraph (a) of the definition of ‘interest’ in section 24J(1).
[Subsection (2) substituted by section 54 of Act 24 of 2011 and section 45 of Act 25 of 2015 effective on 1 January 2016]
(3) Where any murabaha is entered into between a financier and a client of that financier as contemplated in paragraph (a) of the definition of ‘murabaha’-
(a) the financier is deemed not to have acquired or disposed of the asset under the sharia arrangement;
(b) the client is deemed to have acquired the asset from the seller-
(i) for consideration equal to the amount paid by the financier to the seller; and
(ii) at such time as the financier acquired the asset from the seller by virtue of the transaction between the seller and the financier;
(c) the murabaha is deemed to be an instrument for the purposes of section 24J;
(d) the difference between the amount of consideration paid for the asset by the financier to the seller and the consideration payable to the financier by the client to acquire the asset as contemplated in paragraph (b)(ii) of the definition of “murabaha” is deemed to be a premium payable or receivable contemplated in paragraph (a) of the definition of ‘interest’ in section 24J(1); and
[Paragraph (d) substituted by section 55 of Act 22 of 2012 and section 45 of Act 25 of 2015 effective on 1 January 2016]
(e) the amount of consideration paid by the financier to acquire the asset as contemplated in paragraph (a) of the definition of ‘murabaha is deemed to be an issue price for the purposes of section 24J.
(4) ……….
(5) For the purposes of determining the tax on income of the client in respect of a diminishing musharaka-
(a) where the bank and the client jointly acquire an asset, the client is deemed to have acquired the bank s interest in the asset-
(i) for an amount equal to the amount paid by the bank in respect of its interest in the asset; and
(ii) at the time that the seller of the asset was divested of its interest in the asset by virtue of the transaction between the seller and the bank; or
(b) where the bank acquires an interest in an asset from the client, the client is deemed not to have disposed of the interest in the asset or to have acquired that interest from the bank.
(6)
(a) For the purposes of subsection (5), where an instalment is paid by the client to the bank, a portion of that instalment, the amount of which must be determined in accordance with paragraph (b), is deemed to be interest as defined in section 24J(1).
(b) The amount contemplated in paragraph (a) must be determined in accordance with the formula-
X = A – B
in which formula-
(i) ‘X’ represents the amount to be determined;
(ii) ‘A’ represents the total amount of the instalment payable by the client to the bank;
(iii) ‘B’ represents the expenditure incurred by the bank to acquire the portion of the interest in the asset transferred to the client in exchange for the instalment payable by the client to the bank.
(7) Where any sukuk is entered into-
(a) the trust is deemed not to have acquired the asset from the government of the Republic, the public entity that is listed in Schedule 2 to the Public Finance Management Act or the listed company under the sharia arrangement;
[Paragraph (a) substituted by section 45 of Act 25 of 2015 effective on 1 January 2016]
(b) the government, that public entity or that listed company is deemed not to have disposed of or reacquired the asset; and
[Paragraph (b) substituted by section 45 of Act 25 of 2015 effective on 1 January 2016]
(c) any consideration paid by the government, that public entity or that listed company in respect of the use of the asset held by the trust is deemed to be interest as contemplated in paragraph (a) of the definition of ‘interest’ in section 24J(1).
[Paragraph (c) substituted by section 45 of Act 25 of 2015 effective on 1 January 2016]
[Subsection (7) added by section 54 of Act 24 of 2011 and substituted by section 42 of Act 43 of 2014 effective on 1 April 2015]
“Sukuk” definition of section 24JA of ITA
“sukuk” means a sharia arrangement whereby-
(a) the government of the Republic, any public entity that is listed in Schedule 2 to the Public Finance Management Act or a listed company disposes of an interest in an asset to a trust; and
[Paragraph (a) substituted by section 42 of Act 43 of 2014 and section 45 of Act 25 of 2015 effective on1 January 2016]
(b) the disposal of the interest in the asset to the trust by the government, the public entity or the listed company contemplated in paragraph (a) is subject to an agreement in terms of which the government, that public entity or that listed company undertakes to reacquire on a future date from that trust the interest in the asset disposed of at a cost equal to the cost paid by the trust to the government, to that public entity or to that listed company to obtain the asset.
[Paragraph (b) substituted by section 42 of Act 43 of 2014 and section 45 of Act 25 of 2015 effective on 1 January 2016]
“Sharia arrangement” definition of section 24JA of ITA
‘sharia arrangement’ means an arrangement that is-
(a) open for participation by members of the general public; and
(b) presented as compliant with sharia law when the members of the general public are invited to participate therein.
“Murabaha” definition of section 24JA of ITA
‘murabaha’ means a sharia arrangement between a financier and a client of that financier, one of which is a bank or listed company whereby-
[Words preceding paragraph (a) substituted by section 45 of Act 25 of 2015 effective on 1 January 2016]
(a) the financier will acquire an asset from a third party (the seller) for the benefit of the client on such terms and conditions as are agreed upon between the client and the seller;
(b) the client-
(i) will acquire the asset from the financier within 180 days after the acquisition of the asset by the financier contemplated in paragraph (a); and
(ii) agrees to pay to the financier a total amount that-
(aa) exceeds the amount payable by the financier to the seller as consideration to acquire the asset;
(bb) is calculated with reference to the consideration payable by the financier to the seller in combination with the duration of the sharia arrangement; and
(cc) may not exceed the amount agreed upon between the financier and the client when the sharia arrangement is entered into; and
(c) no amount is received by or accrues to the financier in respect of that asset other than an amount contemplated in paragraph (b)(ii);
“Mudaraba” definition of section 24JA of ITA
‘mudaraba’ means a sharia arrangement between a bank and a client of that bank whereby-
(a) funds are deposited with the bank by the client;
(b) the anticipated return in respect of the sharia arrangement is dependent on the amount deposited by the client in combination with the duration of the period for which the funds are deposited;
(c) the bank invests the funds deposited by the client in other sharia arrangements;
(d) the client bears the risk of the loss in respect of the sharia arrangements contemplated in paragraph (c); and
(e) the return in respect of the sharia arrangements contemplated in paragraph (c) is divided between the client and the bank as agreed at the time that the client deposits the funds with the bank;