PART IA
Withholding tax on interest
37I. ……….
37J. ……….
37JA ……….
37K. ……….
Author: admin_kmos
Section 37G (ITA) – Determination of taxable income derived from small business undertakings
37G. Determination of taxable income derived from small business undertakings
(1) The Minister of Finance may make regulations to facilitate compliance with the provisions of this Act by natural persons who carry on business through small business undertakings, whether as sole proprietors or in partnership with other natural persons.
(2) A regulation made under subsection (1) may –
(a) prescribe what shall constitute a small business undertaking, having regard to –
(i) the nature of the undertaking;
(ii) the turnover, taxable income or profit of the undertaking;
(iii) the number of persons employed in the undertaking;
(iv) the nature and extent of other income derived by the proprietor or partners; and
(v) any other feature which, in the opinion of the said Minister, indicates that an undertaking should be regarded as a small business undertaking;
(b) provide for the variation of any provision of this Act relating to the determination of the taxable income derived from a small business undertaking, including –
(i) the determination of taxable income having regard only to amounts actually received or expended;
(ii) any variation in the manner in which the values of trading stock are taken into account;
(iii) the manner in which expenditure of a capital nature incurred is to be treated; and
(iv) any other provision which, save in so far as the timing of the receipt or accrual of income or the incurral of expenditure is concerned, will not result in a material variation in the determination of the taxable income derived by the undertaking over a period of time;
(c) provide for the exemption from, or extension of time limits in, any provision of this Act relating to the preparation and submission of documents, accounts, returns or payments;
(d) make such other provision as in the opinion of the said Minister will facilitate the carrying on of small business undertakings.
37H. ……….
Section 37F (ITA) – Determination of taxable income derived by persons previously assessable under certain other laws
37F. Determination of taxable income derived by persons previously assessable under certain other laws
Where it is necessary for any rule provided in this Act as to the inclusion in the income of any taxpayer for any year or as to the deduction or set–off of any amount from or against his income for such year, that regard shall be had to anything that has been done or has occurred in or in relation to a previous year of assessment, anything that has in fact been done or has in fact occurred in or in relation to a year of assessment during which the taxpayer was assessable for taxation purposes in terms of any law of a former self–governing territory declared under section 26 of the repealed Self–governing Territories Constitution Act, 1971 (Act No. 21 of 1971), to be a self–governing territory or of the former Republic of Transkei, Bophuthatswana, Venda or Ciskei for any year of assessment, shall, subject to such adjustments as may in the circumstances be appropriate, for the purposes of applying such rule be taken into account.
Section 37C (ITA) – Deductions in respect of environmental conservation and maintenance
37C. Deductions in respect of environmental conservation and maintenance
(1) Expenditure actually incurred by a taxpayer to conserve or maintain land is deemed to be expenditure incurred in the production of income and for purposes of a trade carried on by that taxpayer, if-
(a) the conservation or maintenance is carried out in terms of a biodiversity management agreement that has a duration of at least five years entered into by the taxpayer in terms of section 44 of the National Environmental Management: Biodiversity Act, 2004 (Act No. 10 of 2004); and
(b) land utilised by the taxpayer for the production of income and for purposes of a trade consists of, includes or is in the immediate proximity of the land that is the subject of the agreement contemplated in paragraph (a).
(2)
(a) Any deduction of expenditure contemplated in subsection (1) must not be allowed to the extent that the expenditure exceeds the income of the taxpayer derived from trade carried on by the taxpayer on land utilised as contemplated in subsection (1)(b) in any year of assessment.
(b) The amount by which the deduction exceeds the income of the taxpayer so derived must be deemed to be expenditure incurred by the taxpayer in the following year of assessment.
(3) An amount equal to the expenditure actually incurred by a taxpayer to conserve or maintain land owned by the taxpayer is for purposes of section 18A deemed to be a donation by the taxpayer actually paid or transferred during the year to the Government for which a receipt has been issued in terms of section 18A(2), if the conservation or maintenance is carried out in terms of a declaration that has a duration of at least 30 years in terms of section 20, 23 or 28 of the National Environmental Management: Protected Areas Act, 2003 (Act No. 57 of 2003).
(4) If during the current or any previous year of assessment a deduction is or was allowed to the taxpayer in terms of subsection (1) or (3) in respect of expenditure incurred to conserve or maintain land in terms of an agreement or declaration contemplated in those subsections, and the taxpayer subsequently is in breach of that agreement or violates that declaration, an amount equal to the deductions allowed in respect of expenditure incurred within the period of five years preceding the breach or violation must be included in the income of the taxpayer for the current year of assessment.
(5) ……….
[Subsection (5) amended by section 86 of Act 31 of 2013, deleted by section 52 of Act 43 of 2014 effective on 1 March 2015]
(6) ……….
[Subsection (6) deleted by section 52 of Act 43 of 2014 effective on 1 March 2015]
(7) ……….
[Subsection (7) deleted by section 52 of Act 43 of 2014 effective on 1 March 2015]
Subsections 2, 3, 4, 5, 6, 7, 8 and 9 of section 37B of ITA
(2) There shall be allowed to be deducted from the income of the taxpayer, in respect of any year of assessment, an allowance equal to –
(a) in the case of a new and unused environmental treatment and recycling asset owned by the taxpayer or acquired by the taxpayer as purchaser in terms of an agreement contemplated in paragraph (a) of the definition of an ‘instalment credit agreement’ in section 1 of the Value-Added Tax Act, 40 per cent of the cost to the taxpayer to acquire the asset in the year of assessment that it is brought into use for the first time by that taxpayer, and 20 per cent in each succeeding year of assessment; and
(b) in the case of a new and unused environmental waste disposal asset owned by the taxpayer or acquired by the taxpayer as purchaser in terms of an agreement contemplated in paragraph (a) of the definition of an ‘instalment credit agreement’ in section 1 of the Value-Added Tax Act, five per cent of the cost to the taxpayer to acquire the asset in the year of assessment that it is brought into use for the first time by that taxpayer, and five per cent in each succeeding year of assessment.
(3) For the 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 or the cost which a person would, if that person had acquired such asset under a cash transaction concluded at arm’s length on the date on which the transaction for the acquisition was in fact concluded, have incurred in respect of the direct cost of the acquisition.
(4) 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 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 asset that has been disposed of by the taxpayer during any previous year of assessment.
(6) For purposes of determining the taxable income derived during any year of assessment by a taxpayer, there shall be allowed as a deduction any expenditure or loss in respect of decommissioning, remediation or restoration arising from any trade previously carried on by that taxpayer to the extent that such expenditure or loss –
(a) is incurred for purposes of complying with any law of the Republic that provides for the protection of the environment upon the cessation of trade;
(b) would otherwise have been allowed as a deduction in terms of section 11 had that taxpayer still been carrying on that trade; and
(c) is not otherwise allowed as a deduction.
(7) Any assessed loss of a taxpayer as defined in section 20(2) that is attributable to any expenditure or loss contemplated in subsection (6) may be set off against income derived by that taxpayer during a year of assessment notwithstanding the fact that the taxpayer is not carrying on any trade during that year.
(8) No deduction shall be allowed under section 11, 12C or 13 in respect of the cost of an environmental treatment and recycling asset or an environmental waste disposal asset.
(9) 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.
“Environmental waste disposal asset” definition of section 37B of ITA
‘environmental waste disposal asset’ means any air, water, and solid waste disposal site, dam, dump, reservoir, or other structure of a similar nature, or any improvement thereto, if the structure is –
(a) of a permanent nature;
(b) utilised in the course of a taxpayer’s trade in a process that is ancillary to any process of manufacture or any other process which, in the opinion of the Commissioner, is of a similar nature; and
(c) required by any law of the Republic for purposes of complying with measures that protect the environment.
“Environmental treatment and recycling asset” definition of section 37B of ITA
(1) For purposes of this section –
‘environmental treatment and recycling asset’ means any air, water, and solid waste treatment and recycling plant or pollution control and monitoring equipment (and any improvement to the plant or equipment) if the plant or equipment is-
(a) utilised in the course of a taxpayer’s trade in a process that is ancillary to any process of manufacture or any other process which, in the opinion of the Commissioner, is of a similar nature; and
(b) required by any law of the Republic for purposes of complying with measures that protect the environment; and
Section 37A (ITA) – Closure rehabilitation company or trust
37A. Closure rehabilitation company or trust
(1) For purposes of determining the taxable income derived by a person from carrying on any trade, any cash paid during any year of assessment commencing on or after 2 November 2006 by that person to a company or trust shall be deducted from that person’s income if –
(a) the sole object of that company or trust is to apply its property solely for rehabilitation upon premature closure, decommissioning and final closure, and post closure coverage of any latent and residual environmental impacts on the area covered in terms of any permit, right, reservation or permission contemplated in paragraph (d)(i)(aa) to restore one or more areas to their natural or predetermined state, or to a land use which conforms to the generally accepted principle of sustainable development;
(b) that company or trust holds assets solely for purposes contemplated in paragraph (a);
(c) that company or trust makes distributions solely for purposes contemplated in paragraph (a), or subsection (3) or (4); and
(d) that person –
(i)
(aa) holds a permit or right in respect of prospecting, exploration, mining or production, an old order right or OP26 right as defined in item 1 of Schedule II or any reservation or permission for or right to the use of the surface of land as contemplated in item 9 of Schedule II to the Mineral and Petroleum Resources Development Act; or
(bb) is engaged in prospecting, exploration, mining or production in terms of any permit, right, reservation or permission as contemplated in item (aa); or
(ii) after approval by the Commissioner, paid any cash to that company or trust and that payment was not part of any transaction, operation or scheme designed solely or mainly for purposes of shifting the deduction contemplated in this subsection from another person to that person.
(2) The company or trust contemplated in subsection (1) may only hold –
(a) financial instruments issued by any –
(i) collective investment scheme as regulated in terms of the Collective Investment Schemes Control Act;
(ii) long-term insurer as regulated in terms of the Long-Term Insurance Act;
(iii) bank as regulated in terms of the Banks Act; or
(iv) mutual bank as regulated in terms of the Mutual Banks Act 1993 (Act No. 124 of 1993);
(b) financial instruments of a listed company unless –
(i) those financial instruments are issued by a person contemplated in subsection (1)(d); or
(ii) those financial instruments are issued by a person that is a connected person in relation to a person contemplated in subsection (1)(d);
(c) financial instruments issued by any sphere of government in the Republic; or
(d) any other investments which were held by that company or trust before 18 November 2003.
(3) To the extent that the Cabinet member for mineral resources is satisfied that all of the areas in terms of any permit, right, reservation or permission contemplated in subsection (1)(d)(i)(aa) that have been rehabilitated as contemplated in subsection (1)(a), the company or trust in respect of those areas must be wound-up or liquidated and its assets remaining after the satisfaction of its liabilities must be transferred to –
(a) another company or trust as contemplated in this section as approved by the Commissioner; or
(b) if no such company or trust has been established, to an account or trust prescribed by the Cabinet member for mineral resources as approved of by the Commissioner if the Commissioner is satisfied that such company or trust satisfies the objects of subsection (1)(a).
(4) If the Cabinet member for mineral resources is satisfied that a company or trust as contemplated in subsection (1)(a) –
(a) will be able to satisfy all of the liabilities of that company or trust; and
(b) such company or trust has sufficient assets to rehabilitate and restore, as contemplated in subsection (1)(a), all areas to which any permit, right, reservation or permission contemplated in subsection (1)(d)(i)(aa) relates, as the case may be,
that company or trust may transfer assets not required for purposes of paragraphs (a) and (b) to another company or trust established in terms of this section as approved by the Commissioner,
(5)
(a) The constitution of a company or the instrument establishing a trust contemplated in this section must incorporate the provisions of this section and any amendments thereto.
(b) Where the constitution of a company or the instrument establishing a trust contemplated in this section does not comply with this section, it shall be deemed to comply for a period not exceeding two years, if the person responsible in a fiduciary capacity for the funds and the assets of that company or trust, furnishes the Commissioner with a written undertaking that that company or trust will be administered in compliance with this section.
(6) If a company or trust holds a financial instrument or investment during any year of assessment-
(a) other than a financial instrument contemplated in subsection (2); or
(b) other than an investment contemplated in subsection (2)(d),
an amount equal to 50 per cent of the highest market value of that other financial instrument or other investment during that year of assessment must be deemed to be an amount of normal tax payable by the person contemplated in subsection (1)(d), subject to subsection (8), to the extent that the financial instrument or investment is directly or indirectly derived from any amount in cash paid by that person to that company or that trust.
[Subsection (6) amended by section 28 of Act 8 of 2007 and substituted by section 49 of Act 17 of 2017 effective on 18 December 2017]
(7) If a company or trust contemplated in subsection (1) during any year of assessment-
(a) distributes property from that company or trust for a purpose other than-
(i) rehabilitation upon premature closure;
(ii) decommissioning and final closure;
(iii) post closure coverage of any latent or residual environmental impacts; or
(iv) transfer to another company, trust, or account established for the purposes contemplated in subsection (1)(a); or
(b) uses property from that company or trust as security for any debt for a purpose other than a purpose contemplated in paragraph (a)(i) or (ii),
an amount equal to 50 per cent of the highest market value during that year of assessment of the property so distributed or used as security must be deemed to be an amount of normal tax payable by the person contemplated in subsection (1)(d), subject to subsection (8), in respect of that year of assessment.
[Subsection (7) amended by section 28 of Act 8 of 2007 and substituted by section 47 of Act 35 of 2007 and section 49 of Act 17 of 2017 effective on 18 December 2017]
(8) Any amount deemed to be an amount of normal tax payable by the person contemplated in subsection (1)(d) in terms of subsection (6) or (7) must, to the extent that the amount cannot be recovered from that person, be recovered from the trust or company contemplated in this section.
[Subsection (8) amended by section 28 of Act 8 of 2007 and substituted by section 49 of Act 17 of 2017 effective on 18 December 2017]
(9) Subsection (7) does not apply in respect of any amount deemed to be an amount of normal tax that is paid to the Commissioner by a company or trust contemplated in this section.
[Subsection (9) inserted by section 49 of Act 17 of 2017 effective on 18 December 2017]
(10) A company or trust contemplated in this section must-
(a) within three months after the end of any year of assessment submit a report to the Director-General of the National Treasury in respect of that year of assessment providing the Director-General of the National Treasury with information comprising-
(i) the total amount of contributions to the company or the trust;
(ii) the total amount of withdrawals from the company or the trust; and
(iii) the purposes for which any amount of those withdrawals were applied; and
(b) within seven days after receiving a request from the Director-General of the National Treasury provide such information as the Director-General may require.
[Subsection (10) inserted by section 49 of Act 17 of 2017 effective on 18 December 2017]
Section 37 (ITA) – Calculation of capital expenditure on sale, transfer, lease or cession of mining property
37. Calculation of capital expenditure on sale, transfer, lease or cession of mining property
(1) For the purposes of this Act, but subject to subsection (1A), whenever a taxpayer-
(a) sells, transfers, leases or cedes any mining property; and
(b) disposes of any assets contemplated in section 36(11) (hereinafter referred to as ‘the capital assets’) in consequence of the sale, transfer, lease or cession contemplated in paragraph (a),
the person acquiring those capital assets shall be deemed to have acquired such capital assets at a cost equal to the effective value of those capital assets to that person on the effective date of that agreement of sale, transfer, lease or cession of the mining property, and the said cost shall be deemed to be expenditure that is incurred by that person during the period of assessment during which that agreement takes effect and to be capital expenditure which is in respect of such period required to be taken into account for the purposes of the definition of ‘capital expenditure incurred’ in section 36(11).
(1A) Where any consideration is given by the person acquiring the assets disposed of by the taxpayer, as contemplated in subsection (1), and the effective value of all those assets (including any mining property) so acquired, exceeds that consideration, the amount of the cost and expenditure in respect of the capital assets shall, for the purposes of subsection ( 1), be deemed to be an amount which bears to the total amount of such consideration the same ratio as such effective value of those capital assets bears to the effective value to that person of all the assets (including any mining property) so disposed of to that person.
(2) For the purposes of paragraph (j) of the definition of ‘gross income’ in section 1 and section 36, the taxpayer who disposes of any capital assets contemplated in subsection (1), shall be deemed to have disposed of such capital assets for a consideration equal in value to the cost of those capital assets to the person acquiring such capital assets as determined under subsection (1) and (1A), and such consideration shall be deemed to have been received by or to have accrued to the said taxpayer on the effective date of the agreement of sale, transfer, lease or cession.
(3) If the value of the consideration given or the value of the property disposed of is in dispute, the value may, be fixed by the Commissioner and shall be determined –
(a) in the case of any mining property, in the same manner as if transfer duty were payable; or
(b) in the case of any capital asset, at the market value of such capital asset.
(4) The effective value on the effective date of the agreement of sale, transfer, lease or cession, of all the assets disposed of, shall be determined by the Director General for Minerals and Energy who shall, notwithstanding the repeal of the Second Schedule to the Transvaal Mining Leases and Mineral Law Amendment Act, 1918 (Act No. 30 of 1918), for the purposes of such determination have all the powers which were conferred upon him by the provisions of that Schedule.
(5) For the purpose of this section, ‘mining property’ means-
(a) any land on which mining is carried on; or
(b) any right to minerals (including any right to mine for minerals) and a lease or sub-lease of such a right.
Subsection 12 of section 36 of ITA
(12) The balance of capital expenditure unredeemed at the commencement of the first year of assessment chargeable under this Act shall be the balance shown to be unredeemed at the end of the last year of assessment chargeable under the Income Tax Act, 1941.