12.     Events treated as disposals and acquisitions

(1)     Where an event described in subparagraph (2) occurs, a person must, subject to paragraph 24, be treated for the purposes of this Schedule as having disposed of an asset described in subparagraph (2) for an amount received or accrued equal to the market value of the asset at the time of the event and to have immediately reacquired the asset at an expenditure equal to that market value, which expenditure must be treated as an amount of expenditure actually incurred for the purposes of paragraph 20(1)(a).

[Subparagraph (1) substituted by section 72 of Act 60 of 2001, section 93 of Act 45 of 2003, section 50 of Act 3 of 2008 and section 81 of Act 43 of 2014 effective on 20 January 2015]

(2)     Subparagraph (1) applies, in the case of-

(a)     a person-

(i)      that commences to be a resident; or

[Subitem (i) substituted by section 81 of Act 43 of 2014 effective on 20 January 2015]

(ii)     that is a foreign company that commences to be a controlled foreign company,

[Subitem (ii) substituted by section 81 of Act 43 of 2014 effective on 20 January 2015]

(iii)    ……….

[Subitem (iii) deleted by section 81 of Act 43 of 2014 effective on 20 January 2015]

in respect of all assets of that person other than-

(aa)    assets in the Republic listed in paragraph 2(1)(b)(i) and (ii);

(bb)   any right to acquire any marketable security contemplated in section 8A;

(b)     an asset of a person that is not a resident, which asset-

(i)      becomes an asset of that person’s permanent establishment in the Republic otherwise than by way of acquisition; or

(ii)     ceases to be an asset of that person’s permanent establishment in the Republic otherwise than by way of a disposal contemplated in paragraph 11;

(c)     assets that are held by a person otherwise than as trading stock, when they commence to be held by that person as trading stock;

(d)     an asset which ceases to be held by a person as a personal-use asset otherwise than by way of a disposal contemplated in paragraph 11;

(e)     an asset which is held by a person otherwise than as a personal-use asset, when that asset commences to be held by that person as a personal-use asset; or

(f)      an asset transferred by an insurer contemplated in section 29A from one fund contemplated in section 29A(4) to any other such fund.

(3)     Where assets that are held by a person as trading stock cease to be held by that person as trading stock, otherwise than by way of a disposal contemplated in paragraph 11, that person will be treated as having disposed of those assets for a consideration equal to the amount included in that person’s income in terms of section 22(8) and to have immediately reacquired those assets for a cost equal to that amount, which cost must be treated as an amount of expenditure actually incurred for the purposes of paragraph 20(1)(a).

[Subparagraph (3) substituted by section 72(1)(b) of Act 60 of 2001 and by section 46(a) of Act 23 of 2020]

(4)     In the event of a person ceasing to be a controlled foreign company as a result of becoming a resident that person must, subject to paragraph 24, be treated for the purposes of this Schedule as having-

(a)     disposed of each of that person’s assets, other than-

(i)      assets in the Republic listed in paragraph 2(1)(b)(i) and (ii); and

(ii)     assets held by that person if any amount received or accrued from the disposal of those assets would have been taken into account for purposes of determining the net income as contemplated in section 9D of that person; and

(b)     immediately reacquired each of those assets at an expenditure equal to the market value of those assets immediately before the disposal, which expenditure must be treated as an amount of expenditure actually incurred for the purposes of paragraph 20(1)(a).

[Item (b) substituted by section 46(b) of Act 23 of 2020]

11.     Disposals

(1)     Subject to subparagraph (2), a disposal is any event, act, forbearance or operation of law which results in the creation, variation, transfer or extinction of an asset, and includes-

(a)     the sale, donation, expropriation, conversion, grant, cession, exchange or any other alienation or transfer of ownership of an asset;

(b)     the forfeiture, termination, redemption, cancellation, surrender, discharge, relinquishment, release, waiver, renunciation, expiry or abandonment of an asset;

(c)     the scrapping, loss, or destruction of an asset;

(d)     the vesting of an interest in an asset of a trust in a beneficiary;

(e)     the distribution of an asset by a company to a holder of shares;

(f)      the granting, renewal, extension or exercise of an option; or

(g)     the decrease in value of a person’s interest in a company, trust or partnership as a result of a value shifting arrangement.

(2)     There is no disposal of an asset-

(a)     by a person who transfers the asset as security for a debt or by a creditor who transfers that asset back to that person upon release of the security;

(b)     by a company in respect of-

(i)      the issue, cancellation or extinction of a share in the company; or

(ii)     the granting of an option to acquire a share in or certificate acknowledging or creating a debt owed by that company;

[Item (b) substituted by section 71 of Act 60 of 2001, section 44 of Act 20 of 2006 and section 106 of Act 22 of 2012, amended by section 126 of Act 31 of 2013 and substituted by section 126 of Act 31 of 2013 and section 105 of Act 25 of 2015 effective on 1 April 2014]

(c)     by a portfolio of a collective investment scheme in respect of the issue of a participatory interest in that portfolio, or by a portfolio in respect of the granting of an option to acquire a participatory interest in that portfolio;

(d)     by a person in respect of the issue of any debt by or to that person;

(e)     ……….

(f)      ……….

(g)     by a person where a disposal is made to correct an error in the registration in the deeds registry of immovable property in that person’s name;

(h)     by a lender to a borrower or by a borrower to a lender, where any security or bond has been lent by a lender to a borrower in terms of a securities lending arrangement; or

[Item (h) amended by section 67 of Act 74 of 2002, substituted by section 92 of Act 45 of 2003 and section 70 of Act 15 of 2016 effective on 1 January 2017, applies in respect of any securities lending arrangement entered into on or after that date]

(i)      by a person where that asset vests in the Master of the High Court or in a trustee, in consequence of the sequestration of the estate of the spouse of that person, as contemplated in section 21 of the Insolvency Act, 1936 (Act No. 24 of 1936), and where that asset is subsequently released by the Master or that trustee as contemplated in that section.

(j)      ……….

[Item (j) added by section 55 of Act 32 of 2004 and deleted by section 105 of Act 25 of 2015 effective on 1 March 2016]

(k)     by a person on the cession or release of a right to acquire a marketable security in whole or in part for a consideration which consists of or includes another right to acquire a marketable security in the circumstances contemplated in section 8A(5);

(l)      by a person of shares held in a company where that company-

(i)      subdivides or consolidates those shares;

(ii)     converts shares of par value to no par value or of no par value to par value; or

(iii)    converts shares in terms of section 40A or 40B,

solely in substitution of the shares held by that person, and-

(aa)    the proportionate participation rights and interests of that person in that company remain unaltered; and

(bb)   no other consideration whatsoever passes directly or indirectly in consequence of that subdivision, consolidation or conversion;

[Item (l) added by section 126 of Act 31 of 2013 and amended by section 80 of Act 43 of 2014 effective on 20 January 2015]

(m)    by a person where that person exchanges a qualifying equity share for another qualifying equity share as contemplated in section 8B(2);

[Item (m) added by section 80 of Act 43 of 2014 and amended by section 105 of Act 25 of 2015 effective on 1 January 2016]

(n)     by a transferor to a transferee or by a transferee to a transferor where any share or bond has been transferred in terms of a collateral arrangement;

[Item (n) added by section 105 of Act 25 of 2015, substituted by section 70 of Act 15 of 2016 effective on 1 January 2017, applies in respect of any collateral arrangement entered into on or after that date]

(o)       by a person that-

(i)      disposed of an asset to another person in terms of an agreement; and

(ii)     reacquired that asset from that other person by reason of the cancellation or termination, during the year of assessment during which that asset was so disposed of, of that agreement and the restoration of both persons to the position they were in prior to entering into that agreement.

[Item (o) added by section 105 of Act 25 of 2015 effective on 1 January 2016]