Author: admin_kmos

Paragraph 65B (Eighth Schedule) – Disposal by recreational club

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65B.    Disposal by recreational club

 

(1)     A recreational club approved in terms of section 30A may elect that this paragraph applies in respect of the disposal of an asset the whole of which was used mainly for purposes of providing social and recreational facilities and amenities for members of that club, where –

 

(a)     proceeds accrue to that club in respect of that disposal;


(b)     those proceeds are equal to or exceed the base cost of that asset;


(c)


(i)      an amount at least equal to the receipts and accruals from that disposal has been or will be expended to acquire one or more replacement assets all of which will be used mainly for such purposes;

 

(ii)     the contracts for the acquisition of the replacement asset or assets have all been or will be concluded within 12 months after the date of the disposal of that asset; and

 

(iii)    the replacement asset or assets will all be brought into use within three years of the disposal of that asset:
Provided that the Commissioner may extend the period within which the contract must be concluded or asset brought into use by no more than six months if all reasonable steps were taken to conclude those contracts or bring those assets into use; and

 

(d)     that asset is not deemed to have been disposed of and to have been reacquired by that club.

 

(2)     Where a club has elected in terms of subparagraph (1) that this paragraph must apply in respect of the disposal of an asset, any capital gain determined in respect of that disposal must, subject to subparagraphs (3), (4) and (5) be disregarded when determining that club’s aggregate capital gain or aggregate capital loss.

 

(3)     Where a club acquires more than one replacement asset as contemplated in subparagraph (1), that club must, in applying subparagraphs (4) and (5), apportion the capital gain derived from the disposal of that asset to each replacement asset in the same ratio as the receipts and accruals from that disposal respectively expended in acquiring each of those replacement assets bear to the total amount of those receipts and accruals expended in acquiring all those replacement assets.

 

(4)     Where a club during any year of assessment disposes of a replacement asset and any portion of the disregarded capital gain which is apportioned to that asset, has not otherwise been treated as a capital gain in terms of this paragraph, that club must treat that portion of disregarded capital gain as a capital gain from the disposal of that replacement asset in that year of assessment.

 

(5)     Where a club fails to conclude a contract or fails to bring any replacement asset into use within the period prescribed in subparagraph (1)(c)(ii) and (iii), that club must –

 

(a)     treat the capital gain contemplated in subparagraph (2) as a capital gain on the date on which the relevant period ends;


(b)     determine interest at the prescribed rate on that capital gain from the date of that disposal to the date contemplated in item (a); and


(c)     treat that interest as a capital gain on the date contemplated in item (a) when determining that club’s aggregate capital gain or aggregate capital loss.

Paragraph 65 (Eighth Schedule) – Involuntary disposal

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65.     Involuntary disposal

(1)     A person may elect that this paragraph applies in respect of the disposal of an asset (other than a financial instrument), where-

(a)     that asset is disposed of by way of operation of law, theft or destruction;

(b)     proceeds accrue to that person by way of compensation in respect of that disposal;

(c)     those proceeds are equal to or exceed the base cost of that asset;

(d)

 

(i)      an amount at least equal to the receipts and accruals from that disposal has been or will be expended to acquire one or more asset (hereinafter referred to as the ‘replacement asset or assets’);

(ii)     all the replacement assets constitute assets contemplated in section 9(2)(j) or (k);

[Subitem (ii) substituted by section 124(1)(a) of Act 22 of 2012, section 124(1)(b) of Act 22 of 2012 and section 119 of Act 25 of 2015 effective on 1 January 2012]

(iii)    the contracts for the acquisition of the replacement asset or assets have all been or will be concluded within 12 months after the date of the disposal of that asset; and

(iv)    the replacement asset or assets will all be brought into use within three years of the disposal of that asset: Provided that the Commissioner may, on application by the taxpayer, decice to extend the period within which the contract must be concluded or asset brought into use by no more than six months if all reasonable steps were taken to conclude those contracts or bring those assets into use; and

[Proviso substituted by section 119 of Act 25 of 2015 effective on 8 January 2016]

(e)     that asset is not deemed to have been disposed of and to have been reacquired by that person.

(2)     Where a person has elected in terms of subparagraph (1) that this paragraph must apply in respect of the disposal of an asset, any capital gain determined in respect of that disposal must, subject to subparagraphs (4), (5) and (6) be disregarded when determining that person’s aggregate capital gain or aggregate capital loss.

(3)     Where a person acquires more than one replacement asset as contemplated in subparagraph (1), that person must, in applying subparagraphs (4) and (5), apportion the capital gain derived from the disposal of that asset to each replacement asset in the same ratio as the receipts and accruals from that disposal respectively expended in acquiring each of those replacement assets bear to the total amount of those receipts and accruals expended in acquiring all those replacement assets.

(4)     Where a replacement asset contemplated in subparagraph (1) constitutes a depreciable asset, the person must treat as a capital gain for a year of assessment, so much of the disregarded capital gain contemplated in subparagraph (3), as bears to the total amount of that disregarded gain apportioned to that replacement asset as contemplated in subparagraph (3) the same ratio as the amount of any deduction or allowance allowed in that year in respect of the replacement asset bears to the total amount of the deduction or allowance (determined with reference to the cost or value of that asset at the time of acquisition thereof) which is allowable for all years of assessment in respect of that replacement asset.

 

(5)     Where a person during any year of assessment disposes of a replacement asset and any portion of the disregarded capital gain which is apportioned to that asset, has not otherwise been treated as a capital gain in terms of this paragraph, that person must treat that portion of disregarded capital gain as a capital gain from the disposal of that replacement asset in that year of assessment.

(6)     Where a person fails to conclude a contract or fails to bring any replacement asset into use within the period prescribed in subparagraph (1)(d)(iii) or (iv), subparagraph (2) shall not apply and that person must-

(a)     treat the capital gain contemplated in subparagraph (2) as a capital gain on the date on which the relevant period ends;

(b)     determine interest at the prescribed rate on that capital gain from the date of that disposal to the date contemplated in item (a); and

(c)     treat that interest as a capital gain on the date contemplated in item (a) when determining that person’s aggregate capital gain or aggregate capital loss.

(7)     Where a replacement asset or assets constitute personal use assets, the provisions of this paragraph shall not apply.

Paragraph 64B (Eighth Schedule) – Disposal of equity shares in foreign companies

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64B.  Disposal of equity shares in foreign companies

(1)     Subject to subparagraph (4), a person other than a headquarter company must disregard any capital gain or capital loss determined in respect of the disposal of any equity share in any foreign company (other than an interest contemplated in paragraph 2(2)), if-

(a)     that person (whether alone or together with any other person forming part of the same group of companies as that person) immediately before that disposal-

 

(i)      held an interest of at least 10 per cent of the equity shares and voting rights in that foreign company; and

 

(ii)     held the interest contemplated in subitem (i) for a period of at least 18 months prior to that disposal, unless-

 

(aa)    that person is a company;

 

(bb)   that interest was acquired by that person from any other company that forms part of the same group of companies as that person; and

 

(cc)    that person and that other company in aggregate held that interest for more than 18 months; and

 

(b)     that interest is disposed of to any person that is not a resident, other than-

(i)      a controlled foreign company or any person that is a connected person in relation to the person disposing of that interest;

(ii)     a non-resident company that formed part of the same group of companies as the company disposing of the shares at any time during a period of 18 months before that disposal; or

(iii)    a non-resident company, of which the shareholders and their shareholding, immediately after the disposal, are substantially the same as the shareholders of and their shareholding in any company that is in the same group of companies as the company in the group of companies disposing of the shares,

[Item (iii) substituted by section 35(1)(a) of Act 42 of 2024 deemed to have come into operation on 1 November, 2023 and applicable in respect of disposals on or after that date]

for an amount that is equal to or exceeds the market value of the interest.

[Item (b) substituted by section 117(1) of Act 25 of 2015 and by section 42(1)(a) of Act 17 of 2023 effective on 1 November, 2023 and applicable in respect of any disposals on or after that date]

(2)     Subject to subparagraph (4), a headquarter company must disregard any capital gain or capital loss determined in respect of the disposal of any equity share in any foreign company (other than an interest contemplated in paragraph 2(2)) if that headquarter company (whether alone or together with any other person forming part of the same group of companies as that headquarter company) immediately before that disposal held at least 10 per cent of the equity shares and voting rights in that foreign company.

(3)     Paragraph 8(b) applies in respect of any capital gain determined in respect of any disposal of any equity share in any foreign company on or before 31 December 2012 by a person which is or was disregarded in terms of subparagraphs (1) and (4) in any year of assessment, if-

(a)     the foreign company prior to that disposal was a controlled foreign company in relation to that person or in relation to any other company in the same group of companies as that person;

 

(b)     the equity share in that foreign company was disposed of to a connected person in relation to that person either before or after that disposal;

 

(c)     that person-

 

(i)      disposed of that equity share for no consideration or for consideration which does not reflect an arm’s length price, other than a distribution contemplated in subitem (ii);

 

(ii)     disposed of that equity share by means of a distribution made unless-

 

(aa)   that distribution was made to a company that forms part of the same group of companies as that person; or

 

(bb)   the full amount of that distribution was included in the income of a holder of shares in that foreign company or would, but for the provisions of section 10B(2)(a) or (b), have been so included; or

 

(iii)    disposed of any consideration where that consideration was received or accrued from the disposal of that equity share (or any amount received in exchange therefor) in terms of any transaction, operation or scheme of which the disposal of the equity share forms part-

 

(aa)   for no consideration or for consideration which does not reflect an arm’s length price (other than a distribution contemplated in subsubitem (bb)); or

 

(bb)   by means of a distribution by a company, unless the full amount of that distribution was included in the income of a holder of shares in that company or would, but for the provisions of section 10B(2)(a) or (b), have been so included; and

[Subsubitem (bb) amended by section 144 of Act 31 of 2013 and substituted by section 84 of Act 23 of 2018 effective on 17 January 2019]

 

(d)     that foreign company ceased, in terms of any transaction, operation or scheme of which the disposal of the equity share forms part, to be a controlled foreign company in relation to that person or other company in the same group of companies as that person (having regard solely to any rights contemplated in paragraph (a) of the definition of ‘participation rights’ in section 9D).

(4)     A person must disregard any capital gain determined in respect of any foreign return of capital received by or accrued to that person from a “foreign company” as defined in section 9D (other than an interest contemplated in paragraph 2(2) where that person (whether alone or together with any other person forming part of the same group of companies as that person)-

(a)     holds an interest of at least 10 per cent of the total equity shares and voting rights in that company; and

(b)     has held the interest referred to in item (a) for at least 18 months prior to the receipt or accrual of that foreign return of capital, unless-

(i)      that person is a company;

(ii)     that interest was acquired by that person from any other company that forms part of the same group of companies as that person; and

(iii)     that person and that other company in aggregate held that interest for longer than 18 months.

[Subparagraph (4) substituted by section 42(1)(b) of Act 17 of 2023 and by section 35(1)(b) of Act 42 of 2024 deemed to have come into operation on 1 January, 2024 and applicable in respect of foreign returns of capital received or accrued on or after that date]

(5)     The provisions of this paragraph do not apply in respect of any capital gain or capital loss determined in respect of-

(a)     the disposal of any equity share in any portfolio contemplated in paragraph (e) of the definition of ‘company’ in section 1; and

 

(b)     any distribution contemplated in subparagraph (4) by any portfolio contemplated in item (a).

(6)     This paragraph must not apply in respect of any capital gain or capital loss determined in respect of the disposal of any share in a controlled foreign company to the extent that the value of the assets of that controlled foreign company is attributable to assets directly or indirectly located, issued or registered in the Republic.

[Subparagraph (6) added by section 51(1) of Act 23 of 2020 effective on 1 January, 2021 and applicable in respect of any disposal on or after that date]

Paragraph 64A (Eighth Schedule) – Awards in terms of land restitution programmes and land reform measures

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64A.  Awards in terms of land restitution programmes and land reform measures

A person must disregard any capital gain or capital loss in respect of the disposal that resulted in that person receiving-

(a)     restitution of a right to land, an award or compensation in terms of the Restitution of Land Rights Act, 1994 (Act No. 22 of 1994); or

(b)     land or right to land by virtue of the measures as contemplated in Chapter 6 of the National Development Plan: Vision 2030 of 11 November 2011 released by the National Planning Commission, Presidency of the Republic of South Africa.

[Paragraph 64A inserted by section 92 of Act 74 of 2002, substituted by section 55 of Act 20 of 2006, amended by section 121 of Act 22 of 2012, substituted by section 76 of Act 15 of 2016 effective on 29 February 2016, applies in respect of years of assessment ending on or after that date]

Paragraph 64 (Eighth Schedule) – Asset used to produce exempt income

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64.    Asset used to produce exempt income

 

A person must disregard any capital gain or capital loss in respect of the disposal of an asset which is used by that person solely to produce amounts which are exempt from normal tax in terms of –

 

(a)     section 10, other than receipts and accruals contemplated in paragraphs (cN), (cO), (i) and (k) of subsection (1) thereof; or

 

(b)     section 12K.

Paragraph 63A (Eighth Schedule) – Public benefit organisations

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63A.    Public benefit organisations

 

A public benefit organisation approved by the Commissioner in terms of section 30(3) must disregard any capital gain or capital loss determined in respect of the disposal of an asset if –

 

(a)     that public benefit organisation did not use that asset on or after valuation date in carrying on any business undertaking or trading activity; or

 

(b)     substantially the whole of the use of that asset by that public benefit organisation on and after valuation date was directed at –

 

(i)      a purpose other than carrying on a business undertaking or trading activity; or

 

(ii)     carrying on a business undertaking or trading activity contemplated in section 10(1)(cN)(ii)(aa), (bb) or (cc).

Paragraph 62 (Eighth Schedule) – Donations and bequests to public benefit organisations and exempt persons

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62.    Donations and bequests to public benefit organisations and exempt persons

 

A person must disregard a capital gain or capital loss determined in respect of the donation or bequest of an asset by that person to-

 

(a)     the government of the Republic in the national, provincial or local sphere, as contemplated in section 10(1)(a);

 

(b)     a public benefit organisation contemplated in paragraph (a) of the definition of ‘public benefit organisation’in section 30(1) that has been approved by the Commissioner in terms of section 30(3);

 

(c)     a person contemplated in section 10(1)(cA) or (d)(iv);

 

(d)     a person referred to in section 10(1)(cE) or (e); or

 

(e)     a recreational club which is a company, society or other organisation as contemplated in the definition of ‘recreational club’ in section 30A(1) that has been approved by the Commissioner in terms of section 30A.

Paragraph 61 (Eighth Schedule) – Portfolios of collective investment schemes other than portfolios of collective investment schemes in property

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61.    Portfolios of collective investment schemes other than portfolios of collective investment schemes in property

 

(1)     Subject to paragraph 82A, a holder of a participatory interest in a portfolio of a collective investment scheme, other than a portfolio of a collective investment scheme in property, must determine a capital gain or capital loss in respect of the participatory interest only upon the disposal of that participatory interest.

[Subparagraph (1) substituted by section 141(1)(b) of Act 31 of 2013 and by section 33(1) of Act 5 of 2026 effective on 1 March, 2026 and applicable in respect of disposals made on or after that date]

 

(2)     The capital gain or capital loss to be determined in terms of subparagraph (1) must be determined with reference to the proceeds from the disposal of that participatory interest and its base cost.

 

(3)      Any capital gain or capital loss in respect of a disposal by a portfolio of a collective investment scheme, other than a portfolio of a collective investment scheme in property, must be disregarded.