Author: admin_kmos

Paragraph 42 (Eighth Schedule) – Short-term disposals and acquisitions of identical financial instruments

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42.    Short-term disposals and acquisitions of identical financial instruments

(1)     Where a capital loss is determined in respect of the disposal by a person of a financial instrument, other than a disposal contemplated in section 29B, and within a period beginning 45 days before the date of disposal and ending 45 days after that date, that person or a connected person in relation to that person, subject to subparagraph (3), acquires or has entered into a contract to acquire a financial instrument of the same kind and of the same or equivalent quality-

(a)     the person who disposed of the financial instrument must be treated as having disposed thereof for proceeds equal to the base cost thereof; and

(b)     the person who acquired the financial instrument of the same kind and of the same or equivalent quality must be treated as having acquired that financial instrument at a cost equal to the total of –

(i)      any amount allowable in terms of paragraph 20; and

(ii)     the amount of any capital loss which would have arisen in the hands of the person who disposed of the asset, were it not for the operation of item (a).

which cost must be treated as an amount of expenditure actually incurred for the purposes of paragraph 20(1)(a).

[Item (b) substituted by section 90(1)(a) of Act 60 of 2001 and amended by section 74 of Act 35 of 2007, by section 55 of Act 3 of 2008 and by section 50 of Act 23 of 2020]

(2)     For the purposes of subparagraph (1), there must not be taken into account in determining the period of 91 days any days in which the person disposing of the financial instrument-

(a)     has an option to sell, is under a contractual obligation to sell or has made (and not closed) a short sale of a financial instrument of the same kind and of the same or equivalent quality;

(b)     is the grantor of an option to buy a financial instrument of the same kind and of the same or equivalent quality; or

(c)     has otherwise diminished risk of loss in respect of that financial instrument by holding one or more contrary positions with respect to a financial instrument of the same kind and of the same or equivalent quality.

(3)     For the purposes of this paragraph, a connected person in relation to-

(a)     a natural person does not include a relative of that person other than a parent, child, stepchild, brother, sister, grandchild or grandparent of that person; or

(b)     a fund of an insurer contemplated in section 29A does not include another such fund of that insurer in respect of the disposal of an asset by such fund to another such fund.

(4)     This paragraph must not apply to any asset-

(a)     in respect of which the weighted average method of determining base cost of assets, as contemplated in paragraph 32(4), is used; and

(b)     if that asset is, in terms of section 29B, allocated to any policyholder fund of an insurer as defined in that section.

Paragraph 41 (Eighth Schedule) – Tax payable by heir of a deceased estate

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41.    Tax payable by heir of a deceased estate

(1)       Where a person dies before 1 March 2016-

[Words preceding item (a) substituted by section 113 of Act 25 of 2015 effective on 1 March 2016]

(a)     the tax determined in terms of this Act, which relates to the taxable capital gain of a deceased person, exceeds 50 per cent of the net value of the estate determined for purposes of the Estate Duty Act, before taking into account the amount of that tax so determined; and

[Item (a) substituted by section 83 of Act 74 of 2002 and section 87 of Act 43 of 2014 effective on 20 January 2015]

(b)     the executor of the estate is required to dispose of any asset of the estate for purposes of paying the amount of that tax, any heir or legatee of the estate, who would have been entitled to that asset contemplated in item (b), had there been no liability for tax, may elect that that asset be distributed to that heir or legatee upon the condition that the amount of tax which exceeds 50 per cent of that net value be paid by him or her within a period of three years after the date that the executor obtained permission to distribute the assets of the estate, as contemplated in section 35(12) of the Administration of Estates Act, 1965 (Act No. 66 of 1965).

(2)     Any amount of tax payable by an heir as contemplated in subparagraph (1), 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.

Paragraph 40 (Eighth Schedule) – Disposal to and from deceased estate

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40.    Disposal to and from deceased estate

 

(1)     A person who dies before 1 March 2016 must be treated as having disposed of his or her assets, other than-

[Words preceding item (a) substituted by section 112 of Act 25 of 2015 effective on 1 March 2016]

(a)     assets transferred to the surviving spouse of that deceased person as contemplated in section 9HB(2)(a);

[Item (a) substituted by section 60(a) of Act 34 of 2019]

(b)     ………..

(c)     a long-term insurance policy of the deceased which if the proceeds of the policy had been received by or accrued to the deceased, the capital gain or capital loss determined in respect of that disposal would be disregarded in terms of paragraph 55; or

(d)     an interest in a pension, pension preservation, provident, provident preservation or retirement annuity fund in the Republic or a fund, arrangement or instrument situated outside the Republic which provides benefits similar to a pension, pension preservation, provident, provident preservation or retirement annuity fund which if the proceeds thereof had been received by or accrued to the deceased, the capital gain or capital loss determined in respect of the disposal of the interest would have been disregarded in terms of paragraph 54

for an amount received or accrued equal to the market value of those assets at the date of that person’s death.

(1A)  If any asset of a deceased person is treated as having been disposed of as contemplated in subparagraph (1) and is transferred directly to –

(a)     the estate of the deceased person, the estate must be treated as having acquired that asset at a cost equal to the market value of that asset as at the date of death of that deceased person; or

(b)     an heir or legatee of the person, the heir or legatee must be treated as having acquired that asset at a cost equal to the market value of that asset as at the date of death of that deceased person,

which cost must be treated as an amount of expenditure actually incurred for the purposes of paragraph 20(1)(a).

(2)     Where an asset is disposed of by a deceased estate to an heir or legatee (other than the surviving spouse of the deceased person as contemplated in section 9HB(2)(a))-

(a)     the deceased estate must be treated as having disposed of that asset for proceeds equal to the base cost of the deceased estate in respect of that asset; and

(b)     the heir or legatee must be treated as having acquired that asset at a cost equal to the base cost of the deceased estate in respect of that asset, which cost must be treated as an amount of expenditure actually incurred for the purposes of paragraph 20(1)(a).

[Sub­paragraph (2) amended by section 82(c) of Act 74 of 2002, by section 50 of Act 20 of 2006, by section 79(1)(c) of Act 60 of 2008, by section 115(1) of Act 22 of 2012 and by section 60(b) of Act 34 of 2019]

(3)     For the purposes of this Schedule, the disposal of an asset by the deceased estate of a natural person shall be treated in the same manner as if that asset had been disposed of by that natural person.

Paragraph 39A (Eighth Schedule) – Disposal of asset for unaccrued amounts of proceeds

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39A.    Disposal of asset for unaccrued amounts of proceeds

 

(1)     Where a person during any year of assessment disposes of an asset and all the proceeds from the disposal of that asset will not accrue to that person during that year, that person must, when determining the aggregate capital gain or aggregate capital loss for that year or any subsequent year of assessment, disregard any capital loss determined in respect of that disposal.

 

(2)     A person’s capital loss which is disregarded during any year of assessment in terms of subparagraph (1) which has not otherwise been allowed as a deduction may be deducted from that person’s capital gains determined in any subsequent year in respect of the disposal of the asset contemplated in subparagraph (1).

 

(3)     If during any year of assessment a person shows that no further proceeds will accrue to that person from the disposal contemplated in subparagraph (1), so much of the capital loss contemplated in that subparagraph as has not been deducted from any subsequent capital gains as contemplated in subparagraph (2), may be taken into account in determining that person’s aggregate capital gain or aggregate capital loss for that year of assessment.

Paragraph 39 (Eighth Schedule) – Capital losses determined in respect of disposals to certain connected persons

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39.    Capital losses determined in respect of disposals to certain connected persons

(1)     A person must, when determining the aggregate capital gain or aggregate capital loss of that person, disregard any capital loss determined in respect of the disposal of an asset to any person-

(a)     who was a connected person in relation to that person immediately before that disposal; or

(b)     which is immediately after the disposal –

(i)      a member of the same group of companies as that person; or

(ii)     a trust with a beneficiary which is a member of the same group of companies as that person.

(2)     A person’s capital loss which is disregarded in terms of subparagraph (1) may be deducted from that person’s capital gains determined in respect of disposals of assets during that year or subsequent years to the same person to whom the disposal giving rise to that capital loss was made, if at the time of those subsequent disposals, that person is still a connected person in relation to that person.

(3)     For the purposes of subparagraph (1), a connected person in relation to-

(a)     a natural person does not include a relative of that person other than a parent, child, stepchild, brother, sister, grandchild or grandparent of that person; or

(b)     a fund of an insurer contemplated in section 29A does not include another such fund of that insurer in respect of the disposal of an asset by such fund to another such fund.

(4)     Subparagraph (1) does not apply in respect of the disposal by a trust of any right, marketable security or equity instrument contemplated in section 8A or 8C to a beneficiary of that trust, if –

(a)     that right, marketable security or equity instrument is disposed of to that beneficiary –

(i)      by virtue of that beneficiary’s employment with an employer, directorship of a company or services rendered or to be rendered by that beneficiary as an employee to an employer: or

(ii)     as a result of the exercise, cession, release, conversion or exchange by that beneficiary of the right, marketable security or equity instrument contemplated in subitem (i); and

(b)     that trust is an associated institution as contemplated in paragraph 1 of the Seventh Schedule in relation to that employer or company.

(5)     For the purposes of subparagraph (1), where a company redeems its shares, the holder of those shares must be treated as having disposed of them to that company.

[Subparagraph (5) added by section 79 of Act 23 of 2018 effective on 17 Januaery 2019]

Paragraph 38 (Eighth Schedule) – Disposal by way of donation, consideration not measurable in money and transactions between connected persons not at arm’s length price

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38.    Disposal by way of donation, consideration not measurable in money and transactions between connected persons not at an arm’s length price

(1)    Subject to subparagraph (2) and section 9HB, where a person disposed of an asset by means of a donation or for a consideration not measurable in money or to a person who is a connected person immediately prior to or immediately after that disposal in relation to that person for a consideration which does not reflect an arm’s length price-

[Sub­paragraph (1) (previously paragraph 38) amended by section 87(1)(a) of Act 60 of 2001, by section 81 of Act 74 of 2002, by section 114(1) of Act 22 of 2012 and by section 59(a) of Act 34 of 2019]

(a)     the person who disposed of that asset must be treated as having disposed of that asset for an amount received or accrued equal to the market value of that asset as at the date of that disposal; and

(b)     the person who acquired that asset must be treated as having acquired that asset at a cost equal to that market value, which cost must be treated as an amount of expenditure actually incurred for the purposes of paragraph 20(1)(a).

[Item (b) substituted by section 87(1)(b) of Act 60 of 2001 and by section 59(b) of Act 34 of 2019]

(2)     Subparagraph (1) does not apply in respect of the disposal of-

(a)     a right contemplated in section 8A;

(b)     an asset in the circumstances contemplated in section 10(1)(nE);

(c)     a qualifying equity share contemplated in section 8B by an employer, associated institution or any other person by arrangement with the employer, as contemplated in paragraph 1 of the Seventh Schedule, to an employee; or

(d)     ……….

(e)     any asset in respect of which section 40CA applies;

[Item (e) substituted by section 134 of Act 31 of 2013 and amended by section 71 of Act 15 of 2016 effective on 1 March 2015, applies in respect of years of assessment commencing on or after that date]

(f)     any land from the date on which that land becomes declared land as defined in section 37D(1).

[Paragraph (f) added by section 71 of Act 15 of 2016 effective on 1 March 2015, applies in respect of years of assessment commencing on or after that date]

Paragraph 37G (Eighth Schedule) – Determination of taxable income derived from small business undertakings

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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.

Paragraph 6 (Tenth Schedule) – Exploration and post-exploration expenses

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6.    Exploration and post-exploration expenses

 

If a company holds an oil and gas right contemplated in paragraph (a) or (b) of the definition of ‘oil and gas right’ during any year of assessment-

 

(a)     that company is deemed to be carrying on a trade in respect of that oil and gas right; and

 

(b)     expenditure and losses incurred by that company in respect of that oil and gas right are deemed to be incurred in the production of income of that company.

Paragraph 5 (Tenth Schedule) – Deductions from income derived from oil and gas activities

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5.    Deductions from income derived from oil and gas activities

 

(1)     For purposes of determining the taxable income of an oil and gas company during any year of assessment, there must be allowed as deductions from the oil and gas income of that company all expenditure and losses actually incurred (other than any expenditure or loss actually incurred in respect of the acquisition of any oil and gas right, except as allowed in paragraph 7(3)) in that year in respect of exploration or post-exploration.

 

(2)     In addition to any other deductions (as contemplated in subparagraph (1) other than any expenditure or loss actually incurred in respect of the acquisition of any oil and gas right) allowable in terms of this paragraph, for purposes of determining the taxable income of an oil and gas company during any year of assessment, there must be allowed as deductions from the oil and gas income of that company derived in that year of assessment-

 

(a)     100 per cent of all expenditure of a capital nature actually incurred in that year of assessment in respect of exploration in terms of an oil and gas right; and

 

(b)     50 per cent of all expenditure of a capital nature actually incurred in that year of assessment in respect of post-exploration in respect of an oil and gas right.

 

(2A)  For the purposes of determining the taxable income of an oil and gas company during the first year of assessment of that oil and gas company commencing on or after 2 November 2006, there will be brought forward and allowed as a deduction from the oil and gas income of that oil and gas company the amount determined in terms of section 36(7E) in respect of the immediately preceding year of assessment.

 

(3)     For purposes of determining the taxable income of an oil and gas company during any year of assessment, any assessed losses (as defined in section 20) in respect of exploration or post-exploration may only be set off against –

 

(a)     the oil and gas income of that company; and

 

(b)     income from the refining of gas derived in respect of any oil and gas right held by that company,

 

to the extent that those assessed losses do not exceed that income.

 

(4)     To the extent that any assessed losses remain after the set-off contemplated in subparagraph (3), an amount equal to 10 per cent of those remaining assessed losses may be set off against any other income derived by that company.

 

(5)     To the extent that any assessed loss remains after the set-offs contemplated in subparagraphs (3) and (4), those losses may be carried forward to the succeeding year of assessment of that oil and gas company.