Category: CHAPTER II – The Taxes (ITA)

Subsection 2 of section 8E of ITA

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(2)     Any dividend or foreign dividend received by or accrued to a person during any year of assessment in respect of a share or equity instrument must be deemed in relation to that person to be an amount of income accrued to that person if that share or equity instrument constitutes a hybrid equity instrument at any time during that year of assessment.

[Subsection (2) substituted by section 14 of Act 15 of 2016 effective on 1 January 2017, applies in respect of years of assessment ending on or after that date]


(2A)  Where any share or preference share that was issued in terms of an agreement, all the terms of which were finally agreed to before 1 April 2012 by all the parties to that agreement, constitutes a hybrid equity instrument solely by reason of a right of redemption or a security arrangement acquired in accordance with the terms of that agreement and that right or arrangement is cancelled on or after 26 October 2016 and on or before 31 December 2017-


(a)     the provisions of subsection (2) will not apply in respect of any dividend or foreign dividend that accrues in respect of that share after the date of cancellation of that right or arrangement; and

(b)     the cancellation of that right or arrangement must not be treated as a disposal of that share if no consideration is payable in respect of that cancellation.

[Subsection (2A) inserted by section 14 of Act 15 of 2016 effective on 19 January 2017]

“Instrument” definition of section 8F of ITA

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‘instrument’ means any form of interest-bearing arrangement or debt that is issued by-

(a)     a company that is a resident;

(b)     a company that is not a resident if the interest in respect of that instrument is attributable to a permanent establishment of that company in the Republic; or

(c)     a company that is a controlled foreign company as contemplated in section 9D if the interest incurred in respect of that instrument must be taken into account in determining the net income of that controlled foreign company as contemplated in that section;

[Definition of ‘instrument’ substituted by section 16 of Act 15 of 2016 effective on 24 February 2016, applies in respect of amounts incurred in respect of an instrument on or after that date]

“Foreign financial instrument holding company” definition of section 9D of ITA

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“foreign financial instrument holding company” ……….

 [Definition of “foreign financial instrument holding company” substituted by section 22 of Act 45 of 2003, amended by section 14 of Act 31 of 2005 and section 9 of Act 20 of 2006 and deleted by section 12 of Act 43 of 2014 effective on 20 January 2015]

Section 10(1)(hA) of ITA

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(hA)  any amount received by or accrued to the holder of a debt-

(i)      if the holder of that debt is a company that forms part of the same group of companies, as defined in section 41, as the issuer of that debt; and

(ii)     to the extent that the amount is attributable to any amount of interest as defined in section 23K(1) that is not deductible as a result of the application of section 23K;

“Participation rights” definition of section 9D of ITA

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“participation rights” in relation to a foreign company means –

 

(a)     the right to participate all or part of the benefits of the rights (other than voting rights) attaching to a share, or any interest of a similar nature, in that company; or

 

(b)     in the case where no person has any right in that foreign company as contemplated in paragraph (a) or no such rights can be determined for any person, the right to exercise any voting rights in that company; and

Section 10(1)(h) of ITA

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(h)     any amount of interest which is received by or accrues to any person that is not a resident, unless-

[Words preceding subparagraph (i) substituted by section 16 of Act 17 of 2017 effective on 18 December 2017]

(i)      that person is a natural person who was physically present in the Republic for a period exceeding 183 days in aggregate during the twelve-month period preceding the date on which the interest is received by or accrues to that person; or

[Subparagraph (i) substituted by section 22 of Act 23 of 2018 effective on 17 January 2019]

(ii)     the debt from which the interest arises is effectively connected to a permanent establishment of that person in the Republic;