Category: CHAPTER II – The Taxes (ITA)

Section 10(1)(k) of ITA

Posted on by admin_kmos

(k)

 

(i)      dividends (other than dividends paid or declared by a headquarter company) received by or accrued to any person: Provided that this exemption shall not apply –

 

(aa)   to dividends (other than those received by or accrued to or in favour of a person that is not a resident or a dividend contemplated in paragraph (b) of the definition of ‘dividend’) distributed by a company that is a REIT, or a controlled company as defined in section 25BB;

 

(bb)   ……….

 

(cc)    ………

 

(dd)   to any dividend in respect of a restricted equity instrument as defined in section 8Cto the extent that the restricted equity instrument was acquired in the circumstances contemplated in section 8C, unless-

 

(A)    the restricted equity instrument constitutes an equity share, other than an equity share that would have constituted a hybrid equity instrument as defined in section 8E(1) but for the three-year period requirement contemplated in that definition;

 

(B)     the dividend constitutes an equity instrument as defined in that section; or

 

(C)     the restricted equity instrument constitutes an interest in a trust and, where that trust holds shares, all of those shares constitute equity shares, other than equity shares that would have constituted hybrid equity instruments as defined in section 8E(1) but for the three-year period requirement contemplated in that definition;

 

(ee)    to any dividend received by or accrued to a company in consequence of-

 

(A)    any cession of the right to that dividend; or

 

(B)    the exercise of a discretionary power by any trustee of a trust,

 

unless that cession or exercise results in the holding by that company of all of the rights attaching to a share;

(ff)    to any dividends received by or accrued to a company in respect of a share borrowed by that company; or

 

(gg)   to any dividends received by or accrued to a company in respect of a share held by that company to the extent that the aggregate of those dividends does not exceed an amount equal to the aggregate of any amounts incurred by that company as compensation for any distributions in respect of any other share borrowed by the company, other than a share in respect of which any dividends were received by or accrued to that company as contemplated in paragraph (ff), where the share so borrowed and the share so held are identical shares: Provided that where the company borrowing the share has lent out any other share that is an identical share to the share so borrowed, the aggregate amount so incurred must be reduced by the amount accrued to that company as compensation for any distribution in respect of the share so lent;

[Item (gg) added by section 28 of Act 24 of 2011 effective on 1 April 2012, repealed by section 166 of Act 22 of 2012 effective on 10 January 2012, again item (gg) added by section 19 of Act 22 of 2012, amended by section 14 of Act 43 of 2014 and substituted by section 16 of Act 25 of 2015 effective on 1 January 2016]

(hh)   to any dividends received by or accrued to a company in respect of a share to the extent that-

(A) the aggregate of those dividends does not exceed an amount equal to the aggregate of any deductible expenditure incurred by that company or any amount taken into account that has the effect of reducing income in the application of section 24JB(2); and

(B)    the amount of that expenditure or reduction is determined directly or indirectly with reference to the dividend in respect of an identical share to that share;

[Subitem (B) substituted by section 16 of Act 25 of 2015 effective on 1 January 2016]

 

: Provided that the deductible expenditure so incurred or the amount of the reduction must be reduced by any amount of income accrued to the company in respect of any distribution in respect of any other share that is an identical share in relation to that share;

[Proviso to item (hh) added by section 16 of Act 25 of 2015 effective on 1 January 2016]

[Item (hh) added by section 19 of Act 22 of 2012 effective on 1 April 2013, deleted by section 194 of Act 31 of 2013 effective on 1 April 2013, and agian item (hh) added by section 23 of Act 31 of 2013 and substituted by section 14 of Act 43 of 2014]

 

(ii)     to any dividend received by or accrued to a person in respect of services rendered or to be rendered or in respect of or by virtue of employment or the holding of any office, other than a dividend received or accrued in respect of a restricted equity instrument as defined in section 8C held by that person or in respect of a share held by that person;

 

(jj)     notwithstanding the provisions of paragraphs (dd) and (ii), to any dividend in respect of a restricted equity instrument as defined in section 8C that was acquired in the circumstances contemplated in section 8C(1) if that dividend constitutes-

(A)    an amount transferred or applied by a company as consideration for the acquisition or redemption of any share in that company;

(B)    an amount received or accrued in anticipation or in the course of the winding up, liquidation, deregistration or final termination of a company; or

(C)    an equity instrument that does not qualify, at the time of the receipt or accrual of that dividend, as a restricted equity instrument as defined in section 8C; or

[Item (jj) added by section 23 of Act 15 of 2016 effective on 1 March 2017 and applies in respect any amount received or accrued on or after that date and substituted by section 16 of Act 17 of 2017 effective on 18 Decemeber 2017]

(kk)   notwithstanding the provisions of paragraphs (dd) and (ii), to any dividend in respect of a restricted equity instrument as defined in section 8C that was acquired in the circumstances contemplated in section 8C(1) if that dividend is derived directly or indirectly from-

(A)    an amount transferred or applied by a company as consideration for the acquisition or redemption of any share in that company; or

(B)    an amount received or accrued in anticipation or in the course of the winding up, liquidation, deregistration or final termination of a company;

[Item (kk) added by section 16 of Act 17 of 2017 effective on 18 December 2017]

Section 10(1)(r) of ITA

Posted on by admin_kmos

(r)      any gratuity (other than a leave gratuity) received by or accrued to any person from public funds upon his retirement from any office or employment under the Government, including the Railway Administration and any provincial administration, or from the funds of the Land and Agricultural Bank of South Africa upon his retirement as a member of the board of the said Bank, which the Treasury declares to be free of tax;

Section 11(e) of ITA

Posted on by admin_kmos

(e)     save as provided in paragraph 12(2) of the First Schedule, such sum as the Commissioner may think just and reasonable as representing the amount by which the value of any machinery, plant, implements, utensils and articles (other than machinery, plant, implements, utensils and articles in respect of which a deduction may be granted under section 12B, 12BA, 12C, 12DA, 12E(1), 12U or 37B) owned by the taxpayer or acquired by the taxpayer as purchaser in terms of an agreement contemplated in paragraph (a) of the definition of “instalment credit agreement” in section 1 of the Value-Added Tax Act and used by the taxpayer for the purpose of his or her trade has been diminished by reason of wear and tear or depreciation during the year of assessment: Provided that-

 

(i)      ……….

 

(iA)   no allowance may be made in respect of any machinery, plant, implement, utensil or article the ownership of which is retained by the taxpayer as a seller in terms of an agreement contemplated in paragraph (a) of the definition of ‘instalment credit agreement’ in section 1 of the Value-Added Tax Act;

 

(ii)     in no case shall any allowance be made for the depreciation of buildings or other structures or works of a permanent nature;

 

(iiA)  where any machinery, implement, utensil or article qualifying for an allowance under this paragraph is mounted on or affixed to any concrete or other foundation or supporting structure and –

 

(aa)   the foundation or supporting structure is designed for such machinery, implement, utensil or article and constructed in such manner that it is or should be regarded as being integrated with the machinery, implement, utensil or article; and

 

(bb)   the useful life of the foundation or supporting structure is or will be limited to the useful life of the machinery, implement, utensil or article mounted thereon or affixed thereto,

 

the said foundation or supporting structure shall for the purposes of this paragraph not be deemed to be a structure or work of a permanent nature but shall for the purposes of this Act be deemed to be a part of the machinery, implement, utensil or article mounted thereon or affixed thereto;

 

(iii)    ……….

[Subparagraph (iii) substituted by section 12 of Act 55 of 66 and section 10 of Act 21 of 1994 and deleted by section 18 of Act 25 of 2015 effective on 8 January 2016]

 

(iiiA)  no allowance shall be made under this paragraph in respect of any machinery, implement, utensil or article of which the cost has been allowed as a deduction from the taxpayer’s income under the provisions of section 24D;

 

(iv)    ……….

 

(v)     the value of any machinery, implements, utensils or articles used by the taxpayer for the purposes of his trade shall be increased by the amount of any expenditure (other than expenditure referred to in paragraph (a)) which is incurred by the taxpayer in moving such machinery, implements, utensils or articles from one location to another;

[Subparagraph (v) substituted by section 18 of Act 25 of 2015 effective on 8 January 2016]

 

(vi)    ……….

 

(vii)    where the value of any such machinery, implements, utensils or articles acquired by the taxpayer on or after 15 March 1984 is for the purposes of this paragraph to be determined having regard to the cost of such machinery, implements, utensils or articles, such cost shall be deemed to be the cost which the taxpayer would, if such taxpayer had acquired such machinery, implements, utensils or articles under a cash transaction concluded at arm’s length on the date on which the transaction for the acquisition of such machinery, implements, utensils or articles was in fact concluded, have incurred in respect of the direct cost of the acquisition of such machinery, implements, utensils or articles, including the direct cost of the installation or erection thereof;

[Paragraph (vii) added by section 11(1)(c) of Act 121 of 1984, amended by section 19(1)(c) of Act 7 of 2010 and substituted by section 18(1)(c) of Act 25 of 2015 and by section 8(1)(a) of Act 20 of 2022 deemed effective on 29 July, 2022 and applicable in respect of years of assessment ending on or after that date]

 

(viii)  ……….

 

(ix)    where any such machinery, plant, implement, utensil or article was used by the taxpayer during any previous year of assessment or years of assessment 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 or years the period in use of such asset during such previous year or years shall be taken into account in determining the amount by which the value of such machinery, plant, implement, utensil or article has been diminished; and

[Paragraph (ix) added by section 15(c) of Act 59 of 2000, substituted by section 18(1)(c) of Act 60 of 2008 and by section 18(1)(c) of Act 25 of 2015 and amended by section 8(1)(b) of Act 20 of 2022 deemed effective on 29 July 2022 and applicable in respect of years of assessment ending on or after that date]

 

(x)     no allowance may be made in respect of any machinery, plant, implement, utensil or article acquired by the taxpayer as or with a “government grant” as defined in section 12P(1);

[Paragraph (e) amended by section 9(a) of Act 90 of 1962 and by section 9(a) of Act 90 of 1964, substituted by section 11(1)(a) of Act 88 of 1965 and amended by section 8(1)(b) of Act 90 of 1988, by section 11(1)(a) of Act 101 of 1990, by section 6(a) of Act 9 of 2005, by section 18(a) of Act 31 of 2005, by section 10(1)(a) of Act 3 of 2008, by section 19(1)(a) of Act 7 of 2010, by section 27(1)(a) of Act 31 of 2013, by section 26(1)(a) of Act 15 of 2016 and by section 11(1)(a) of Act 17 of 2023 effective on 1 March, 2023 and applicable in respect of assets brought into use on or after 1 March, 2023. Paragraph (x) added by section 8(1)(b) of Act 20 of 2022 effective on 29 July, 2022 and applicable in respect of years of assessment ending on or after that date]

Section 10(1)(q) of ITA

Posted on by admin_kmos

(q)     any bona fide scholarship or bursary, other than any scholarship or bursary contemplated in paragraph (qA), granted to enable or assist any person to study at a recognized educational or research institution: Provided that if any such scholarship or bursary has been so granted by an employer or an associated institution (as respectively defined in paragraph 1 of the Seventh Schedule) to an employee (as defined in the said paragraph) or to a relative of such employee, the exemption under this paragraph shall not apply –

[Words preceding the proviso substituted by section 16 of Act 17 of 2017 effective on 1 March 2018 and applies in respect of years of assessment commencing on or after that date]

(i)      in the case of a scholarship or bursary granted to so enable or assist any such employee, unless the employee agrees to reimburse the employer for any scholarship or bursary granted to that employee if that employee fails to complete his or her studies for reasons other than death, ill-health or injury;

(ii)     in the case of a scholarship or bursary granted to enable or assist any such relative of an employee so to study –

(aa)   if the remuneration proxy derived by the employee in relation to a year of assessment exceeded R600 000;

[Sub-paragraph (aa) amended by section 1(2)(c) of Act 3 of 2008, substituted by section 23(1)(t) of Act 31 of 2013, by section 23(1)(e) of Act 15 of 2016 and by section 7(1)(a) of Act 14 of 2017 and amended by section 10(1)(b) of Act 23 of 2020 effective on 1 March, 2021 and applicable in respect of years of assessment commencing on or after that date]

(bb)   to so much of any scholarship or bursary contemplated in this subparagraph as in the case of any such relative, during the year of assessment, exceeds-

(A)    R20 000 in respect of-

[Words preceding subsubitem (AA) substituted by section 23 of Act 15 of 2016 and section 7 of Act 14 of 2017 effective on 1 March 2017, applies in respect of years of assessment commencing on or after that date]

(AA)  grade R to grade twelve as contemplated in the definition of ‘school’ in section 1 of the South African Schools Act, 1996 (Act No. 84 of 1996); or

(BB)  a qualification to which an NQF level from 1 up to and including 4 has been allocated in accordance with Chapter 2 of the National Qualifications Framework Act, 2008 (Act No. 67 of 2008);

[Subitem (A) substituted by section 16 of Act 25 of 2015 effective on 1 March 2013]

(B)    R60 000 in respect of a qualification to which an NQF level from 5 up to and including 10 has been allocated in accordance with Chapter 2 of the National Qualifications Framework Act, 2008 (Act 67 of 2008); and

[Sub-paragraph (bb) amended by section 1(2)(c) of Act 3 of 2008, substituted by section 23(1)(t) of Act 31 of 2013 and amended by section 10(1)(b) of Act 23 of 2020 effective on 1 March, 2021 and applicable in respect of years of assessment commencing on or after that date] 

[Item (B) substituted by section 23(1)(g) of Act 15 of 2016 and by section 7(1)(c) of Act 14 of 2017 deemed effective on 1 March, 2017 and applicable in respect of years of assessment commencing on or after that date]

(cc)   if any remuneration to which the employee was entitled or might in the future have become entitled was in any manner whatsoever reduced or forfeited as a result of the grant of such scholarship or bursary;

[Sub-paragraph (cc) added by section 10(1)(b) of Act 23 of 2020 effective on 1 March, 2021 and applicable in respect of years of assessment commencing on or after that date]

[Paragraph (q) deleted by section 12(1)(i) of Act 129 of 1991, inserted by section 10(1)(p) of Act 141 of 1992, amended by section 10(1)(f) of Act 28 of 1997, by section 13(1)(c) and (d) of Act 30 of 2002 and substituted by section 10(1)(o) of Act 20 of 2006 and amended by section 16(1)(h) of Act 17 of 2017 effective on 1 March, 2018 and applicable in respect of years of assessment commencing on or after that date] 

“Annuity contract” definition of section 10A of ITA

Posted on by admin_kmos

“annuity contract” means an agreement concluded between an insurer in the course of his insurance business and a purchaser, in terms of which –

 

(a)     the insurer agrees to pay to the purchaser or the purchaser’s spouse or surviving spouse an annuity or annuities (whether to one such person or to each of them) until the death of the annuitant or the expiry of a specified term;

 

(b)     the purchaser agrees to pay to the insurer a lump sum cash consideration for such annuity or annuities; and

 

(c)     no amounts are or will be payable by the insurer to the purchaser or any other person other than amounts payable by way of such annuity or annuities or, where an annuity is payable for a minimum term and such annuity is in the event of the death of the annuitant before the end of such term to continue to be payable to some third person for the balance of that term, amounts which may be so payable to such third person by way of such annuity,

 

but does not include any agreement for the payment by any insurer of any annuity which is under the rules of a pension fund, pension preservation fund, provident fund, provident preservation fund or retirement annuity fund payable to a member of such fund or to any other person;

Section 11(d) of ITA

Posted on by admin_kmos

(d)     expenditure actually incurred during the year of assessment on repairs of property occupied for the purpose of trade or in respect of which income is receivable, including any expenditure so incurred on the treatment against attack by beetles of any timber forming part of such property and sums expended for the repair of machinery, implements, utensils and other articles employed by the taxpayer for the purposes of his trade;

Section 11(cA) of ITA

Posted on by admin_kmos

(cA)   an allowance in respect of any amount actually incurred by such person in the course of the carrying on of his trade, as compensation in respect of any restraint of trade imposed on any other person who –

 

(i)      is a natural person;

(ii)     is or was a labour broker as defined in the Fourth Schedule (other than a labour broker in respect of which a certificate of exemption has been issued in terms of such Schedule);

(iii)    was a personal service company or personal service trust as defined in the Fourth Schedule prior to section 66 of the Revenue Laws Amendment Act, 2008, coming into operation; or

(iv)    is a personal service provider as defined in the Fourth Schedule,

to the extent that such amount constitutes or will constitute income of the person to whom it is paid: Provided that the amount allowed to be deducted under this paragraph shall not exceed for any one year the lesser of –

(aa)   so much of such amount so incurred as is equal to such amount divided by the number of years, or part thereof, during which the restraint of trade shall apply; or

(bb)   one-third of such amount so incurred;

Section 10(1)(o) of ITA

Posted on by admin_kmos

(o)     any form of remuneration –

(i)      as defined in paragraph 1 of the Fourth Schedule, derived by any person as an officer or crew member of a ship engaged –

(aa)   in the international transportation for reward of passengers or goods; or

(bb)   in the prospecting, exploration or mining (including surveys and other work of a similar nature) for, or production of, any minerals (including natural oils) from the seabed outside the Republic, where such officer or crew member is employed on board such ship solely for the purposes of the “passage” of such ship, as defined in the Marine Traffic Act, 1981 (Act No. 2 of 1981),

if such person was outside the Republic for a period or periods exceeding 183 full days in aggregate during the year of assessment;

(iA)   as defined in paragraph 1 of the Fourth Schedule, derived by any person as an officer or crew member of a South African ship as defined in section 12Q(1) mainly engaged-

(aa)   in international shipping as defined in section 12Q(1); or

(bb)   in fishing outside the Republic; or

(ii)     to the extent to which that remuneration does not exceed R1,25 million in respect of a year of assessment and is received by or accrues to any employee during any year of assessment by way of any salary, leave pay, wage, overtime pay, bonus, gratuity, commission, fee, emolument or allowance, including any amount referred to in paragraph (i) of the definition of gross income in section 1 or an amount referred to in section 8, 8B or 8C, in respect of services rendered outside the Republic by that employee for or on behalf of any employer, if that employee was outside the Republic-

(aa)

(a)    for a period or periods exceeding 183 full days in aggregate during any period of 12 months; or

(b)    for a period or periods exceeding 117 full days in aggregate during any period of 12 months in respect of any year of assessment ending on or after 29 February 2020 but on or before 28 February 2021; and

[Item (aa) substituted by section 16(j) of Act 35 of 2007 and by section 10(1)(c) of Act 23 of 2020 deemed to have come into operation 29 February 2020]

(bb)   for a continuous period exceeding 60 full days during that period of 12 months, and those services were rendered during that period or periods: Provided that-

(A)    for purposes of this subparagraph, a person who is in transit through the Republic between two places outside the Republic and who does not formally enter the Republic through a port of entry a contemplated in section 9(1) of the Immigration Act, 2002 (Act No. 13 of 2002), or at any other place as may be permitted by the Director General of the Department of Home Affairs or the Minister of Home Affairs in terms of that Act, shall be deemed to be outside the Republic;

(B)    the provisions of this subparagraph shall not apply in respect of any remuneration-

(AA)  derived in respect of the holding of a public office contemplated in section 9(2)(g); or

(BB)  received by or accrued to any person in respect of services rendered or work or labour performed as contemplated in section 9(2)(h); and

(C)    for the purposes of this subparagraph, where remuneration is received by or accrues to any employee during any year of assessment in respect of services rendered by that employee in more than one year of assessment, the remuneration is deemed to have accrued evenly over the period that those services were rendered;

[Paragraph (C) added by section 16(m) of Act 35 of 2007]

[Paragraph (o) substituted by section 13(1)(l) of Act 89 of 1969, deleted by section 7(1)(c) of Act 65 of 1973, inserted by section 4(1) of Act 140 of 1993, substituted by section 18(1)(h) of Act 53 of 1999 and by section 13(1)(p) of Act 59 of 2000 and amended by section 18(1)(e) of Act 74 of 2002 and by section 16(g) of Act 35 of 2007. Subparagraph (ii) substituted by section 18(1)(g) of Act 74 of 2002 and amended by section 16(i) of Act 35 of 2007, by section 16(1)(g) of Act 17 of 2017 and by section 6(1) of Act 22 of 2020 deemed effective on 1 March, 2020 and applicable in respect of years of assessment commencing on or after that date (section 6(1) of Act 22 of 2020 erroneously refers to the substitution in paragraph (o)(i) for the words preceding item (aa) instead of in paragraph (o)(ii))]