Category: CHAPTER II – The Taxes (ITA)

Subsections 2, 3, 4, 5 and 6 of section 10B of ITA

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(2)     Subject to subsection (4), there must be exempt from normal tax any foreign dividend received by or accrued to a person-

(a)     if that person (whether alone or together with any other company forming part of the same group of companies as that person) holds at least 10 per cent of the total equity shares and voting rights in the company declaring the foreign dividend;

(b)     if that person is a foreign company and the foreign dividend is paid or declared by another foreign company that is resident in the same country as that person;

(c)     who is a resident to the extent that the foreign dividend does not exceed the aggregate of all amounts which are included in the income of that resident in terms of section 9D in any year of assessment, which relate to the net income of-

(i)      the company declaring the foreign dividend; or

(ii)     any other company which has been included in the income of that resident in terms of section 9D by virtue of that resident’s participation rights in that other company held indirectly through the company declaring the foreign dividend,

reduced by-

(aa)   the amount of any foreign tax payable in respect of the amounts so included in that resident’s income; and

(bb)   so much of all foreign dividends received by or accrued to that resident at any time from any company contemplated in subparagraph (i) or (ii), as was-

(A)    exempt from tax in terms of paragraph (a), (d) or (e); or

[Item (A) substituted by section 23 of Act 23 of 2018 effective on 17 January 2019]

(B)     previously not included in the income of that resident by virtue of any prior inclusion in terms of section 9D;

: Provided that for the purposes of this paragraph, the net income of any company contemplated in subparagraphs (i) and (ii) must be determined without regard to subsection (3).

(d)     to the extent that the foreign dividend is received by or accrues to that person in respect of a listed share and does not consist of a distribution of an asset in specie; or

(e)     to the extent that the foreign dividend is received by or accrues to a company that is a resident in respect of a listed share and consists of the distribution of an asset in specie:

Provided that paragraphs (a) and (b) must not apply to any foreign dividend to the extent that the foreign dividend is deductible by the foreign company declaring or paying that foreign dividend in the determination of any tax on income on companies of the country in which that foreign company has its place of effective management.

: Provided further that paragraph (a) must not apply to any foreign dividend received by or accrued to that person in respect of a share other than an equity share.

(3)     In addition to the exemption provided for in subsection (2), there must be exempt from normal tax so much of the amount of the aggregate of any foreign dividends received by or accrued to a person during a year of assessment as-

(a)     is not exempt from normal tax in terms of subsection (2) for that year of assessment; and

(b)     does not during the year of assessment exceed an amount determined in accordance with the following formula:

A = B × C

in which formula:

(i)     ‘A’ represents the amount to be exempted for a year of assessment in terms of this paragraph;

(ii)    ‘B’ represents-

(aa)   where the person is a natural person, deceased estate, insolvent estate or trust, the ratio of the number 25 to the number 45;

[Item (aa) substituted by section 6 of Act 13 of 2015 and section 8 of Act 14 of 2017 effective on 1 March 2017, applies in respect of years of assessment commencing on or after that date]

(bb)   where the person is-

(A)    a person other than a natural person, deceased estate, insolvent estate or trust; or

(B)    an insurer in respect of its company policyholder fund, corporate fund and risk policy fund,

[Subitem (B) substituted by section 15 of Act 43 of 2014 effective on 1 January 2016]

the ratio of the number 7 to the number 27; or

[Item (bb) amended by section 8(1)(b) of Act 14 of 2017 and by section 10(1)(a) of Act 17 of 2023 effective on 31 March, 2023 and applicable in respect of years of assessment ending on or after that date]

(cc)   where the person is an insurer in respect of its individual policyholder fund, the ratio of the number 10 to the number 30; and

[Item (cc) substituted by section 8 of Act 14 of 2017 effective on 1 March 2017, applies in respect of years of assessment commencing on or after that date]

(iii)    ‘C’ represents the aggregate of any foreign dividends received by or accrued to the person during a year of assessment that is not exempt from normal tax in terms of subsection (2).

(4)     Subsections (2)(a), (2)(b), (2)(d) and (3) do not apply in respect of any foreign dividend received by or accrued to any person if-

(a)

(i)      any amount of that foreign dividend is determined directly or indirectly with reference to; or

(ii)     that foreign dividend arises directly or indirectly from any amount paid or payable by any person to any other person; and

(b)     the amount so paid or payable is deductible from the income of the person by whom it is paid or payable and-

(i)      is not subject to normal tax in the hands of the other person contemplated in subparagraph (i); and

(ii)     where that other person contemplated in subparagraph (i) is a controlled foreign company, is not taken into account in determining the net income, contemplated in section 9D(2A), of that controlled foreign company,

unless the amount so paid or payable is paid or payable as consideration for the purchase of trading stock by the person by whom the amount is paid or payable, or the foreign dividend is declared from profits where less than 20 per cent of the profits were generated from transactions with persons that deducted the amount so paid or payable from income.

[Subsection (4) amended by section 20(1)(e) and (f) of Act 22 of 2012 and substituted by section 10(1)(b) of Act 17 of 2023 with effect from 1 January, 2024 and applicable in respect of dividends or foreign dividends received or accrued on or after that date]

(4A)  Subsection (2)(a) and (b) do not apply in respect of any foreign dividend received by or accrued to any person from any portfolio contemplated in paragraph (e)(ii) of the definition of ‘company’ in section 1.

[Subsection (4A) inserted by section 10(1)(c) of Act 17 of 2023 with effect from 1 January, 2024 and applicable in respect of dividends or foreign dividends received or accrued on or after that date]

(5)     The exemptions from tax provided by subsections (2) and (3) do not apply in respect of any portion of an annuity or extend to any payments out of any foreign dividend received by or accrued to any person.

[Subsection (5) substituted by section 20 of Act 22 of 2012 effective on 1 March 2012 where it applies to any person that is a natural person, deceased estate, insolvent estate or trust, and effective on 1 April 2012 where it applies to any person that is a person other than a natural person, deceased estate, insolvent estate or trust, and by section 17 of Act 17 of 2017 effective on 18 December 2017]

(6)     Subsections (2) and (3) do not apply to any foreign dividend received by or accrued to a person in respect of-

(a)     services rendered or to be rendered or in respect of or by virtue of employment or the holding of any office, other than a foreign dividend in respect of a share held by that person; or

(b)     a restricted equity instrument as defined in section 8C that was acquired in the circumstances contemplated in that section if that foreign dividend is derived directly or indirectly from, or constitutes-

(i)      an amount-

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

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

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

[Subparagraph (ii) substituted by section 17 of Act 17 of 2017 effective on 18 December 2017]

[Subsection (6) added by section 25 of Act 31 of 2013 and substituted by section 25 of Act 15 of 2016 effective on 1 March 2017, applies in respect of amounts received or accrued after that date]

(6A)  Subsections (2) and (3) do not apply to any foreign dividend received by or accrued to any company in respect of a share to the extent that the aggregate of those foreign 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 the amount of that expenditure or reduction is determined directly or indirectly with reference to the foreign dividend in respect of a share that is an identical share to that share: 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.

[Subsection (6A) inserted by section 11(1) of Act 23 of 2020 effective on 1 January, 2021 and applicable to foreign dividends received or accrued on or after that date]

(7)

(a)     The Minister may announce in the national annual budget contemplated in section 27(1) of the Public Finance Management Act, that, effective on a date or dates mentioned in that announcement, the numbers contemplated in subsection (3)(b)(ii) will be altered to the extent mentioned in the announcement.

[Paragraph (a) substituted by section 6(1) of Act 20 of 2022 deemed effective on 17 January 2019]

(b)     If the Minister makes an announcement of an alteration contemplated in paragraph (a), that alteration comes into effect on the date or dates determined by the Minister in that announcement and continues to apply for a period of 12 months from that date subject to Parliament passing legislation giving effect to that announcement within that period of 12 months.

[Subsection (7) added by section 23 of Act 23 of 2018 effective on 17 January 2019]

Section 11(j) of ITA

Posted on by admin_kmos

(j)      an allowance in respect of any debt due to the taxpayer, if that debt would have been allowed as a deduction under any other provision of this Part had that debt become bad, of an amount equal to-

(i)      if IFRS 9 is applied to that debt by that person for financial reporting purposes, other than in respect of lease receivables as defined in IFRS 9 that have not been included in income, the sum of-

(aa)   40 per cent of the aggregate of-

(A)    the loss allowance relating to impairment that is measured at an amount equal to the lifetime expected credit loss, as contemplated in IFRS 9, in respect of debt; and

[Sub-item (A) substituted by section 13(1)(b) of Act 23 of 2020 deemed effective on 28 October, 2020 and applicable in respect of years of assessment commencing on or after that date]

(B)    the amounts of debts included in the income of the taxpayer in the current or any previous year of assessment that are disclosed as bad debt written off for financial reporting purposes and that have not been allowed as a deduction under section 11(a) or (i) for the current or any previous year of assessment; and

(bb)   25 per cent of the loss allowance relating to impairment, as contemplated in IFRS 9, in respect of debt other than in respect of debt taken into account under item (aa); or

[Subparagraph (i) amended by section 13(1)(a) of Act 23 of 2020 deemed effective on 28 October, 2020 and applicable in respect of years of assessment commencing on or after that date. Item (bb) substituted by section 13(1)(c) of Act 23 of 2020 deemed effective on 28 October, 2020 and applicable in respect of years of assessment commencing on or after that date]

(ii)     if IFRS 9 is not applied to that debt by that person for financial reporting purposes, the sum of-

(aa)   40 per cent of so much of any debt, other than a debt contemplated in subparagraph (i), due to the taxpayer, if that debt is 120 days or more in arrears, after taking into account the value of any security in respect of that debt; and

[Item (aa) substituted by section 13(1)(d) of Act 23 of 2020 effective on 1 January, 2021 and applicable in respect of years of assessment commencing on or after that date]

(bb)   25 per cent of so much of any debt, other than a debt contemplated in subparagraph (i) or item (aa), due to the taxpayer, if that debt is 60 days or more in arrears, after taking into account the value of any security in respect of that debt:

[Item (bb) substituted by section 13(1)(d) of Act 23 of 2020 effective on 1 January, 2021 and applicable in respect of years of assessment commencing on or after that date]

Provided that an allowance under this paragraph must be included in the income of the taxpayer in the following year of assessment: Provided further that the Commissioner may, on application by a taxpayer, issue a directive that the percentage contemplated in subparagraph (i)(aa) or (ii)(aa) may be increased, to a percentage not exceeding 85 per cent after taking into account-

(a)     the history of a debt owed to that taxpayer, including the number of repayments not met, and the duration of the debt;

(b)     steps taken to enforce repayment of the debt;

(c)     the likelihood of the debt being recovered;

(d)     any security available in respect of that debt;

(e)     the criteria applied by the taxpayer in classifying debt as bad; and

(f)      such other considerations as the Commissioner may deem relevant;

[Paragraph (j) substituted by section 14(1)(e) of Act 89 of 1969, amended by section 10(1)(h) of Act 94 of 1983 and by section 18(c) of Act 31 of 2005 and substituted by section 22(1)(b) of Act 22 of 2012, by section 25(1)(e) of Act 23 of 2018 and by section 15(1)(a) of Act 34 of 2019]

Section 11(i) of ITA

Posted on by admin_kmos

(i)      the amount of any debt due to the taxpayer which has during the year of assessment become bad, provided such amount is included in the current year of assessment or was included in previous years of assessment in the taxpayer’s income;

[Paragraph (i) substituted by section 14(1)(d) of Act 89 of 1969, by section 10(1)(g) of Act 94 of 1983, by section 9(1)(e) of Act 113 of 1993, by section 22(1)(b) of Act 22 of 2012 and by section 17(1)(a) of Act 43 of 2014]

Subsections 2 and 3 of section 10 of ITA

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(2)     Notwithstanding the exemptions provided for in paragraphs (h) and (k) of subsection (1)-

(a)     ……….

(b)     the said exemptions shall not apply in respect of any portion of an annuity.

(3)     The exemptions from tax provided by any paragraph of subsection (1) shall not extend to-

(a)     any payments out of the receipts, accruals, amounts or profits mentioned in such paragraph; or

(b)     any tax leviable under this Act in respect of any taxable capital gain determined in accordance with the Eighth Schedule.


(4) . . . . . .


(5)


(a)     A person is disqualified from managing the collective interests common to all its members as mentioned in subsection (1)(e)(i)(cc)(A) if that person is disqualified in terms of section 6 of the Trust Property Control Act, 1988 (Act 57 of 1988), section 25A of the Nonprofit Organisations Act, 1997 (Act 71 of 1997), or section 69 of the Companies Act.


(b)     A person who manages the collective interests common to all its members, as mentioned in subsection (1)(e)(i)(cc)(A) in contravention of paragraph (a), shall be guilty of an offence and liable, on conviction, to a fine or to imprisonment for a period not exceeding 24 months.

[Subsection (5) added by section 3 of Act 18 of 2023]

Section 11(hB) of ITA

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(hB)  an allowance in respect of expenditure actually incurred and paid in the production of income to discharge all consideration, royalties or compensation otherwise payable to a community or natural person in respect of any existing consideration, contractual royalty, future consideration or compensation that accrued to that community or natural person as contemplated in Item 11 of Schedule II of the Petroleum Resources Development Act, 2002 (Act No. 28 of 2002): Provided that for any year of assessment, the allowance shall not exceed an amount equal to the expenditure incurred and paid divided by the number of years for which all consideration, royalties or compensation otherwise payable has been discharged;

Section 10(1)(zJ) of ITA

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(zJ)   any amount received by or accrued to or in favour of a registered micro business as defined in the Sixth Schedule, from the carrying on of a business in the Republic, other than an amount received by or accrued to a natural person registered as a micro business that constitutes-

(i)      investment income as defined in paragraph 1 of the Sixth Schedule; or

(ii)     remuneration as defined in the Fourth Schedule.

Subsection 2 of section 10C of ITA

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(2)     There shall be exempt from normal tax in respect of the aggregate of qualifying annuities payable to a person an amount equal to so much of any contributions to any pension fund, provident fund and retirement annuity fund that did not rank for a deduction against the person’s income in terms of section 11F as has not previously been-

(a)     allowed to the person as a deduction in terms of the Second Schedule; or

(b)     exempted from normal tax in terms of this section,

in respect of any prior year of assessment.

[Subsection (2) amended by section 26(1) of Act 31 of 2013, by section 18(1) of Act 17 of 2017, by section 24(1) of Act 23 of 2018, by section 14(1)(c) of Act 34 of 2019 and by section 12(1)(d) of Act 23 of 2020 effective on 1 March, 2021]

[Section 10C inserted by section 21(1) of Act 22 of 2012 and amended by section 14(1)(a) of Act 34 of 2019 effective on 1 March, 2020 and applicable in respect of any contributions made to a provident or provident preservation fund in determining the taxable annuity received during any year of assessment from such fund in relation to annuities received on or after 1 March, 2020]

Section 11(h) of ITA

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(h)     such allowance in respect of amounts included in the taxpayer’s gross income under paragraph (g) or paragraph (h) of the definition of “gross income” in section 1 as the Commissioner may deem reasonable having regard to any special circumstances of the case and, in the case of an amount so included under the said paragraph (h), to the original period for which the right of use or occupation was granted or, in the case of any amount so included under the said paragraph (h) in consequence of an agreement concluded on or after 1 July 1983, to the number of years taken into account in the determination of the relevant allowance granted to any other person under the provisions of paragraph (g) of this section: Provided that where there has on or after the twenty–ninth day of March, 1972, accrued to the taxpayer the right to have improvements effected on land or to buildings by any other person and an amount is required to be included in the taxpayer’s gross income under the said paragraph (h) with respect to such improvements, no allowance shall be made to the taxpayer under this paragraph in respect of such amount, if –

 

(i)      the taxpayer or such other person is a company and such other person or the taxpayer, as the case may be, is interested in more than 50 per cent of any class of shares issued by such company, whether directly as a holder of shares in that company or indirectly as a holder of shares in any other company; or

 

(ii)     both the taxpayer and such other person are companies and any third person is interested in more than 50 per cent of any class of shares issued by one of those companies and in more than 50 per cent of any class of shares issued by the other company, whether directly as a holder of shares in the company by which the shares in question were issued or indirectly as a holder of shares in any other company;