Category: CHAPTER II – The Taxes (ITA)

Section 11(m) of ITA

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(m)    any amount paid by way of annuity during the year of assessment by any taxpayer –

 

(i)      to a former employee who has retired from the taxpayer’s employ on grounds of old age, ill health or infirmity; or

  

(ii)     to a person who was for a period of at least five years a partner in an undertaking carried on by the taxpayer and who retired from the partnership in respect of that undertaking on grounds of old age, ill health or infirmity, provided that the amount so paid to such person is reasonable, having regard to the services rendered by such person as a partner in such undertaking prior to his retirement and the profits made in such undertaking, and that the said amount does not represent consideration payable to such person in respect of his interest in the partnership; or

 

(iii)    to any person who is dependent for his maintenance upon a former employee or a former partner in an undertaking carried on by the taxpayer or (where such former employee or former partner is deceased) was so dependent immediately prior to his death;

“Registered learnership agreement” definition of section 12H of ITA

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‘registered learnership agreement’ means a learnership agreement that is-

 

(a)    registered in accordance with the Skills Development Act, 1998; and

(b)     entered into between a learner and an employer before 1 April 2024;

[Paragraph (b) substituted by section 30(1)(a) of Act 15 of 2016 and by section 14(1) of Act 20 of 2021 effective on 1 April, 2022 and applicable in respect of learnership agreements entered into on or after that date]

Section 12DA (ITA) – Deduction in respect of rolling stock

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12DA.  Deduction in respect of rolling stock

(1)     There shall be allowed to be deducted from the income of the taxpayer an allowance, in respect of rolling stock brought into use by the taxpayer on or before 28 February 2022, in the carrying on of a trade, in respect of the cost actually incurred by the taxpayer in respect of the acquisition or improvement of any rolling stock which is 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 is used directly by the taxpayer wholly or mainly for the transportation of persons, goods or things to the extent that such rolling stock is used in the production of that taxpayer’s income.

[Subsection (1) substituted by section 34 of Act 31 of 2013, by section 15 of Act 23 of 2020 and by section 12 of Act 20 of 2021]

(2)     The allowance contemplated in subsection (1) shall, in respect of any one year of assessment, be 20 per cent of the cost incurred in respect of any rolling stock.

(3)     For purposes of this section the cost to a taxpayer of any rolling stock shall be deemed to be the lesser of the actual cost to the taxpayer or the cost which a person would, if that person had acquired or improved the rolling stock under a cash transaction concluded at arm’s length on the date on which the transaction for the acquisition or improvement of rolling stock was in fact concluded, have incurred in respect of the direct cost of acquisition or improvement of the rolling stock.

[Subsection (3) substituted by section 25 of Act 17 of 2017 effective on 18 December 2017]

(4)     Where any rolling stock in respect of which any deduction is claimed in terms of this section was during any previous year of assessment used by the taxpayer 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, any deduction which could have been allowed in terms of this section during such year or any subsequent year in which such asset was used by the taxpayer shall for the purposes of this section be deemed to have been allowed during such previous year or years as if the receipts and accruals of such trade had been included in the income of such taxpayer.

(5)     No deduction shall be allowed under this section in respect of any rolling stock that has been disposed of by the taxpayer during any previous year of assessment.

(6)     The deductions which may be allowed or deemed to have been allowed in terms of this section and any other provision of this Act in respect of the cost of any rolling stock shall not in the aggregate exceed the amount of such cost.

Section 12E (ITA) – Deduction in respect of small business corporations

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12E.     Deductions in respect of small business corporations

(1)     Where any plant or machinery (hereinafter referred to as an asset) owned by a taxpayer which qualifies as a small business corporation or acquired by such a 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-

[Words preceding paragraph (a) substituted by section 35 of Act 31 of 2013 effective 12 December 2013]

(a)     is brought into use for the first time by that taxpayer on or after 1 April 2001 for the purpose of that taxpayer’s trade (other than mining or farming); and

(b)     is used by that taxpayer directly in a process of manufacture (or any other process which is of a similar nature) carried on by that taxpayer, a deduction equal to the cost of such asset shall be allowed in the year that such asset is so brought into use.

[Subsection (1) amended by section 21 of Act 31 of 2005 and substituted by section 21 of Act 25 of 2015 effective on 8 January 2016]

(1A)  Subject to subsection (1). where any machinery, plant, implement, utensil, article, aircraft or ship in respect of which a deduction is allowable under section 11(e) (‘the asset’) is acquired by a small business corporation under an agreement formally and finally signed by every party to the agreement on or after 1 April 2005, the amount allowed to be deducted in respect of the asset must, at the election of the small business corporation and subject to the provisions of that section, be either-

(a)     the amount allowable in terms of and subject to that section; or

(b)     an amount equal to 50 per cent of the cost of the asset in the year of assessment during which it was first brought into use, 30 per cent in the first succeeding year and 20 per cent in the second succeeding year.

(2)     For purposes of this section the cost to a taxpayer of any asset shall be deemed to be the lesser of the actual cost to the taxpayer to acquire that asset or the cost which a person would, if he had acquired the said asset under a cash transaction concluded at arm’s length on the date on which the transaction for the acquisition of the asset was in fact concluded, have incurred in respect of the direct cost of acquisition of the asset, including the direct cost of the installation or erection thereof.

[Subsection (2) substituted by section 21 of Act 31 of 2005 and section 26 of Act 17 of 2017 effective on 18 December 2017]

(3)     Any expenditure (other than expenditure referred to in section 11(a)) incurred by a taxpayer during any year of assessment in moving an asset in respect of which a deduction was allowed or is allowable under this section from one location to another must –

(a)     where the taxpayer is or was entitled to a deduction in respect of that asset under subsection (1A) in that year and one or more succeeding years, be allowed to be deducted from his or her income in equal instalments in that year and each succeeding year in which that deduction is allowable; or

(b)     in any other case, be allowed to be deducted from that taxpayer’s income in that year.

(3B)   No deduction shall be allowed under this section in respect of any asset in respect of which an allowance has been granted to the taxpayer under section 12BA.

[Subsection (3B) inserted by section 17(1) of Act 17 of 2023 effective on 1 March, 2023 and applicable in respect of assets brought into use on or after that date]

“Investment income” definition of section 12E of ITA

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(b)     ‘investment income’ means-

(i)      any income in the form of dividends, foreign dividends, royalties, rental derived in respect of immovable property, annuities or income of a similar nature;

(ii)     any interest as contemplated in section 24J (other than any interest received by or accrued to any co-operative bank as contemplated in paragraph (a)(ii)(ff)), any amount contemplated in section 24K and any other income which, by the laws of the Republic administered by the Commissioner, is subject to the same treatment as income from money lent; and

(iii)    any proceeds derived from investment or trading in financial instruments (including futures, options and other derivatives), marketable securities or immovable property;

(c)     ………

“Personal service” definition of section 12E of ITA

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(d)     “personal service” in relation to a company, co-operative or close corporation, means any service in the field of accounting, actuarial science, architecture, auctioneering, auditing, broadcasting, consulting, draftsmanship, education, engineering, financial service broking, health, information technology, journalism, law, management, real estate broking, research, sport, surveying, translation, valuation or veterinary

(i)      that service is performed personally by any person who holds an interest in that company, co-operative or close corporation or by any person that is a connected person in relation to any person holding such an interest; and

[Subparagraph (i) substituted by section 26 of Act 17 of 2017 effective on 18 December 2017]

(ii)     that company, co-operative or close corporation does not throughout the year of assessment employ three or more full-time employees (other than any employee who is a holder of a share in the company or a member of the co-operative or close corporation, as the case may be, or who is a connected person in relation to a holder of a share in the company or a member), who are on a full-time basis engaged in the business of that company, co-operative or close corporation of rendering that service.

Section 11A (ITA) – Deductions in respect of expenditure and losses incurred prior to commencement of trade

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11A.  Deductions in respect of expenditure and losses incurred prior to commencement of trade

(1)     For purposes of determining the taxable income derived during any year of assessment by a person from carrying on any trade, there shall be allowed as a deduction from the income so derived, any expenditure and losses-

(a)     actually incurred by that person prior to the commencement of and in preparation for carrying on that trade;

 

(b)     which would have been allowed as a deduction in terms of section 11 (other than section 11(x)), 11D or 24J had the expenditure or losses been incurred after that person commenced carrying on that trade; and

[Paragraph (b) substituted by section 15 of Act 17 of 2009 and section 20 of Act 17 of 2017 effective on 18 December 2017]

 

(c)     which were not allowed as a deduction in that year or any previous year of assessment.

(2)     So much of the expenditure and losses contemplated in subsection (1) as exceeds the income derived during the year of assessment from carrying on that trade after deduction of any amounts allowable in that year of assessment in terms of any other provision of this Act, shall not be set off against any income of that person which is derived otherwise than from carrying on that trade, notwithstanding section 20(1)(b).

 

11B. ………

 

11C. ………