Category: CHAPTER II – The Taxes (ITA)

“Venture capital share” definition of section 12J of ITA

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“venture capital share” means an equity share held by a taxpayer in a venture capital company which was issued to that taxpayer by that venture capital company, and does not include any share which-

[Words preceding paragraph (b) substituted by section 29 of Act 23 of 2018 effective on 1 January 2019 applies in respect of years of assessment commencing on or after that date]

(b)     would have constituted a hybrid equity instrument, as defined in section 8E(1), but for the three-year period requirement contemplated in paragraph (b)(i) of the definition of ‘hybrid equity instrument’ in that section;

[Paragraph (b) substituted by section 29 of Act 23 of 2018 effective on 1 January 2019 applies in respect of years of assessment commencing on or after that date]

(c)     constitutes a third-party backed share as defined in section 8EA(1); or

(d)     was issued to that taxpayer solely in respect or by reason of services rendered or to be rendered by that taxpayer in respect of the incorporation, marketing, management or administration of that venture capital company or of any qualifying company in which that venture capital company holds or acquires any share.

[Paragraph (d) added by section 29 of Act 23 of 2018 effective on 24 October 2018]

Subsections 2, 3, 4, 5 and 6 of section 12P of ITA

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(2)     There must be exempt from normal tax any amount received by or accrued to a person as a beneficiary of a government grant if that government grant-

 

(a)     is listed in the Eleventh Schedule; or

 

(b)     is identified by the Minister by notice in the Gazette for the purpose of exempting that government grant with effect from a date specified by the Minister in that notice (including any date that precedes the date of that notice), after having regard to-

 

(i)      the implications of the exemption for the National Revenue Fund; and

 

(ii)     whether the tax implications were taken into account in allocating that grant.

 

(2A)  Notwithstanding subsection (2), there must be exempt from normal tax any amount received by or accrued to or in favour of any person from the Government in the national, provincial or local sphere, where-

 

(a)    that amount is granted for the performance by that person of its obligations pursuant to a Public Private Partnership; and

 

(b)     that person is required in terms of that Public Private Partnership to expend an amount at least equal to that amount in respect of any improvements on land or to buildings owned by any sphere of government or over which any sphere of government holds a servitude.

[Paragraph (b) substituted by section 33 of Act 15 of 2016 effective on 1 March 2016, applies in respect of grants received or expenditure incurred on or after that date]

 

(3)     Where during any year of assessment any amount is received by or accrues to a person by way of a government grant as contemplated in subsection (2) or (2A), other than a government grant in kind, for the acquisition, creation or improvement, or as a reimbursement for expenditure incurred in respect of the acquisition, creation or improvement of-

[Words preceding paragraph (a) substituted by section 26 of Act 25 of 2015 effective on 1 January 2016]

 

(a)     trading stock-

 

(i)      any expenditure incurred in respect of that trading stock allowed as a deduction in terms of section 11(a) ;or

 

(ii)     any amount taken into account in respect of the value of trading stock as contemplated in section 22(1) or (2); or

 

(b)     an allowance asset, the base cost of that allowance asset, must be reduced to the extent that the amount of that government grant is applied for that purpose.

 

(4)     Where any amount is received by or accrues to a person by way of a government grant as contemplated in subsection (2) or (2A) for the acquisition, creation or improvement of an allowance asset or as a reimbursement for expenditure incurred in respect of that acquisition, creation or improve ment, the aggregate amount of the deductions or allowances allowable to that person in respect of that allowance asset may not exceed an amount equal to the aggregate of the expenditure incurred in the acquisition, creation or improvement of that allowance asset, reduced by an amount equal to the sum of-

 [Words preceding paragraph (a) substituted by section 26 of Act 25 of 2015 effective on 1 January 2016]

 

(a)     the amount of the government grant; and

 

(b)     the aggregate amount of all deductions and allowances previously allowed to that person in respect of that allowance asset.

 

Provided that where a person referred to in this subsection qualifies for a deduction under section 12BA in respect of an allowance asset, the aggregate amount of the deductions or allowances allowable to that person in respect of that allowance asset may not exceed an amount equal to 125 per cent of the aggregate amount otherwise determined in terms of this subsection

[Subsection (4) amended by section 26(1)(c) of Act 25 of 2015 and by section 19(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]

 

(5)     Where during any year of assessment any amount is received by or accrues to a person by way of a government grant as contemplated in subsection (2) or (2A), other than a government grant in kind-

[Words preceding paragraph (a) substituted by section 26 of Act 25 of 2015 effective on 1 January 2016]

 

(a)     for the purpose of the acquisition, creation or improvement of an asset other than an asset contemplated in subsection (3) or (4); or

 

(b)     as a reimbursement for expenditure incurred for the acquisition, creation or improvement of an asset other than an asset contemplated in subsection (3) or (4),

 

the base cost of that asset must be reduced to the extent that the amount of the government grant is applied for that acquisition, creation or improvement.

 

(6)

 

(a)     Where during any year of assessment-

 

(i)      any amount is received by or accrues to a person by way of a government grant as contemplated in subsection (2) or (2A), other than a government grant in kind; and

[Subparagraph (i) substituted by section 26 of Act 25 of 2015 effective on 1 January 2016]

 

(ii)     subsection (3), (4) or (5) does not apply to that amount, any amount allowed to be deducted from that person’s income in terms of section 11 for that year of assessment must be reduced to the extent of the amount of that government grant.

 

(b)     To the extent that the amount received or accrued by way of a government grant exceeds the amount allowed to be deducted as contemplated in paragraph (a), that excess is deemed to be an amount received or accrued in respect of that government grant during the following year of assessment for the purposes of paragraph (a).

“Allowance asset” definition of section 12P of ITA

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(1)     For the purposes of this section-

 

‘allowance asset’ means an asset as defined in paragraph 1 of the Eighth Schedule, other than trading stock, in respect of which a deduction or allowance is allowable in terms of this Act for purposes other than the determination of any capital gain or capital loss;

Section 12L (ITA) – Deduction in respect of energy efficiency savings

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12L     Deduction in respect of energy efficiency savings

(1)     For the purpose of determining the taxable income derived by any person from carrying on any trade in respect of any year of assessment ending before 1 January 2026, there must be allowed as a deduction from the income of that person an amount in respect of energy efficiency savings by that person in respect of that year of assessment determined in accordance with subsection (2), subject to subsection (3).

[Subsection (1) substituted by section 19(1) of Act 34 of 2019 and by section 9(1) of Act 20 of 2022 effective on 1 January, 2023]

(2)    The amount of the deduction contemplated in subsection (1) must be calculated at 95 cents per kilowatt hour or kilowatt hour equivalent of energy efficiency savings.

[Subsection (2) substituted by section 38 of Act 31 of 2013 and section 24 of Act 25 of 2015 effective on 1 March 2015]

(3)     A person claiming the deduction allowed in terms of subsection (1) during any year of assessment must obtain a certificate issued by an institution, board or body prescribed by the regulations contemplated in subsection (5) in respect of the energy efficiency savings for which a deduction is claimed in respect of that year of assessment containing-

(a)     the baseline at the beginning of the year of assessment;

(b)     the reporting period energy use at the end of the year of assessment;

(c)     the annual energy efficiency savings expressed in kilowatt hours or kilowatt hours equivalent for the year of assessment including the full criteria and methodology used to calculate the energy efficiency savings; and

(d)     any other information prescribed by the regulations contemplated in subsection (5).

(4)     A deduction must not be allowed in terms of this section if the person claiming the allowance receives any concurrent benefit in respect of energy efficiency savings.

(5)     The Minister of Finance, in consultation with the Minister of Energy and the Minister of Trade and Industry, must make regulations prescribing-

(a)     the institution, board or body that must issue the certificate contemplated in subsection (3);

(b)     the powers and responsibilities of the institution, board or body contemplated in paragraph (a);

(c)     the information that must be contained in the certificate contemplated in subsection (3) in addition to the information contemplated in that subsection;

(d)     those benefits that constitute concurrent benefits for the purpose of subsection (4); and

(e)     any limitation of energy sources in respect of which the allowance may be claimed.

“Government grant” definition of section 12P of ITA

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‘government grant’ means a grant-in-aid, subsidy or contribution by the government of the Republic in the national, provincial or local sphere.

[Definition of “government grant” substituted by section 33 of Act 15 of 2016 effective on 1 March 2016, applies in respect of grants received or expenditure incurred on or after that date]

Subsection 2 of section 12M of ITA

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(2)     In determining the taxable income derived by any taxpayer in any year of assessment from carrying on any trade, there must be allowed as a deduction from the income of that taxpayer so derived any amount paid by way of a lump sum during the year of assessment by that taxpayer –

 

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

 

(b)     under any policy of insurance taken out with an insurer solely in respect of one or more former employees or dependants contemplated in paragraph (a),

 

but only to the extent that the amount is paid for the purposes of making any contribution, in respect of any former employee or dependant contemplated in paragraph (a), to any medical scheme or fund contemplated in section 6A(2)(a)(i) or (ii):

 

Provided that no deduction may be allowed in terms of this section if the taxpayer making the payment, or a connected person in relation to that taxpayer, retains any further obligation, whether actual or contingent, relating to the mortality risk of any former employee or dependant contemplated in paragraph (a).