“debt” includes any contingent liability;
[Definition of “debt” inserted by section 50 of Act 17 of 2017 effective on 18 December 2017]
Category: CHAPTER II – The Taxes (ITA)
Subsection 2 of section 22B of ITA
(2) Subject to subsection (3), where a company disposes of shares in another company in terms of a transaction that is not a deferral transaction and that company held a qualifying interest in that other company at any time during the period of 18 months prior to that disposal, the amount of any exempt dividend received by or that accrued to that company in respect of the shares disposed of must-
[Words preceding paragraph (a) substituted by section 38 of Act 23 of 2018 effective on 1 January 2019 and applies in respect of disposals on or after that date]
(a) to the extent that the exempt dividend constitutes an extraordinary dividend; and
(b) if that company immediately before that disposal held the shares disposed of as trading stock,
be included in the income of that company in the year of assessment in which those shares are disposed of or, where that dividend is received or accrues after that year of assessment, the year of assessment in which that dividend is received or accrues: Provided that where a company disposes of shares that are treated as having been disposed of previously by that company in terms of subsection (4), the amount of any extraordinary dividend in respect of those shares must be included in the income of that company only to the extent to which it has not previously been included in the income of that company in terms of this subsection.
[Subsection (2) amended by section 38(1)(d) of Act 23 of 2018, by section 25(1)(c) of Act 34 of 2019 and by section 25(1)(d) of Act 34 of 2019 deemed effective on 20 February, 2019 and applicable in respect of shares held by a company in a target company if the effective interest held by that company in the shares of that target company is reduced on or after that date]
(3) Where a company holds shares in another company and disposes of any of those shares in terms of a transaction that is not a deferral transaction within a period of 18 months after having acquired those shares in terms of a deferral transaction, other than an unbundling transaction and-
(a) within a period of 18 months prior to the disposal of those shares by that company an exempt dividend in respect of those shares accrued to or was received by a person that-
(i) disposed of those shares in terms of a deferral transaction; and
(ii) was a connected person in relation to that company at any time within that period,
that dividend must for purposes of this section be treated as a dividend that accrued to or was received by that company in respect of those shares within the period during which that company held those shares; and
(b) if that company acquired those shares (hereinafter referred to as ‘new shares’) in terms of that deferral transaction in return for or by virtue of the holding, by that company, of other shares (hereinafter referred to as ‘old shares’) that were disposed of in terms of that deferral transaction and an exempt dividend in respect of the old shares, other than a dividend consisting of new shares, accrued to or was received by that company within a period of 18 months prior to the disposal by that company of the new shares, that dividend must for purposes of this section be treated as an amount that accrued to or was received by that company as an exempt dividend in respect of the new shares.
[Subsection (3) added by section 38(1)(e) of Act 23 of 2018 and amended by section 25(1)(e) of Act 34 of 2019]
(4) Where a company holds equity shares in another company (hereinafter referred to as the “target company”) and-
(a) the target company issues shares (hereinafter referred to as the “new shares”) to a person other than that company; and
(b) the effective interest of that company in the equity shares of the target company is reduced by reason of the new shares issued by the target company,
that company must for purposes of this section be treated as having disposed, immediately after the new shares were issued, of a percentage of those equity shares that is equal to the percentage by which the effective interest of that company in the equity shares of the target company has been reduced by reason of the new shares issued by the target company: Provided that any new shares that are convertible to equity shares must for purposes of this subsection be treated as equity shares.
[Subsection (4) added by section 25(1)(f) of Act 34 of 2019 deemed effective on 20 February, 2019 and applicable in respect of shares held by a company in a target company if the effective interest held by that company in the shares of that target company is reduced on or after that date]
[Section 22B inserted by section 34 of Act 17 of 2009, amended by section 40 of Act 7 of 2010, substituted by section 46 of Act 24 of 2011, amended by section 4 of Act 22 of 2012, section 41 of Act 22 of 2012 and substituted by section 34 of Act 17 of 2017 effective on 19 July 2017, applies in respect of any disposal on or after that date other than a disposal in terms of an agreement all the terms of which were finally agreed to before that date by all the parties to that agreement]
“Qualifying interest” definition of section 22B of ITA
‘qualifying interest’ means an interest held by a company in another company, whether alone or together with any connected persons in relation to that company, that constitutes-
(a) if that other company is not a listed company, at least-
(i) 50 per cent of the equity shares or voting rights in that other company; or
(ii) 20 per cent of the equity shares or voting rights in that other company if no other person (whether alone or together with any connected person in relation to that person) holds the majority of the equity shares or voting rights in that other company; or
(b) if that other company is a listed company, at least 10 per cent of the equity shares or voting rights in that other company.
“Extraordinary dividend” definition of section 22B of ITA
‘extraordinary dividend’ means, in relation to-
(a) a preference share, so much of the amount of any dividend received or accrued in respect of that share as exceeds the amount that would have accrued in respect of that share had that amount been determined with reference to the consideration for which that share was issued by applying an interest rate of 15 per cent per annum for the period in respect of which that dividend was received or accrued;
[Paragraph (a) substituted by section 38 of Act 23 of 2018 effective on 19 July 2017, applies in respect of disposals on or after that date]
(b) any other share, so much of the amount of any dividend received or accrued:
(i) within a period of 18 months prior to the disposal of that share; or
(ii) in respect, by reason or in consequence of that disposal,
as exceeds 15 per cent of the higher of the market value of that share as at the beginning of the period of 18 months and as at the date of disposal of that share:
Provided that a dividend in specie that was distributed in terms of a deferral transaction must not be taken into account to the extent to which that distribution was made in terms of an unbundling transaction as defined in section 46(1)(a) or a liquidation distribution as defined in section 47(1)(a);
[Definition of “extraordinary dividend” amended by section 25(1)(a) of Act 34 of 2019 deemed effective on 30 October, 2019 and applicable in respect of dividends received or accrued on or after that date]
“Exempt dividend” definition of section 22B of ITA
‘exempt dividend’ means any dividend or foreign dividend to the extent that the dividend or foreign dividend is-
(a) not subject to tax under Part VIII of Chapter II; and
(b) exempt from normal tax in terms of section 10(1)(k)(i) or section 10B(2)(a) or (b);
“Group of companies” definition of section 19 of ITA
“group of companies” means a group of companies as defined in section 41; and
[Definition of “group of companies” amended by section 17(1)(a) of Act 20 of 2021]
“Concession or compromise” definition of section 19 of ITA
“concession or compromise” means any arrangement in terms of which-
(a) a debt is-
(i) cancelled or waived; or
(ii) extinguished by-
(aa) redemption of the claim in respect of that debt by the person owing that debt or by any person that is a connected person in relation to that person; or
(bb) merger by reason of the acquisition by the person owing that debt of the claim in respect of that debt,
otherwise than as the result or by reason of the implementation of an arrangement described in paragraph (b);
(b) a debt owed by a company is settled, directly or indirectly-
(i) by being converted to or exchanged for shares in that company; or
(ii) by applying the proceeds from shares issued by that company;
[Definition of “concession or compromise” substituted by section 36 of Act 23 of 2018 effective on 1 January 2018, applies in respect of years of assessment commencing on or after that date]
Section 11(jA) of ITA
(jA) notwithstanding paragraph (j), an allowance equal to 25 per cent of the loss allowance relating to impairment, as contemplated in IFRS 9, other than in respect of lease receivables as defined in IFRS 9 that have not been included in income, if the person is a covered person, other than a person that is a controlling company as defined in the Banks Act, as determined by applying the criteria in paragraphs (c)(i) to (iii) and (d) of the definition of “covered person” in section 24JB(1): Provided that the allowance must be increased-
(a) to 85 per cent of so much of that loss allowance relating to impairment as is equal to the amount that is in default, as determined by applying to any credit exposure, including any retail exposure, the criteria in paragraphs (a)(ii) to (vi) and (b) of the definition of ‘default’ as defined in Regulation 67 of the regulations issued in terms of section 90 of the Banks Act (contained in Government Notice No. R.1029 published in Government Gazette No. 35950 of 12 December 2012); and
(b) to 40 per cent of so much of that loss allowance relating to impairment as is equal to the difference between-
(i) the amount of the loss allowance relating to impairment that is measured at an amount equal to the lifetime expected credit losses; and
(ii) the amount that is in default as determined under paragraph (a):
Provided further that the allowance must be included in the income of that person in the following year of assessment: Provided further that the loss allowance relating to impairment must exclude any loss allowance in respect of a financial asset that would not be allowed to be deducted under paragraph (a) or (i) if it became bad;
[Paragraph (jA) inserted by section 19(1)(a) of Act 17 of 2017 and amended by section 25(1)(f) of Act 23 of 2018, by section 15(1)(b) of Act 34 of 2019 and by section 13(1)(e) and (f) 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]
Section 8G (ITA) – Determination of contributed tax capital in respect of shares issued to a group company
8G. Determination of contributed tax capital in respect of shares issued to a group company
(1) For the purposes of this section ‘group of companies’ means two or more companies in which one company (hereinafter referred to as the ‘controlling group company’) directly or indirectly holds shares or voting rights in at least one other company (hereinafter referred to as the ‘controlled group company’), to the extent that-
(a) at least 50 per cent of the equity shares or voting rights in each controlled group company are directly held by the controlling group company, one or more other controlled group companies or any combination thereof; and
(b) the controlling group company directly holds at least 50 per cent of the equity shares or voting rights in at least one controlled group company.
(2) Where a company issues shares (hereinafter referred to as the ‘issuing company’) to any company that is not a resident (hereinafter referred to as the ‘subscribing company’) that forms, after that transaction, part of the same group of companies as the issuing company, the amount of the contributed tax capital in relation to those shares will, to the extent that the consideration for those shares-
(a) consists of; or
(b) is used, directly or indirectly to acquire,
any shares in another company that is a resident (hereinafter referred to as the “target company”) and that forms part of a group of companies in relation to the subscribing company, be equal to so much of the total contributed tax capital attributable to shares of that class in that target company so acquired, determined in terms of subsection (3), as bears the same ratio that the number of shares so acquired bears to the total number of shares of that class: Provided that this subsection does not apply to any shares acquired in the target company, from a shareholder in that target company, and that shareholder-
(a) is not a connected person; and
(b) does not form part of a group of companies,
in relation to the subscribing company, at the time of the transaction.
[Subsection (2) amended by section 9(1) of Act 5 of 2026 effective on 1 January, 2026 and applicable in respect of shares acquired on or after that date]
(3) The contributed tax capital in relation to the shares in that target company must be determined-
(a) in terms of paragraph (b) of the definition of ‘contributed tax capital’ in section 1; and
(b) with reference to the date from which that target company formed part of a group of companies in relation to the subscribing company.
(4) Paragraph (a) of the definition of ‘contributed tax capital’ in section 1 does not apply in respect of any shares of a class that were issued, as contemplated in subsection (2), by an issuing company before that issuing company became a resident.
[Section 8G inserted by section 13 of Act 17 of 2017 effective on 19 July 2017, applies in respect of any share issued on or after that date]
Section 7D (ITA) – Calculation of amount of interest
7D. Calculation of amount of interest
Where it must be determined, for the purposes of this Act, what amount would have accrued or been incurred as interest in respect of any loan, debt, advance or amount of credit provided to a person or an amount owed by a person had that interest accrued or been incurred at a specific rate of interest, that amount must be determined-
(a) without regard to any rule of the common law or provision of any Act in terms of which-
(i) the amount of any interest, fee or similar finance charge that accrues or is incurred in respect of a debt may not in aggregate exceed the amount of that debt; or
(ii) no interest may accrue or be incurred in respect of a debt once the amount that has accrued or been incurred as interest is equal to the amount of that debt; and
(b) as simple interest calculated daily.
[Section 7D inserted by section 6 of Act 17 of 2017 and substituted by section 10 of Act 23 of 2018 effective on 17 January 2019]