“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]
Category: CHAPTER II – The Taxes (ITA)
“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.
(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]
Section 11F (ITA) – Deduction in respect of contributions to retirements funds
11F. Deduction in respect of contributions to retirement funds
(1) Notwithstanding section 23(g), for the purposes of determining the taxable income of a natural person in respect of any year of assessment there must be allowed as a deduction from the income of that person any amount contributed during a year of assessment to any pension fund, provident fund or retirement annuity fund in terms of the rules of that fund by a person that is a member of that fund.
(2) The total deduction allowed in terms of subsection (1) must not in a year of assessment exceed the lesser of-
(a) R350 000: Provided that where any person’s year of assessment is less than a period of 12 months, the aggregate of amounts that shall be allowed as deductions under this paragraph for years of assessment during the period of 12 months commencing on 1 March and ending at the end of February of the immediately following calendar year, must not exceed R350 000;
[Paragraph (a) amended section 26(1)(a) of Act 23 of 2018 and by section 13(1)(a) of Act 17 of 2023 with effect from 1 March, 2024 and applicable in respect of years of assessment commencing on or after that date]
(b) 27,5 per cent of the higher of the person’s-
(i) remuneration (other than in respect of any retirement fund lump sum benefit, retirement fund lump sum withdrawal benefit and severance benefit) as defined in paragraph 1 of the Fourth Schedule; or
(ii) taxable income (other than in respect of any retirement fund lump sum benefit, retirement fund lump sum withdrawal benefit and severance benefit) as determined before allowing any deduction under this section and sections 6quat(1C) and 18A; or
[Subparagraph (ii) substituted by section 26 of Act 23 of 2018 effective on 1 March 2019]
(c) the taxable income (other than in respect of any retirement fund lump sum benefit, retirement fund lump sum withdrawal benefit and severance benefit) of that person before-
[Words preceding subparagraph (i) substituted by section 26 of Act 23 of 2018 effective on 1 March 2019]
(i) allowing any deduction under this section and sections 6quat(1C) and 18A; and
[Subparagraph (i) substituted by section 26 of Act 23 of 2018 effective on 1 March 2019]
(ii) the inclusion of any taxable capital gain.
(3) Any amount contributed to a pension fund, provident fund or retirement annuity fund in any previous year of assessment which has been disallowed solely by reason of the fact that the amount that was contributed exceeds the amount of the deduction allowable in respect of that year of assessment is deemed to be an amount contributed in the current year of assessment, except to the extent that the amount contributed has been-
(a) allowed as a deduction against income in any year of assessment;
(b) accounted for under paragraph 5(1)(a) or 6(1)(b)(i) of the Second Schedule; or
(c) taken into account in determining the amounts exempt under section 10C.
[Paragraph (c) substituted by section 26 of Act 23 of 2018 effective on 17 January 2019]
(4) Any amount paid or contributed by an employer of the person on behalf of or for the benefit of that person must be deemed-
(a)
(i) to be equal to the amount of the cash equivalent of the value of the taxable benefit contemplated in paragraph 2(l) of the Seventh Schedule determined in accordance with paragraph 12D of that Schedule; or
(ii) if that amount is paid by an employer to a retirement annuity fund, to be equal to the amount of the cash equivalent of the value of the taxable benefit contemplated in paragraph 2(h) of the Seventh Schedule determined in accordance with paragraph 13 of that Schedule; and
(b) to the extent that the amount has been included in the income of that person, to have been contributed by that person.
[Subsection (4) substituted by section 26(1)(e) of Act 23 of 2018 and by section 13(1)(b) of Act 17 of 2023 with effect from 1 March, 2024 and applicable in respect of years of assessment commencing on or after that date]
(5) For the purposes of this section-
(a) a partner in a partnership must be deemed to be an employee of the partnership; and
(b) a partnership must be deemed to be the employer of the partners in that partnership.
[Section 11F inserted by section 21 of Act 17 of 2017 effective on 1 March 2016]
“Social and labour plan” definition of section 36 of ITA
“social and labour plan” means social and labour plan as contemplated in Part II of the Mineral and Petroleum Resources Development Regulations, 2004 (Government Notice R. 527 published in Government Gazette No. 26275 of 23 April 2004), made by the Minister of Minerals and Energy in terms of section 107(1) of the Mineral and Petroleum Resources Development Act.
[Definition of “social and labour plan” inserted by section 52 of Act 15 of 2016 effective on 1 April 2017, applies in respect of expenditure incurred during years of assessment commencing on or after that date]
“Base cost” definition of section 23O of ITA
‘base cost’ means base cost as defined in paragraph 1 of the Eighth Schedule.
[Definition of ‘base cost’ added by section 43 of Act 15 of 2016 effective on 19 January 2017]
Section 12U (ITA) – Additional deduction in respect of roads and fences in respect of production of renewable energy
12U. Additional deduction in respect of roads and fences in respect of production of renewable energy
(1) There must be allowed to be deducted by a person any amount actually incurred during the year of assessment in which that expenditure is incurred, subject to subsection (3), in respect of-
(a) the construction of any road or the erecting of any fence and a foundation or supporting structure designed for such a fence for the purpose of trade of that person of generation of electricity which exceeds 5 megawatts from-
(i) wind power;
(ii) solar energy;
(iii) hydropower to produce electricity of not more than 30 megawatts; or
(iv) biomass comprising organic wastes, landfill gas or plant material; or
(b) improvements (other than repairs) to-
(i) any road or fence contemplated in paragraph (a); or
(ii) foundation or supporting structure designed for such a fence, subject to subsection (2).
(2) For the purpose of any deduction under subsection (1)-
(a) the foundation or supporting structure designed for a fence must be constructed in such manner that the foundation or supporting structure is or should be regarded as being integrated with that fence; and
(b) the useful life of the foundation or supporting structure is or will be limited to the useful life of that fence.
(3) For purposes of deduction under subsection (1) any expenditure-
(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 subsection (1) had the expenditure been incurred after that person commenced carrying on that trade; and
(c) which was not allowed as a deduction in any previous year of assessment,
shall be allowed as a deduction in terms of this section.
[Section 12U inserted by section 36 of Act 15 of 2016 effective on 1 April 2016, applies in respect of years of assessment commencing on or after that date]
Section 12S (ITA) – Deduction in respect of buildings in special economic zones
12S. Deduction in respect of buildings in special economic zones
(1) For the purposes of this section, ‘qualifying company’ means a qualifying company as defined in section 12R, notwithstanding section 12R(4).
[Subsection (1) substituted by section 35 of Act 15 of 2016 effective on 19 January 2017]
(2) A qualifying company may deduct from the income of that qualifying company an allowance equal to ten per cent of the cost to the qualifying company of any new and unused building owned by the qualifying company, or any new and unused improvement to any building owned by the qualifying company, if that building or improvement is wholly or mainly used by the qualifying company during the year of assessment for purposes of producing income within a special economic zone, as defined in section 12R(1), in the course of the taxpayer’s trade, other than the provision of residential accommodation.
[Subsection (2) substituted by section 27 of Act 43 of 2014 effective on the date on which the Special Economic Zones Act is operational]
(3) If a qualifying company completes an improvement as contemplated in section 12N, the expenditure incurred by the qualifying company to complete the improvement must be deemed to be the cost to the qualifying company of any new and unused building or of any new and unused improvement to a building contemplated in subsection (2).
(4) For the purposes of this section the cost to a qualifying company of any building or improvement must be deemed to be the lesser of the actual cost to the qualifying company or the cost which a person would, if that person had acquired, erected or improved the building under a cash transaction concluded at arm’s length on the date on which the transaction for the acquisition, erection or improvement of the building was in fact concluded, have incurred in respect of the direct cost of the acquisition, erection or improvement of the building.
(5) No deduction may be allowed under this subsection in respect of any building that has been disposed of by the qualifying company during any previous year of assessment.
(6) A deduction may not be allowed under any other section of this Act in respect of the cost of a building or improvement if any of that cost has qualified or will qualify for deduction from the qualifying company’s income as a deduction of expenditure or an allowance in respect of expenditure under this section.
(7) 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 building or improvement may not in the aggregate exceed the amount of such cost.
(8) The Commissioner may, notwithstanding the provisions of sections 99 and 100 of the Tax Administration Act disallow all deductions otherwise provided for under this section if a qualifying company is guilty of fraud or misrepresentation or non-disclosure of material facts with regard to any tax, duty or levy administered by the Commissioner.
[Subsection (8) substituted by section 35 of Act 15 of 2016 effecive on 19 January 2017]
(9) The Commissioner may, notwithstanding the provisions of sections 99 and 100 of the Tax Administration Act, raise an additional assessment for any year of assessment where a deduction that has been allowed in any previous year must be disallowed in terms of subsection (8).
(10) This provision ceases to apply in respect of expenditure incurred during any year of assessment commencing on or after 1 January 2031.
[Subsection (10) substituted by section 19(1) of Act 23 of 2020 deemed effective on 9 February, 2016]
[Section 12S inserted by section 44(1) of Act 31 of 2013 effective on the date that the Special Economic Zones Act referred to in section 12R of this Act comes into operation: 9 February, 2016 (Proclamation No. R.6 in Government Gazette 39667 of 9 February, 2016) and applicable in respect of years of assessment commencing on or after that date]