Category: CHAPTER II – The Taxes (ITA)

Section 24BA (ITA) – Transactions where assets are acquired as consideration for shares issued

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24BA.  Transactions where assets are acquired as consideration for shares issued

(1)     For the purposes of this section, ‘asset’ means an asset as defined in paragraph 1 of the Eighth Schedule or a number of such assets.

(2)     Subject to subsection (4), this section applies where-

(a)     in terms of any transaction, a company, for consideration, acquires an asset from a person in exchange for the issue by that company to that person of shares in that company; and

(b)     the consideration contemplated in paragraph (a) is (before taking into account any other transaction, operation, scheme, agreement or understanding that directly or indirectly affects that consideration) different from the consideration that would have applied had that asset been acquired in exchange for the issue of those shares in terms of a transaction between independent persons dealing at arm’s length.

(3)     Notwithstanding paragraph 11(2)(b) of the Eighth Schedule, where a company acquires an asset from a person in exchange for the issue by that company to that person of shares in that company as contemplated in subsection (2) and the market value of-

(a)     that asset immediately before that disposal exceeds the market value of the shares immediately after that issue, the amount of the excess must-

(i)      be deemed to be a capital gain in respect of a disposal by that company of the shares; and

(ii)     where those shares are acquired by that person as-

(aa)   a capital asset, be applied to reduce any amount of expenditure incurred by that person in acquiring those shares that is allowable in terms of paragraph 20 of the Eighth Schedule; or

(bb)   trading stock, be applied to reduce any amount that must be takan into account by the person in respect of the shares in terms of section 11(a) or 22(1) or (2); or 

(b)     the shares immediately after that issue exceeds the market value of that asset immediately before the disposal, the amount of the excess must, for the purposes of Part VIII, be deemed to be a dividend as defined in section 64D that-

(i)      consists of a distribution of an asset in specie; and

(ii)     is paid by the company on the date of that issue.

(4)     This section must not apply where a company acquires an asset from a person as contemplated in subsection (2)(a) if-

(a)

(i)      that company and that person form part of the same group of companies immediately after that company acquires that asset; or

(ii)     that person holds all the shares in that company immediately after that company acquires that asset; or

(b)     paragraph 38 of the Eighth Schedule applies.

Section 24C (ITA) – Allowance in respect of future expenditure on contracts

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24C.    Allowance in respect of future expenditure on contracts

(1)     For the purposes of this section, “future expenditure” in relation to any year of assessment means an amount of expenditure which will be incurred after the end of such year –

(a)     in such manner that such amount will be allowed as a deduction from income in a subsequent year of assessment; or

(b)     in respect of the acquisition of any asset in respect of which any deduction will be admissible under the provisions of this Act.

[Subsection (1) substituted by section 42 of Act 25 of 2015 effective on 8 January 2016]

(2)     If the income of any taxpayer in any year of assessment includes or consists of an amount received by or accrued to him in terms of any contract and such amount will be utilised in whole or in part to finance future expenditure which will be incurred by the taxpayer in the performance of the taxpayer’s obligations under such contract, there shall be deducted in the determination of the taxpayer’s taxable income for such year such allowance (not exceeding the said amount) in respect of so much of such future expenditure as relates to the said amount.

[Subsection (2) substituted by section 42 of Act 25 of 2015 effective on 8 January 2016]

(3)     The amount of any allowance deducted under subsection (2) in any year of assessment shall be deemed to be income received by or accrued to the taxpayer in the following year of assessment.

Subsections 2 and 3 of section 23I of ITA

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(2)     Other than a deduction allowed in terms of section 11(gC) or a deduction allowed in respect of trading stock, a deduction is not allowed in respect of-

 

(a)     any amount of expenditure incurred for the use or right of use of or permission to use tainted intellectual property; or

(b)     expenditure the incurral or amount of which is determined directly or indirectly with reference to expenditure incurred for the use or, right of use of or permission to use tainted intellectual property,

[Paragraph (b) substituted by section 36 of Act 43 of 2014 effective on 20 January 2015]

to the extent that the amount of expenditure does not constitute income received by or accrued to any other person or to the extent that the amount of expenditure does not constitute a proportional amount of net income of a controlled foreign company an amount equal to which is included in the income of any resident in terms of section 9D.

(3)       Notwithstanding any provision of subsection (2) to the contrary, an amount equal to-

(a)     one third of any expenditure contemplated in subsection (2)  must be allowed to be deducted if withholding tax on royalties contemplated in Part IVA is payable in respect of that amount at a rate of 10 per cent; or

(b)     one half of any expenditure contemplated in subsection (2) must be allowed to be deducted if withholding tax on royalties contemplated in Part IVA is payable in respect of that amount at a rate of 15 per cent.

(4)     Subsection (2) must not apply where the aggregate amount of taxes on income payable to all spheres of government of any country other than the Republic by a controlled foreign company contemplated in that subsection in respect of the foreign tax year of that controlled foreign company is at least 67,5 per cent of the amount of normal tax that would have been payable in respect of any taxable income of the controlled foreign company had the controlled foreign company been a resident for that foreign tax year: Provided that the aggregate amount of tax payable by a controlled foreign company in respect of a foreign tax year of that controlled foreign company must be determined—

(a)     after taking into account any applicable agreement for the prevention of double taxation and any credit, rebate or other right of recovery of tax from any sphere of government of any country other than the Republic; and

(b)     after disregarding any loss in respect of a year other than that foreign tax year or from a company other than that controlled foreign company.

[Sub­section (4) added by section 38(1) of Act 17 of 2017 and amended by section 27(1) of Act 34 of 2019 effective on 1 January, 2020 and applicable in respect of years of assessment ending on or after that date]

“Investment policy” definition of section 23L of ITA

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(1)       For the purposes of this section-

“investment policy” . . . . . .

[Definition of “investment policy” deleted by section 60(1)(b) of Act 31 of 2013 effective on 1 April, 2014 and applicable in respect of premiums incurred on or after that date]

Section 24D (ITA) – Deduction of certain expenditure incurred in respect of any National Key Point or specified important place or area

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24D.  Deduction of certain expenditure incurred in respect of any National Key Point or specified important place or area

(1)     There shall be allowed to be deducted from the income of any taxpayer for any year of assessment so much of any expenditure actually incurred by the taxpayer during such year –

[Words preceding paragraph (a) substituted by section 43 of Act 25 of 2015 effective on 8 January 2016]

(a)     directly in the performance of any act ordered, performed or executed under the provisions of the National Key Points Act, 1980 (Act No. 102 of 1980), in respect of any National Key Point or Key Point as defined in section 1 of that Act; or

(b)     directly in providing efficient security against loss, damage, disruption or immobilization of any place or area as defined in section 1 of the said Act which, although not declared a National Key Point under the provisions of the said Act, has been evaluated and approved by the Minister of Defence or any person or committee appointed by him as such a place or area in respect of which measures for the efficient security thereof ought to be taken by such taxpayer.

(2)     The amount of any expenditure allowed to be deducted under the provisions of subsection (1) shall be restricted to expenditure –

(a)     actually incurred by the taxpayer on or after 1 September 1978; and

(b)     which was or is not otherwise allowable as a deduction under the provisions of this Act,

and no expenditure shall be deducted under the provisions of this section unless the Minister of Defence or any person or committee appointed by that Minister has confirmed in writing that it was deemed necessary or expedient that the expenditure in question be incurred by the taxpayer concerned.

[Words following paragraph (b) substituted by section 43 of Act 25 of 2015 effective on 8 January 2016]

(3)     Where an amount has been paid by the State to a taxpayer in respect of expenditure incurred by him prior to 1 July 1983 which has qualified for deduction from his income under subsection (1) and the Minister, person or committee referred to in subsection (2) confirms that such amount was paid as a supplement to the benefit which the taxpayer has enjoyed or will enjoy by way of the said deduction, the provisions of section 8(4)(a) shall not apply in respect of the said amount [K-MOS].

“Taxable person” definition of section 23I of ITA

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“taxable person” means any person other than-

 

(a)     a person that is not a resident;

 

(b)     the government of the Republic in the national, provincial or local sphere contemplated in section 10(1)(a);

 

(c)     an institution, board or body contemplated in section 10(1)(cA);

 

(d)     any public benefit organisation as defined in section 30 that has been approved by the Commissioner in terms of that section;

 

(e)     any recreational club as defined in section 30A that has been approved by the Commissioner in terms of that section;

 

(f)      any company or trust contemplated in section 37A;

 

(g)     any fund contemplated in section 10(1)(d)(i) or (ii); or

 

(h)     any person contemplated in section 10(1)(t).

Section 24E (ITA) – Allowance in respect of future expenditure by sporting bodies

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24E.     Allowance in respect of future expenditure by sporting bodies

 

(1)     If income is received by or accrued to a taxpayer contemplated in section 11E in respect of an event that will not recur in the following year of assessment, the taxpayer may for the purposes of determining taxable income deduct so much of that income as will be required to fund expenditure contemplated in section 11E that will be incurred in a future year of assessment.

 

(2)     Any amount allowed to be deducted in terms of subsection (1) in any year of assessment must be deemed to be income received by or accrued to the taxpayer in the following year of assessment.


24F.     ………