Category: CHAPTER II – The Taxes (ITA)

“Adjusted gain on transfer or redemption of an instrument” definition of section 24J of ITA

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“adjusted gain on transfer or redemption of an instrument” means –

 

(a)     in relation to the holder of any income instrument, where –

 

(i)      an alternative method has not been applied, the amount by which the sum of the transfer price or redemption payment of such income instrument in relation to such holder and any payments received by such holder in terms of such income instrument during the accrual period in which such income instrument is transferred or redeemed, exceeds the sum of the adjusted initial amount in relation to such income instrument and the accrual amount in relation to such accrual period and any payments made by such holder in terms of such income instrument during such accrual period; or

 

(ii)     an alternate method has been applied, the amount by which the sum of the transfer price or redemption payment of such income instrument in relation to such holder and any payments received by such holder in terms of such income instrument during the period from acquisition until transfer or redemption of such income instrument by such holder, exceeds the sum of the initial amount and all amounts determined in accordance with such alternative method and any other payments made by such holder in terms of such income instrument during the period from acquisition until transfer or redemption of such income instrument by such holder; or

 

(b)     in relation to the issuer of any instrument, where –

 

(i)      an alternative method has not been applied, the amount by which the sum of the adjusted initial amount in relation to such instrument and the accrual amount in relation to the accrual period during which such instrument is transferred or redeemed and any payments received by such issuer in terms of such instrument during the accrual period, exceeds the sum of the transfer price or redemption payment in relation to such instrument in relation to such issuer and any payments made by such issuer in terms of such instrument during such accrual period; or

 

(ii)     an alternative method has been applied, the amount by which the sum of the initial amount and all amounts determined in accordance with such alternative method and any other payments received by such issuer in terms of such instrument during the period from issue or acquisition until transfer or redemption of such instrument by such issuer, exceeds the sum of the transfer price or redemption payment in relation to such instrument in relation to such issuer and any payments made by such issuer in terms of such instrument during the period from issue or acquisition until transfer or redemption of such instrument by such issuer;

“Affected contract” definition of section 24I of ITA

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“affected contract” means any foreign currency option contract or forward exchange contract to the extent that the foreign currency option contract or forward exchange contract has been entered into by any person during any year of assessment to serve as a hedge in respect of a debt, where-

(a)     that debt-

(i)      is to be utilised by that person for the purposes of acquiring any asset or for financing any expenditure; or

(ii)     will arise from the sale of any asset or supply of any services,

in terms of an agreement entered into by that person in the ordinary course of the person’s trade prior to the end of the current year of assessment; and

(b)     that debt has not yet been incurred by such person or the amount payable in respect of such debt has not yet accrued during that current year of assessment;

[Definition of “affected forward exchange contract” inserted by section 18 of Act 21 of 1994, substituted by section 13 of Act 36 of 1996, amended by section 35 of Act 30 of 1998 and substituted by section 53 of Act 22 of 2012 and section 42 of Act 17 of 2017 effective on 18 December 2017]

“Issuer” definition of section 24J of ITA

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“issuer”, in relation to any instrument –

 

(a)     means any person who has incurred any interest or has any obligation to repay any amount in terms of such instrument; or

 

(b)     at any particular time, means any person who, if any interest payable in terms of such instrument was due and payable at that time, would be liable to pay such interest;

“Accrual period” definition of section 24J of ITA

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“accrual period”, in relation to an instrument, means –

 

(a)     where in terms of such instrument regular payments at intervals of equal length and not exceeding 12 months per interval are to be made throughout the term of such instrument, the period between such regular payments; or

 

(b)     any period not exceeding 12 months elected by the holder or issuer, as the case may be,

 

which period shall be applied consistently throughout the term of such instrument;

“Transaction date” definition of section 24I of ITA

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 “transaction date” means, in relation to –

(a)     ……….

(b)     a debt owing by a person, the date on which such debt was actually incurred;



(bA)   a preference share, the date on which the preference share was issued or acquired;

[Paragraph (bA) inserted by section 22(1)(e) of Act 5 of 2026 deemed effective on 1 January, 2025 and applicable in respect of years of assessment commencing on or after that date]

(c)     ……….

(d)     a debt owing to a person, the date on which the amount payable in respect of such debt accrued to such person or the date on which such debt was acquired by such person in any other manner;

(e)     a forward exchange contract, the date on which such contract was entered into;

(f)      a foreign currency option contract, the date on which such contract was entered into or acquired; and

(g)     an amount which constitutes a unit of currency, the date on which that amount was acquired;

“Acquisition rate” definition of section 24I of ITA

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(1)     For the purposes of this section –

“acquisition rate” means the exchange rate in respect of an exchange item obtained by dividing the amount of the expenditure incurred for the acquisition of such exchange item by the foreign currency amount in respect of such exchange item;

“Ruling exchange rate” definition of section 24I of ITA

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“ruling exchange rate” means, in relation to an exchange item, where such exchange item is –

(a)     a debt or a preference share in a foreign currency on-

(i)      transaction date, the spot rate on such date;

(ii)     the date it is translated, the spot rate on such date; or

(iii)    the date it is realised, the spot rate on such date:

Provided that where the rate prescribed in respect of a debt or a preference share in terms of this definition is the spot rate on transaction date or the spot rate on the date on which such debt is realised, and any consideration paid or incurred or received or accrued in respect of the acquisition or disposal of such debt or preference share was determined by applying a rate other than such spot rate on transaction date or date realised, such spot rate shall be deemed to be the acquisition rate or disposal rate, as the case may be;

[Paragraph (a) amended by section 53(1)(d) and (e) of Act 22 of 2012 and by section 22(1)(c) and (d) of Act 5 of 2026 deemed effective on 1 January, 2025 and applicable in respect of years of assessment commencing on or after that date]

(b)     a forward exchange contract on –

(i)      transaction date, the forward rate in terms of such forward exchange contract;

(ii)     the date it is translated, the market-related forward rate available for the remaining period of such forward exchange contract or in respect of a forward exchange contract which is an affected contract, the forward rate in terms of such forward exchange contract;

(iii)    the date it is realised, the spot rate on such date; or

(c)     a foreign currency option contract on–

(i)      transaction date, a nil rate;

(ii)     the date it is translated–

(aa)   in relation to a foreign currency option contract which is not an affected contract, the rate obtained by dividing the market value of such foreign currency option contract on that date by the foreign currency amount as specified in such foreign currency option contract; or

(bb)   in relation to a foreign currency option contract which is an affected contract, the rate obtained by dividing any amount included or deducted, as the case may be, in terms of subsection (3)(b) by the foreign currency amount, as specified in such affected contract;

(iii)    the date it is realised, the rate obtained by dividing the market value of such foreign currency option contract on that date by the foreign currency amount as specified in such foreign currency option contract: Provided that where such foreign currency option contract is realised by the disposal thereof, the rate shall be obtained by dividing the amount received or accrued as a result of the disposal of such foreign currency option contract, by the foreign currency amount as specified in such foreign currency option contract:

(d)     an amount which constitutes a unit of currency, on-

(i)      transaction date, the spot rate on that date;

(ii)     the date it is translated, the spot rate on that date; or

(iii)    the date it is realised, the spot rate on that date:

: Provided that the Commissioner may, having regard to the particular circumstances of the case, prescribe an alternative rate to any of the aforementioned prescribed rates to be applied by a person in such particular circumstances, if such alternative rate is used for the purposes of financial reporting pursuant to IFRS;

[Proviso substituted by section 44 of Act 25 of 2015 effective on 8 January 2016]