Category: CHAPTER II – The Taxes (ITA)

Section 10(1)(bB) of ITA

Posted on by admin_kmos

(bB)  the receipts and accruals of the-

(i)     African Development Bank established on 10 September 1964;

(ii)    World Bank established on 27 December 1945 including the International Bank for Reconstruction and Development and International Development Association;

(iii)   International Monetary Fund established on 27 December 1945;

(iv)    African Import and Export Bank established on 8 May 1993;

(v)     European Investment Bank established on 1 January 1958 under the Treaty of  Rome;

(vi)    New Development Bank established on 15 July 2014;

[Paragraph (bB) inserted by section 23 of Act 15 of 2016 effective on 19 January 2017]

“Third-party backed instrument” definition of section 8F of ITA

Posted on by admin_kmos

‘third-party backed instrument’ means any instrument in respect of which an enforcement right is exercisable as a result of any amount relating to that instrument not being received by or accruing to any person entitled thereto.

[Definition of ‘third-party backed instrument’ added by section 16 of Act 15 of 2016 effective on 1 January 2017, applies in respect of years of assessment commencing on or after that date]

“Enforcement right” definition of section 8F of ITA

Posted on by admin_kmos

(1)     For the purposes of this section—


‘enforcement right’ in relation to an instrument means any right, whether fixed or contingent, to require any person other than the issuer of that instrument to-

(a)     acquire that instrument from the holder thereof;

(b)     make any payment in respect of that instrument in terms of a guarantee, indemnity or similar arrangement; or

(c)     procure, facilitate or assist with any acquisition contemplated in paragraph (a) or the making of any payment contemplated in paragraph (b);

[Definition of ‘enforcement right’ inserted by section 16 of Act 15 of 2016 effective on 1 January 2017, applies in respect of years of assessment commencing on or after that date]

“Equity instrument” definition of section 8EA of ITA

Posted on by admin_kmos

‘equity instrument’ means a right or interest the value of which is determined directly or indirectly with reference to-

(a)     a preference share; or

(b)     an amount derived from a preference share;

[Definition of ‘equity instrument’ inserted by section 15 of Act 15 of 2016 effective on 1 January 2017, applies in respect of years of assessment ending on or after that date]

“Equity instrument” definition of section 8E of ITA

Posted on by admin_kmos

“equity instrument” means any right or interest the value of which is determined directly or indirectly with reference to-

(a)     a share; or

(b)     an amount derived from a share;

[Definition of “equity instrument” inserted by section 14 of Act 15 of 2016 effective on 1 January 2017, applies in respect of years of assessment ending on or after that date]

Section 7C (ITA) – Loan or credit advanced to a trust by a connected person

Posted on by admin_kmos

7C.    Loan, advance or credit granted to trust by connected person

[Heading to section 7C amended by section 4 of Act 34 of 2019]

 

(1)     This section applies in respect of any loan, advance or credit that-

 

(a)     a natural person; or

 

(b)     at the instance of a natural person, a company in relation to which that person is a connected person in terms of paragraph (d)(iv) of the definition of connected person,

[Paragraph (b) substituted by section 5(a) of Act 20 of 2021]

 

directly or indirectly provides to-

 

(i)      a trust in relation to which-

 

(aa)   that person or company; or

 

(bb)   any person that is a connected person in relation to the person or company referred to in item (aa),

 

is a connected person; or

 

(ii)     a company if at least 20 per cent of-

 

(aa)    the equity shares in that company are held, directly or indirectly; or

 

(bb)   the voting rights in that company can be exercised,

 

by a trust referred to in paragraph (i) whether alone or together with any person who is a beneficiary of that trust or the spouse of a beneficiary of that trust or any person related to that beneficiary or that spouse within the second degree of consanguinity.

[Words following paragraph (b) substituted by section 5 of Act 17 of 2017 and section 9 of Act 23 of 2018 effective on 19 July 2017 and applies in respect of any amount owed by a trust or a company in respect of a loan, advance or credit provided to that trust or that company before, on or after that date]

 

(1A)   If a person acquires a claim to an amount owing by a trust or a company in respect of a loan, advance or credit referred to in subsection (1), that person must for purposes of this section be treated as having provided a loan, advance or credit to that trust or company-

 

(a)     on the date on which that person acquired that claim; or

 

(b)     if that person was not a connected person on that date in relation to-

 

(i)      that trust; or

 

(ii)     the person who provided that loan, advance or credit to that trust or company,

 

on the date on which that person became a connected person in relation to that trust or person,

 

that is equal to the amount of the claim so acquired.

[Subsection (1A) inserted by section 5 of Act 17 of 2017 effective on 19 July 2017, applies in respect of any amount owed by a trust or a company in respect of a loan, advance or credit provided to that trust or that company before, on or after that date]

 

(1B)    Where-

 

(a)     a natural person; or

 

(b)     at the instance of a natural person, a company that is a connected person in relation to that natural person in terms of paragraph (d)(iv) of the definition of “connected person”,

 

subscribes for a preference share in a company in which 20 per cent or more of the equity shares are held (whether directly or indirectly) or the voting rights can be exercised by a trust that is a connected person in relation to that natural person or to that company, whether alone or together with any person who is a beneficiary of that trust-

 

(i)      consideration received by or accrued to that company for the issue of that preference share shall be deemed to be a loan for the purposes of subsection (3); and

 

(ii)     any dividend or foreign dividend accrued in respect of that preference share shall be deemed to be interest in respect of the loan contemplated in paragraph (i).

[Subsection (1B) inserted by section 3(1)(a) of Act 23 of 2020 effective on 1 January, 2021 and applicable in respect of any dividend or foreign dividend accruing during any year of assessment commencing on or after that date]

 

(2)     No deduction, loss, allowance or capital loss may be claimed in respect of-

 

(a)     a disposal, including by way of a reduction or waiver; or

 

(b)     the failure, wholly or partly, of a claim for the payment,

 

of any amount owing in respect of a loan, advance or credit referred to in subsection (1).

 

(3)       If a trust or company incurs-

 

(a)     no interest in respect of a loan, advance or credit referred to in subsection (1), (1A) or (1B); or

[Paragraph (a) substituted by section 3(1)(b) of Act 23 of 2020 effective on 1 January, 2021 and applicable in respect of any dividend or foreign dividend accruing during any year of assessment commencing on or after that date]

 

(b)     interest at a rate lower than the official rate of interest,

 

an amount equal to the difference between the amount incurred by that trust or company during a year of assessment as interest in respect of that loan, advance or credit and the amount that would have been incurred by that trust or company at the official rate of interest must, for purposes of Part V of Chapter II, be treated as a donation made to that trust by the person referred to in subsection (1)(a), (1A) or (1B) on the last day of that year of assessment of that trust or company.

[Subsection (3) substituted by section 5(1)(c) of Act 17 of 2017 and amended by section 3(1)(c) of Act 23 of 2020 and by section 3 of Act 20 of 2022]

 

(3A)  Where the amount to be treated as a donation in terms of subsection (3) is denominated in any currency other than that of the Republic, the person referred to in subsection (1), (1A) or (1B) must, for purposes of that subsection, translate that amount to the currency of the Republic by applying the average exchange rate for the year of assessment in respect of which that amount is treated as a donation.

[Subsection (3A) inserted by section 3(1)(a) of Act 17 of 2023 with effect from 1 January, 2024 and applicable in respect of years of assessment commencing on or after that date]

 

(4)     If a loan, advance or credit was provided by a company to a trust or another company at the instance of more than one person that is a connected person in relation to that company as referred to in paragraph (b) of subsection (1), each of those persons must be treated as having donated, to that trust or company, the part of that amount that bears to that amount the same ratio as the equity shares or voting rights in that company that were held by that person during that year of assessment bears to the equity shares or voting rights in that company held in aggregate by those persons during that year of assessment.

[Subsection (4) substituted by section 5 of Act 17 of 2017 effective on 19 July 2017, applies in respect of any amount owed by a trust or a company in respect of a loan, advance or credit provided to that trust or that company before, on or after that date]

 

(5)     Subsections (2) and (3) do not apply in respect of any amount owing by a trust or company during a year of assessment in respect of a loan, advance or credit referred to in subsection (1) if-

[Words preceding paragraph (a) substituted by section 5 of Act 17 of 2017 effective on 19 July 2017, applies in respect of any amount owed by a trust or a company in respect of a loan, advance or credit provided to that trust or that company before, on or after that date]

 

(a)     that trust or company is a public benefit organisation approved by the Commissioner in terms of section 30(3) or a small business funding entity approved by the Commissioner in terms of section 30C;

[Paragraph (a) substituted by section 5 of Act 17 of 2017 effective on 19 July 2017, applies in respect of any amount owed by a trust or a company in respect of a loan, advance or credit provided to that trust or that company before, on or after that date]

 

(b)     that loan, advance or credit was provided to that trust by a person by reason of or in return for a vested interest held by that person in the receipts and accruals and assets of that trust and-

 

(i)      the beneficiaries of that trust hold, in aggregate, a vested interest in all the receipts and accruals and assets of that trust;

 

(ii)     no beneficiary of that trust can, in terms of the trust deed governing that trust, hold or acquire an interest in that trust other than a vested interest in the receipts and accruals and assets of that trust;

 

(iii)    the vested interest of each beneficiary of that trust is determined solely with reference and in proportion to the assets, services or funding contributed by that beneficiary to that trust; and

 

(iv)    none of the vested interests held by the beneficiaries of that trust is subject to a discretionary power conferred on any person in terms of which that interest can be varied or revoked;

 

(c)     that trust is a special trust as defined in paragraph (a) of the definition of a special trust;

 

(d)     that trust or company used that loan, advance or credit wholly or partly for the purposes of funding the acquisition or improvement of an asset and—

 

(i)      the natural person referred to in subsection (1)(a) or (b) or the spouse of that person used that asset as a primary residence as contemplated in paragraph (b) of the definition of “primary residence” in paragraph 44 of the Eighth Schedule, where that primary residence and the land on which it is situated (including unconsolidated adjacent land) do not exceed two hectares are together used mainly for domestic or private purposes, throughout the period during that year of assessment during which that trust or company held that asset; and

 

(ii)     the amount owed relates to the part of that loan, advance or credit that funded the acquisition or improvement of that asset;

[Paragraph (d) amended by section 5(1)(f) and (g) of Act 17 of 2017 and by section 5(b) of Act 20 of 2021 and substituted by section 3(1)(b) of Act 17 of 2023 with effect from 1 January, 2024 and applicable in respect of years of assessment commencing on or after that date]

 

(e)     that loan, advance or credit constitutes an affected transaction as defined in section 31(1) that is subject to the provisions of that section;

 

(f)     that loan, advance or credit was provided to that trust or company in terms of an arrangement that would have qualified as a sharia compliant financing arrangement as contemplated in section 24JA, had that trust or company been a bank as defined in that section;

[Paragraph (f) substituted by section 5 of Act 17 of 2017 effective on 19 July 2017, applies in respect of any amount owed by a trust or a company in respect of a loan, advance or credit provided to that trust or that company before, on or after that date]

 

(g)     that loan, advance or credit is subject to the provisions of section 64E(4); or

[Paragraph (g) amended by section 5 of Act 17 of 2017 effective on 1 March 2017, applies in respect any amount owed by a trust in respect of a loan, advance or credit provided to that trust before, on or after that date]

 

(h)     that trust was created solely for purposes of giving effect to an employee share incentive scheme in terms of which-

 

(i)      that loan, advance or credit was provided-

 

(aa)   by a company to that trust; or

 

(bb)   for purposes of funding the acquisition, by that trust, of shares in that company or in any other company forming part of the same group of companies as that company (hereinafter referred to as a scheme company’);

 

(ii)     equity instruments, as defined in section 8C, that relate to or derive their value from shares in a scheme company may be offered by that trust to a person solely by virtue of that person-

 

(aa)    being in employment on a full-time basis with; or

 

(bb)   holding the office of director of, a scheme company; and

 

(iii)    a person that is a connected person in terms of paragraph (d)(iv) of the definition of connected person in relation to any scheme company is not entitled to participate in that scheme.

[Paragraph (h) inserted by section 5 of Act 17 of 2017 effective on 1 March 2017, applies in respect any amount owed by a trust in respect of a loan, advance or credit provided to that trust before, on or after that date]

 

(6)     For the purposes of this section “preference share” means a preference share as defined in section 8EA (1).

[Section 7C inserted by section 12(1) of Act 15 of 2016 and amended by section 4 of Act 34 of 2019. Subsection (6) added by section 3(1)(d) of Act 23 of 2020 effective on 1 January, 2021 and applicable in respect of any dividend or foreign dividend accruing during any year of assessment commencing on or after that date]

[Section 7C inserted by section 12 of Act 15 of 2016 effective on 1 March 2017, applies in respect of any amount owed by a trust in respect of a loan, advance or credit provided to that trust before, on or after that date]

Section 64LA (ITA) – Refund in respect of dividends in specie

Posted on by admin_kmos

64LA.   Refund of tax in respect of dividends in specie

Notwithstanding the provisions of Chapter 13 of the Tax Administration Act, if-

(a)     dividends tax is paid by a company in respect of a dividend that consists of a distribution of an asset in specie as a result of the company being unable to obtain the declaration and written undertaking contemplated in section 64FA(1)(a) or (2) by the date contemplated in that section; and

(b)     both the declaration and the written undertaking are submitted to the company within three years after the date of payment of the dividend in respect of which they are made,

[Paragraph (b) substituted by section 6 of Act 13 of 2017 and by section 4 of Act 21 of 2021]

so much of the amount of dividends tax paid as would not have been payable had that declaration and written undertaking been submitted by the date contemplated in section 64FA(1)(a) or (2) is refundable to the company by SARS if claimed within three years of the date of payment of the tax.

[Section 64LA inserted by section 6 of Act 44 of 2014 effective on 20 January 2015]

PART IVC – Withholding taxes on service fees (ITA)

Posted on by admin_kmos

PART IVC

Withholding taxes on service fees




51A.  ……….

 

51B.  ……….

51C.  ……….

51D.  ……….

51E.  ……….

51F.  ……….

51G. ……….

51H.  ……….

[Part IVC, sections 51A to 51H inserted by section 99 of Act 31 of 2013 effective on 1 January 2017 – came into operation in terms of section 99 of Act 31 of 2013 as substituted by section 149 of Act 25 of 2015, repealed by section 60 of Act 15 of 2016 effective on 1 January 2017]

Section 50H (ITA) – Currency of payments made to Commissioner

Posted on by admin_kmos

50H.    Currency of payments made to Commissioner

If an amount withheld by a person in terms of section 50E(1) is denominated in any currency other than the currency of the Republic, the amount so withheld must, for the purposes of determining the amount to be paid to the Commissioner in terms of section 50F(2), be translated to the currency of the Republic at the spot rate on the date on which the amount was so withheld.

[Part IVB inserted by section 98 of Act 31 of 2013 effective on 1 March 2015 – comes into operation in terms of section 98 of Act 31 of 2013, substituted by section 125 of Act 43 of 2014]

51.    ……….

Section 50G (ITA) – Refund of withholding tax on interest

Posted on by admin_kmos

50G.    Refund of withholding tax on interest

(1)     Notwithstanding Chapter 13 of the Tax Administration Act, if-

(a)     an amount is withheld from a payment of an amount of interest as contemplated in section 50E(1);


(b)     a declaration contemplated in section 50E(2)(b) or (3) in respect of that interest is not submitted to the person paying that interest by the date of the payment of that interest; and


(c)     a declaration contemplated in section 50E(2)(b) or (3) is submitted to the Commissioner within three years after the payment of the interest in respect of which the declaration is made,


so much of that amount as would not have been withheld had that declaration been submitted by the date contemplated in the relevant subsection is refundable by the Commissioner to the person to which the interest was paid.

(2)     Notwithstanding Chapter 13 of the Tax Administration Act, if-

(a)     an amount of withholding tax on interest is paid as contemplated in section 50E(1) in respect of an amount of interest that became due and payable; and


(b)     the amount of interest subsequently becomes irrecoverable, so much of that amount as would not have been paid had the interest not become due and payable is refundable by the Commissioner to the person who paid the tax.

[Section 50G substituted by section 59 of Act 15 of 2016 effective on 1 March 2015]