(1) For the purposes of this section-
‘controlled company’ means a company that is a subsidiary, as defined in IFRS, of a REIT;
Category: CHAPTER II – The Taxes (ITA)
“Tax base” definition of section 24JB of ITA
‘tax base’ means tax base as defined in International Accounting Standard 12 of IFRS or any International Accounting Standard replacing International Accounting Standard 12.
“Intrinsic value” definition of section 24L of ITA
(1) For the purposes of this section –
“intrinsic value”, in relation to an option contract, means an amount equal to the difference between the market price or value of an asset, index, currency, rate of interest or any other factor, as provided for in the option contract, on the date of acquisition of the option contract and the pre–arranged price or value provided for in the option contract; and
Section 25C (ITA) – Income of insolvent estates
25C. Income of insolvent estates
For the purposes of this Act, and subject to any such adjustments as may be necessary the estate of a person prior to sequestration and that person’s insolvent estate shall be deemed to be one and the same person for purposes of determining-
(a) the amount of any allowance, deduction or set off to which that insolvent estate may be entitled;
(b) any amount which is recovered or recouped by or otherwise required to be included in the income of that insolvent estate; and
(c) any taxable capital gain or assessed capital loss of that insolvent estate.
“Realisation year” definition of section 24JB of ITA
‘realisation year’, in relation to a person, means-
(a) where that person is a covered person, the year of assessment of that person immediately preceding the year of assessment ending on or after 1 January 2014; or
(b) where that person becomes a covered person during any year of assessment ending after 1 January 2014, the year of assessment of that person that precedes the first year of assessment of that person in which that person becomes a covered person;
Section 24N (ITA) – Incurral and accrual of amounts in respect of disposal or acquisition of equity shares
24N. Incurral and accrual of amounts in respect of disposal or acquisition of equity shares
(1) Where a person (hereinafter referred to as ‘the seller’) during a year of assessment disposes of equity shares to any other person (hereinafter referred to as ‘the purchaser’) in the circumstances contemplated in subsection (2), any quantified or quantifiable amount payable by the purchaser to the seller must –
(a) to the extent that it is not due and payable to the seller during that year, be deemed for purposes of this Act –
(i) not to have been accrued to the seller in that year; and
(ii) not to have been incurred by the purchaser during that year; and
(b) to the extent that it becomes due and payable to the seller in any subsequent year of assessment, be deemed for purposes of this Act –
(i) to have been accrued to the seller during that subsequent year; and
(ii) to have been incurred by the purchaser during that subsequent year.
(2) Subsection (1) applies in respect of the disposal by a seller to a purchaser of any equity shares in a company where –
(a) more than 25 per cent of the amount payable for those shares becomes due and payable by the purchaser after the end of the year of assessment of the seller and the amount payable is based on the future profits of that company;
(b) the value of the equity shares in that company which have in aggregate been disposed of during that year and in respect of which the provisions of this section apply, exceeds 25 per cent of the total value of equity shares in that company;
(c) the purchaser and seller are not connected persons in relation to each other after that disposal;
(d) the purchaser is obliged to return the equity shares to the seller in the event of failure by the purchaser to pay any amount when due; and
(e) the amount is not payable by the purchaser to the seller in terms of a financial instrument which is payable on demand and which is readily tradeable in the open market.
Section 25D (ITA) – Determination of taxable income in foreign currency
25D. Determination of taxable income in foreign currency
(1) Subject to subsections (2), (3) and (4), any amount received by or accrued to, or expenditure or loss incurred by, a person during any year of assessment in any currency other than the currency of the Republic must be translated to the currency of the Republic by applying the spot rate on the date on which that amount was so received or accrued or expenditure or loss was so incurred.
(2) Any amounts received by or accrued to, or expenditure incurred by, a person in any currency other than the currency of the Republic which are attributable to a permanent establishment of that person outside the Republic must be determined in the functional currency of that permanent establishment (other than the currency of any country in the common monetary area) and be translated to the currency of the Republic by applying the average exchange rate for the relevant year of assessment.
(2A) Subsection (2) shall not apply to the extent that-
(a) the other currency contemplated in that subsection is not the functional currency of that permanent establishment; and
(b) the functional currency is the currency of a country which has an official rate of inflation of 100 per cent or more throughout the relevant year of assessment.
(3) Notwithstanding subsection (1), a natural person or a trust (other than a trust which carries on any trade) may elect that all amounts received by or accrued to, or expenditure or losses incurred by that person or trust in any currency other than the currency of the Republic, be translated to the currency of the Republic by applying the average exchange rate for the relevant year of assessment.
(4) Where, during any year of assessment-
(a) any amount-
(i) is received by or accrued to; or
(ii) of expenditure is incurred by,
a headquarter company in any currency other than the functional currency of the headquarter company; and
(b) the functional currency of that headquarter company is a currency other than the currency of the Republic,that amount must be determined in the functional currency of the headquarter company and must be translated to the currency of the Republic by applying the average exchange rate for that year of assessment.
(5) Where, during any year of assessment-
(a) any amount-
(i) is received by or accrues to; or
(ii) of expenditure is incurred by,
a domestic treasury management company in any currency other than the functional currency of the domestic treasury management company; and
(b) the functional currency of that domestic treasury management company is a currency other than the currency of the Republic,
that amount must be determined in the functional currency of the domestic treasury management company and must be translated to the currency of the Republic by applying the average exchange rate for that year of assessment.
(6) Where, during any year of assessment-
(a) any amount-
(i) is received by or accrues to; or
(ii) of expenditure is incurred by,
an international shipping company in any currency other than the functional currency of the international shipping company; and
(b) the functional currency of that international shipping company is a currency other than the currency of the Republic,
that amount must be determined in the functional currency of the international shipping company and must be translated to the currency of the Republic by applying the average exchange rate for that year of assessment.
[Subsection (6) added by section 75 of Act 31 of 2013 and substituted by section 46 of Act 43 of 2014 effective on 1 April 2014]
(7) Any amounts received by or accrued to, or expenditure incurred by-
(a) a headquarter company contemplated in subsection (4); or
(b) a domestic treasury management company contemplated in subsection (5); or
(c) an international shipping company contemplated in subsection (6),
during any year of assessment in a functional currency that is a currency other than the currency of the Republic must be translated to the currency of the Republic by applying the average exchange rate for the relevant year of assessment.
[Subsection (7) added by section 46 of Act 43 of 2014 effective on 20 January 2015]
“Post-realisation years” definition of section 24JB of ITA
‘post-realisation years’, in relation to a covered person, means-
(a) the year of assessment immediately succeeding the realisation year;
(b) the year of assessment immediately succeeding the year of assessment contemplated in paragraph (a);and
(c) the year of assessment immediately succeeding the year of assessment contemplated in paragraph (b);
Section 24O (ITA) – Incurral of interest in terms of certain debts deemed to be in production of income
24O. Incurral of interest in terms of certain debts deemed to be in production of income
Subsection 2 and 3 of section 24O of ITA
(2) Subject to subsection (3), where during any year of assessment any interest is incurred by a company in respect of a debt issued, assumed or used by that company-
(a) for the purpose of financing the acquisition by that company, in terms of an acquisition transaction, of an equity share; or
(b) in substitution for a debt issued, assumed or used as contemplated in paragraph (a),
the interest incurred by that company in respect of that debt must, to the extent to which the amount thereof relates to a period during which-
(i) that company held that equity share; and
(ii) that equity share constituted a qualifying interest in an operating company, as determined-
(aa) in the case of an equity share held by that company at the end of that year, at the date on which that year ends; or
(bb) if that equity share was disposed of by that company during that year, at the date of that disposal,
be deemed to have been so incurred in the production of the income of that company and laid out or expended by that company for the purposes of trade.
[Subsection (2) substituted by section 46 of Act 23 of 2018 effective on 1 January 2019, applies in respect of years of assessment ending on or after that date]
(3) An equity share in a company constitutes a qualifying interest in an operating company if that equity share is an equity share on the date referred to in subsection (2) in-
(a) a company that qualified as an operating company in its latest year of assessment that ended prior to or on the date referred to in subsection (2); or
(b) any other company, to the extent that the value of that equity share is derived from an equity share or equity shares held by that company in a company or companies described in paragraph (a)-
(i) in relation to which that company is a controlling group company; and
(ii) that form part, with that company, of a group of companies, as defined in section 41(1):
Provided that if at least 90 per cent of the value of that equity share is so derived, that equity share must be treated as an equity share in an operating company.
[Subsection (3) amended by section 46(1) of Act 23 of 2018 and substituted by section 31(1)(b) of Act 34 of 2019 deemed effective on 1 January, 2019 and applicable in respect of years of assessment ending on or after that date]
(4) ……….
[Subsection (4) deleted by section 46 of Act 23 of 2018 effective on 1 January 2019, applies in respect of years of assessment ending on or after that date]
(5) Where a company that acquired equity shares in a controlling group company in relation to an operating company as contemplated in paragraph (b) of the definition of “acquisition transaction” acquires the equity shares held by that controlling group company in that operating company in terms of-
(a) an unbundling transaction as defined in section 46(1)(a) in respect of which section 46 was applied; or
(b) a liquidation distribution as defined in section 47(1)(a) in respect of which section 47 was applied, those equity shares must for purposes of subsection (2) be treated-
(i) as having been acquired by that company in terms of paragraph (a) of the definition of “acquisition transaction”; and
(ii) as constituting a qualifying interest in an operating company to the extent to which the value of the equity shares in the controlling group company from which the equity shares in the operating company were acquired was derived from the value of the equity shares in the operating company so acquired.
[Subsection (5) added by section 31(1)(c) of Act 34 of 2019 deemed to have come into operation on 1 January, 2019 and applicable in respect of years of assessment ending on or after that date]
[Section 24O inserted by section 57 of Act 22 of 2012, amended by section 72 of Act 31 of 2013 and substituted by section 46 of Act 25 of 2015 effective on 1 January 2016]