Category: CHAPTER II – The Taxes (ITA)

Subsections 2, 3, 4, 5, 6, 7 and 8 of section 24JB of ITA

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(2)     Subject to sections 8F, 8FA and subsection (4), there must be included in or deducted from the income, as the case may be, of any covered person for any year of assessment all amounts in respect of financial assets and financial liabilities of that covered person that are recognised in profit or loss in the statement of comprehensive income in respect of financial assets and financial liabilities of that covered person that are measured at fair value in profit or loss in terms of IFRS 9 or, in the case of commodities, at fair value less cost to sell in profit or loss in terms of IFRS for that year of assessment, excluding any amount in respect of-

[Words preceding paragraph (a) substituted by section 44 of Act 17 of 2017 effective on 1 January 2018, applies in respect of years of assessment commencing on or after that date]

(a)     a financial asset that is-

(i)      a share;

(ii)     an endowment policy;

(iii)    an interest held in a portfolio of a collective investment scheme;

[Subparagraph (iii) amended by section 43 of Act 43 of 2014 effective on 1 January 2014]

(iv)    an interest in a trust; or

[Subparagraph (iv) amended by section 43 of Act 43 of 2014 effective on 1 January 2014]

(v)     an interest in a partnership,

[Subparagraph (v) added by section 43 of Act 43 of 2014 effective on 1 January 2014]

if that financial asset does not constitute trading stock; or

[Words following subparagraph (v) substituted by section 44 of Act 17 of 2017 effective on 1 January 2018, applies in respect of years of assessment commencing on or after that date]

(b)     a dividend or foreign dividend received by or accrued to a covered person, other than a dividend or foreign dividend in respect of a share that is measured at fair value in profit or loss in terms of this subsection and that serves as a hedge in respect of a financial asset or financial liability of that person that is measured at fair value in profit or loss in terms of this subsection;

[Paragraph (b) amended by section 27(1) of Act 23 of 2020 and substituted by section 23(1) of Act 5 of 2026 effective on 1 January, 2026 and applicable in respect of years of assessment commencing on or after that date]

(c)     a dividend distributed.

[Paragraph (c) added by section 27(1) of Act 23 of 2020 effective on 1 January, 2021 and applicable to dividends declared on or after that date]

[Subsection (2) amended by section 44(1)(c) of Act 17 of 2017 effective on 1 January, 2018 and applicable in respect of years of assessment commencing on or after that date]

(2A)   A covered person must include in or deduct from income for a year of assessment a realised gain or a realised loss that is recognised in a statement of other comprehensive income as contemplated in IFRS 9 if that realised gain or realised loss is attributable to a change in the credit risk of the financial liability as contemplated in IFRS 9 and that instrument was issued in any year of assessment commencing on or after 1 January 2018.

[Subsection (2A) inserted by section 44 of Act 17 of 2017 and substituted by section 44 of Act 23 of 2018 effective on 1 January 2018, applies in respect of years of assessment commencing on or after that date]

(2B)   Where a covered person has, during any year of assessment preceding the year of assessment commencing on or after 1 January 2018, included in or deducted from income any amount attributable to a change in the credit risk of a financial liability issued by that covered person measured at fair value through profit or loss in terms of subsection (2), such covered person must include in or deduct from income, as the case may be, any amount in respect of a change in credit risk of that financial liability recognised in other comprehensive income during any year of assessment commencing on or after 1 January 2018.

[Subsection (2B) inserted by section 44 of Act 17 of 2017 effective on 1 January 2018, applies in respect of years of assessment commencing on or after that date]

(3)     Any amount contemplated in the definition of “gross income” or any amount required to be taken into account in determining the taxable income in terms of any provision of Part I of Chapter II, or in determining any assessed capital loss of a covered person in respect of a financial asset or a financial liability contemplated in subsection (2) must only be taken into account in terms of this section

[Subsection (3) substituted by section 43(1)(f) of Act 43 of 2014 and by section 21(1) of Act 42 of 2024 deemed to have come into operation on 31 December, 2024 and applicable in respect of years of assessment ending on or after that date]

(4)     Subsection (2) does not apply to any amount in respect of a financial asset or a financial liability of a covered person where-

(a)     a covered person and another person that is not a covered person, are parties to an agreement in respect of a financial asset or financial liability; and

[Paragraph (a) substituted by section 43 of Act 43 of 2014 effective on 1 January 2014]

(b)     the agreement contemplated in paragraph (a) was entered into solely or mainly for the purpose of a reduction, postponement or avoidance of liability for tax, which, but for that agreement, would have been or would become payable by the covered person.

(5)     In addition to any amount included in or deducted from the income of any person in terms of subsection (2), there must be included in or deducted from the income, as the case may be, of any person for the post-realisation years of that person an amount determined in terms of subsection (6).

(6)     For the purposes of subsection (5)-

(a)     if-

(i)      the financial reporting values of all financial assets of a nature as described in subsection (2) held by that person as at the end of the realisation year of that person exceed the tax base amount attributed to those financial assets as at the end of the realisation year of that person; or

[Subparagraph (i) substituted by section 43 of Act 43 of 2014 effective on 1 January 2014]

(ii)     the tax base amount attributed to all financial liabilities of a nature as described in subsection (2) held by that person as at the end of the realisation year of that person exceeds the financial reporting values of those financial liabilities as at the end of the realisation year of that person,

[Subparagraph (ii) substituted by section 43 of Act 43 of 2014 effective on 1 January 2014]

one-third of the excess must be included in the income of that person;

(b)     if-

(i)      the tax base amount attributed to all financial assets of a nature as described in subsection (2) held by that person as at the end of the realisation year of that person exceeds the financial reporting values of those financial assets as at the end of the realisation year of that person; or

[Subparagraph (i) substituted by section 43 of Act 43 of 2014 effective on 1 January 2014]

(ii)     the financial reporting values of all financial liabilities of a nature as described in subsection (2) held by that person as at the end of the realisation year of that person exceed the tax base amount attributed to those financial liabilities as at the end of the realisation year of that person,

[Subparagraph (ii) substituted by section 43 of Act 43 of 2014 effective on 1 January 2014]

one-third of the excess must be deducted from the income of that person.

(7)     If a person ceases to be a covered person before the expiry of the post-realisation years of that person, the amounts determined in terms of subsection (6) which have not been included in or deducted from, as the case may be, the income of that person, must be included in or deducted from the income of that person in the year of assessment that it ceases to be a covered person.

(8)     Where a person ceases to be a covered person, that person is deemed to have-

(a)     disposed of its financial assets and redeemed its financial liabilities that were subject to tax in terms of subsection (2); and

(b)     immediately reacquired those financial assets and incurred those financial liabilities,

at an amount equal to the market value of those financial assets on the last day of the year of assessment of that person before that person ceased to be a covered person.

(9)     Where a financial asset held by or financial liability owed by a covered person at the end of the year of assessment immediately preceding the year of assessment commencing on or after 1 January 2018 would have ceased to be subject to tax or would have become subject to tax in terms of subsection (2), had IFRS 9 applied on the last day of that immediately preceding year of assessment, that covered person is deemed to have-

(a)     disposed of that financial asset or redeemed that financial liability; and

(b)     immediately reacquired that financial asset or incurred that financial liability,

for an amount equal to the market value of that financial asset or financial liability on that day.

[Subsection (9) inserted by section 44 of Act 17 of 2017 effective on 1 January 2018 and applies in respect of years of assessment commencing on or after that date]

“Option contract” definition of section 24L of ITA

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“option contract” means an agreement the effect of which is that any person acquires the option (excluding a foreign currency option contract as defined in section 24I(1)) –

 

(a)     to buy from or to sell to another person a certain quantity of corporeal or incorporeal things before or on a future date at a pre–arranged price; or

 

(b)     that an amount of money will be paid to or received from another person before or on a future date depending on whether the value or price of an asset, index, currency, rate of interest or any other factor is higher or lower before or on that future date than a pre–arranged value or price.

“Intrinsic value” definition of section 24L of ITA

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(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

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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

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‘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

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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

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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

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‘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);