Category: CHAPTER II – The Taxes (ITA)

Subsections 2, 3, 5, 6 and 7 of section 24JA of ITA

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(2)     Any amount received by or accrued to a client in terms of a mudaraba is deemed to be interest as contemplated in paragraph (a) of the definition of ‘interest’ in section 24J(1).

[Subsection (2) substituted by section 54 of Act 24 of 2011 and section 45 of Act 25 of 2015 effective on 1 January 2016]

(3)     Where any murabaha is entered into between a financier and a client of that financier as contemplated in paragraph (a) of the definition of ‘murabaha’-

(a)     the financier is deemed not to have acquired or disposed of the asset under the sharia arrangement;

(b)     the client is deemed to have acquired the asset from the seller-

(i)      for consideration equal to the amount paid by the financier to the seller; and

(ii)     at such time as the financier acquired the asset from the seller by virtue of the transaction between the seller and the financier;

(c)     the murabaha is deemed to be an instrument for the purposes of section 24J;

(d)     the difference between the amount of consideration paid for the asset by the financier to the seller and the consideration payable to the financier by the client to acquire the asset as contemplated in paragraph (b)(ii) of the definition of “murabaha” is deemed to be a premium payable or receivable contemplated in paragraph (a) of the definition of ‘interest’ in section 24J(1); and

[Paragraph (d) substituted by section 55 of Act 22 of 2012 and section 45 of Act 25 of 2015 effective on 1 January 2016]

(e)     the amount of consideration paid by the financier to acquire the asset as contemplated in paragraph (a) of the definition of ‘murabaha is deemed to be an issue price for the purposes of section 24J.

(4)       ……….

(5)       For the purposes of determining the tax on income of the client in respect of a diminishing musharaka-

(a)     where the bank and the client jointly acquire an asset, the client is deemed to have acquired the bank s interest in the asset-

(i)      for an amount equal to the amount paid by the bank in respect of its interest in the asset; and

(ii)     at the time that the seller of the asset was divested of its interest in the asset by virtue of the transaction between the seller and the bank; or

(b)     where the bank acquires an interest in an asset from the client, the client is deemed not to have disposed of the interest in the asset or to have acquired that interest from the bank.

(6)

(a)     For the purposes of subsection (5), where an instalment is paid by the client to the bank, a portion of that instalment, the amount of which must be determined in accordance with paragraph (b), is deemed to be interest as defined in section 24J(1).

(b)     The amount contemplated in paragraph (a) must be determined in accordance with the formula-

X = A – B

in which formula-

(i)      ‘X’ represents the amount to be determined;

(ii)     ‘A’ represents the total amount of the instalment payable by the client to the bank;

(iii)    ‘B’ represents the expenditure incurred by the bank to acquire the portion of the interest in the asset transferred to the client in exchange for the instalment payable by the client to the bank.

(7)       Where any sukuk is entered into-

(a)     the trust is deemed not to have acquired the asset from the government of the Republic, the public entity that is listed in Schedule 2 to the Public Finance Management Act or the listed company under the sharia arrangement;

[Paragraph (a) substituted by section 45 of Act 25 of 2015 effective on 1 January 2016]

(b)     the government, that public entity or that listed company is deemed not to have disposed of or reacquired the asset; and

[Paragraph (b) substituted by section 45 of Act 25 of 2015 effective on 1 January 2016]

(c)     any consideration paid by the government, that public entity or that listed company in respect of the use of the asset held by the trust is deemed to be interest as contemplated in paragraph (a) of the definition of ‘interest’ in section 24J(1).

[Paragraph (c) substituted by section 45 of Act 25 of 2015 effective on 1 January 2016]

[Subsection (7) added by section 54 of Act 24 of 2011 and substituted by section 42 of Act 43 of 2014 effective on 1 April 2015]

Section 25A (ITA) – Determination of taxable income of permanently separated spouses

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25A.    Determination of taxable incomes of permanently separated spouses

Where during any period of assessment any taxpayer who is married in community of property has lived apart from his or her spouse in circumstances which indicate that the separation is likely to be permanent, his or her taxable income for such period shall be determined at the amount at which such taxpayer’s taxable income would have been determined under the provisions of this Act if such taxpayer had not been married in community of property.

 [Section 25A inserted by section 21 of Act 55 of 1966, amended by section 271 of Act 28 of 2011 and substituted by section 49 of Act 25 of 2015 effective on 8 January 2016]

“Covered person” definition of section 24JB of ITA

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(1)     For the purposes of this section-

 

‘covered person’ means-

(a)     any authorised user as defined in section 1 of the Financial Markets Act that is a company, other than any company of which the principal trading activities constitute the activities of a treasury operation;

[Paragraph (a) substituted by section 46 of Act 15 of 2016 effective on 1 January 2017, applies in respect of years of assessment ending on or after that date]

(b)     the South African Reserve Bank;

(c)     any-

(i)      bank;

(ii)     branch;

(iii)    branch of a bank; or

(iv)    controlling company,

as defined in section 1 of the Banks Act;

(d)     any company or trust that forms part of a banking group as defined in section 1 of the Banks Act, excluding-

(i)      a company that is a long-term insurer as defined in section 1 of the Long-term Insurance Act;

(ii)     a company that is a short-term insurer as defined in section 1 of the Short-term Insurance Act;

(iii)    a company of which more than 50 per cent of the shares are directly or indirectly held by a company contemplated in subparagraph (i) or (ii) if that company does not form part of the same group of companies as a bank;

(iv)    any subsidiary, as defined in section 1 of the Companies Act, of a company contemplated in subparagraph (i) or (ii);

[Subparagraph (iv) added 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]

Section 25B (ITA) – Income of trusts and beneficiaries of trusts

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25B.     Taxation of trusts and beneficiaries of trusts

[Heading amended by section 28(a) of Act 23 of 2020]

 

(1)     Any amount (other than an amount of a capital nature which is not included in gross income or an amount contemplated in paragraph 3B of the Second Schedule) received by or accrued to or in favour of any person during any year of assessment in his or her capacity as the trustee of a trust, shall, subject to the provisions of section 7, to the extent to which that amount has been derived for the immediate or future benefit of any ascertained beneficiary, who is a resident and has a vested right to that amount during that year, be deemed to be an amount which has accrued to that beneficiary, and to the extent to which that amount is not so derived, be deemed to be an amount which has accrued to that trust.

[Subsection (1) substituted by section 28(b) of Act 23 of 2020 and by section 29(1)(a) of Act 17 of 2023 with effect from 1 March, 2024 and applicable in respect of years of assessment commencing on or after that date]

 

(2)     Where a beneficiary who is a resident has acquired a vested right to any amount referred to in subsection (1) in consequence of the exercise by the trustee of a discretion vested in him or her in terms of the relevant deed of trust, agreement or will of a deceased person, that amount shall for the purposes of that subsection be deemed to have been derived for the benefit of that beneficiary.

[Subsection (2) substituted by section 29(1)(b) of Act 17 of 2023 with effect from 1 March, 2024 and applicable in respect of years of assessment commencing on or after that date]

 

(2A)  Where during any year of assessment any resident acquires any vested right to any amount representing capital of any trust which is not a resident, that amount must be included in the income of that resident in that year, if –

 

(a)     that capital consists of or is derived, directly or indirectly, from any receipts and accruals of such trust which would have constituted income if such trust had been a resident, in any previous year of assessment during which that resident had a contingent right to that amount; and

[Paragraph (a) substituted by section 48 of Act 23 of 2018 effective on 1 March 2019, applies in respect of any year of assessment commencing on or after that date]

 

(b)     that amount has not been subject to tax in the Republic in terms of this Act.

 

(2B)  In determining, for purposes of subsection (2A), whether an amount received by or that accrued to a trust which is not a resident would have constituted income had that trust been a resident, the provisions of section 10B(2)(a) must be disregarded in respect of an amount received or accrued consisting of or derived, directly or indirectly, from a foreign dividend-

 

(i)      paid or payable by a company if-

 

(aa)   more than 50 per cent of the total participation rights, as defined in section 9D(1), or of the voting rights in that company are directly or indirectly held or are exercisable, as the case may be, by that trust whether alone or together with any one or more persons that are connected persons in relation to that trust; and

 

(bb)   that resident or any person that is a connected person in relation to that resident is a connected person in relation to that trust; and

 

(ii)     to the extent to which that foreign dividend is not derived from an amount that must be included in the income of or that must be attributed as a capital gain to-

 

(aa)   the resident who acquired the vested right to the amount referred to in subsection (2A); or

 

(bb)   a resident who is a connected person in relation to the resident referred to in item (aa).

[Subsection (2B) inserted by section 48 of Act 23 of 2018 effective on 1 March 2019, applies in respect of any year of assessment commencing on or after that date]

 

(3)     Any deduction or allowance which may be made under the provisions of this Act in the determination of the taxable income derived by way of any amount referred to in subsection (1), must, to the extent to which that amount is under that subsection deemed to be an amount which has accrued to –

 

(a)     a beneficiary, be deemed to be a deduction or allowance which may be made in the determination of the taxable income derived by that beneficiary; and

 

(b)     the trust, be deemed to be a deduction or allowance which may be made in the determination of the taxable income derived by that trust.

 

(4)     The deduction or allowance contemplated in subsection (3) which is deemed to be made in the determination of the taxable income of a beneficiary of a trust during any year of assessment, shall be limited to so much of the amount deemed to have been received by or accrued to that beneficiary in terms of subsection (1), as is included in the income of that beneficiary during that year of assessment.

 

(5)     The amount by which the sum of the deductions and allowances contemplated in subsection (4) exceeds the amount included in the income of the beneficiary during a year of assessment as contemplated in that subsection –

 

(a)     is deemed to be a deduction or allowance which may be made in the determination of the taxable income of the trust during that year: Provided that the sum of those deductions and allowances shall be limited to the taxable income of that trust during that year of assessment as calculated before allowing any deduction or allowance under this subsection; or

 

(b)     where the trust is not subject to tax in the Republic, must be carried forward and be deemed to be a deduction or allowance which may be made in the determination of the taxable income derived by that beneficiary by way of amounts referred to in subsection (1) during the immediately succeeding year of assessment.

 

(6)     The amount by which the sum of the deductions and allowances contemplated in subsection (4) exceeds the sum of the amount included in the income of the beneficiary as contemplated in subsection (4) and the taxable income of the trust as contemplated in subsection (5)(a), must be deemed to be a deduction or allowance for purposes of subsection (3), which may be made in the determination of the taxable income derived by that beneficiary by way of any amount referred to in subsection (1) during the immediately succeeding year of assessment.

 

(7)     Subsections (4), (5) and (6) do not apply in respect of any amount which is deemed to have accrued to any beneficiary in terms of subsection (1), where that beneficiary is not subject to tax in the Republic on that amount.

“Murabaha” definition of section 24JA of ITA

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‘murabaha’ means a sharia arrangement between a financier and a client of that financier, one of which is a bank or listed company whereby-

[Words preceding paragraph (a) substituted by section 45 of Act 25 of 2015 effective on 1 January 2016]

(a)     the financier will acquire an asset from a third party (the seller) for the benefit of the client on such terms and conditions as are agreed upon between the client and the seller;

(b)     the client-

(i)      will acquire the asset from the financier within 180 days after the acquisition of the asset by the financier contemplated in paragraph (a); and

(ii)     agrees to pay to the financier a total amount that-

(aa)   exceeds the amount payable by the financier to the seller as consideration to acquire the asset;

(bb)   is calculated with reference to the consideration payable by the financier to the seller in combination with the duration of the sharia arrangement; and

(cc)    may not exceed the amount agreed upon between the financier and the client when the sharia arrangement is entered into; and

(c)     no amount is received by or accrues to the financier in respect of that asset other than an amount contemplated in paragraph (b)(ii);