Category: CHAPTER II – The Taxes (ITA)

Section 25BA (ITA) – Amounts received by or accrued to certain portfolios of collective investment schemes and holders of participatory interests in portfolios

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25BA.    Amounts received by or accrued to certain portfolios of collective investment schemes and holders of participatory interests in portfolios

 

(1)     Any amount, other than an amount of a capital nature, received by or accrued to any portfolio of a collective investment scheme, other than a portfolio of a collective investment scheme in property, must-

 

(a)     to the extent that the amount is distributed by that portfolio-

 

(i)      to any person who is entitled to the distribution by virtue of the person being a holder of a participatory interest in that portfolio; and

 

(ii)     not later than 12 months after its accrual to or, in the case of interest, its receipt by that portfolio;

 

be deemed to have directly accrued to the person on the date of the distribution; and

 

(b)     to the extent that the amount is not distributed as contemplated in paragraph (a) within 12 months after its accrual to, or in the case of interest, its receipt by that portfolio-

 

(i)      be deemed to have accrued to that portfolio on the last day of the period of 12 months commencing on the date of its accrual to or receipt by that portfolio; and

 

(ii)     to the extent that the amount is attributable to a dividend received by or accrued to that portfolio, be deemed to be income of that portfolio.

 

(2)     Where a portfolio of a hedge fund collective investment scheme is constituted as a partnership any amount allocated by that portfolio to the partners in that partnership must for the purposes of subsection (1)(a) be treated as having been distributed by that portfolio to the partners in that partnership by virtue of those partners being holders of participatory interests in that portfolio.

“Mudaraba” definition of section 24JA of ITA

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‘mudaraba’ means a sharia arrangement between a bank and a client of that bank whereby-

 

(a)     funds are deposited with the bank by the client;

 

(b)     the anticipated return in respect of the sharia arrangement is dependent on the amount deposited by the client in combination with the duration of the period for which the funds are deposited;

 

(c)     the bank invests the funds deposited by the client in other sharia arrangements;

 

(d)     the client bears the risk of the loss in respect of the sharia arrangements contemplated in paragraph (c); and

 

(e)     the return in respect of the sharia arrangements contemplated in paragraph (c) is divided between the client and the bank as agreed at the time that the client deposits the funds with the bank;

Subsections 2 and 3 of section 24K of ITA

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(2)     Any amount contemplated in the definition of “interest rate agreement” in subsection (1) shall for the purposes of this Act be deemed to have been incurred by or accrued to, as the case may be, a person contemplated in such definition on a day to day basis during the period in respect of which it is calculated.

 

(3)     Where any amount contemplated in subsection (2) is to be calculated with reference to a variable rate for the purposes of such subsection, such amount shall be calculated with reference to the variable rate applicable on the date such amount is to be calculated to determine all amounts payable or receivable after such date.

“Transfer” definition of section 24J of ITA

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“transfer”, in relation to an instrument, includes –

 

(a)     the transfer, sale, assignment or disposal in any other manner of such instrument by the holder or issuer thereof, as the case may be; or

 

(b)     the acquisition of such instrument by the holder or issuer thereof, as the case may be, by way of a transfer, sale, assignment or disposal in any other manner,

 

but does not include the redemption of such instrument;

“Diminishing musharaka” definition of section 24JA of ITA

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‘diminishing musharaka’ means a sharia arrangement between a bank and a client of that bank whereby-

 

(a)

 

(i)      the bank and the client jointly acquire an asset from a third party (the seller); or

 

(ii)     the bank acquires an interest in an asset from the client;

 

(b)     the client will acquire the bank s interest in the asset after the acquisition of the asset by the bank as contemplated in paragraph (a); and

 

(c)     the amount of consideration payable by the client to the bank for the acquisition of the interest of the bank in the asset will be paid over a period of time as agreed between the client and the bank;

“Interest rate agreement” definition of section 24K of ITA

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(1)     For the purposes of this section “interest rate agreement” means any agreement in terms of which any person –

 

(a)     acquires the right to receive –

 

(i)      an amount calculated by applying any rate of interest to a notional principal amount specified or referred to in such agreement; or

 

(ii)     an amount calculated with reference to the difference between any combination of rates of interest applied to a notional principal amount specified or referred to in such agreement; or

 

(iii)    a fixed amount specified or referred to in such agreement as consideration in terms of such agreement whereunder the obligation is imposed to pay any other amount as contemplated in paragraph (b) (i) in terms of such agreement or an amount equal to the difference between such fixed amount and such other amount; or

 

(b)     becomes liable to pay –

 

(i)      an amount calculated by applying any rate of interest to a notional principal amount specified or referred to in such agreement; or

 

(ii)     an amount calculated with reference to the difference between any combination of rates of interest applied to a notional principal amount specified or referred to in such agreement; or

 

(iii)    a fixed amount specified or referred to in such agreement as consideration in terms of such agreement whereunder the right is acquired to receive any other amount as contemplated in paragraph (a) (i) in terms of such agreement or an amount equal to the difference between such fixed amount and such other amount.

Subsection 2, 3, 4, 5, 6, 7 and 8 of section 25BB of ITA

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(2)

(a)     There must be deducted from the income for a year of assessment of-

(i)      a REIT; or

(ii)     a controlled company that is a resident,

the amount of any qualifying distribution made by that REIT or that controlled company in respect of that year of assessment if that company is a REIT or a controlled company on the last day of that year of assessment.

(b)     The aggregate amount of the deductions contemplated in paragraph (a) may not exceed the taxable income for that year of assessment of that REIT or that controlled company, before taking into account-

(i)      any deduction in terms of this subsection;

(ii)     any assessed loss brought forward in terms of section 20; and

(iii)    the amount of taxable capital gain included in taxable income in terms of section 26A.

(2A)    For the purposes of calculating the taxable income in respect of a year of assessment of a REIT or a controlled company as contemplated in subsection (2)(b)-

(a)     where-

(i)      a REIT or a controlled company is a beneficiary of a vesting trust that is not a resident; and

(ii)     the trust contemplated in subparagraph (i) is liable for or subject to tax on income in the country in which that trust is established or formed,

so much of any amount of tax on income proved to be payable by that trust to the government of a country other than the Republic as is attributable to the interest of that REIT or controlled company in that trust, without any right of recovery of that tax by any person, other than a right of recovery in terms of any entitlement to carry back losses arising during any year of assessment, limited to the amount of taxable income that is attributable to those amounts, must be allowed to be deducted by that REIT or controlled company before taking into account any deduction in terms of subsection (2)(a).

[Words following subparagraph (ii) substituted by section 48 of Act 15 of 2016 and section 49 of Act 23 of 2018 effective on 17 January 2019]

(b)     there must be allowed as a deduction from the income of that REIT or that controlled company the sum of any taxes on income proved to be payable, by that REIT or that controlled company in respect of any amount to any sphere of government of any country other than the Republic, without any right of recovery by any person other than a right of recovery in terms of any entitlement to carry back losses arising during any year of assessment, limited to the amount of taxable income that is attributable to those amounts, before taking into account any deduction in terms of paragraph (c) and subsection (2)(a);

[Paragraph (b) substituted by section 48(1)(c) of Act 15 of 2016 and amended by section 29(1)(b) of Act 23 of 2020 effective on 1 January, 2021 and applicable in respect of years of assessment commencing on or after that date]

(c)     where during any year of assessment a REIT or controlled company has made a bona fide donation to any organisation as contemplated in section 18A(1)(a) or (b) there must be allowed to be deducted an amount equal to the amount of that donation: Provided that the deduction so allowed may not exceed 10 per cent of the taxable income of that REIT or controlled company after taking into account any deduction in terms of paragraph (a) and (b) but before taking into account any deduction in terms of subsection (2)(a); and

[Paragraph (c) amended by section 29(1)(b) of Act 23 of 2020 effective on 1 January, 2021 and applicable in respect of years of assessment commencing on or after that date]

(d)     where a foreign dividend is received by or accrued to a REIT or controlled company, section 10B(2)(a) must not apply.

[Subsection (2A) inserted by section 50(1)(b) of Act 25 of 2015 effective on 1 January, 2016 and applicable in respect of years of assessment commencing on or after that date. Paragraph (d) added by section 29(1)(b) of Act 23 of 2020 effective on 1 January, 2021 and applicable in respect of years of assessment commencing on or after that date]

(3)       ……….

[Subsection (3) deleted by section 50 of Act 25 of 2015 effective on 1 April 2013]

(4)     A company that is a REIT or a controlled company on the last day of a year of assessment may not deduct by way of an allowance any amount in respect of immovable property in terms of section 11(g), 13, 13bis, 13ter, 13quat, 13quin or 13sex.

(5)     In determining the aggregate capital gain or aggregate capital loss of a company that is a REIT or a controlled company on the last day of a year of assessment for purposes of the Eighth Schedule, any capital gain or capital loss determined in respect of the disposal of-

[Words preceding paragraph (a) substituted by section 45 of Act 43 of 2014 effective on 1 April 2013]

(a)     immovable property of a company that is a REIT or controlled company at the time of the disposal;

[Paragraph (a) substituted by section 45 of Act 43 of 2014 effective on 20 January 2015]

(b)     a share or a linked unit in a company that is a REIT at the time of that disposal; or

(c)     a share or a linked unit in a company that is a property company at the time of that disposal,

must be disregarded.

(6)

(a)     Any amount of interest received by or accrued to a person during a year of assessment in respect of a debenture forming part of a linked unit held by that person in a company that is-

(i)      a REIT or a controlled company that is a resident must be deemed to be a dividend received by or accrued to that person; or

(ii)     a controlled company that is a foreign company must be deemed to be a foreign dividend received by or accrued to that person,

during that year of assessment.

[Paragraph (a) substituted by section 45 of Act 43 of 2014, section 50 of Act 25 of 2015 and section 48 of Act 15 of 2016 effective on 19 January 2017]

(b)     Any amount of interest received by or accrued to a company that is a REIT or a controlled company that is a resident during a year of assessment in respect of a debenture forming part of a linked unit held by that company in a property company must if the property company is a resident be deemed to be a dividend, or if the property company is a foreign company be deemed to be a foreign dividend, received by or accrued to that company during that year of assessment if that company is a REIT or a controlled company that is a resident at the time of that receipt or accrual.

[Paragraph (b) substituted by section 45 of Act 43 of 2014 and section 50 of Act 25 of 2015 effective on 1 April 2013]

(c)     Any amount of interest paid in respect of a linked unit in a REIT or a controlled company must be deemed-

(i)      to be a dividend paid by that REIT or that controlled company that is a resident for the purposes of the dividends tax contemplated in Part VIII of this Chapter; and

[Subparagraph (i) substituted by section 48 of Act 15 of 2016 effective on 1 January 2017, applies in respect of amounts paid on or after that date]

(ii)     not to be an amount of interest paid by that REIT or that controlled company for the purposes of the withholding tax on interest contemplated in Part IVB of this Chapter.

(7)     If during any year of assessment a company that is a REIT ceases to be a REIT and that company does not qualify as a controlled company or a company that is a controlled company ceases to be a controlled company and that company does not qualify as a REIT-

(a)     that year of assessment of that REIT or controlled company is deemed to end on the day preceding the date on which that company ceases to be either a REIT or a controlled company; and

[Paragraph (a) substituted by section 45 of Act 17 of 2017 effective on 18 December 2017]

(b)     the following year of assessment of that company is deemed to commence on the day on which that company ceased to be either a REIT or a controlled company.

[Paragraph (b) substituted by section 45 of Act 17 of 2017 effective on 18 December 2017]

(8)     If a REIT or a controlled company cancels the debenture part of a linked unit and capitalises the issue price of the debenture to stated capital for the purposes of financial reporting in accordance with IFRS-

(a)     the cancellation of the debenture must be disregarded in determining the taxable income of the holder of the debenture and of the REIT or controlled company;

(b)     expenditure incurred by the holder of a share in the REIT or controlled company in respect of the shares is deemed to be equal to the amount of the expenditure incurred in respect of the acquisition of that linked unit; and

[Paragraph (b) substituted by section 45 of Act 43 of 2014 effective on 1 April 2013]

(c)     the issue price of the cancelled debenture must be added to the contributed tax capital of the class of shares that forms part of the linked unit.