“expenditure” means net expenditure after taking into account any rebates or returns from expenditure, regardless of when such last-mentioned expenditure was incurred;
[Definition of “expenditure” subsitututed by section 21(d) of Act 65 of 1973 and amended by section 52(1)(b) of Act 15 of 2016 effective on 1 April, 2017 and applicable in respect of expenditure incurred during years of assessment commencing on or after that date]
37N. ……….
[Section 37N inserted by section 66 of Act 24 of 2011, repealed by section 68 of Act 22 of 2012 effective on 31 December 2012, inserted by section 11 of Act 21 of 2012 effective on 1 July 2013 – insertion by section 11 of Act 21 of 2012 repealed by section 66 of Act 44 of 2014 effective on 30 June 2013 – section 37N substituted with previous version as it was prior to the amendment by section 11 of Act 21 of 2012]
“capital expenditure incurred”, for the purpose of determining the amount of capital expenditure incurred during any period in respect of any mine, means the amount (if any) by which the expenditure that is incurred during such period in respect of such mine and is capital expenditure, exceeds the sum of the amounts received or accrued during the said period from disposals of assets the cost of which has in whole or in part been included in capital expenditure taken into account (whether under this Act or any previous Income Tax Act) for the purposes of any deduction in respect of such mine under section 15(a) of this Act or the corresponding provisions of any previous Income Tax Act;
37O. ……….
[Section 37O inserted inserted by section 11 of Act 21 of 2012 effectiv eon 1 July 2013 – insertion by section 11 of Act 21 of 2012 repealed by section 66 of Act 44 of 2014 effective on 30 June 2013 – section 37O substituted with previous version as it was prior to the amendment by section 11 of Act 21 of 2012]
(2) Subject to subsections (3) and (4), the Commissioner must approve an entity for the purposes of section 10(1)(d)(iii) or (iv) if-
(a) that entity has submitted to the Commissioner a copy of the constitution or written instrument under which it has been established;
(b) the constitution or written instrument contemplated in paragraph (a) provides that-
(i) the entity must have a committee, board of management or similar governing body consisting of at least three natural persons, who are not connected persons in relation to each other, to accept the fiduciary responsibility of that entity;
[Subparagraph (i) substituted by section 8(a) of Act 18 of 2023]
(ii) no single person may directly or indirectly control the decision-making powers relating to that entity;
(iii) the entity may not directly or indirectly distribute any of its funds or assets to any person other than in the course of furthering its objectives;
(iv) the entity is required to utilise substantially the whole of its funds for the sole or principal object for which it has been established;
(v) no member may directly or indirectly have any personal or private interest in that entity;
(vi) substantially the whole of the activities of the entity must be directed to the furtherance of its sole or principal object and not for the specific benefit of an individual member or minority group;
(vii) the entity may not have a share or other interest in any business, profession or occupation which is carried on by its members;
(viii) the entity must not pay to any employee, office bearer, member or other person any remuneration, as defined in the Fourth Schedule, which is excessive, having regard to what is generally considered reasonable in the sector and in relation to the service rendered;
(ix) substantially the whole of the entity’s funding must be derived from its annual or other long-term members or from an appropriation by the government of the Republic in the national, provincial or local sphere;
(x) the entity must as part of its dissolution transfer its assets to-
(aa) another entity approved by the Commissioner in terms of this section;
(bb) a public benefit organisation approved in terms of section 30;
(cc) an institution, board or body which is exempt from tax under section 10(1)(cA)(i); or
(dd) the government of the Republic in the national, provincial or local sphere;
(xi) the persons contemplated in paragraph (b)(i) will submit any amendment of the constitution or written instrument of the entity to the Commissioner within 30 days of its amendment;
(xii) the entity will comply with such reporting requirements as may be determined by the Commissioner from time to time; and
(xiii) the entity is not knowingly and will not knowingly become a party to, and does not knowingly and will not knowingly permit itself to be used as part of, an impermissible avoidance arrangement contemplated in Part IIA of Chapter III, or a transaction, operation or scheme contemplated in section 103(5); and
[Subparagraph (xiii) amended by section 8(b) of Act 18 of 2023]
(c) the Commissioner is satisfied that the association does not have a person acting in a fiduciary capacity, who is disqualified in terms of section 6 of the Trust Property Control Act, 1988 (Act 57 of 1988), section 25A of the Nonprofit Organisations Act, 1997 (Act 71 of 1997), or section 69 of the Companies Act.
[Paragraph (c) added by section 8(c) of Act 18 of 2023]
(3) The requirements contained in subsection (2)(b)(iii) and (v) do not apply in respect of a mutual loan association.
(4) Where the constitution or written instrument of an entity does not comply with subsection (2)(b), the Commissioner may deem it to so comply if the person who has accepted fiduciary responsibility for the funds and assets of that entity furnishes the Commissioner with a written undertaking that the entity will be administered in compliance with that subsection.
(5) Where the Commissioner is-
(a) satisfied that any entity approved in terms of subsection (2) has during any year of assessment in any material respect; or
(b) during any year of assessment satisfied that any such entity has on a continuous or repetitive basis,
failed to comply with this section, or the constitution or written instrument under which it was established to the extent that it relates to this section, the Commissioner must notify the entity that he or she intends to withdraw approval of the entity if corrective steps are not taken by the entity within the period stated in the notice.
(6) If no corrective steps are taken by the entity contemplated in subsection (5), the Commissioner must withdraw approval of that entity with effect from the commencement of the year of assessment contemplated in subsection (5).
(7) If the Commissioner has withdrawn the approval of an entity as contemplated in subsection (6) the entity must within six months after the date of the withdrawal of approval (or such longer period as the Commissioner may allow) transfer, or take reasonable steps to transfer, its remaining assets to any entity, public benefit organisation, institution, board or body or the government of the Republic, contemplated in subsection (2)(b)(x).
(8) If an entity is wound up or liquidated, the entity must, as part of the winding-up or liquidation, transfer its assets remaining after the satisfaction of its liabilities to any entity, public benefit organisation, institution, board or body or the government of the Republic, contemplated in subsection (2)(b)(x).
(9) If an entity fails to transfer, or to take reasonable steps to transfer, its assets as contemplated in subsection (7) or (8), an amount equal to the market value of those assets which have not been transferred less an amount equal to the bona fide liabilities of that entity must for the purposes of this Act be deemed to be an amount of taxable income which accrued to that entity during the year of assessment in which the withdrawal of approval in terms of subsection (6) or the winding-up or liquidation contemplated in subsection (8) took place.
(10) Any person who is in a fiduciary capacity responsible for the management or control of the income and assets of any approved association and who intentionally fails to comply with any provision of this section or of the constitution, or other written instrument under which such association is established to the extent that it relates to the provisions of this section, shall be guilty of an offence and liable on conviction to a fine or to imprisonment for a period not exceeding 24 months.
(11) A person may not act in a fiduciary capacity if that person is disqualified in terms of section 6 of the Trust Property Control Act, 1988 (Act 57 of 1988), section 25A of the Nonprofit Organisations Act, 1997 (Act 71 of 1997), or section 69 of the Companies Act.
[Subsection (11) inserted by section 8(d) of Act 18 of 2023]
(12) A person who fails to comply with the provisions of subsection (11) shall be guilty of an offence and liable, on conviction, to a fine or to imprisonment for a period not exceeding 24 months.
. [Subsection (12) inserted by section 8(d) of Act 18 of 2023]
PART II
Special provisions relating to companies
38. Classification of companies
(1) For the purposes of this Act a company shall in respect of each year of assessment be recognized as either a public or a private company, and the Commissioner shall upon the request of any company inform that company whether it is recognized as a public company or as a private company..
(2) The following companies shall, subject to the provisions of section 39, be recognized as public companies, namely –
(a) any company all classes of whose equity shares are publicly quoted on the specified date by a stock exchange in the list issued under its authority, provided-
[Words preceding subparagraph (i) substituted by section 58 of Act 25 of 2015 effective on 8 January 2016]
(i) that the stock exchange is a recognized and bona fide stock exchange under adequate control;
(ii) that the rules and regulations of the stock exchange for granting and continuing a quotation for the purchase and sale of shares provide for full protection of the interests of the public in regard to dealings in the shares of the company;
(iii) that the memorandum of incorporation prohibits such restrictions on the right to acquire or transfer any of its shares as are likely to preclude members of the general public from becoming shareholders in any class of the company’s shares; and
(iv) that the general public was throughout the year of assessment in question interested either directly as shareholders in the company or indirectly as shareholders in any other company, in more than forty per cent. of every class of equity shares issued by the company;
(b) any other company, not being a private company as defined in section 1 of the Companies Act, nor a close corporation, if–
(i) the general public was throughout the year of assessment in question interested either directly as shareholders in the company or indirectly as shareholders in any other company, in more than fifty per cent of every class of equity shares issued by the company; and
(ii) the business of the company is conducted and its profits are distributed in such a manner that no person enjoys or receives or is entitled to enjoy or receive, by reason of shareholding, participation in the management or otherwise, any advantage which would not be enjoyed or received by him if the company had been under the control of a board of directors acting in the best interests of all its shareholders and had been one which could have been recognized as a public company under paragraph (a);
[Paragraph (b) amended by section 16 of Act 90 of 1964, section 31 of Act 85 of 1974, section 24 of Act 121 of 1984 and section 59 of Act 7 of 2010, substituted by section 58 of Act 25 of 2015 effective on 8 January 2016]
(c) any company which has been approved as a public benefit organisation in terms of the provisions of section 30(3);
(d) any co–operative;
(e) any insurance society or company subject to assessment in terms of section 28, 29 or 29A;
(f) any public utility company, established by or under a special Act of Parliament;
(g) any company the sole or principal business of which in the Republic is mining for gold or diamonds;
(h) any company to which the provisions of section thirty–three apply; and
(3) A company which is not recognized as a public company shall be recognized as a private company.
(4) For the purposes of this section –
(a) the general public in relation to any company (in this paragraph referred to as the company) shall be deemed not to include –
(i) any director of the company; or
(ii) any relative of any director of the company, unless such relative, if he is not the spouse or minor child of such director, has at all relevant times exercised his rights as a shareholder in the company or in any other company through which such relative is interested in the shares of the company, independently of such director; or
[Subparagraph (ii) substituted by section 58 of Act 25 of 2015 effective on 8 January 2016]
(iii) the executor of the deceased estate or the trustee of the insolvent estate of any person referred to in sub-paragraph (i) or (ii); or
(iv) any person to the extent that he acts in a fiduciary capacity, or as a nominee, for the benefit of any person who is not in fact or in terms of any other provision of this subsection a member of the general public in relation to the company; or
(v) any man or his wife or any minor child of any man or his wife, if one or more of such persons are directly or indirectly interested (otherwise than by virtue of any shareholding in any public company or any private company which is interested in the shares of the company through a direct or indirect interest in the equity shares in a public company) in altogether more than 15 per cent of any class of equity shares issued by the company;
(b) the general public in relation to any company (in this paragraph referred to as the company) shall be deemed to include –
(i) any benefit fund, pension fund, pension preservation fund, provident fund, provident preservation fund or retirement annuity fund or any trust or institution which is of a public character, and
[Subparagraph (i) substituted by section 24 of Act 3 of 2008 and section 58 of Act 25 of 2015 effective on 8 January 2016]
(ii) any person to the extent that he acts in a fiduciary capacity, or as a nominee, for the benefit of any person who is in fact or in terms of any other provision of this subsection a member of the general public in relation to the company;
(c) where any person –
(i) being a public company, is indirectly interested in any shares of any other company; or
(ii) being a member of the general public in relation to any company, is indirectly interested in any shares of that company,
by virtue of the said person being a shareholder in any private company and such interest is not attributable to a direct or indirect interest of such private company in the equity shares in a public company, the said person shall be deemed to be interested in only that portion of such shares as such person would be entitled to receive if every company through which that person is interested in those shares were to be wound up or liquidated and the assets of each such company were, without regard to its liabilities, to be distributed among its shareholders;
[Words following subparagraph (ii) substituted by section 59 of Act 7 of 2010 and section 58 of Act 25 of 2015 effective on 8 January 2016]
(d) where persons are jointly interested, whether directly or indirectly, but otherwise than through a direct or indirect interest in the equity shares of a public company, in the shares of any company, each such person shall be deemed to be interested in only such proportion of those shares as he would be entitled to receive if the joint interest of all such persons in such shares were to be divided between such persons.
[Paragraph (d) substituted by section 59 of Act 7 of 2010 and section 58 of Act 25 of 2015 effective on 8 January 2016]
[Subsection (4) added by section 16 of Act 90 of 1964]
“group of companies” means a group of companies as defined in section 1: Provided that for the purposes of this definition-
(i) any company that would, but for the provisions of this definition, form part of a group of companies shall not form part of that group of companies if-
(aa) that company is a company contemplated in paragraph (c), (d) or (e) of the definition of ‘company’;
(bb) that company is a non-profit company as defined in section 1 of the Companies Act;
(cc) any amount constituting gross income of whatever nature would be exempt from tax in terms of section 10 were it to be received by or to accrue to that company;
(dd) that company is a public benefit organisation or recreational club that has been approved by the Commissioner in terms of section 30 or 30A;
(ee) that company is a company contemplated in paragraph (b) of the definition of ‘company’, unless that company has its place of effective management in the Republic; or
(ff) that company has its place of effective management outside the Republic; and
(ii) any share that would, but for the provisions of this definition, be an equity share shall be deemed not to be an equity share if –
(aa) that share is held as trading stock; or
(bb) any person is under a contractual obligation to sell or purchase that share, or has an option to sell or purchase that share unless that obligation or option provides for the sale or purchase of that share at its market value at the time of that sale or purchase;
(1) For the purposes of this section –
“asset-for-share transaction” means any transaction-
(a)
(i) in terms of which a person disposes of an asset (other than an asset which constitutes a restraint of trade or personal goodwill), the market value of which is equal to or exceeds-
(aa) in the case of an asset held as a capital asset, the base cost of that asset on the date of that disposal; or
(bb) in the case of an asset held as trading stock, the amount taken into account in respect of that asset in terms of section 11(a) or 22(1) or (2),
to a company which is a resident, in exchange for the issue of an equity share in that company and that person-
(A) at the close of the day on which that asset is disposed of, holds a qualifying interest in that company; or
(B) is a natural person who will be engaged on a full-time basis in the business of that company, or a controlled group company in relation to that company, of rendering a service; and
(ii) as a result of which that company acquires that asset from that person-
(aa) as trading stock, where that person holds it as trading stock;
(bb) as a capital asset, where that person holds it as a capital asset; or
(cc) as trading stock, where that person holds it as a capital asset and that company and that person do not form part of the same group of companies:
: Provided that this subparagraph does not apply in respect of any transaction which meets the requirements of subparagraph (i) in terms of which a person disposes of-
(i) an equity share in a listed company or in a portfolio of a collective investment scheme in securities or in a portfolio of a hedge fund collective investment scheme to any other company and after that disposal, together with any other transaction that is concluded-
(aa) on the same terms as that transaction; and
(bb) within a period of 90 days after that disposal,
that other company holds-
(A) at least 35 per cent of the equity shares of that listed company or portfolio; or
(B) at least 25 per cent of the equity shares of that listed company or portfolio if no person other than that other company holds an equal or greater number of equity shares in the listed company or portfolio; or
[Subparagraph (B) substituted by section 25(1)(a) of Act 20 of 2021]
(ii) an asset to a portfolio of a hedge fund collective investment scheme; or
[Proviso to subparagraph (ii) substituted by section 62 of Act 25 of 2015 effective on 1 April 2015]
(b) in terms of which a person that is a company disposes of an asset that constitutes an equity share held by that person in a foreign company as a capital asset, the market value of which is equal to or exceeds the base cost of that equity share on the date of that disposal, to another foreign company in exchange for the issue of an equity share in that other foreign company and-
(i) immediately before the asset is disposed of in terms of that transaction-
(aa) that person and the other foreign company form part of the same group of companies (as defined in section 1); and
(bb) the other foreign company is a controlled foreign company in relation to any company that is a resident and that forms part of that group of companies; and
(ii) at the close of the day on which the asset is disposed of in terms of that transaction-
(aa) more than 50 per cent of the equity shares in the foreign company are directly or indirectly held by a resident (whether alone or together with any company forming part of the same group of companies as that resident); or
(bb) at least 70 per cent of the equity shares in that other foreign company are directly or indirectly held by a resident (whether alone or together with any other company forming part of the same group of companies as that resident);
‘market value’ in relation to unbundling shares acquired prior to the valuation date as defined in paragraph 1 of the Eighth Schedule, means any market value adopted or determined by the shareholder in respect of those shares within the period contemplated in paragraph 29(4) of the Eighth Schedule.