Category: CHAPTER II – The Taxes (ITA)

“Qualifying interest” definition of section 42 of ITA

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 ‘qualifying interest’ of a person means-

(a)     an equity share held by that person in a company which is a listed company or will become a listed company within 12 months after the transaction as a result of which that person holds that share;

(b)     an equity share held by that person in a portfolio of a collective investment scheme in securities;

(c)     equity shares held by that person in a company that constitute at least 10 per cent of the equity shares and that confer at least 10 per cent of the voting rights in that company;

[Paragraph (c) substituted by section 36(a) of Act 17 of 2023]

(d)     an equity share held by that person in a company which forms part of the same group of companies as that person; or

[Paragraph (d) substituted by section 36(b) of Act 17 of 2023 and by section 28 of Act 42 of 2024]


(e)     any equity share held in a portfolio of a hedge fund collective investment scheme.

[Paragraph (e) added by section 62 of Act 25 of 2015 effective on 1 April 2015]

Subsection 3(a) of section 46

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(3)

(a)     If a shareholder acquires equity shares (hereinafter referred to as ‘unbundled shares’) in terms of an unbundling transaction –

(i)      that shareholder must –

(aa)   allocate a portion of the expenditure and any market value attributable to the equity shares held in the unbundling company (hereinafter referred to as the ‘unbundling shares’) to the unbundled shares in accordance with subparagraph (v); and

(bb)   reduce the expenditure and market value attributable to the unbundling shares by the amount so allocated to the unbundled shares;

(ii)     the unbundled shares must, other than for purposes of determining whether a share has been held for at least three years for the purposes of section 9C(2), be deemed to have been acquired on the same date as the unbundling shares;

[Subparagraph (ii) substituted by section 57 of Act 35 of 2007 and section 54 of Act 17 of 2017 effective on 1 January 2016]

(iii)    the unbundled shares must be deemed to have been acquired as –

(aa)    trading stock, if the unbundling shares were held as trading stock;

(bb)   capital assets, if the unbundling shares were held as capital assets;

(iv)    any expenditure allocated to the unbundled shares must be deemed to have been incurred on the date on which the expenditure was incurred in respect of the unbundling shares; and

(v)     the proportionate amount of the expenditure and market value to be allocated to the unbundled shares in terms of subparagraph (i)(aa) must be determined in accordance with the ratio that the market value of the unbundled shares, as at the end of the day after that distribution, bears to the sum of the market value, as at the end of that day, of the unbundling shares and of the unbundled shares: Provided that a shareholder that acquires unbundled shares in terms of an unbundling transaction shall, in addition to any expenditure allocated to unbundled shares in accordance with this subparagraph, be treated as having incurred an amount equal to any amount of tax payable by the unbundling company arising in respect of all equity shares to which this section does not apply as contemplated in subsection (7) the same ratio as the number of equity shares held by that shareholder in that unbundled company bears to the number of all the issued equity shares in that unbundled company immediately after that unbundling transaction.

[Subparagraph (v) amended by section 37(1)(b) of Act 17 of 2023 with effect from 1 January, 2024 and applicable in respect of the allocation of expenditure to unbundled shares acquired on or after that date]

Section 47G (ITA) – Personal liability of resident

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47G.    Personal liability of resident

(1)     A resident who –

(a)     fails to deduct or withhold an amount of tax in terms of section 47D from any payment made to a taxpayer: or

(b)     deducts or withholds an amount of tax but fails to pay that amount over in terms of section 47E,

is personally liable for payment of that amount of tax in accordance with Part A of Chapter 10 of the Tax Administration Act.

(2)     ……….

(3)     Subsection (1)(a) does not apply where the taxpayer has in terms of section 47C(1) paid to the Commissioner the amount of tax payable under this Part in respect of the payment from which the resident has so failed to deduct or withhold the tax.


47H.  . . . . . .



47I.   . . . . . .

[Wording of section 47I prior to amendment by Act 28 of 2011 applicable to the extent it relates to interest]

“Group of companies” definition of section 41 of ITA

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“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;

“Asset-for-share transaction” definition of section 42 of ITA

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(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 holding less than 20 per cent of the-

(i)      equity shares 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 disposes of an equity share in that company 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

[Subparagraph (ii) amended by section 62(1)(a) of Act 25 of 2015 and by section 27(1)(a) of Act 5 of 2026 effective on 1 January, 2026 to the extent of the amendment “holding less than 20 per cent of the equity shares in a listed company” and “disposes of an equity share in that company” and applicable in respect of years of assessment commencing into on or after that date]

(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);

Section 47J – Currency of payments made to Commissioner

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47J.     Currency of payments made to Commissioner

If an amount deducted or withheld by a resident in terms of section 47D is denominated in any currency other than the currency of the Republic, the amount so deducted or withheld and paid to the Commissioner must be translated to the currency of the Republic at the spot rate on the date on which that amount was so deducted or withheld.

Section 64 (ITA) – Rate of donations tax

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64.    Rate of donations tax

 

(1)     The rate of the donations tax chargeable under section 54 in respect of the value of any property disposed of under a donation shall be-

 

(a)

 

(i)      20 per cent of that value if the aggregate of that value and the value of any other property disposed of under a taxable donation on or after 1 March 2018 until the date of that donation does not exceed R30 million; and

[Subparagraph (i) substituted by section 35(1) of Act 23 of 2020 deemed effective on 1 March, 2018]

 

(ii)     25 per cent of that value to the extent that that value is not taxed under subparagraph (i); or

[Paragraph (a) substituted by section 5 of Act 21 of 2018 effective on 1 March 2018]

 

(b)     such percentage of such value as the Minister may announce in the national annual budget contemplated in section 27(1) of the Public Finance Management Act, with effect from a date mentioned in that Announcement.

 

(2)     If the Minister makes an announcement contemplated in subsection (1)(b), that rate comes into effect on the date determined by the Minister in that announcement and continues to apply for a period of 12 months from that date subject to Parliament passing legislation giving effect to that announcement within that period of 12 months.

[Section 64 substituted by section 30 of Act 90 of 1988, amended by section 19 of Act 36 of 1996 and substituted by section 59 of Act 17 of 2017 effective on 18 December 2017]

Section 54 (ITA) – Levy of donations tax

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54.    Levy of donations tax

 

Subject to the provisions of section 56, there shall be paid for the benefit of the National Revenue Fund a tax (in this Act referred to as donations tax) on the value of any property disposed of (whether directly or indirectly and whether in trust or not) under any donation by any resident (in this Part referred to as the donor).