Category: CHAPTER II – The Taxes (ITA)

Section 49B (ITA) – Levy of withholding tax on royalties

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49B.     Levy of withholding tax on royalties

(1)

(a)     There must be levied for the benefit of the National Revenue Fund a tax, to be known as the withholding tax on royalties, calculated-

(i)      at the rate of 15 per cent; or

(ii)     at such rate 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,

of the amount of any royalty that is paid by any person to or for the benefit of any foreign person to the extent that the amount is regarded as having been received by or accrued to that foreign person from a source within the Republic in terms of section 9(2)(c), (d), (e) or (f).

(b)     If the Minister makes an announcement contemplated in paragraph (a)(ii), 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.

[Subsection (1) substituted by section 97 of Act 31 of 2013 and section 57 of Act 17 of 2017 effective on 18 December 2017]

(2)     For the purposes of this Part, a royalty is deemed to be paid on the earlier of the date on which the royalty is paid or becomes due and payable.

(3)     The withholding tax on royalties is a final tax.

(4)     Where a person making payment of a royalty to or for the benefit of a foreign person has withheld an amount as contemplated in section 49E(1), that person must, for the purposes of this Part, be deemed to have paid the amount so withheld to that foreign person.

Section 57A (ITA) – Donations by spouses married in community of property

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57A.    Donations by spouses married in community of property

 

For the purposes of this Part, in the case of spouses married in community of property, where any property is disposed of in terms of a donation by one of the spouses and –

 

(a)     such property falls within the joint estate of the spouses, such donation shall be deemed to have been made in equal shares by each spouse; and

 

(b)     such property was excluded from the joint estate of the spouses, such donation shall be deemed to have been made solely by the spouse making the donation.

“Regulated intermediary” definition of section 64D of ITA

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‘regulated intermediary’ means any-

(a)     central securities depository participant contemplated in section 32 of the Financial Markets Act;

(b)     authorised user as defined in section 1 of the Financial Markets Act;

(c)     approved nominee contemplated in section 76(3) of the Financial Markets Act;

(d)     nominee that holds investments on behalf of clients as contemplated in section 9.1 of Chapter 1 and section 8 of Chapter II of the Codes of Conduct for Administrative and Discretionary Financial Service Providers, 2003 (Board Notice 79 of 2003) published in Government Gazette No. 25299 of 8 August 2003;

(e)     portfolio of a collective investment scheme in securities;

[Paragraph (e) amended by section 70 of Act 7 of 2010 effective on 1 April 2012 and section 73 of Act 25 of 2015 effective on 1 April 2015]

(f)      transfer secretary that is a person other than a natural person and that has been approved by the Commissioner subject to such conditions and requirements as may be determined by the Commissioner; or

[Paragraph (f) inserted by section 70 of Act 7 of 2010 effective on 1 April 2012, amended by section 73 of Act 25 of 2015 effective on 1 April 2015]

(g)     a portfolio of a hedge fund collective investment scheme.

[Paragraph (g) added by section 73 of Act 25 of 2015 and amended by section 60 of Act 17 of 2017 effective on 18 December 2017]

Section 49C (ITA) – Liability for tax

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49C.    Liability for tax

 

(1)     A foreign person to which a royalty is paid is liable for the withholding tax on royalties to the extent that the royalty is regarded as having been received by or accrued to that foreign person from a source within the Republic in terms of section 9(2)(c), (d), (e) or (f).

 

(2)     Any amount of withholding tax on royalties that is-

 

(a)     withheld as contemplated in section 49E(1); and


(b)     paid as contemplated in section 49F(1),


is a payment made on behalf of the foreign person to which the royalty is paid in respect of that foreign person’s liability under subsection (1).

Section 58 (ITA) – Property disposed of under certain transactions deemed to have been disposed of under a donation

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58.    Property disposed of under certain transactions deemed to have been disposed of under a donation

 

(1)     Where any property has been disposed of for a consideration which, in the opinion of the Commissioner, is not an adequate consideration that property shall for the purposes of this Part be deemed to have been disposed of under a donation: Provided that in the determination of the value of such property a reduction shall be made of an amount equal to the value of the said consideration.

 

(2)     Where a person disposes of a restricted equity instrument, as defined in section 8C, under the circumstances contemplated in section 8C(5)(a) or (b), that restricted equity instrument shall for the purposes of this Part be deemed to have been donated by that person at the time that it is deemed to vest for the purposes of section 8C and to have a value equal to the fair market value of that instrument at that time: Provided that in the determination of the value of that restricted equity instrument a reduction shall be made of an amount equal to the value of any consideration in respect of that donation.

Section 49D (ITA) – Exemption from withholding tax on royalties

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49D.    Exemption from withholding tax on royalties

 

A foreign person is exempt from the withholding tax on royalties if-

[Words preceding paragraph (a) substituted by section 68 of Act 25 of 2015 effective on 8 January 2016]

 

(a)     that foreign person is a natural person who was physically present in the Republic for a period exceeding 183 days in aggregate during the twelve-month period preceding the date on which the royalty is paid; or

 

(b)     the property in respect of which that royalty is paid is effectively connected with a permanent establishment of that foreign person in the Republic if that foreign person is registered as a taxpayer in terms of Chapter 3 of the Tax Administration Act;

[Paragraph (b) substituted by section 68(b) of Act 25 of 2015 and by section 38(1)(a) of Act 17 of 2023 with effect 1 March, 2024 and applicable in respect of royalties that are received by or accrues to a trust that is resident on or after that date]

 

(c)     that royalty is paid by a headquarter company in respect of the granting of the use or right of use of or permission to use intellectual property as defined in section 23I to which section 31 does not apply as a result of the exclusions contained in section 31(5)(c) or (d); or

[Paragraph (c) substituted by section 38(1)(b) of Act 17 of 2023 with effect 1 March, 2024 and applicable in respect of royalties that are received by or accrues to a trust that is resident on or after that date]

 

(d)     that royalty is received by or accrued to a trust that is a resident and is then paid to a beneficiary of that trust as a distribution by that trust.

[Paragraph (d) added by section 38(1)(c) of Act 17 of 2023 with effect 1 March, 2024 and applicable in respect of royalties that are received by or accrues to a trust that is resident on or after that date]

[Section 49D inserted by section 80 of Act 22 of 2012, substituted by section 60 of Act 43 of 2014 effective on 1 July 2013]

Section 64E (ITA) – Levy of tax

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64E.     Levy of tax

(1)

(a)     Subject to paragraph 3 of the Tenth Schedule, there must be levied for the benefit of the National Revenue Fund a tax, to be known as the dividends tax, calculated-

(i)      at the rate of 20 per cent; or

(ii)     at such rate 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,

of the amount of any dividend paid by any company other than a headquarter company.

(b)     If the Minister makes an announcement contemplated in paragraph (a)(ii), 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.

[Subsection (1) substituted by section 71 of Act 7 of 2010, section 6 of Act 13 of 2012, section 83 of Act 22 of 2012, section 11 of Act 14 of 2017 effective on 22 February 2017 and applies in respect of any dividend paid on or after that date and section 61 of Act 17 of 2017 effective on 18 December 2017]

(2)     For the purposes of this Part, a dividend must, to the extent that the dividend-

(a)     does not consist of a distribution of an asset in specie and is declared by a company that is-

(i)      a listed company, be deemed to be paid on the date on which the dividend is paid; or

(ii)     not a listed company, be deemed to be paid on the earlier of the date on which the dividend is paid or becomes due and payable; or

(b)     consists of a distribution of an asset in specie, be deemed to be paid on the earlier of the date on which the dividend is paid or becomes due and payable.

(3)     Where a company declares and pays a dividend and that dividend consists of a distribution of an asset in specie, the amount of the dividend must, for the purposes of subsection (1), be deemed-

(a)     in the case of an asset which is a financial instrument listed on a recognised exchange as defined in paragraph 1 of the Eighth Schedule and for which a price was quoted on that exchange, to be equal to the ruling price of that financial instrument on that recognised exchange at close of business on the last business day before the date that the dividend is, in terms of subsection (2), deemed to be paid; or

(b)     in the case of an asset which is not an asset contemplated in paragraph (a), to be equal to the market value of the asset on the date that the dividend is, in terms of subsection (2), deemed to be paid.

(4)

(a)     Where, during any year of assessment, any amount is owing to a company by-

(i)      a person that is-

(aa)    not a company;

(bb)   a resident; and

(cc)    a connected person in relation to that company; or

(ii)     a person that is-

(aa)    not a company;

(bb)   a resident; and

(cc)    a connected person in relation to a person contemplated in subparagraph (i),

in respect of a debt, that company must, for the purposes of this Part, be deemed to have paid a dividend if that debt arises by virtue of any share held in that company by a person contemplated in subparagraph (i).

(b)     The amount of the dividend that is deemed to have been paid in terms of paragraph (a) must-

(i)      the market-related interest in respect of that loan or advance, less the amount of interest that is payable to that company in respect of that loan or advance for that year of assessment; or

(ii)     for the purposes of subsection (1), be deemed to be equal to the greater of-

(aa)   the market-related interest in respect of that debt, less the amount of interest that is payable to that company in respect of that debt for that year of assessment; or

(bb)   nil.

(c)     Where during any year of assessment a company is deemed to have paid a dividend in terms of paragraph (a), that dividend must be deemed to have been paid on the last day of that year of assessment.

(d)     For the purposes of this subsection, ‘market-related interest’, in relation to any debt owed to a company means the amount of interest that would be payable to that company on the amount owing to that company in respect of that debt for a period during a year of assessment if the debt had been owed for that period at the official rate of interest.

[Paragraph (d) substituted by section 83 of Act 22 of 2012 and section 61 of Act 17 of 2017 effective on 18 December 2017]

(e)     This subsection does not apply to the extent that the amount owing to a company in respect of a debtcontemplated in paragraph (a) was deemed to be a dividend that was subject to the secondary tax on companies.

(5)     For the purposes of subsection (1), where any amount of any dividend is denominated in any currency other than the currency of the Republic, that amount must be translated to the currency of the Republic by applying the spot rate applicable at the time that the dividend is paid.

(6)       Where a-

(a)     company that makes payment of a dividend to any person withholds an amount of dividends tax from that payment in terms of section 64G(1); or

(b)     regulated intermediary that makes payment of a dividend to any person withholds an amount of dividends tax from that payment in terms of section 64H(1),

that company or regulated intermediary must, for the purposes of this Part, be deemed to have paid the amount so withheld to that person.

Section 49E – Withholding of withholding tax on royalties by payers of royalties

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49E.     Withholding of withholding tax on royalties by payers of royalties

(1)     Subject to subsections (2) and (3), any person making payment of any amount of royalties to or for the benefit of a foreign person must withhold an amount of withholding tax on royalties from that payment.

[Subsection (1) substituted by section 61 of Act 43 of 2014 effective on 1 July 2013]

(2)     A person must not withhold any amount from any payment contemplated in subsection (1) –

(a)     to the extent that the royalty is exempt from the withholding tax on royalties in terms of section 49D(c); or

(b)     if the foreign person to or for the benefit of which that payment is to be made has, before the royalty is paid, submitted to the person making the payment—

(i)      a declaration in such form as may be prescribed by the Commissioner that the foreign person is, in terms of section 49D(a) or (b) or an agreement for the avoidance of double taxation, exempt from the withholding tax on royalties in respect of that payment; and

[Subparagraph (i) substituted by section 30(1) of Act 20 of 2021 effective on 1 January, 2022 and applicable in respect of royalties paid on or after that date]

(ii)      a written undertaking in such form as may be prescribed by the Commissioner to forthwith inform the person making the payment in writing, should the circumstances affecting the exemption referred to in subparagraph (i) change or should the payment of the royalty no longer be for the benefit of that foreign person.

[Paragraph (b) substituted by section 69 of Act 25 of 2015 and by section 3(1)(a) of Act 33 of 2019]

(3)     The rate referred to in section 49B(1) must, for the purposes of that subsection, be reduced if the foreign person to or for the benefit of which the payment contemplated in that subsection is to be made has, before the royalty is paid, submitted to the person making the payment-

(a)     a declaration in such form as may be prescribed by the Commissioner that the royalty is subject to that reduced rate of tax as a result of the application of an agreement for the avoidance of double taxation; and

(b)     a written undertaking in such form as may be prescribed by the Commissioner to forthwith inform the person making the payment in writing, should the circumstances affecting the application of the agreement referred to in paragraph (a) change or should the payment of the royalty no longer be for the benefit of that foreign person.

[Sub­section (3) substituted by section 3(1)(b) of Act 33 of 2019]

(4)     A declaration and written undertaking submitted in terms of subsection (2)(b) or (3) are no longer valid after a period of five years from the date of the declaration.

[Subsection (4) added by section 3(1)(c) of Act 33 of 2019 effective on 1 July, 2020]