Category: CHAPTER II – The Taxes (ITA)

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 to the person contemplated in subparagraph (i), if that debt arises by virtue of any share held directly or indirectly in that company by a person contemplated in subparagraph (i).

[Paragraph (a) amended by section 83(1)(d) and (e) of Act 22 of 2012 and by section 28 of Act 5 of 2026]

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

(i)      be deemed to consist of a distribution of an asset in specie; and

(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

[Item (aa) substituted by section 83(1)(g) of Act 22 of 2012 (as amended by section 200(1) of Act 31 of 2013) effective on 1 January, 2013]

(bb)   nil.

[Paragraph (b) substituted by section 83(1)(f) of Act 22 of 2012 deemed effective on 1 April, 2012]

(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]

Section 60 (ITA) – Payment and assessment of the tax

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60.    Payment and assessment of the tax

(1)     Donations tax shall be paid to the Commissioner by the end of the month following the month during which a donation takes effect or such longer period as the Commissioner may allow from the date upon which the donation in question takes effect.

(2)     Where a donor has during the year of assessment disposed of property under more than one donation in respect of which an exemption may be applicable under the provisions of section 56 (2) (a) or (b), the amount to be exempted in respect of any such donation shall be calculated according to the order in which such donations took effect.

(3)     Where a donor has disposed of property under more than one donation on the same date those donations shall for the purpose of determining the tax payable in respect of each donation be deemed to have taken effect –

(a)     in such order as the donor may elect; or

(b)     if the donor fails to make an election within fourteen days after having been called upon by the Commissioner to do so, in such order as the Commissioner may determine.

(4)     The payment of the tax in terms of subsection (1) shall be accompanied by a return.

(5)     The Commissioner may, in accordance with Chapter 8 of the Tax Administration Act, at any time assess either the donor or the donee or both the donor and the donee for the amount of donations tax payable or, where the Commissioner is satisfied that the tax payable under this Part has not been paid in full, for the difference between the amount of the tax payable and the amount paid, but the payment by either of those parties of the amount payable under such assessment shall discharge the joint obligation.

[Sub­section (5) substituted by section 5 of Act 33 of 2019]

Section 64EA (ITA) – Liability for tax

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64EA.   Liability for tax

Any-

(a)     beneficial owner of a dividend, to the extent that the dividend does not consist of a distribution of an asset in specie; or

(b)     company that is a resident that declares and pays a dividend to the extent that the dividend consists of a distribution of an asset in specie,

is liable for the dividends tax in respect of that dividend.

[Section 64EA inserted by section 77(1) of Act 24 of 2011 and amended by section 84(1) of Act 22 of 2012 and by section 44 of Act 34 of 2019]

Section 49F – Payment and recovery of tax

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49F.     Payment and recovery of tax

(1)     If, in terms of section 49C, a foreign person is liable for any amount of withholding tax on royalties in respect of any amount of royalties that is paid to or for the benefit of the foreign person, that foreign person must pay that amount of withholding tax and submit a return by the last day of the month following the month during which the royalty is paid, unless the tax has been paid by any other person.

[Subsection (1) substituted by section 62(1) of Act 43 of 2014 and by section 3 of Act 21 of 2021]

(2)     Any person that withholds any withholding tax on royalties in terms of section 49E must submit a return and pay the tax to the Commissioner by the last day of the month following the month during which the royalty is paid.

[Subsection (2) substituted by section 62 of Act 43 of 2014 effective on 1 January 2015]

Section 61 (ITA) – Extension of scope of certain provisions of Act for purposes of donations tax

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61.    Extension of scope of certain provisions of Act for purposes of donations tax

 

For the purposes of the donations tax –

 

(a)     any reference in paragraph (a) or (e) of the definition of ‘representative taxpayer’ in section 1 to the income of any person or to the gross income received by or accrued to or in favour of any person shall be deemed to include a reference to property disposed of by any person under a donation or to the value of such property, as the context may require;

 

(b)     ……….

 

(c)     ……….

 

(d)     the reference in paragraphs (b) and (c) of the definition of “representative taxpayer” in section 1 to the income under the management, disposition or control of an agent or to income which is the subject of any trust, as the case may be, shall be deemed to include a reference to any property disposed of under a donation which is under the management, disposition or control of the agent or to property disposed of under a donation which is the subject of the trust, as the case may be;

 

(e)     ……….

 

(f)      ……….

 

(g)     ……….

[Paragraph (g) added by section 25 of Act 90 of 1962, substituted by section 29 of Act 90 of 1988 and deleted by section 3 of Act 23 of 2015 effective on 8 January 2016]

Section 64EB (ITA) – Deemed beneficial owners of dividends

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64EB.    Deemed beneficial owners of dividends

(1)       For the purposes of this Part, where-

(a)     a person contemplated in section 64F(1) acquires the right to a dividend in respect of a share, including a dividend that has not yet been declared or has not yet accrued, by way of cession; and

(b)     an amount in respect of that dividend is received by or accrues to the person who acquired that right,

any person ceding that right is deemed to be the beneficial owner of that dividend: Provided that this subsection does not apply to any cession in respect of a share if the person to whom those rights are ceded holds all the rights attaching to the share after the cession.

[Subsection (1) amended by section 61(1)(a) of Act 23 of 2018 and by section 37(1)(a) of Act 23 of 2020 effective on 1 January, 2021 and applicable in respect of amounts paid on or after that date in respect of shares that are borrowed or acquired in terms of a collateral arrangement]

(2)       For the purposes of this Part, where-

(a)     a person that is –

(i)      a company which is a resident;

(ii)     the government of the Republic in the national, provincial or local sphere;

[Subparagraph (ii) substituted by section 69 of Act 43 of 2014 effective on 4 July 2013]

(iii)    a public benefit organisation approved by the Commissioner in terms of section 30(3);

(iv)    a trust contemplated in section 37A;

(v)     an institution, board or body contemplated in section 10(1)(cA);

(vi)    a fund contemplated in section 10(1)(d)(i)or(ii);

(vii)   a person contemplated in section 10(1)(t);

(viii)  ……….

[Subparagraph (viii) deleted by section 74 of Act 25 of 2015 effective on 8 January 2016]

(ix)    ……….

[Subparagraph (ix) deleted by section 74 of Act 25 of 2015 effective on 8 January 2016]

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

(xi)    any person to the extent that the dividend constitutes income of that person;

(xii)   ………..

[Subparagraph (xii) amended by section 69 of Act 43 of 2014 effective on 4 July 2013, deleted by section 74 of Act 25 of 2015 effective on 8 January 2016]

(xiii)  any fidelity or indemnity fund contemplated in section 10(1)(d)(iii), or

[Subparagraph (xiii) amended by section 69 of Act 43 of 2014 effective on 4 July 2013]

(xiv)   a small business funding entity as contemplated in section 10(1)(cQ).

[Subparagraph (xiv) added by section 69 of Act 43 of 2014 effective on 4 July 2013]

borrows from another person or acquires a listed share in terms of a collateral arrangement entered into with another person; and

[Paragraph (a) amended by section 61(1)(b) of Act 23 of 2018 and by section 37(1)(b) of Act 23 of 2020 effective on 1 January, 2021 and applicable in respect of amounts paid on or after that date in respect of shares that are borrowed or acquired in terms of a collateral arrangement]

(b)     a dividend in respect of that share or any amount determined with reference to a dividend in respect of that share is received by or accrues to that person,

[Paragraph (b) substituted by section 61(1)(c) of Act 23 of 2018 and by section 37(1)(c) of Act 23 of 2020 effective on 1 January, 2021 and applicable in respect of amounts paid on or after that date in respect of shares that are borrowed or acquired in terms of a collateral arrangement]

any amount paid by that person to that other person not exceeding that dividend or amount determined with reference to a dividend in respect of that share is deemed to be a dividend paid by that person for the benefit of that other person.

[Subsection (2) amended by section 69(1)(c) of Act 43 of 2014, by section 61(1)(d) of Act 23 of 2018 and by section 37(1)(d) of Act 23 of 2020 effective on 1 January, 2021 and applicable in respect of amounts paid on or after that date in respect of shares that are borrowed or acquired in terms of a collateral arrangement]

(3)       For the purposes of this Part, where-

(a)     a person that is contemplated in section 64F(1) acquires a share in a listed company (or any right in respect of that share) from another person;

[Paragraph (a) substituted by section 61 of Act 23 of 2018 effective on 1 January 2019, applies in respect of years of assessment commencing on or after that date]

(b)     that acquisition is part of a resale agreement between the person acquiring that share and that other person or any other company forming part of the same group of companies as that other person; and

[Paragraph (b) amended by section 61 of Act 23 of 2018 effective on 1 January 2019, applies in respect of years of assessment commencing on or after that date]

(c)     a dividend in respect of that share is received by or accrues to that person,

[Paragraph (c) added by section 61 of Act 23 of 2018 effective on 1 January 2019, applies in respect of years of assessment commencing on or after that date]

that other person or other company is deemed to be the beneficial owner of that dividend.

(4)     For the purposes of this section, ‘resale agreement’ means the acquisition of a share by any person subject to an agreement in terms of which that person undertakes to dispose of that share or any other share of the same kind and of the same or equivalent quality at a future date.

Section 49G – Refund of withholding tax on royalties

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49G.    Refund of withholding tax on royalties

 

(1)     Notwithstanding  Chapter 13 of the Tax Administration Act, if-

 

(a)     an amount is withheld from a payment of a royalty as contemplated in section 49E(1);

 

(b)     a declaration contemplated in section 49E(2) or (3) in respect of that royalty is not submitted to the person paying that royalty by the date of the payment of that royalty; and

 

(c)     a declaration contemplated in section 49E(2) or (3) is submitted to the Commissioner within three years after the payment of the royalty in respect of which the declaration is made,

 

so much of that amount as would not have been withheld had that declaration been submitted by the date contemplated in the relevant subsection is refundable by the Commissioner to the person to which the royalty was paid.

[Subsection (1) inserted by section 12(1) of Act 21 of 2012 and renumbered by section 5 of Act 24 of 2020]

 

(2)     Notwithstanding Chapter 13 of the Tax Administration Act, if—

 

(a)     an amount of withholding tax on royalties is paid as contemplated in section 49E(1) in respect of an amount of royalties that became due and payable; and

 

(b)     the amount of royalties subsequently becomes irrecoverable,

 

so much of that amount as would not have been paid had the royalties not become due and payable is refundable by the Commissioner to the person who paid the tax.

[Subsection (2) added by section 5 of Act 24 of 2020]

Section 62 (ITA) – Value of property disposed of under donations

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62.    Value of property disposed of under donations

 

(1)     For the purposes of donations tax the value of any property shall be deemed to be –

 

(a)     in the case of any fiduciary, usufructuary or other like interest in property, an amount determined by capitalizing at twelve per cent. the annual value of the right of enjoyment of the property over which such interest was or is held, to the extent to which the donee becomes entitled to such right of enjoyment, over the expectation of life of the donor, or if such right of enjoyment is to be held for a lesser period than the life of the donor, over such lesser period;

 

(b)     in the case of any right to any annuity, an amount equal to the value of the annuity capitalized at twelve per cent. over the expectation of life of the donor, or if such right is to be held by the donee for a lesser period than the life of the donor, over such lesser period;

 

(c)     in the case of a right of ownership in any movable or immovable property which is subject to a usufructuary or other like interest in favour of any person, the amount by which the fair market value of the full ownership of such property exceeds the value of such interest, determined –

 

(i)      in the case of a usufructuary interest, by capitalizing at twelve per cent. the annual value of the right of enjoyment of the property subject to such usufructuary interest over the expectation of life of the person entitled to such interest, or, if such right of enjoyment is to be held for a lesser period than the life of such person, over such lesser period;

 

(ii)     in the case of an annuity charged upon the property, by capitalizing at twelve per cent. the amount of the annuity over the expectation of life of the person entitled to such annuity, or, if it is to be held for a lesser period than the life of such person, over such lesser period; or

 

(iii)    in the case of any other interest, by capitalizing at twelve per cent such amount as the Commissioner may consider reasonable as representing the annual yield of such interest, over the expectation of life of the person entitled to such interest, or, if such interest is to be held for a lesser period than the life of such person, over such lesser period;

 

(d)     in the case of any other property, the fair market value of such property as at the date upon which the donation takes effect: Provided that in any case in which, as a result of conditions which in the opinion of the Commissioner were imposed by or at the instance of the donor, the value of any property is reduced in consequence of the donation, the value of such property shall be determined as though the conditions in terms of which the value of the said property is reduced in consequence of the donation, had not been imposed.

 

(1A)  Where any company not quoted on any stock exchange owns immovable property on which bona fide farming operations are being carried on in the Republic, the value of such immovable property shall, in so far as it is relevant for the purposes of determining the value of any shares in such company, be determined in the manner prescribed in the definition of “fair market value” in section 55(1).

 

(2)     For the purposes of paragraphs (a) and (c) of subsection (1) the annual value of the right of enjoyment of a property means an amount equal to twelve per cent. upon the value of the full ownership of the property which is subject to any fiduciary, usufructuary or other like interest: Provided that –

 

(a)     where the Commissioner is satisfied that the property which is subject to any such interest could not reasonably be expected to produce an annual yield equal to 12 per cent on such value of the property, the Commissioner may fix such sum as representing the annual yield as may seem to him to be reasonable, and the sum so fixed shall for the purposes of paragraphs (a) and (c) of subsection (1) be deemed to be the annual value of the enjoyment of such property;

 

(b)     where the property which is subject to any such interest consists of books, pictures, statuary or other objects of art, the annual value of the right of enjoyment shall for the purposes of paragraph (a) of subsection (1) be deemed to be the average net receipts (if any) derived by the person entitled to such right of enjoyment of such property during the three years immediately preceding the date on which the donation took effect.

 

(3)     Where for the purposes of subsection (1) any calculation is required to be made over the expectation of life of any person, such calculation shall, in the case of a person who is not a natural person, be made over a period of fifty years.

 

(4)     If the Commissioner is of the opinion that the amount shown in any return as the fair market value of any property is less than the fair market value of that property, he or she may fix the fair market value of that property, and the value so fixed is deemed for the purposes of this Part to be the fair market value of such property.

 

(5)     In fixing the fair market value of any property in terms of subsection (4), the Commissioner shall have regard inter alia –

 

(a)     to the municipal or divisional council valuation (if any) of such property;

 

(b)     to any sworn valuation of such property furnished by or on behalf of the donor or the donee; and

 

(c)     to any valuation of such property made by any competent and disinterested person appointed by the Commissioner.

 

63.  ……….

Section 64F (ITA) – Exemption from tax in respect of dividends other than dividends comprising distribution of assets in specie

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64F.  Exemption from tax in respect of dividends other than dividends comprising distribution of assets in specie

[Heading of section 64F substituted by section 78 of Act 24 of 2011 and section 62 of Act 23 of 2018 effective on 17 January 2019]

(1)     Any dividend is exempt from the dividends tax to the extent that it does not consist of a dividend that comprises a distribution of an asset in specie if the beneficial owner is-

[Words preceding paragraph (a) substituted by section 78 of Act 24 of 2011 and section 62 of Act 23 of 2018 effective on 17 January 2019]

(a)     a company which is a resident;

(b)     the government of the Republic in the national, provincial or local sphere;

[Paragraph (b) substituted by section 70 of Act 43 of 2014 effective on 20 January 2015]

(c)     a public benefit organisation approved by the Commissioner in terms of section 30(3);

(d)     a trust contemplated in section 37A;

(e)     an institution, board or body contemplated in section 10(1)(cA);

(f)      a fund contemplated in section 10(1)(d)(i) or (ii);

(g)     a person contemplated in section 10(1)(t);

(h)     a holder of shares in a registered micro business, as defined in the Sixth Schedule, paying that dividend, to the extent that the aggregate amount of dividends paid by that registered micro business to all holders of shares in that registered micro business during the year of assessment in which that dividend is paid does not exceed the amount of R200 000;

(i)      a small business funding entity as contemplated in section 10(1)(cQ);

[Paragraph (i) substituted by section 72 of Act 7 of 2010, deleted by section 78 of Act 24 of 2011, re-inserted by section 70 of Act 43 of 2014 effective on 1 March 2015]

(iA)   ……….

(j)      a person that is not a resident and the dividend is a dividend contemplated in paragraph (b) of the definition of ‘dividend’ in section 64D;

(k)     ……….

[Paragraph (k) added by section 86 of Act 22 of 2012 and deleted by section 62 of Act 23 of 2018 effective on 17 January 2019]

(l)      any person to the extent that the dividend constitutes income of that person; or

(m)    any person to the extent that the dividend was subject to the secondary tax on companies;

[Paragraph (m) added by section 86(1)(b) of Act 22 of 2012, amended by section 86(1)(c) of Act 22 of 2012 and section 70 of Act 43 of 2014 effective on 1 March 2015]

(n)     any fidelity or indemnity fund contemplated in section 10(1)(d)(iii); or

[Paragraph (n) added by section 86 of Act 22 of 2012, amended by section 70 of Act 43 of 2014 effective on 1 March 2015]

(o)     a natural person or deceased estate or insolvent estate of that person in respect of a dividend paid in respect of a tax free investment as contemplated in section 12T(1).

[Paragraph (o) added by section 70 of Act 43 of 2014 effective on 1 March 2015, substituted by section 75 of Act 25 of 2015 effective on 1 March 2015]

(2)     Any dividend paid by a REIT or a controlled company, as defined in section 25BB, and received or accrued before 1 January 2014 is exempt from the dividends tax to the extent that the dividend does not consist of a dividend that comprises a distribution of an asset in specie.

[Subsection (2) added by section 86 of Act 22 of 2012 and substituted by section 104 of Act 31 of 2013 and section 62 of Act 23 of 2018 effective on 17 January 2019]