Category: CHAPTER II – The Taxes (ITA)

“Alternative method” definition of section 24J of ITA

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“alternative method” means a method of calculating interest in relation to any class of instruments which-

(a)     is in accordance with IFRS;

(b)     is consistently applied in respect of all such instruments for all financial reporting purposes; and

(c)     method achieves a result in so far as the timing of the accrual and incurral of interest is concerned which produces substantially the same result achieved by the application of the provisions of subsections (2)(a) and (3)(a);

[Definition of “alternative method” substituted by section 43 of Act 17 of 2017 effective on 18 December 2017]

“Accrual amount” definition of section 24J of ITA

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(1)     For the purposes of this section, unless the context otherwise indicates –

 

“accrual amount”, in relation to an accrual period, means an amount determined in accordance with the following formula:

 

A = B x C

 

in which formula –

 

(a)     “A” represents the amount to be determined;

 

(b)     “B” represents the yield to maturity; and

 

(c)     “C” represents the adjusted initial amount:

 

Provided that –

 

(i)      where the commencement or end of any year of assessment falls within an accrual period, the amount so determined shall be apportioned on a day to day basis over the term of such accrual period in order to determine the relevant portion of such amount relating to that part of such accrual period falling within the year of assessment so commencing or ending, as the case may be;

 

(ii)     where an instrument is transferred on a date other than at the end of an accrual period, the amount so determined shall be apportioned on a day to day basis over the term of such accrual period in order to determine the relevant portion of such amount relating to the relevant transferor or transferee, as the case may be, in relation to such instrument; and

 

(iii)    the amount so determined shall be appropriately adjusted by taking into account amounts received or payments made other than at the end of an accrual period;

Section 20 (ITA) – Set off of assessed losses

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20.     Set–off of assessed losses

(1)     For the purpose of determining the taxable income derived by any person from carrying on any trade, there shall, subject to section 20A, be set off against the income so derived by such person-

(a)             

(i)      that is a company, other than a company referred to in subparagraph (ii), any balance of assessed loss incurred by that person in any previous year which has been carried forward from the preceding year of assessment, to the extent that the amount of such set-off does not exceed the higher of R1 million and 80 per cent of the amount of taxable income determined before taking into account the application of this section;

(ii)      that is a company carrying on mining operations as contemplated in section 15, any balance of assessed loss incurred by that person in any previous year which has been carried forward from the preceding year of assessment, to the extent that the amount of such set-off does not exceed the higher of R1 million and 80 per cent of the amount of taxable income determined before taking into account the application of—

(A)   this section; and

B)    the provisions of section 36(7C); or

(iii)    that is not a company, any balance of assessed loss incurred by that person in any previous year which has been carried forward from the preceding year of assessment: Provided that no person whose estate has been voluntarily or compulsorily sequestrated shall be entitled to carry forward any assessed loss incurred prior to the date of sequestration, unless the order of sequestration has been set aside, in which case the amount to be carried forward shall be reduced by an amount which was allowed to be set off against the income of the insolvent estate of such person from the carrying on of any trade:

[Subparagraph (iii) substituted by section 16(1)(a) of Act 42 of 2024 effective on 31 December, 2024 and applicable in respect of years of assessment ending on or after that date]

Provided that where a company has taken steps to liquidate, wind up or deregister as contemplated in section 41(4) and has not at any stage withdrawn any of those steps or done anything to invalidate any step so taken, with the result that the company will not be liquidated, wound up or deregistered, the amount of the balance of assessed loss that may be set off under subparagraph (i) or (ii) in relation to that company must not be limited to the higher of R1 million and 80 per cent of the amount of taxable income described in that subparagraph; or

[Paragraph (a) amended by section 19(a) of Act 101 of 1990, by section 17 of Act 21 of 1995, by section 15 of Act 28 of 1997, by section 19(a) of Act 8 of 2007, by section 32(a) of Act 35 of 2007, by section 37(1) of Act 22 of 2012 and by section 31(1) of Act 43 of 2014, substituted by section 39(a) of Act 15 of 2016 and by section 18(1) of Act 20 of 2021 (as substituted by section 42(1) of Act 20 of 2022 and effective date in section 18(2) of Act 20 of 2021 as substituted by section 9 of Act 19 of 2022) and amended by section 16(1)(b) of Act 42 of 2024 effective on 31 December, 2024 and applicable in respect of years of assessment ending on or after that date]

(b)     any assessed loss incurred by a person during the same year of assessment in carrying on any other trade either alone or in partnership with others, otherwise than as a member of a company the capital whereof is divided into shares:

[Words preceding proviso substituted by section 39 of Act 15 of 2016 effective on 19 January 2017]

Provided that there shall not be set off against any amount –

(a)     ……….

(b)     derived by any person from a source within the Republic, any—

(i)      assessed loss incurred by such person during such year; or

(ii)     any balance of assessed loss incurred in any previous year of assessment,

in carrying on any trade outside the Republic; or

[Paragraph (b) substituted by section 35(1)(b) of Act 45 of 2003, amended by section 19(c) of Act 8 of 2007, substituted by section 15(1) of Act 3 of 2008 and amended by section 54(1)(a) of Act 31 of 2013 effective on 1 January, 2014 and applicable in respect of years of assessment commencing on or after that date]

(c)     that is a retirement fund lump sum benefit, retirement fund lump sum withdrawal benefit or severance benefit included in taxable income, any-

(i)      balance of assessed loss;

(ii)     ‘assessed loss’ as defined in subsection (2) incurred in such year before taking into account that retirement fund lump sum benefit or retirement fund lump sum withdrawal benefit.

“Improvements” definition of section 13 of ITA

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(9)     For the purposes of this section –

 

“improvements”, in relation to any improvements commenced on or after the first day of April, 1971, means any extension, addition or improvements (other than repairs) to a building which is or are effected for the purpose of increasing or improving the industrial capacity of the building;

Subsections 2, 3, 4, 5 and 6 of section 12O of ITA

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(2)     There must be exempt from normal tax the receipts and accruals in respect of income derived from the exploitation rights of a film-

(a)     if the National Film and Video Foundation has approved the film in terms of section 3(c) read with section 4(1) of the National Film and Video Foundation Act, 1997 (Act No. 73 of 1997), as a local production or co-production whereby a film is co-produced in terms of an international co-production agreement between the government of the Republic and the government of another country, which agreement must be subject to the Constitution;

(b)     if income is derived from the exploitation rights of the film-

(i)      by a person who acquired the exploitation rights in respect of that film prior to the date that the principal photography of that film commenced; or

(ii)     by a person who acquired the exploitation rights in respect of that film after the date that principal photography of that film commenced but before the completion date of that film if consideration for those exploitation rights was not directly or indirectly paid or applied for the benefit of a person contemplated in subparagraph (i); and

(c)     to the extent that the income is received or accrues within a period of 10 years after the completion date of that film.

(3)     No exemption shall be allowed under this section to a person that is a broadcaster as defined in section 1 of the Broadcasting Act, 1999 (Act No. 4 of 1999), or any person that is a connected person in relation to that broadcaster.

(4)

(a)     Any-

(i)      special purpose corporate vehicle; or

(ii)     collection account manager that-

(aa)    manages exploitation rights under a collection account management agreement; and

(bb)   is approved by the Minister for the purpose of this section by notice in the Gazette,

must provide a report to the National Film and Video Foundation containing such information, within such time and in such manner as is prescribed by the Minister when income arising from exploitation rights of a film is distributed to a person within a period of 10 years commencing from the completion date of the film.

(b)     The National Film and Video Foundation must provide a report annually to the Minister in respect of all films approved in terms of subsection (2)(a) containing such information, within such time and in such manner as is prescribed by the Minister for a period of 10 years commencing from the completion date of a film if-

(i)      any income is received or accrues in respect of the film; and

(ii)     the income is eligible for the exemption under subsection (2).

(5)

(a)     Notwithstanding section 23(f), a taxpayer may deduct from the income of the taxpayer an amount in respect of any expenditure incurred to acquire exploitation rights in respect of a film in accordance with paragraph (b).

[Paragraph (a) substituted by section 25 of Act 25 of 2015 effective on 1 January 2012, applies in respect of receipts and accruals in respect of films of which principal photography commences on or after that date but before 1 January 2022]

(b)     The amount of the deduction contemplated in paragraph (a) is equal to the amount of any expenditure incurred as contemplated in that paragraph less any amount received or accrued during any year of assessment in respect of that film.

(c)     No deduction may be made under this subsection to the extent that the expenditure was funded from a loan, credit or similar financing.

(d)     The deduction contemplated in paragraph (a) may only be made in any year of assessment commencing at least two years after the completion date of the film to the extent that the amount of expenditure incurred exceeds the total amount received by or accrued to that taxpayer in respect of the exploitation rights.

(e)     Subsection (2) and paragraph (a) of this subsection cease to apply to any income derived from a film in any year of assessment subsequent to the date of a deduction made under paragraph (a) in respect of that film.

(6)

(a)     In addition to the exemption under subsection (2), any amount received by or accrued to a special purpose corporate vehicle by way of a grant payable by the State under the South African Film and Television Production and Co-production Incentive administered by the Department of Trade and Industry shall be exempt from normal tax subject to section 8(4).

(b)     Where a special purpose corporate vehicle that received a grant contemplated in paragraph (a), or to whom such grant has accrued, pays the whole or any portion of the amount of the grant to another person pursuant to any exploitation rights in respect of that film, the exemption under this paragraph must also apply to the amount received by or accrued to that other person to the extent that the amount does not exceed any amount that the other person contributed to the production of the film.