Category: CHAPTER II – The Taxes (ITA)

“Broad-based employee share plan” definition of section 8B of ITA

Posted on by admin_kmos

(3)     For the purposes of this section –

‘broad-based employee share plan’ of an employer means a plan in terms of which –

(a)     equity shares in that employer, or in a company that is an associated institution as defined in the Seventh Schedule in relation to the employer are acquired by employees of that employer;

[Paragraph (a) substituted by section 10(1)(b) of Act 60 of 2008, by section 9 of Act 17 of 2017 and by section 7 of Act 34 of 2019]

(b)     employees who participate in any other equity scheme of that employer or of a company that is an associated institution as defined in the Seventh Schedule in relation to that employer are not entitled to participate and where at least 80 per cent of all other employees who are employed by that employer on a permanent basis on the date of grant (and who have continuously been so employed on a full-time basis for at least one year) are entitled to participate;

(c)     the employees who acquire the equity shares as contemplated in paragraph (a) are entitled to all dividends and foreign dividends and full voting rights in relation to those equity shares; and

(d)     no restrictions have been imposed in respect of the disposal of those equity shares, other than –

(i)      a restriction imposed by legislation;

(ii)     a right of any person to acquire those equity shares from the employee or former employee who acquired the equity shares as contemplated in paragraph (a) –

(aa)   in the case where the employee or former employee is or was guilty of misconduct or poor performance, at the lower of market value on the date of grant or the market value on the date of acquisition by that employer; or

(bb)   in any other case, at market value on the date of acquisition by that person; or

(iii)    a restriction in terms of which the employee or former employee who acquired the equity shares as contemplated in paragraph (a) may not dispose of those equity shares for a period, which may not extend beyond five years from the date of grant;

Subsection 4 and 4A of section 8 of ITA

Posted on by admin_kmos

(4)

 

(a)     There shall be included in the taxpayer’s income all amounts allowed to be deducted or set off under the provisions of sections 11 to 20, inclusive, section 24D, section 24F, section 24G, section 24I, section 24J, section 27(2)(b) and section 37B(2) of this Act, except section 11(k), 11(n), 11(p) and (q), section 11F, section 12(2) or section 12(2) as applied by section 12(3), section 12A(3), section 13(5), or section 13(5) as applied by section 13(8), or section 13bis(7), section 15(a) or section 15A, or under the corresponding provisions of any previous Income Tax Act, whether in the current or any previous year of assessment which have been recovered or recouped during the current year of assessment:

[Words preceding the proviso substituted by section 9 of Act 31 of 2013 and section 8 of Act 17 of 2017 effective on 1 March 2016]

 

Provided that the provisions of this paragraph shall not apply in respect of any such amount so recovered or recouped which has been-

 

(i)      included in the gross income of such taxpayer in terms of paragraph (jA) of the definition of ‘gross income’;

 

(ii)     applied to reduce any cost or expenditure incurred by such taxpayer in terms of section 19; or

 

(iii)    previously taken into account as an amount that is deemed to have been recovered or recouped in terms of section 19(4), (5), (6) or (6A).

[Paragraph (a) amended by section 6(1)(a) of Act 90 of 1964, substituted by section 9(1)(a) of Act 88 of 1965, by section 10(1)(a) of Act 55 of 1966, by section 10(a) of Act 89 of 1969, by section 8(d) of Act 85 of 1974, by section 7(1)(b) of Act 69 of 1975, by section 7(1)(a) of Act 113 of 1977, by section 8(a) of Act 94 of 1983, by section 5(1)(b) of Act 121 of 1984, by section 6(f) of Act 85 of 1987 and by section 6(a) of Act 90 of 1988 and amended by section 17(1)(b) of Act 30 of 2000, by section 21(1)(a) of Act 60 of 2001, by section 6 of Act 32 of 2004, by section 6(1) of Act 8 of 2007, by section 5(1)(a) of Act 3 of 2008, by section 11(1)(b) of Act 17 of 2009, by section 16(1)(b) of Act 24 of 2011, by section 9(1)(b) of Act 22 of 2012, by section 9(1)(a) of Act 31 of 2013 and by section 8(1) of Act 17 of 2017 deemed effective on 1 March, 2016. Paragraph (iii) added by section 9(1)(d) of Act 31 of 2013 and substituted by section 6 of Act 20 of 2021]

 

(b)     For the purposes of paragraph (a), where during any year of assessment any actuarial surplus is paid to a taxpayer pursuant to the provisions of section 15E(1)(f) or (g) of the Pension Funds Act the taxpayer must be deemed to have recovered or recouped an amount equal to the amount of that actuarial surplus less any expenditure incurred by that taxpayer in respect of that actuarial surplus that was not allowed as a deduction during any year of assessment.

 

(c)     ……….

 

(d)     ……….

 

(dA)  ……….

 

(dB)   ……….

 

(e)     Notwithstanding paragraph (a), but subject to paragraph (eB), (eC), (eD) and (eE), there shall not be included in the income of a person any amount recovered or recouped as a result of the disposal of any asset, where that person has elected that paragraph 65 or 66 of the Eighth Schedule applies in respect of the disposal of that asset.

 

(eA)  Where a person acquires more than one asset (hereinafter referred to as “the replacement asset or assets”) contemplated in paragraph (e), that person must, in applying paragraphs (eB), (eC) and (eD), apportion the amount recovered or recouped to each replacement asset in the same ratio as the receipts and accruals from that disposal respectively expended in acquiring each replacement asset bear to the total amount of those receipts and accruals expended in acquiring all those replacement assets.

 

(eB)   Where a replacement asset in relation to an asset of a person as contemplated in paragraph (e) constitutes a depreciable asset, that person shall be deemed to have recovered or recouped in a year of assessment so much of the amount contemplated in paragraph (e) apportioned to that asset as contemplated in paragraph (eA) as bears to the total amount of the recovery or recoupment contemplated in paragraph (e) the same ratio as the amount of any deduction or allowance allowed in that year of assessment in respect of that replacement asset bears to the total amount of the deduction or allowance (determined with reference to the cost or value of that asset at the time of acquisition thereof) allowable for all years of assessment in respect of that replacement asset.

 

(eC)   Where a person during any year of assessment disposes of a replacement asset in relation to an asset contemplated in paragraph (e) and any portion of the recovery or recoupment which is apportioned to that replacement asset has not been included in the income of that person in terms of paragraph (eE) or (eD), that portion must be deemed to be an amount recovered or recouped by that person in respect of that replacement asset in that year of assessment.

 

(eD)   Where during any year of assessment a person ceases to use a replacement asset in relation to an asset contemplated in paragraph (e), in respect of which paragraph 66 of the Eighth Schedule applies, for the purposes of that person’s trade and any portion of the amount which is apportioned to that replacement asset has not been included in the income of that person in terms of paragraph (eE) or (eC), that portion must be deemed to be an amount recovered or recouped in that year of assessment.

 

(eE)   Where a person contemplated in paragraph (e) fails to conclude a contract or fails to bring any replacement asset into use within the period prescribed in paragraphs 65 or 66 of the Eighth Schedule, as the case may be, paragraph (e) shall not apply and that person must-

 

(i)     deem the amount contemplated in paragraph (e) to be an amount recovered or recouped for purposes of paragraph (a) on the date on which the relevant period ends;

 

(ii)     determine interest at the prescribed rate on the amount recovered or recouped from the date of the disposal contemplated in paragraph (e) to the date contemplated in subparagraph (i); and

 

(iii)    deem that interest to be an amount recovered or recouped for purposes of paragraph (a) on the date contemplated in subparagraph (i).

 

(f)      If as a result of the loss, sale or disposal in any other manner by the taxpayer of the further asset referred to in paragraph (e) there has accrued to or has been received by the taxpayer an amount in excess of the cost thereof less the amount referred to in the said paragraph, so much of the excess as does not exceed such last–mentioned amount shall (unless such last–mentioned amount has been included in income in terms of the proviso to the said paragraph) be deemed to have been recovered or recouped and shall be included in the taxpayer’s income for the year of assessment during which such further asset was so lost, sold or disposed of in addition to any recovery or recoupment referred to in paragraph (a).

 

(g)     ……….

[Paragraph (g) added by section 9 of Act 88 of 1965, amended by section 6 of Act 141 of 1992 and deleted by section 5 of Act 43 of 2014 effective on 12 December 2013]

 

(h)     ……….

[Paragraph (h) added by section 9 of Act 88 of 65 and deleted by section 5 of Act 43 of 2014 effetive on 12 December 2013]

 

(i)      ……….

[Paragraph (i) added by section 9 of Act 88 of 1965 and deleted by section 5 of Act 43 of 2014 effecive on 12 December 2013]

 

(j)      ……….

[Paragraph (j) added by section 9 of Act 88 of 1965 and deleted by section 5 of Act 43 of 2014 effective on 12 December 2013]

 

(k)     For the purposes of paragraph (a), where during any year of assessment any person has –

 

(i)      donated any asset;

 

(ii)  in the case of a company, transferred in whatever manner or form any asset to any holder of a share in that company;

[Sub­paragraph (ii) substituted by section 9(1)(g) of Act 31 of 2013 and amended by section 6(d) of Act 34 of 2019]

 

(iii)  disposed of any asset to a person who is a connected person in relation to that person; or

[Sub­paragraph (iii) amended by section 6(d) of Act 34 of 2019]

 

(iv)  commenced to hold any asset as trading stock which was previously not held as trading stock,

[Sub­paragraph (iv) added by section 6(d) of Act 34 of 2019]

 

in respect of which a deduction or an allowance has been granted to such person in terms of any of the provisions referred to in that paragraph, that person shall be deemed to have disposed of that asset for an amount equal to the market value of that asset as at the date of that donation, transfer, disposal or commencement.

[Paragraph (k) added by section 4(1) of Act 113 of 1993, substituted by section 7(g) of Act 19 of 2001 and by section 21(1)(b) of Act 60 of 2001, amended by section 11(1)(c) and (d) of Act 74 of 2002, substituted by section 5(b) of Act 20 of 2006 and amended by section 4(1)(b) of Act 23 of 2020 deemed effective on 15 January, 2020]

 

(l)      For the purposes of paragraph (a), where –

 

(i)      any person was entitled to a deduction in respect of any interest or related finance charges (including a discount or premium), which was incurred or deemed to have been incurred by such person in relation to any financial arrangement during any year of assessment and such interest or related finance charges were allowed as a deduction in terms of the provisions of this Act during such year of assessment in the hands of such person;

 

(ii)     such person has transferred such financial arrangement during any year of assessment to any other person; and

 

(iii)    any obligation or part thereof in respect of such interest or related finance charges which such person is legally liable to pay has, as a result of such transfer, been transferred to such other person,

 

such person shall be deemed to have recovered or recouped an amount equal to the amount of such obligation or part thereof so transferred during the year of assessment in which such obligation or part thereof has been so transferred
.

(m)    ……….

 

(n)     Where a taxpayer disposes of an industrial asset contemplated in section 12G or a manufacturing asset contemplated in section 12I before completion of the write off period of that asset for purposes of section 11(e), 12C or 13, as applicable, there shall be included in the taxpayer’s income, all amounts allowed to be deducted in respect of that industrial asset under section 12G or manufacturing asset under section 12I, whether in the current year or any previous year of assessment, which have been recovered or recouped during the current year of assessment, in addition to the inclusion of those amounts in terms of paragraph (a).

 

(nA)  Where, before 1 March 2026, a taxpayer disposes of an asset contemplated in section 12BA, there shall be included in the taxpayer’s income 25 per cent of the cost of that asset, which has been recouped during the current year of assessment, in addition to the inclusion of amounts in terms of paragraph (a), but limited to the total amount allowed to be deducted in respect of that asset.

[Paragraph (nA) inserted by section 4(1) of Act 17 of 2023 effective on 1 March, 2023 and applicable in respect of assets brought into use on or after that date]

 

(nB)  Where a taxpayer disposes of an asset contemplated in section 12V before the expiration of five years from the date on which that asset was brought into use, there shall be included in the taxpayer’s income 50 per cent of the cost of that asset, which has been recouped during the current year of assessment, in addition to the inclusion of amounts in terms of paragraph (a), but limited to the total amount allowed to be deducted in respect of that asset.

[Paragraph (nB) inserted by section 5(1) of Act 42 of 2024 effective on 1 March, 2026 and applicable in respect of assets brought into use on or after that date]

 

(nC)  Where an asset contemplated in section 12V is no longer used mainly in the production of battery electric or hydrogen-powered vehicles in the Republic, before the expiration of five years from the date on which that asset was brought into use, there shall be included in the taxpayer’s income 50 per cent of the cost of that asset allowed as a deduction under section 12V in respect of that asset, whether in the current or any previous year of assessment.

[Paragraph (nC) inserted by section 5(1) of Act 42 of 2024 effective on 1 March, 2026 and applicable in respect of assets brought into use on or after that date]

 

(4A)   The provisions of subsection (4)(a), (e), (f) or (k) shall not apply in respect of any amount which is deemed to have been allowed as a deduction in terms of subparagraph (ix) of the proviso to section 11(e), section 12B(4B), section 12C(4A), section 12D(3A), section 12DA(4), section 12F(3A), section 13(1A), section 13bis(3A), section 13ter(6A), section 13quin(3) or section 37B(4).

Section 8 (ITA) – Certain amounts to be included in income or taxable income

Posted on by admin_kmos

8.     Certain amounts to be included in income or taxable income

 

(1)

 

(a)

 

(i)   There shall be included in the taxable income of any person (hereinafter referred to as the “recipient”) for any year of assessment any amount which has been paid or granted during that year by his or her principal as an allowance or advance, excluding any portion of any allowance or advance to the extent that the allowance or advance or a portion of the allowance or advance is exempt from normal tax under section 10(1) or has actually been expended by that recipient—

 

(aa)   on travelling on business, as contemplated in paragraph (b), unless an allowance or advance has been granted by an employer in respect of the use of a motor vehicle as contemplated in paragraph 7 of the Seventh Schedule;

 

(bb)   on any accommodation, meals and other incidental costs, as contemplated in paragraph (c), while such recipient is by reason of the duties of his or her office or employment obliged to spend at least one night away from his or her usual place of residence in the Republic; or

 

(cc)   by reason of the duties attendant upon his or her office, as contemplated in paragraph (d).

[Sub­paragraph (i) amended by section 6(a) of Act 34 of 2019]

 

(ii)     There shall not be included in the taxable income of a person in terms of the provisions of paragraph (a)(i), any amount paid or granted by a principal in reimbursement of, or as an advance for, any expenditure incurred or to be incurred by the recipient –

 

(aa)

 

(A)    on the instruction of his or her principal; or

 

(B)    where the recipient is allowed by his or her principal to incur expenditure on meals and other incidental costs while such recipient is by reason of the duties of his or her office or employment obliged to spend a part of a day away from his or her usual place of work or employment, not exceeding an amount determined by way of notice in the Gazette,

 

in the furtherance of the trade of that principal; and

[Item (aa) substituted by section 4(1)(a) of Act 23 of 2020 effective on 1 March, 2021 and applicable in respect of years of assessment commencing on or after that date]

 

(bb)   where that recipient must produce proof to that principal that such expenditure was wholly incurred as aforesaid and must account to that principal for that expenditure:

 

Provided that where that expenditure was incurred to acquire any asset, the ownership in that asset must vest in that principal.

 

(iii)    For the purposes of this paragraph, ‘principal’ in relation to a recipient includes his or her employer or the authority, company, body or other organisation in relation to which any office is held, or any associated institution, as defined in the Seventh Schedule, in relation to such employer, authority, company, body or organisation.

 

(iv)    The provisions of this paragraph shall not apply in respect of any amount paid or granted as an allowance or advance that is received by or accrued to a person in respect of-

 

(aa)   the holding of a public office by that person as contemplated in section 9(2)(g);or

 

(bb)   services rendered or work or labour performed by that person as contemplated in section 9(2)(h),

 

if that person is stationed outside the Republic and that amount is attributable to services rendered by that person outside the Republic.

 

(b)     For the purposes of paragraph (a)(i)(aa) –

 

(i)      any allowance or advance in respect of transport expenses shall, to the extent to which such allowance or advance has been expended by the recipient on private travelling (including travelling between his or her place of residence and his or her place of employment or business or any other travelling done for his or her private or domestic purposes), be deemed not to have been actually expended on travelling on business;

[Subparagraph (i) amended by section 4 of Act 96 of 1985, section 9 of Act 129 1991 and section 5 of Act 43 of 2014 effective on 20 January 2015]

 

(ii)   subject to the provisions of subparagraph (iii), where such allowance or advance has been paid to the recipient in order that it may be utilized for defraying expenditure in respect of any motor vehicle used by the recipient, the portion of the allowance expended by the recipient during the year of assessment for business purposes shall, unless an acceptable calculation based on accurate data is furnished by the recipient, be deemed to be an amount calculated by applying the rate per kilometre determined in the manner prescribed by the Minister of Finance by notice in the Gazette for the category of vehicle used, on a distance travelled during the said year for business purposes (other than private travelling as contemplated in subparagraph (i)): Provided that where an allowance or advance is deemed to have accrued under section 7B to the recipient in the year of assessment during which that allowance or advance is paid, the distance travelled for business purposes in respect of which that allowance or advance is received shall be deemed to have been travelled during the year in which that allowance or advance is paid;

[Sub­paragraph (ii) substituted by section 6(a) of Act 85 of 1987 and amended by section 9(b) of Act 129 of 1991, by section 8(1)(a) of Act 21 of 1995, by section 6(1)(a) of Act 28 of 1997, by section 24(1) of Act 30 of 1998, bysection 4(a) of Act 9 of 2005, by section 21 of Act 9 of 2006, by section 11(1)(a) of Act 17 of 2009, by section 10(1)(b) of Act 7 of 2010 and by section 6(b) of Act 34 of 2019]

 

(iii)  where such allowance or advance is based on the actual distance travelled by the recipient in using a motor vehicle on business (excluding the said private travelling), or such actual distance is proved to the satisfaction of the Commissioner to have been travelled by the recipient, the amount expended by the recipient on such business travelling shall, unless the contrary appears, be deemed to be an amount determined on such actual distance at the rate per kilometre fixed by the Minister of Finance by notice in the Gazette for the category of vehicle used: Provided that where an allowance or advance is deemed to have accrued under section 7B to the recipient in the year of assessment during which that allowance or advance is paid, the distance travelled for business purposes in respect of which that allowance or advance is received shall be deemed to have been travelled during the year in which that allowance or advance is paid;

[Sub­paragraph (iii) amended by section 6(c) of Act 34 of 2019]

 

(iiiA)  where the portion of the allowance or advance which is claimed by the recipient to be actually expended is calculated based on accurate data furnished by the recipient in respect of any vehicle –

 

(aa)   in the case of a vehicle that is being leased, the total amount of payments in respect of that lease may not in any year of assessment exceed an amount of the fixed cost determined by the Minister in the notice contemplated in subparagraph (ii), for the category of vehicle used;

 

(bb)   in any other case –

 

(A)    the wear and tear of that vehicle must be determined over a period of seven years from the date of original acquisition by that recipient and the cost of the vehicle must for this purpose be limited to R800 000, or such other amount determined by the Minister by notice in the Gazette; and

[Sub-item (A) substituted by section 5(1) of Act 42 of 2014, by section 6(1) of Act 14 of 2017, by section 5(1) of Act 22 of 2020 and by section 5(1) of Act 19 of 2023 effective on 1 March, 2023 and applicable in respect of years of assessment commencing on or after that date]

 

(B)    the finance charges in respect of any debt incurred in respect of the purchase of that vehicle must be limited to an amount which would have been incurred had the original debt been R800 000, or such other amount determined by the Minister in terms of subitem (A);

[Sub-item (B) substituted by section 5(1) of Act 42 of 2014, by section 6(1) of Act 14 of 2017, by section 5(1) of Act 22 of 2020 and by section 5(1) of Act 19 of 2023 effective on 1 March, 2023 and applicable in respect of years of assessment commencing on or after that date]

 

(iv)    where any motor vehicle which is owned or leased by an employee, his spouse or his child, whether directly or indirectly by virtue of an interest in a company or trust or otherwise, has been let to the employer or any associated institution, as defined in paragraph 1 of the Seventh Schedule, in relation to the employer, the sum of the rental paid by that employer or associated institution and any expenditure defrayed by that employer or associated institution in respect of the vehicle, shall be deemed to be an allowance paid to the employee in respect of transport expenses, and in such case the said rental shall for the purposes of this Act (excluding this paragraph) be deemed not to have been received by or to have accrued to the lessor of such motor vehicle, and for the purposes of paragraph 2(b) of the Seventh Schedule such employee shall be deemed not to have been granted the right to use such motor vehicle.

[Paragraph (b) amended by section 12(1)(b) of Act 30 of 2002 deemed effective on 1 March, 2002. Subparagraph (iv) added by section 5(1)(a) of Act 101 of 1990 and substituted by section 4(1) of Act 5 of 2026 effective on 1 March, 2026 and applicable in respect of years of assessment commencing on or after that date]

 

(c)     A recipient shall, for the purposes of paragraph (a)(i) (bb), be deemed to have actually expended, –

 

(i)      where that recipient proves to the Commissioner the amount of the expenses incurred by him or her in respect of accommodation, meals or other incidental costs (other than any amount of expenditure borne by the employer otherwise than by way of payment or granting of the allowance), the amount so actually incurred but limited to the amount of the allowance or advance paid or granted to meet those expenses; or

 

(ii)     for each day or part of a day in the period during which that recipient is absent from his or her usual place of residence, such amount in respect of meals and other incidental costs, or incidental costs only, as the Commissioner may determine for a country or region for the relevant year of assessment by way of notice in the Gazette, but limited to the amount of the allowance paid or granted to meet those expenses: Provided that this subparagraph does not apply to the extent that –

 

(aa)   the employer has borne the expenses (otherwise than by way of granting the allowance or advance) in respect of which the allowance was paid or granted for that day or part of that day; or

 

(bb)   the recipient has proved to the Commissioner any amount of actual expenditure in respect of meals or incidental costs for that day or part of that day, as contemplated in subparagraph (i).

 

(d)     Any allowance granted to the holder of any public office contemplated in paragraph (e) to enable him to defray expenditure incurred by him in connection with such office shall for the purposes of paragraph (a) be deemed to have been so expended by him to the extent that expenditure relevant to such allowance and not otherwise recoverable by him has actually been incurred by him for the purposes of his office in respect of –

 

(i)      secretarial services, duplicating services, stationery, postage, telephone calls, the hire of office accommodation and the maintenance of such accommodation;

 

(ii)     travelling;

 

(iii)    hospitality extended at any official or civic function which the holder of such office is by reason of the nature of such office normally expected to arrange;

 

(iv)    ……….

 

(v)     subsistence and incidental costs incurred in the circumstances contemplated in paragraph (c).

 

(e)     For the purposes of paragraph (d) the holder of a public office includes –

 

(i)      the President, Deputy President, a Minister, Deputy Minister, a member of the National Assembly, a permanent delegate to the National Council of Provinces, a Premier, a member of an Executive Council or a member of a provincial legislature;

 

(ii)     any member of a municipal council, a traditional leader, a member of a provincial House of Traditional Leaders and a member of the Council of Traditional Leaders; and

 

(iii)    a person occupying the office of president, chairman or chief executive officer of any non-profitmaking organization which is organized on a national or regional basis to represent persons with common interests and the funds of which are derived wholly or mainly from subscriptions of members or donations from the general public.

 

(f)      Where it is expected of any person contemplated in paragraph (e) (i) to defray any expenditure referred to in paragraph (d) out of his salary received as the holder of any public office, an amount equal to a portion (which shall be determined by the National Assembly or the President, as the case may be, as provided for in the Remuneration of Public Office Bearers Act, 1998 (Act No. 20 of 1998)) of such salary shall for the purposes of paragraph (d) be deemed to be an allowance granted to such person.

 

(g)     Where, during any year of assessment, any person contemplated in paragraph (e) has held a public office for less than 12 months, the amount determined in terms of paragraph (f), shall be reduced to an amount which bears to the relevant amount, the same ratio as the number of months (in the determination of which a part of a month shall be reckoned as a full month), for which the office was held bears to 12 months.

 

(2)     ……….

 

(3)     ……….

Subsection 2 of section 7B of ITA

Posted on by admin_kmos

(2)     In determining the taxable income derived by any person during a year of assessment, any amount to which an employee becomes entitled from an employer in respect of variable remuneration is deemed to-

(a)     accrue to the employee; and

(b)     constitute expenditure incurred by the employer,

on the date during the year of assessment on which the amount is paid to the employee by the employer: Provided that where the employee is deceased before the date of payment, the amount is deemed to accrue to the employee and constitutes expenditure incurred by the employer, on the day during the year of assessment prior to the date of the employee’s death.

[Section 7B inserted by section 8(1) of Act 22 of 2012 with effect from 1 March, 2013 and applicable in respect of amounts accrued or expenditure incurred on or after that date. Subsection (2) amended by section 2(1)(c) of Act 20 of 2022 with effect from 1 March, 2023 and applicable in respect of amounts accrued or expenditure incurred on or after that date]

“Variable remuneration” definition of section 7B of ITA

Posted on by admin_kmos

“variable remuneration” means-

(a)     overtime pay, bonus or commission contemplated in the definition of “remuneration” in paragraph 1 of the Fourth Schedule;

(b)     an allowance or advance paid in respect of transport expenses as contemplated in section 8(1)(b)(ii) or (iii);

[Paragraph (b) substituted by section 3(1)(a) of Act 34 of 2019 effective on 1 March, 2020 and applicable in respect of amounts accrued or expenditure incurred on or after that date]

(c)     any amount which an employer has during any year of assessment become liable to pay to an employee in consequence of the employee having during such year become entitled to any period of leave which had not been taken by the employee during that year.

(d)     any night shift allowance;

[Paragraph (d) added by section 3(1)(b) of Act 34 of 2019 effective on 1 March, 2020 and applicable in respect of amounts accrued or expenditure incurred on or after that date]

(e)     any standby allowance;

[Paragraph (e) added by section 3(1)(b) of Act 34 of 2019 and substituted by section 2(1)(a) of Act 20 of 2022 with effect from 1 March, 2023 and applicable in respect of amounts accrued or expenditure incurred on or after that date]

(f)      any amount paid or granted in reimbursement of any expenditure as contemplated in section 8(1)(a)(ii); or

[Paragraph (f) added by section 3(1)(b) of Act 34 of 2019 and substituted by section 2(1)(a) of Act 20 of 2022 with effect from 1 March, 2023 and applicable in respect of amounts accrued or expenditure incurred on or after that date]

(g)     any amount of “remuneration” as defined in paragraph 1 of the Fourth Schedule (other than a bonus) that is determined based on the employee’s work performance.

[Paragraph (g) added by section 2(1)(b) of Act 20 of 2022 with effect from 1 March, 2023 and applicable in respect of amounts accrued or expenditure incurred on or after that date]

Section 6quat (ITA) – Rebate or deduction in respect of foreign taxes on income

Posted on by admin_kmos

6quat.    Rebate or deduction in respect of foreign taxes on income

 

(1)     Subject to subsection (2), where the taxable income of any resident during a year of assessment includes-

 

(a)     any income received by or accrued to such resident from any source outside the Republic; or

 

(b)     any proportional amount contemplated in section 9D; or

 

(c)     ……….

 

(d)     ……….

 

(e)     any taxable capital gain contemplated in section 26A, from a source outside the Republic; or

 

(f)      any amount-

 

(i)      contemplated in paragraph (a) or (b) which is received by or accrued to any other person and which is deemed to have been received by or accrued to such resident in terms of section 7;

 

(ii)     of capital gain of any other person from a source outside the Republic and which is attributed to that resident in terms of paragraph 68, 69, 70, 71, 72 or 80 of the Eighth Schedule; or

 

(iii)    contemplated in paragraphs (a), (b) or (e) which represents capital of a trust, and which is included in the income of that resident in terms of section 25B(2A) or taken into account in determining the aggregate capital gain or aggregate capital loss of that resident in terms of paragraph 80(3) of the Eighth Schedule,

 

in determining the normal tax payable in respect of that taxable income there must be deducted a rebate determined in accordance with this section.

[Words following paragraph (f) substituted by section 10 of Act 15 of 2016 effective on 19 January 2017]

 

(1A)  For the purposes of subsection (1), the rebate shall be an amount equal to the sum of any taxes on income proved to be payable to any sphere of government of any country other than the Republic, without any right of recovery by any person (other than a right of recovery in terms of any entitlement to carry back losses arising during any year of assessment to any year of assessment prior to such year of assessment), by-

 

(a)     such resident in respect of-

 

(i)      any income contemplated in subsection (1)(a); or

 

(ii)     ……….

 

(iii)    any amount of taxable capital gain as contemplated in subsection (1)(e); or

 

(b)     any controlled foreign company, in respect of such proportional amount contemplated in subsection (1)(b), subject to section 72A(3); or

 

(c)     ……….

 

(d)     ……….

 

(e)     ……….

 

(f)      any other person contemplated in subsection (1)(f)(i) or (ii) or any trust contemplated in subsection (1)(f)(iii), in respect of the amount included in the taxable income of that resident as contemplated in subsection (1)(f),

 

which is so included in that resident’s taxable income: Provided that-

 

(i)      where such resident is a member of any partnership or a beneficiary of any trust and such partnership or trust is liable for tax as a separate entity in such other country, a proportional amount of any tax payable by such entity, which is attributable to the interest of such resident in such partnership or trust, shall be deemed to have been payable by such resident; and

 

(ii)     for the purposes of this subsection, the amount so included in such resident’s taxable income must be determined-

 

(aa)   without regard to section 10B(3); and

 

(bb)   by replacing the percentages in paragraph 10(1)(a), (b)(i), (iii) and (iv), and (c) of the Eighth Schedule with 100 per cent.

]Paragraph (ii) substituted by section 2(1)(a) of Act 42 of 2024 effective on 1 January, 2025 and applicable in respect of years of assessment commencing on or after that date. Subparagraph (bb) substituted by section 2 of Act 5 of 2026]

[Subsection (1A) amended by section 8(c) and (f) of Act 5 of 2001, by section 9(1)(c) of Act 74 of 2002 and by section 3(1)(a) of Act 22 of 2012 deemed to have come into operation (a) on 1 March, 2012 and applicable in respect of foreign dividends received or accrued on or after that date insofar as it applies to any person that is a natural person, deceased estate, insolvent estate or trust; and (b) on 1 April, 2012 and applicable in respect of foreign dividends received or accrued on or after that date insofar as it applies to any person that is a person other than a natural person, deceased estate, insolvent estate or trust]

 

(1B)   Notwithstanding the provisions of subsection (1A)-

 

(a)     the rebate or rebates of any tax proved to be payable as contemplated in subsection (1A), shall not in aggregate exceed an amount which bears to the total normal tax payable the same ratio as the total taxable income attributable to the income, proportional amount, taxable capital gain or amount, as the case may be, which is included as contemplated in subsection (1), bears to the total taxable income:

 

Provided that –

 

(i)      in determining the amount of the taxable income that is attributable to that income, proportional amount, taxable capital gain or amount-

 

(aa)   any allowable deductions contemplated in sections 11F and 18A must be deemed to have been incurred proportionately in respect of taxable income derived from sources within and outside the Republic;

 

(bb)   the deduction under section 11F must be allocated in relation to the taxable income from sources within and outside the Republic before taking into account any deduction in terms of that section, subsection (1C) and section 18A; and

 

(cc)   the deduction under section 18A must be allocated in relation to taxable income from sources within and outside the Republic before taking into account any deduction in terms of that section and subsection (1C);

[Paragraph (i) of the proviso substituted by section 11 of Act 24 of 2011, section 4 of Act 17 of 2017 and section 7 of Act 23 of 2018 effective on 1 March 2018, applies in respect of years of assessment commencing on or after that date]

 

(iA)   the taxes contemplated in subsection (1A)(b) that are attributable to any proportional amount which-

 

(aa)    ……….

 

(bb)   relates to any amount contemplated in section 9D(9A)(a) which is not excluded from the application of section 9D(2) in terms of that section or section 9D(9)(b),

 

shall in aggregate be limited to the amount of the normal tax which is attributable to those proportional amounts;

 

(iB)   the taxes contemplated in subsection (1A)(a)(iii) that are attributable to any taxable capital gain must in aggregate be limited to the amount of normal tax that is attributable to that taxable capital gain;

[Paragraph (iB) inserted by section 8(a) of Act 31 of 2005 and substituted by section 2(1)(b) of Act 42 of 2024 effective on 1 January, 2025 and applicable in respect of years of assessment commencing on or after that date]

 

 

(ii)     where the sum of any such taxes proved to be payable (excluding any taxes contemplated in paragraphs (iA) and (iB) of this proviso) exceeds the rebate as so determined (hereinafter referred to as the excess amount), that excess amount may-

 

(aa)   be carried forward to the immediately succeeding year of assessment and shall be deemed to be a tax on income paid to the government of any other country in that year; and

 

(bb)   be set off against the amount of any normal tax payable by that resident during that year of assessment in respect of any amount derived from any other country which is included in the taxable income of that resident during that year, as contemplated in subsection (1), after any tax payable to the government of any other country in respect of any amount so included during such year of assessment which may be deducted in terms of subsection (1) and (1A), has been deducted from the amount of such normal tax payable in respect of such amount so included; and

 

(iii)    the excess amount shall not be allowed to be carried forward for more than seven years reckoned from the year of assessment when such excess amount was for the first time carried forward;

 

(b)     ……….

 

(c)     ……….

 

(d)     ……….

 

(e)     ……….

 

(1C)

 

(a)     For the purpose of determining the taxable income derived by any resident from carrying on any trade, there may at the election of the resident be allowed as a deduction from the income of such resident so derived the sum of any taxes on income (other than taxes contemplated in subsection (1A)) paid or proved to be payable by that resident to any sphere of government of any country other than the Republic, without any right of recovery by any person other than in terms of a mutual agreement procedure in terms of an international tax agreement or a right of recovery in terms of any entitlement to carry back losses arising during any year of assessment to any year of assessment prior to such year of assessment.

 

(b)     Where, during any year of assessment, any amount was deducted in terms of this  subsection from the income of a resident and, in any year of assessment subsequent to that year of assessment, that resident receives any amount by way of refund in respect of the amount so deducted or is discharged from any liability in respect of that amount, so much of the amount so received or so much of the amount of that discharge as does not exceed that amount must be included in the income of that resident in respect of that subsequent year of assessment.

[Subsection (1C) inserted by section 7 of Act 35 of 2007 and substituted by section 3 of Act 22 of 2012, section 6 of Act 25 of 2015 and section 10 of Act 15 of 2016 effective on 1 January 2016, applies in respect of years of assessment commencing on or after that date]

 

(1D)   Notwithstanding subsection (1C), the deduction of any tax paid or proved to be payable as contemplated in that subsection shall not in aggregate exceed the total taxable income (before taking into account any such deduction) attributable to income which is subject to taxes as contemplated in that subsection: Provided that in determining the amount of the taxable income that is attributable to that income-

 

(a)     any allowable deductions contemplated in sections 11F and 18A must be deemed to have been incurred proportionately in respect of attributable and non-attributable taxable income;

 

(b)     the deduction under section 11F must be allocated in relation to the taxable income from attributable and non-attributable taxable income before taking into account any deduction in terms of that section, subsection (1C) and section 18A; and

 

(c)     the deduction under section 18A must be allocated in relation to attributable and non-attributable taxable income before taking into account any deduction in terms of that section and subsection (1C).

[Subsection (1D) inserted by section 7 of Act 35 of 2007, substituted by section 6 of Act 25 of 2015, section 4 of Act 17 of 2017 and section 7 of Act 23 of 2018 effective on 1 March 2018, applies in respect of years of assessment commencing on or after that date]

 

(2)     The rebate under subsection (1) and the deduction under subsection (1C) shall not be granted in addition to any relief to which the resident is entitled under any agreement between the governments of the Republic and the said other country for the prevention of or relief from double taxation, but may be granted in substitution for the relief to which the resident would be so entitled.

 

(3)     For the purposes of this section-

 

“taxes on income” does not include any compulsory payment to the government of any other country which constitutes a consideration for the right to extract any mineral or natural oil;

 

(4)     For the purpose of this section the amount of any foreign tax proved to be payable as contemplated in-

 

(a)     subsection (1A)(a) or (f) or any amount paid or proved to be payable as contemplated in subsection (1C) in respect of any amount which is included in the taxable income of any resident during any year of assessment, shall be translated to the currency of the Republic on the last day of that year of assessment by applying the average exchange rate for that year of assessment; or

 

(b)     subsection (1A)(b) in respect of any amount which is included in the taxable income of any resident during any year of assessment, shall be translated to the currency of the Republic on the last day of the foreign tax year of the controlled foreign company in respect of which the proportional amount referred to in that subsection is determined, by applying the average exchange rate for that foreign tax year.

[Subsection (4) substituted by section 9(1)(l) of Act 74 of 2002, by section 7(e) of Act 35 of 2007, by section 7(a) of Act 18 of 2009, by section 6(1)(c) of Act 25 of 2015 and by section 2(1)(c) of Act 42 of 2024 effective on 31 December, 2024 and applicable in respect of foreign tax years of controlled foreign companies ending on or after that date]

 

(4A)  If the amount translated in accordance with subsection (4) includes a number of cents that is less than one rand, that amount must be rounded off to the nearest rand.

 

(5)     Notwithstanding the provisions of sections 93, 99(1) and 100 of the Tax Administration Act, an additional or reduced assessment in respect of a year of assessment to give effect to subsections (1) and (1A) may be made within a period that does not exceed six years from the date of the original assessment in respect of that year.

[Section 6quat inserted by section 9 of Act 89 of 1969, repealed by section 5 of Act 94 of 1983, inserted by section 5 of Act 85 of 1987, amended by section 5 of Act 28 of 1997, by section 12 of Act 53 of 1999 and by section 16(1) of Act 30 of 2000, substituted by section 4 of Act 59 of 2000(as amended by section 125(1) of Act 74 of 2002) and amended by section 7(a) of Act 35 of 2007. Subsection (5) amended by section 9(1)(m) of Act 74 of 2002 and substituted by section 7(e) of Act 35 of 2007, by section 11(1)(g) of Act 24 of 2011, by section 271 read with paragraph 29 of Schedule 1 of Act 28 of 2011, by section 3 of Act 39 of 2013 and by section 2 of Act 18 of 2023]

“Dependent” definition of section 6B of ITA

Posted on by admin_kmos

‘dependant’ means-

(a)     a person’s spouse;

(b)     a person’s child and the child of his or her spouse;

(c)     any other member of a person’s family in respect of whom he or she is liable for family care and support; or

[Paragraph (c) amended by section 6 of Act 23 of 2018 effective on 17 January 2019]

(d)     any other person who is recognised as a dependant of that person in terms of the rules of a medical scheme or fund contemplated in section 6A(2)(a) (i) or (ii),

at the time the fees contemplated in section 6A(2)(a) were paid, the amounts contemplated in paragraph (a) and (b) of the definition of ‘qualifying medical expenses’ were paid or the expenditure contemplated in paragraph (c) of that definition was incurred and paid;