Category: PART I – Normal Tax (ITA)

Section 5 (ITA) – Levy of normal tax and rates thereof

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5.     Levy of normal tax and rates thereof

(1)     Subject to the provisions of the Fourth Schedule there shall be paid annually for the benefit of the National Revenue Fund, an income tax (in this Act referred to as the normal tax) in respect of the taxable income received by or accrued to or in favour of –

(a)     ……….

(b)     ……….

(c)     any person (other than a company) during the year of assessment ending during the period of 12 months ending the last day of February each year; and

[Paragraph (c) substituted by section 10(1)(b) of Act 30 of 2002, by section 15(b) of Act 45 of 2003 and by section 4(1) of Act 13 of 2016 deemed effective on 1 March, 2016 and applicable in respect of years of assessment commencing on or after that date]

(d)     any company during every financial year of such company.

(2)

(a)     The Minister may announce in the national annual budget contemplated in section 27(1) of the Public Finance Management Act, 1999, (Act No. 1 of 1999), that, with effect from a date or dates mentioned in that announcement, the rates of tax chargeable in respect of taxable income will be altered to the extent mentioned in the announcement.

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

[Subsection (2) substituted by section 6 of Act 95 of 1967, section 5 of Act 103 of 1976, section 5 of Act 113 of 1977, section 4 of Act 20 of 2006, section 4 of Act 8 of 2007, section 6 of Act 15 of 2016 and section 3 of Act 23 of 2018 effective on 17 January 2019]

(3)     ……….

(4)     ……….

(5)     ……….

(6)     ……….

(7)     ……….

[Subsection (7) added by section 6 of Act 88 of 1965, substituted by section 7 of Act 55 of 1966, deleted by section 5 of Act 65 of 1973, inserted by section 5 of Act 103 of 1976 and substituted by section 271 of Act 28 of 2011 and deleted by section 6 of Act 15 of 2016 efffective on 19 January 2017]

(8)     ……….

(9)     For the purposes of subsection (10) “special remuneration” means any amount received by or accrued to any mineworker over and above his normal remuneration and any regular allowance, in respect of special services rendered by him (otherwise than in the course of his normal duties) in combating any fire, flood, subsidence or other disaster in a mine or in rescuing persons trapped in a mine or in performing any hazardous task during any emergency in a mine, if such services are rendered by him as a member of a team recognized by the management of the mine and the members of such team have been appointed for the purpose of rendering such services.

(10)   Where any taxpayer’s income includes any special remuneration, or where the provisions of paragraph 15(3), 17 or 19(1) of the First Schedule are applicable in the case of the taxpayer in respect of any year of assessment, the normal tax (excluding tax on any lump sum benefit or severance benefit) payable by the taxpayer in respect of such year (as determined before the deduction of any rebate) shall be determined in accordance with the formula-

Y = (             A             ) x B

             B + D – C

in which formula-

(a)     ‘Y’ represents the amount of normal tax to be determined;

(b)     ‘A’ represents the amount of normal tax (as determined before the deduction of any rebate) calculated at the full rate of tax chargeable for the said year in respect of taxable income equal to the amount represented by the expression ‘B + D – C’ in the formula;

(c)    ‘B’ represents the taxpayer’s taxable income (excluding any lump sum benefit or severance benefit) for the said year;

[Paragraph (c) substituted by section 3 of Act 23 of 2018 effective on 17 January 2019]

(d)     ‘C’ represents an amount equal to the sum of-

(i)      the amount of any special remuneration (as defined in subsection (9)) which is included in the taxpayer’s income for the said year;

(ii)     where the provisions of paragraph 15(3) of the First Schedule are in the case of the taxpayer applicable in respect of the said year, an amount determined in accordance with those provisions as being the amount, if any, by which the taxable income derived by the taxpayer during the said year from the disposal of plantations and forest produce exceeds the annual average taxable income derived by the taxpayer from that source over the three years of assessment immediately preceding the said year;

(iii)    where the provisions of paragraph 17 of the First Schedule are in the case of the taxpayer applicable in respect of the said year, an amount equal to so much of the taxable income of the taxpayer for such year as has been derived from the disposal of sugar cane as a result of fire in the taxpayer’s cane fields and but for such fire would not have been derived by the taxpayer in that year; and

(iv)    where the provisions of subparagraph (1) of paragraph 19 of the First Schedule are in the case of the taxpayer applicable in respect of the said year, the amount by which the taxpayer’s taxable income derived from farming for that year exceeds the taxpayer’s average taxable income from farming as determined in relation to that year in accordance with subparagraph (2) of the said paragraph; and

(e)     ‘D’ represents an amount equal to so much of any current contribution to a pension fund, provident fund or retirement annuity fund as is allowable as a deduction in terms of section 11F solely by reason of the inclusion in the taxpayer’s income of any amount contemplated in paragraph (d)(i), (ii), (iii) or (iv):

[Paragraph (e) substituted by section 5 of Act 31 of 2013 effective on 1 March 2015 – comes into operation in terms of section 5 of Act 31 of 2013 effective on 1 March 2015, substituted by section 120 of Act 43 of 2014, effective on 1 March 2016, and operation date in terms of section 120 of Act 43 of 2014 effective on 1 March 2016, repealed by section 156 of Act 25 of 2015 effective on 20 January 2015, and section 3 of Act 17 of 2017 effective on 1 March 2016]

Provided that in no case shall the amount of normal tax so payable be less than the amount of normal tax which would be chargeable at the relevant rate fixed in terms of subsection (2) in respect of the first rand of taxable income, and nothing in this section contained shall be construed as relieving any person from liability for taxation under this Act upon any portion of that person’s taxable income.

Section 9K (ITA) – Listing of security on exchange outside Republic

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9K.    Listing of security on exchange outside Republic

(1)     Where a natural person or a trust that is a resident holds a security in a company and that security is delisted on an exchange as defined in section 1 of the Financial Markets Act and licenced under section 9 of that Act, and subsequent to that delisting that security is listed on an exchange outside the Republic, that person must be treated as having—

(a)     disposed of that security for an amount received or accrued equal to the market value of that security as contemplated in the definition of “market value” in section 9H(1) on the day that the security is listed on the exchange outside the Republic; and

(b)     reacquired that security on the same day on which that security is treated as having been disposed of under paragraph (a) for expenditure in an amount equal to that market value.

(2)     For the purposes of section 9C(2), a security that is listed on an exchange outside the Republic as contemplated in subsection (1) must be treated to be one and the same security that is delisted.

[Section 9K inserted by section 9(1) of Act 23 of 2020 effective on 1 March, 2021 and applicable in respect of any security listed on an exchange outside the Republic on or after that date]

“Branch policy” definition of section 28 of ITA

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(1)     For the purposes of this section-

“branch policy” means a policy contemplated in paragraph (c) of the definition of “short­term policy” that is also a long­term policy as defined in section 1 of the Long­term Insurance Act;

[Definition of “branch policy” inserted by section 33(1)(a) of Act 34 of 2019]

“Issue price” definition of section 8E of ITA

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“issue price” in relation to a share in a company means the amount that was received by or that accrued to that company in respect of the issue of that share;

[Definition of “issue price” inserted by section 8(1)(d) of Act 34 of 2019 deemed effective on 21 July, 2019 and applicable in respect of years of assessment ending on or after that date]

Section 10(1)(gJ) of ITA

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(gJ)   any amount received by or accrued to a person who is a member of a bargaining council that is established in terms of section 27 of the Labour Relations Act, 1995 (Act No. 66 of 1995), from a scheme or fund as contemplated in section 28(1)(g) of that Act, other than an amount from a pension fund or a provident fund;

[Paragraph (gJ) inserted by section 22 of Act 23 of 2018 effective on 1 March 2019]

“Market value” definition of section 19 of ITA

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‘market value’, in relation to shares acquired or held by reason or as a result of implementing a concession or compromise in respect of a debt, means the market value of those shares immediately after the implementation of that concession or compromise.

[Definition of “market value” inserted by section 36 of Act 23 of 2018 effective on 1 January 2018, applies in respect of years of assessment commencing on or after that date]

Section 9J (ITA) – Interest of non-resident persons in immovable property

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9J.     Interest of non-resident persons in immovable property

(1)     Any amount received or accrued in respect of the disposal by a person of trading stock consisting of-

(a)     immovable property situated in the Republic held by that person; or

(b)     any interest or right of whatever nature of that person to or in immovable property situated in the Republic,

shall be an amount received or accrued from a source within the Republic.

(2)     For purposes of subsection (1), any interest or right in immovable property situated in the Republic includes-

(a)     rights to variable or fixed payments as consideration for the working of, or the right to work mineral deposits, sources and other natural resources; or

(b)     any equity shares held by a person in a company or ownership or the right to ownership of a person in any other entity or a vested interest of a person in any assets of any trust, if-

(i)      80 per cent or more of the market value of those equity shares, ownership or right to ownership or vested interest, as the case may be, at the time of disposal thereof is attributable directly or indirectly to immovable property situated in the Republic or any interest or right of whatever nature in or to immovable property situated in the Republic including rights to variable or fixed payments as consideration for the working of, or the right to work mineral deposits, sources and other natural resources in the Republic; and

[Subparagraph (i) substituted by section 8 of Act 23 of 2020]

(ii)     in the case of a company or other entity, that person (whether alone or together with any connected person in relation to that person), directly or indirectly, holds at least 20 per cent of the equity shares in that company or ownership or right to ownership of that other entity.

[Section 9J inserted by section 21 of Act 23 of 2018 effective on 17 January 2019]

Section 9HB (ITA) – Transfer of asset between spouses

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9HB. Transfer of asset between spouses

(1)

(a)     A person (hereinafter referred to as ‘the transferor’) must disregard any capital gain or capital loss determined in respect of the disposal of an asset to his or her spouse (hereinafter referred to as ‘the transferee’).

(b)     The transferee must be treated as having-

(i)   acquired the asset on the same date that such asset was acquired by the transferor;

[Sub­paragraph (i) substituted by section 12(1) of Act 34 of 2019 deemed effective on 17 January, 2019]

(ii)     incurred an amount of expenditure equal to the expenditure contemplated in paragraph 20 of the Eighth Schedule that was incurred by that transferor in respect of that asset;

(iii)    incurred that expenditure on the same date and in the same currency that it was incurred by the transferor;

(iv)    used that asset in the same manner that it was used by the transferor; and

(v)     received an amount equal to any amount received by or accrued to that transferor in respect of that asset that would have constituted proceeds on disposal of that asset had that transferor disposed of it to a person other than the transferee.

(2)       For the purposes of subsection (1)-

(a)     a person whose spouse dies must be treated as having disposed of an asset to that spouse immediately before the date of death of that spouse, if ownership of that asset is acquired by the deceased estate of that spouse in settlement of a claim arising under section 3 of the Matrimonial Property Act, 1984 (Act No. 88 of 1984); or

(b)     a person must be treated as having disposed of an asset to his or her spouse, if that asset is transferred to that spouse in consequence of a divorce order or, in the case of a union contemplated in paragraph (b) or (c) of the definition of ‘spouse’ in section 1, an agreement of division of assets which has been made an order of court.

(3)      A person who disposes of an asset consisting of trading stock, livestock or produce contemplated in the First Schedule to his or her spouse, must be treated as having disposed of that asset for an amount received or accrued that is equal to the amount that was allowed as a deduction in respect of that asset for purposes of determining that person’s taxable income, before the inclusion of any taxable capital gain.

(4)     Where a person acquires an asset consisting of trading stock, livestock or produce contemplated in the First Schedule from his or her spouse, that person and his or her spouse must, for purposes of determining any taxable income derived by that person, be deemed to be one and the same person with respect to the date of acquisition of that asset by that person and the amount and date of incurral by that spouse of any cost or expenditure incurred in respect of that asset as contemplated in section 11(a) or 22(1) or (2).

(5)     This section must not apply in respect of the disposal of an asset by a person to his or her spouse who is not a resident, unless the asset disposed of is an asset contemplated in section 9J or in paragraph 2(1)(b) of the Eighth Schedule.

[Section 9HB inserted by section 20 of Act 23 of 2018 effective on 17 January 2019]