(j)      an allowance in respect of any debt due to the taxpayer, if that debt would have been allowed as a deduction under any other provision of this Part had that debt become bad, of an amount equal to-

(i)      if IFRS 9 is applied to that debt by that person for financial reporting purposes, other than in respect of lease receivables as defined in IFRS 9 that have not been included in income, the sum of-

(aa)   40 per cent of the aggregate of-

(A)    the loss allowance relating to impairment that is measured at an amount equal to the lifetime expected credit loss, as contemplated in IFRS 9, in respect of debt; and

[Sub-item (A) substituted by section 13(1)(b) of Act 23 of 2020 deemed effective on 28 October, 2020 and applicable in respect of years of assessment commencing on or after that date]

(B)    the amounts of debts included in the income of the taxpayer in the current or any previous year of assessment that are disclosed as bad debt written off for financial reporting purposes and that have not been allowed as a deduction under section 11(a) or (i) for the current or any previous year of assessment; and

(bb)   25 per cent of the loss allowance relating to impairment, as contemplated in IFRS 9, in respect of debt other than in respect of debt taken into account under item (aa); or

[Subparagraph (i) amended by section 13(1)(a) of Act 23 of 2020 deemed effective on 28 October, 2020 and applicable in respect of years of assessment commencing on or after that date. Item (bb) substituted by section 13(1)(c) of Act 23 of 2020 deemed effective on 28 October, 2020 and applicable in respect of years of assessment commencing on or after that date]

(ii)     if IFRS 9 is not applied to that debt by that person for financial reporting purposes, the sum of-

(aa)   40 per cent of so much of any debt, other than a debt contemplated in subparagraph (i), due to the taxpayer, if that debt is 120 days or more in arrears, after taking into account the value of any security in respect of that debt; and

[Item (aa) substituted by section 13(1)(d) of Act 23 of 2020 effective on 1 January, 2021 and applicable in respect of years of assessment commencing on or after that date]

(bb)   25 per cent of so much of any debt, other than a debt contemplated in subparagraph (i) or item (aa), due to the taxpayer, if that debt is 60 days or more in arrears, after taking into account the value of any security in respect of that debt:

[Item (bb) substituted by section 13(1)(d) of Act 23 of 2020 effective on 1 January, 2021 and applicable in respect of years of assessment commencing on or after that date]

Provided that an allowance under this paragraph must be included in the income of the taxpayer in the following year of assessment: Provided further that the Commissioner may, on application by a taxpayer, issue a directive that the percentage contemplated in subparagraph (i)(aa) or (ii)(aa) may be increased, to a percentage not exceeding 85 per cent after taking into account-

(a)     the history of a debt owed to that taxpayer, including the number of repayments not met, and the duration of the debt;

(b)     steps taken to enforce repayment of the debt;

(c)     the likelihood of the debt being recovered;

(d)     any security available in respect of that debt;

(e)     the criteria applied by the taxpayer in classifying debt as bad; and

(f)      such other considerations as the Commissioner may deem relevant;

[Paragraph (j) substituted by section 14(1)(e) of Act 89 of 1969, amended by section 10(1)(h) of Act 94 of 1983 and by section 18(c) of Act 31 of 2005 and substituted by section 22(1)(b) of Act 22 of 2012, by section 25(1)(e) of Act 23 of 2018 and by section 15(1)(a) of Act 34 of 2019]

(i)      the amount of any debt due to the taxpayer which has during the year of assessment become bad, provided such amount is included in the current year of assessment or was included in previous years of assessment in the taxpayer’s income;

[Paragraph (i) substituted by section 14(1)(d) of Act 89 of 1969, by section 10(1)(g) of Act 94 of 1983, by section 9(1)(e) of Act 113 of 1993, by section 22(1)(b) of Act 22 of 2012 and by section 17(1)(a) of Act 43 of 2014]

(2)     Notwithstanding the exemptions provided for in paragraphs (h) and (k) of subsection (1)-

(a)     ……….

(b)     the said exemptions shall not apply in respect of any portion of an annuity.

(3)     The exemptions from tax provided by any paragraph of subsection (1) shall not extend to-

(a)     any payments out of the receipts, accruals, amounts or profits mentioned in such paragraph; or

(b)     any tax leviable under this Act in respect of any taxable capital gain determined in accordance with the Eighth Schedule.

(4) . . . . . .

(5)

(a)     A person is disqualified from managing the collective interests common to all its members as mentioned in subsection (1)(e)(i)(cc)(A) if that person is disqualified in terms of section 6 of the Trust Property Control Act, 1988 (Act 57 of 1988), section 25A of the Nonprofit Organisations Act, 1997 (Act 71 of 1997), or section 69 of the Companies Act.

(b)     A person who manages the collective interests common to all its members, as mentioned in subsection (1)(e)(i)(cc)(A) in contravention of paragraph (a), shall be guilty of an offence and liable, on conviction, to a fine or to imprisonment for a period not exceeding 24 months.

[Subsection (5) added by section 3 of Act 18 of 2023]

(hB)  an allowance in respect of expenditure actually incurred and paid in the production of income to discharge all consideration, royalties or compensation otherwise payable to a community or natural person in respect of any existing consideration, contractual royalty, future consideration or compensation that accrued to that community or natural person as contemplated in Item 11 of Schedule II of the Petroleum Resources Development Act, 2002 (Act No. 28 of 2002): Provided that for any year of assessment, the allowance shall not exceed an amount equal to the expenditure incurred and paid divided by the number of years for which all consideration, royalties or compensation otherwise payable has been discharged;

(zJ)   any amount received by or accrued to or in favour of a registered micro business as defined in the Sixth Schedule, from the carrying on of a business in the Republic, other than an amount received by or accrued to a natural person registered as a micro business that constitutes-

(i)      investment income as defined in paragraph 1 of the Sixth Schedule; or

(ii)     remuneration as defined in the Fourth Schedule.

(h)     such allowance in respect of amounts included in the taxpayer’s gross income under paragraph (g) or paragraph (h) of the definition of “gross income” in section 1 as the Commissioner may deem reasonable having regard to any special circumstances of the case and, in the case of an amount so included under the said paragraph (h), to the original period for which the right of use or occupation was granted or, in the case of any amount so included under the said paragraph (h) in consequence of an agreement concluded on or after 1 July 1983, to the number of years taken into account in the determination of the relevant allowance granted to any other person under the provisions of paragraph (g) of this section: Provided that where there has on or after the twenty–ninth day of March, 1972, accrued to the taxpayer the right to have improvements effected on land or to buildings by any other person and an amount is required to be included in the taxpayer’s gross income under the said paragraph (h) with respect to such improvements, no allowance shall be made to the taxpayer under this paragraph in respect of such amount, if –

 

(i)      the taxpayer or such other person is a company and such other person or the taxpayer, as the case may be, is interested in more than 50 per cent of any class of shares issued by such company, whether directly as a holder of shares in that company or indirectly as a holder of shares in any other company; or

 

(ii)     both the taxpayer and such other person are companies and any third person is interested in more than 50 per cent of any class of shares issued by one of those companies and in more than 50 per cent of any class of shares issued by the other company, whether directly as a holder of shares in the company by which the shares in question were issued or indirectly as a holder of shares in any other company;

(zL)   any amount received or accrued previously prohibited as a deduction during any year of assessment under section 23(o)(iii) that is recovered in any subsequent year of assessment.

[Paragraph (zL) added by section 22 of Act 23 of 2018 effective on 1 April 2019 and applies in respect of years of assessment commencing on or after that date]