Category: PART I – Normal Tax (ITA)

Subsections 2, 3, 4, 5, 6, 7, 8, 10 and 11 of section 10A of ITA

Posted on by admin_kmos

(2)     There shall be exempt from normal tax so much of any annuity amount payable to a purchaser or his spouse or surviving spouse (as contemplated in paragraph (a) of the definition of “annuity contract” in subsection (1)), or to the deceased or insolvent estate of such spouse or surviving spouse as is determined in accordance with subsection (3) to represent the capital element of such amount.

(3)     The capital element of an annuity amount shall be –

(a)     a sum determined in accordance with the formula

             Y   =      A      x   C

                          B

in which formula –

(i)      “Y” represents the sum to be determined;

(ii)     “A” represents the amount of the total cash consideration given by the purchaser under the annuity contract in question as contemplated in paragraph (b) of the definition of “annuity contract” in subsection (1);

  

(iii)    “B” represents the total expected returns of all the annuities provided for in the annuity contract in question; and

(iv)    “C” represents the aforesaid annuity amount; or

(b)     where, by reason of any unpredictable contingency (other than the death or survival of any person), any amount payable by way of any annuity under the annuity contract in question is uncertain at the date on which the first payment by way of an annuity becomes due under that contract, such sum as may on the basis of a fair and reasonable calculation be taken to be the capital element of the aforesaid annuity amount: Provided that the said sum shall be determined in such manner that the capital element of all the annuity amounts becoming due during any year of assessment in respect of all the annuities under the said contract does not in total exceed an amount determined in accordance with the formula

Z   =      1      x   A

             N

in which formula –

(i)      “Z” represents the amount to be determined;

(ii)     “N” represents the probable number of years during which annuity amounts will be payable under the said annuity contract from the date on which the first of such amounts becomes due, due regard being had to the manner in which and the frequency with which such amounts are payable; and

  

 (iii)    “A” represents the amount of the total cash consideration given by the purchaser under the said annuity contract as contemplated in paragraph (b) of the definition of “annuity contract” in subsection (1); or


(c)     where such annuity amount is payable in consequence of the commutation or termination of the annuity contract concerned, an amount determined in accordance with the formula

X   =   A – D

in which formula –

(i)      “X” represents the amount to be determined;

(ii)     “A” represents the amount of the total cash consideration given by the purchaser under the annuity contract concerned as contemplated in paragraph (b) of the definition of “annuity contract” in subsection (1); and

(iii)    “D” represents the sum of the amounts determined in accordance with paragraphs (a) and (b) as representing the capital element of all annuity amounts payable under the annuity contract prior to the commutation or termination thereof.

  

(4)     The statutory actuary of an insurer who is a party to an annuity contract shall, before payment of the first annuity amount is made under such contract, or within such period as the Commissioner may allow, make a calculation (with due regard to the provisions of subsection (5)) in the manner prescribed in paragraph (a) of subsection (3) or, if the provisions of paragraph (b) of that subsection are applicable, in accordance with that paragraph, of the capital element of all the annuity amounts to be paid under the said contract: Provided that –

  

(i)      where the capital element is calculated under the said paragraph (a), it shall be sufficient if the capital element is calculated as a percentage to be applied to each of the said annuity amounts; or

(ii)     where the capital element is calculated under the said paragraph (b), it shall be sufficient if a calculation is made of the amount to be determined in accordance with the formula in the proviso to that paragraph.

  

(5)     A statutory actuary who makes any calculation as provided in subsection (4) or any recalculation as provided in subsection (6) (b), shall do so in accordance with generally accepted actuarial principles or practice, and where a determination has to be made of the life expectancy of any person for the purpose of a calculation of the expected return of any annuity or the probable number of years during which annuity amounts will be paid under any annuity contract, the mortality tables to be used for such determination shall be the select tables in the volume of tables published in 1953 at the University Press, Cambridge, for the Institute of Actuaries and the Faculty of Actuaries, entitled “The a (55) Tables for Annuitants”, and the age of the person concerned shall for the purposes of such determination be taken to be his age on his birthday immediately preceding the commencement of the annuity contract in question.

  

(6)    

(a)     Where any annuity contract is varied so that it no longer conforms with the requirements prescribed in the definition of “annuity contract” in subsection (1), the exemption conferred by subsection (2) in respect of the capital element of annuity amounts under that contract shall not apply in respect of such amounts under that contract which become due on or after the date of such variation.

(b)     Subject to the provisions of paragraph (a), where any annuity contract is varied as to the payment of any annuity or consideration payable thereunder, the capital element of annuity amounts becoming due thereunder after such variation is effected shall, with due regard to the provisions of subsection (5), be re–calculated by the statutory actuary of the insurer concerned.

(7)    

(a)    Where the capital element of annuity amounts has been calculated as provided in subsection (4) or has been re–calculated as provided in subsection (6) (b), the insurer concerned shall furnish each annuitant under the annuity contract in question, within one month after the date on which the calculation or re–calculation is made, as the case may be, or within such further period as the Commissioner may allow, with two copies of such calculation or re–calculation, as the case may be.

(b)     An annuitant who has received the two copies referred to in paragraph (a) shall submit one of them to the Commissioner as and when required by the Commissioner.

(c)     Where the capital element of annuity amounts has been calculated as provided in subsection (4) or has been re-calculated as provided in subsection (6)(b), the calculation or re-calculation shall apply in respect of all annuity amounts which become due to any person under the annuity contract in question and shall also apply to any year of assessment subsequent to the year of assessment in which the calculation or re-calculation took place.

[Paragraph (c) added by section 24 of Act 15 of 2016 effective on 8 January 2016] 

(8)     ……….

[Subsection (8) deleted by section 17 of Act 25 of 2015 effective on 8 January 2016]

(9)     ……….

(10)   ……….

[Subsection (10) substituted by section 271 of Act 28 of 2011 and deleted by section 24 of Act 15 of 2016 effective on 19 January 2017]

(11)   Where the cash consideration given by the purchaser and the annuity amount receivable under an annuity contract is denominated in any currency other than the currency of the Republic, the capital element of that annuity amount must be calculated in terms of subsection (3) in that other currency and must be translated to the currency of the Republic by applying the exchange rate applied in terms of section 25D in respect of the annuity amount payable during the relevant year of assessment.

Section 11(g) of ITA

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(g)     an allowance in respect of any expenditure actually incurred by the taxpayer, in pursuance of an obligation to effect improvements on land or to buildings, incurred under an agreement whereby the right of use or occupation of the land or buildings is granted by any other person, where the land or buildings are used or occupied for the production of income or income is derived therefrom: Provided that –

(i)      the aggregate of the allowances under this paragraph shall not exceed the amount stipulated in the agreement as the value of the improvements or as the amount to be expended on the improvements or, if no amount is so stipulated, an amount representing the fair and reasonable value of the improvements;

[Subparagraph (i) substituted by section 18 of Act 25 of 2015 effective on 8 January 2016]

(ii)     any such allowance shall not exceed for any one year such portion of the aggregate of the allowances under this paragraph as is equal to the said aggregate divided by the number of years (calculated from the date on which the improvements are completed, but not more than 25 years) for which the taxpayer is entitled to the use or occupation;

(iii)    if-

(aa)   the taxpayer is entitled to such use or occupation for an indefinite period; or

(bb)   the taxpayer or the person by whom such right of use or occupation was granted holds a right or option to extend or renew the original period of such use or occupation, the taxpayer shall for the purposes of this paragraph be deemed to be entitled to such use or occupation for such period as represents the probable duration of such use or occupation;

[Subparagraph (iii) substituted by section 19 of Act 7 of 2010 and section 18 of Act 25 of 2015 effective on 8 January 2016]

(iv)    the aggregate of the allowances under this paragraph in respect of any building or improvements referred to in section 13(1) or 27(2)(b) shall not exceed the cost (after the deduction of any amount which has been set off against the cost of such building or improvements under section 13(3) or section 27(4)) to the taxpayer of such building or improvements less the aggregate of the allowances in respect of such building or improvements made to the taxpayer under the said section 13(1) or 27(2)(b) or the corresponding provisions of any previous Income Tax Act;

(v)     ……….

(vi)    the provisions of this paragraph shall not apply in relation to any such expenditure incurred if the value of such improvements or the amount to be expended on such improvements, as contemplated in paragraph (h) of the definition of “gross income” in section 1, does not for the purposes of this Act constitute income of the person to whom the right to have such improvements effected has accrued;

(vii)   if during any year of assessment the agreement whereby the right of use or occupation of the land or buildings is granted is terminated before expiry of the period to which that taxpayer was entitled to the use or occupation, as contemplated in paragraph (ii) or (iii), so much of the allowance which may be allowed under this paragraph, which has not yet been allowed in that year or any previous year of assessment, shall be allowable as a deduction in that year of assessment;

Section 10(1)(r) of ITA

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(r)      any gratuity (other than a leave gratuity) received by or accrued to any person from public funds upon his retirement from any office or employment under the Government, including the Railway Administration and any provincial administration, or from the funds of the Land and Agricultural Bank of South Africa upon his retirement as a member of the board of the said Bank, which the Treasury declares to be free of tax;

Section 11(e) of ITA

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(e)     save as provided in paragraph 12(2) of the First Schedule, such sum as the Commissioner may think just and reasonable as representing the amount by which the value of any machinery, plant, implements, utensils and articles (other than machinery, plant, implements, utensils and articles in respect of which a deduction may be granted under section 12B, 12BA, 12C, 12DA, 12E(1), 12U or 37B) owned by the taxpayer or acquired by the taxpayer as purchaser in terms of an agreement contemplated in paragraph (a) of the definition of “instalment credit agreement” in section 1 of the Value-Added Tax Act and used by the taxpayer for the purpose of his or her trade has been diminished by reason of wear and tear or depreciation during the year of assessment: Provided that-

 

(i)      ……….

 

(iA)   no allowance may be made in respect of any machinery, plant, implement, utensil or article the ownership of which is retained by the taxpayer as a seller in terms of an agreement contemplated in paragraph (a) of the definition of ‘instalment credit agreement’ in section 1 of the Value-Added Tax Act;

 

(ii)     in no case shall any allowance be made for the depreciation of buildings or other structures or works of a permanent nature;

 

(iiA)  where any machinery, implement, utensil or article qualifying for an allowance under this paragraph is mounted on or affixed to any concrete or other foundation or supporting structure and –

 

(aa)   the foundation or supporting structure is designed for such machinery, implement, utensil or article and constructed in such manner that it is or should be regarded as being integrated with the machinery, implement, utensil or article; and

 

(bb)   the useful life of the foundation or supporting structure is or will be limited to the useful life of the machinery, implement, utensil or article mounted thereon or affixed thereto,

 

the said foundation or supporting structure shall for the purposes of this paragraph not be deemed to be a structure or work of a permanent nature but shall for the purposes of this Act be deemed to be a part of the machinery, implement, utensil or article mounted thereon or affixed thereto;

 

(iii)    ……….

[Subparagraph (iii) substituted by section 12 of Act 55 of 66 and section 10 of Act 21 of 1994 and deleted by section 18 of Act 25 of 2015 effective on 8 January 2016]

 

(iiiA)  no allowance shall be made under this paragraph in respect of any machinery, implement, utensil or article of which the cost has been allowed as a deduction from the taxpayer’s income under the provisions of section 24D;

 

(iv)    ……….

 

(v)     the value of any machinery, implements, utensils or articles used by the taxpayer for the purposes of his trade shall be increased by the amount of any expenditure (other than expenditure referred to in paragraph (a)) which is incurred by the taxpayer in moving such machinery, implements, utensils or articles from one location to another;

[Subparagraph (v) substituted by section 18 of Act 25 of 2015 effective on 8 January 2016]

 

(vi)    ……….

 

(vii)    where the value of any such machinery, implements, utensils or articles acquired by the taxpayer on or after 15 March 1984 is for the purposes of this paragraph to be determined having regard to the cost of such machinery, implements, utensils or articles, such cost shall be deemed to be the cost which the taxpayer would, if such taxpayer had acquired such machinery, implements, utensils or articles under a cash transaction concluded at arm’s length on the date on which the transaction for the acquisition of such machinery, implements, utensils or articles was in fact concluded, have incurred in respect of the direct cost of the acquisition of such machinery, implements, utensils or articles, including the direct cost of the installation or erection thereof;

[Paragraph (vii) added by section 11(1)(c) of Act 121 of 1984, amended by section 19(1)(c) of Act 7 of 2010 and substituted by section 18(1)(c) of Act 25 of 2015 and by section 8(1)(a) of Act 20 of 2022 deemed effective on 29 July, 2022 and applicable in respect of years of assessment ending on or after that date]

 

(viii)  ……….

 

(ix)    where any such machinery, plant, implement, utensil or article was used by the taxpayer during any previous year of assessment or years of assessment for the purposes of any trade carried on by such taxpayer, the receipts and accruals of which were not included in the income of such taxpayer during such year or years the period in use of such asset during such previous year or years shall be taken into account in determining the amount by which the value of such machinery, plant, implement, utensil or article has been diminished; and

[Paragraph (ix) added by section 15(c) of Act 59 of 2000, substituted by section 18(1)(c) of Act 60 of 2008 and by section 18(1)(c) of Act 25 of 2015 and amended by section 8(1)(b) of Act 20 of 2022 deemed effective on 29 July 2022 and applicable in respect of years of assessment ending on or after that date]

 

(x)     no allowance may be made in respect of any machinery, plant, implement, utensil or article acquired by the taxpayer as or with a “government grant” as defined in section 12P(1);

[Paragraph (e) amended by section 9(a) of Act 90 of 1962 and by section 9(a) of Act 90 of 1964, substituted by section 11(1)(a) of Act 88 of 1965 and amended by section 8(1)(b) of Act 90 of 1988, by section 11(1)(a) of Act 101 of 1990, by section 6(a) of Act 9 of 2005, by section 18(a) of Act 31 of 2005, by section 10(1)(a) of Act 3 of 2008, by section 19(1)(a) of Act 7 of 2010, by section 27(1)(a) of Act 31 of 2013, by section 26(1)(a) of Act 15 of 2016 and by section 11(1)(a) of Act 17 of 2023 effective on 1 March, 2023 and applicable in respect of assets brought into use on or after 1 March, 2023. Paragraph (x) added by section 8(1)(b) of Act 20 of 2022 effective on 29 July, 2022 and applicable in respect of years of assessment ending on or after that date]

Section 10(1)(q) of ITA

Posted on by admin_kmos

(q)     any bona fide scholarship or bursary, other than any scholarship or bursary contemplated in paragraph (qA), granted to enable or assist any person to study at a recognized educational or research institution: Provided that if any such scholarship or bursary has been so granted by an employer or an associated institution (as respectively defined in paragraph 1 of the Seventh Schedule) to an employee (as defined in the said paragraph) or to a relative of such employee, the exemption under this paragraph shall not apply –

[Words preceding the proviso substituted by section 16 of Act 17 of 2017 effective on 1 March 2018 and applies in respect of years of assessment commencing on or after that date]

(i)      in the case of a scholarship or bursary granted to so enable or assist any such employee, unless the employee agrees to reimburse the employer for any scholarship or bursary granted to that employee if that employee fails to complete his or her studies for reasons other than death, ill-health or injury;

(ii)     in the case of a scholarship or bursary granted to enable or assist any such relative of an employee so to study –

(aa)   if the remuneration proxy derived by the employee in relation to a year of assessment exceeded R600 000;

[Sub-paragraph (aa) amended by section 1(2)(c) of Act 3 of 2008, substituted by section 23(1)(t) of Act 31 of 2013, by section 23(1)(e) of Act 15 of 2016 and by section 7(1)(a) of Act 14 of 2017 and amended by section 10(1)(b) 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)   to so much of any scholarship or bursary contemplated in this subparagraph as in the case of any such relative, during the year of assessment, exceeds-

(A)    R20 000 in respect of-

[Words preceding subsubitem (AA) substituted by section 23 of Act 15 of 2016 and section 7 of Act 14 of 2017 effective on 1 March 2017, applies in respect of years of assessment commencing on or after that date]

(AA)  grade R to grade twelve as contemplated in the definition of ‘school’ in section 1 of the South African Schools Act, 1996 (Act No. 84 of 1996); or

(BB)  a qualification to which an NQF level from 1 up to and including 4 has been allocated in accordance with Chapter 2 of the National Qualifications Framework Act, 2008 (Act No. 67 of 2008);

[Subitem (A) substituted by section 16 of Act 25 of 2015 effective on 1 March 2013]

(B)    R60 000 in respect of a qualification to which an NQF level from 5 up to and including 10 has been allocated in accordance with Chapter 2 of the National Qualifications Framework Act, 2008 (Act 67 of 2008); and

[Sub-paragraph (bb) amended by section 1(2)(c) of Act 3 of 2008, substituted by section 23(1)(t) of Act 31 of 2013 and amended by section 10(1)(b) of Act 23 of 2020 effective on 1 March, 2021 and applicable in respect of years of assessment commencing on or after that date] 

[Item (B) substituted by section 23(1)(g) of Act 15 of 2016 and by section 7(1)(c) of Act 14 of 2017 deemed effective on 1 March, 2017 and applicable in respect of years of assessment commencing on or after that date]

(cc)   if any remuneration to which the employee was entitled or might in the future have become entitled was in any manner whatsoever reduced or forfeited as a result of the grant of such scholarship or bursary;

[Sub-paragraph (cc) added by section 10(1)(b) of Act 23 of 2020 effective on 1 March, 2021 and applicable in respect of years of assessment commencing on or after that date]

[Paragraph (q) deleted by section 12(1)(i) of Act 129 of 1991, inserted by section 10(1)(p) of Act 141 of 1992, amended by section 10(1)(f) of Act 28 of 1997, by section 13(1)(c) and (d) of Act 30 of 2002 and substituted by section 10(1)(o) of Act 20 of 2006 and amended by section 16(1)(h) of Act 17 of 2017 effective on 1 March, 2018 and applicable in respect of years of assessment commencing on or after that date] 

“Annuity contract” definition of section 10A of ITA

Posted on by admin_kmos

“annuity contract” means an agreement concluded between an insurer in the course of his insurance business and a purchaser, in terms of which –

 

(a)     the insurer agrees to pay to the purchaser or the purchaser’s spouse or surviving spouse an annuity or annuities (whether to one such person or to each of them) until the death of the annuitant or the expiry of a specified term;

 

(b)     the purchaser agrees to pay to the insurer a lump sum cash consideration for such annuity or annuities; and

 

(c)     no amounts are or will be payable by the insurer to the purchaser or any other person other than amounts payable by way of such annuity or annuities or, where an annuity is payable for a minimum term and such annuity is in the event of the death of the annuitant before the end of such term to continue to be payable to some third person for the balance of that term, amounts which may be so payable to such third person by way of such annuity,

 

but does not include any agreement for the payment by any insurer of any annuity which is under the rules of a pension fund, pension preservation fund, provident fund, provident preservation fund or retirement annuity fund payable to a member of such fund or to any other person;

Section 11(d) of ITA

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(d)     expenditure actually incurred during the year of assessment on repairs of property occupied for the purpose of trade or in respect of which income is receivable, including any expenditure so incurred on the treatment against attack by beetles of any timber forming part of such property and sums expended for the repair of machinery, implements, utensils and other articles employed by the taxpayer for the purposes of his trade;