Category: PART I – Normal Tax (ITA)

“Affected asset” definition of section 23A of ITA

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(1)     For the purposes of this section –

 

“affected asset” means any machinery, plant, implement, utensil, article, aircraft or ship which has been let and in respect of which the lessor is or was entitled to an allowance under section 11(e), 12B, 12BA, 12C, 12DA or 37B(2)(a), whether in the current or a previous year of assessment, but excluding any such asset let by the lessor under an operating lease or any such asset which was during the year of assessment mainly used by the taxpayer in the course of any trade carried on by the taxpayer, other than the letting of any such asset;

[Definition of “affected asset” amended by section 22(1)(a) of Act 101 of 1990, by section 34 of Act 30 of 1998, by section 32(1)(a) of Act 60 of 2001 and by section 33 of Act 35 of 2007 and substituted by section 25(a) of Act 23 of 2020 and by section 24(1)(a) of Act 17 of 2023 effective on 1 March, 2023 and applicable in respect of assets brought into use on or after that date]

Section 23B (ITA) – Prohibition of double deductions

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23B.     Prohibition of double deductions

(1)     Where, but for the provisions of this subsection, an amount –

(a)     qualifies or has qualified for a deduction or an allowance; or

(b)     is otherwise taken into account in determining the taxable income of any person,

under more than one provision of this Act, that amount or any portion thereof, shall not be allowed or taken into account more than once in the determination of the taxable income of any person.

(2)     The provisions of subsection (1) shall not apply to expenditure in respect of which a deduction or an allowance has been determined, if any section under which such deduction or allowance is allowed, expressly requires such expenditure to be deductible under any other section as a prerequisite for a deduction under such section.

(3)     No deduction shall be allowed under section 11(a) in respect of any expenditure or loss of a type for which a deduction or allowance may be granted under any other provision of this Act, notwithstanding that –

(a)     such other provision may impose any limitation on the amount of such deduction or allowance; or

(b)     that deduction or allowance in terms of that other provision may be granted in a different year of assessment.

(4)       ……….

[Subsection (4) added by section 42 of Act 7 of 2010 effective on 1 January 2011, repealed by section 163 of Act 24 of 2011 effective on 1 January 2011), re-added by section 48 of Act 24 of 2011 and deleted by section 34 of Act 43 of 2014 effective on 1 January 2014]

(5)     No deduction shall be allowed under section 11(a) in respect of any expenditure incurred by a person in respect of any premium paid under a policy of insurance, where the policy relates to death, disablement or illness of an employee or director, or former employee or director, of the person that is the policyholder (other than a policy that relates to death, disablement or illness arising solely out of and in the course of employment of the employee or director).

[Subsection (5) added by section 48 of Act 24 of 2011 and substituted by section 43 of Act 22 of 2012 and section 36 of Act 17 of 2017 effective on 18 December 2017]

Section 23C (ITA) – Reduction of cost or market value of certain assets

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23C.    Reduction of cost or market value of certain assets

(1)     Notwithstanding the Seventh Schedule, where regard is to be had to the cost to the taxpayer or the market value of any asset acquired by him or her or to the amount of any expenditure incurred by him or her, and—

(a)     the taxpayer is a vendor as defined in section 1 of the Value–Added Tax Act; and

(b)     the taxpayer is or was in any previous year of assessment entitled under section 16(3) of the last–mentioned Act to a deduction of input tax as defined in section 1 of that Act,

the amount of such input tax shall be excluded from the cost or the market value of such asset or the amount of such expenditure: Provided that in the case of any lease as contemplated in paragraph (b) of the definition of “instalment credit agreement” in section 1 of that Act, there shall be excluded by the lessee from each rental payment made by him in respect of such lease, an amount which bears to such input tax the same ratio as such rental payment bears to the sum of all rental payments in connection with such lease.

[Sub­section (1) substituted by section 21(1) of Act 141 of 1992 and amended by section 33(1)(b) and (c) of Act 60 of 2001 and by section 26 of Act 34 of 2019]

(2)     Where a taxpayer (being a vendor as defined in section 1 of the Value-Added Tax Act) has in respect of any tax period applicable to the vendor under that Act which has ended during the vendor’s year of assessment, included in input tax deducted by the vendor under section 16(3) of that Act an amount of sales tax, as permitted by section 78 of that Act so to be included-

(a)     that amount shall, if it was included in capital expenditure taken into account for the purposes of any deduction in respect of any mine under section 15(a) of this Act, be deemed for the purposes of paragraph (j) of the definition of “gross income” in section 1 of this Act to be an amount received by or accrued to the taxpayer during the said year of assessment in respect of a disposal of assets referred to in the said paragraph; or

(b)     that amount (not being an amount accounted for under paragraph (a)), shall for the purposes of section 8(4)(a) of this Act be deemed to be an amount which has been recovered or recouped by the taxpayer during the said year of assessment.

Section 23D (ITA) – Limitation of allowances granted in respect of certain assets

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23D.    Limitation of allowances granted in respect of certain assets

 

(1)     ……….

 

(2)     Where any depreciable asset which is let or licensed by a taxpayer to a lessee or licensee was held within a period of two years preceding the commencement of the lease or licence-

 

(a)     by the lessee or licensee, or by any sublessee or sublicensee in relation to the asset; or


(b)     by a person who was at any time during that period a connected person in relation to the lessee, licensee, sublessee or sublicense,


the cost or value of the depreciable asset for the purpose of this section and any deduction or allowance claimed by the taxpayer in respect of the asset shall not exceed the amount determined in accordance with subsection (2A).

 

(2A)  The amount to be determined for purposes of subsection (2) is the sum of-

 

(a)     the cost of the asset to the most recent lessee, licensee, sublessee, sublicensee or connected person contemplated in subsection (2) that previously held that asset, less the sum of-


(i)      all deductions which have been allowed to the lessee, licensee, sublessee, sublicensee or connected person in respect of the asset; and


(ii)     all deductions that are deemed to have been allowed to the lessee, licensee, sublessee, sublicensee or connected person in respect of the asset in terms of section 11(e)(ix), 12B(4B), 12C(4A), 12D(3A), 12DA(4), 12F(3A), 13(1A), 13bis(3A), 13ter(6A), 13quin(3) or 37B(4);


(b)     any amount contemplated in paragraph (n) of the definition of ‘gross income’ in section 1 that is required to be included in the income of the lessee, licensee, sublessee, sublicensee or connected person that arises as a result of the disposal of the asset; and

 

(c)     the applicable percentage in paragraph 10 of the Eighth Schedule, of the capital gain of the lessee, licensee, sublessee, sublicensee or connected person that arises as a result of the disposal.

Section 23F (ITA) – Acquisition or disposal of trading stock

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23F.     Acquisition or disposal of trading stock

 

(1)     Where any taxpayer has during any year of assessment incurred expenditure for the acquisition of trading stock which was neither disposed of by him during such year nor held by him at the end of such year, any deduction which may be allowed to him under the provisions of section 11(a) in respect of such expenditure shall not be allowed in such year, but such expenditure shall for the purposes of such provisions be deemed to have been incurred by him in the first subsequent year of assessment in which –

 

(a)     such trading stock is disposed of by him;

 

(b)     the value of such trading stock falls to be included in his income under the provisions of section 22(1); or

 

(c)     it is shown by him that by reason of the loss or destruction of such trading stock or the termination of the agreement in terms of which such trading stock was acquired by him or for any other reason, such trading stock will neither be disposed of nor held by him, to the extent that such expenditure was actually paid.

 

(2)     Where a taxpayer has during any year of assessment disposed of any trading stock in the ordinary course of his or her trade for any consideration the full amount of which will not accrue to him or her during that year of assessment and any expenditure incurred in respect of the acquisition of that trading stock was allowed as a deduction under the provisions of section 11(a) during that year or any previous year of assessment, any amount which would otherwise be deducted must, to the extent that it exceeds any amount received or accrued from the disposal of that trading stock be disregarded during that year of assessment.

 

(2A)  So much of any amount disregarded in terms of subsection (2) may be deducted from the income of that person in any subsequent year of assessment to the extent that any amount which is received by or accrued to that person in that subsequent year from that disposal is included in the income of that person,

 

(2B)   If during any year of assessment a person contemplated in subsection (2) proves that no further amounts will accrue to him or her in that year and any subsequent year as contemplated in subsection (2A), so much of the amount which was disregarded in terms of subsection (2) as has not been allowed as a deduction in any year, must be allowed as a deduction from thejncome of that person in that year of assessment.

  

(3)     Where –

 

(a)     any taxpayer has during any year of assessment in the ordinary course of his trade disposed of any right or interest in any asset which constitutes trading stock which has the effect that the remaining right or interest in such asset held and not disposed of will not be included in trading stock at the end of such year; and

 

(b)     any expenditure incurred in respect of the acquisition of such asset was allowed as a deduction under the provisions of section 11(a) or was otherwise taken into account during such year or any previous year of assessment,

 

there shall be deemed to have been recovered or recouped by such taxpayer and be included in the income of such taxpayer for such year of assessment, so much of such expenditure as relates to the remaining right or interest contemplated in paragraph (a).

Section 23H (ITA) – Limitations of certain deductions

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23H.    Limitation of certain deductions

(1)     Where any person has during any year of assessment actually incurred any expenditure (other than expenditure incurred in respect of the acquisition of any trading stock) –

(a)     which is allowable as a deduction in terms of the provisions of section 11(a), (c), (d) or (w), or section 11A; and

[Paragraph (a) substituted by section 29 of Act 59 of 2000, section 36 of Act 35 of 2007, section 19 of Act 3 of 2008, section 43 of Act 7 of 2010, section 46 of Act 22 of 2012 and section 35 of Act 43 of 2014 effective on 1 October 2012]

(b)     in respect of-

(i)      goods or services, all of which will not be supplied or rendered to such person, during such year of assessment; or,

(ii)     any other benefit, the period to which the expenditure relates extends beyond such year of assessment,

the amount of the expenditure in respect of which a deduction shall be allowable in terms of such section in the said year and any subsequent year of assessment, shall be limited to, in the case of expenditure incurred in respect of –

(i)      goods to be supplied, so much of the expenditure as relates to the goods actually supplied to such person in such year of assessment; or

(ii)     services to be rendered, an amount which bears to the total amount of such expenditure the same ratio as the number of months in such year during which such services are rendered bears to the total number of months during which such services will be rendered or, where the period during which such services will be rendered is not determinable, such period during which the services are likely to be rendered; or

(iii)    any other benefit to which such expenditure relates, an amount which bears to the total amount of such expenditure the same ratio as the number of months in such year during which such person will enjoy such benefit bears to the total number of months during which such person will enjoy such benefit or where the period of such benefit is not determinable, such period over which the benefit is likely to be enjoyed:

Provided that the provisions of this section shall not apply –

(aa)   where all the goods or services are to be supplied or rendered within six months after the end of the year of assessment during which the expenditure was incurred, or such person will have the full enjoyment of such benefit in respect of which the expenditure was incurred within such period, unless the expenditure is allowable as a deduction in terms of section 11D(2); or

[Paragraph (aa) substituted by section 34 of Act 60 of 2001, section 36 of Act 35 of 2007 and section 37 of Act 17 of 2017 effective on 18 December 2017]

(bb)   where the aggregate of all amounts of expenditure incurred by such person, which would otherwise be limited by this section, does not exceed R100000; or

(cc)   to any expenditure to which the provisions of 24K or 24L apply; or

(dd)   to any expenditure actually paid in respect of any unconditional liability to pay an amount imposed by legislation.

(2)     If in any case the apportionment of the expenditure in accordance with subsection (1) does not reasonably represent a fair apportionment of such expenditure in respect of the goods, services or benefits to which it relates, such apportionment must be made in such other manner as is fair and reasonable.

[Subsection (2) substituted by section 38 of Act 25 of 2015 effective on 8 January 2016]

(3)     Notwithstanding the provisions of subsections (1) and (2), where it is during any year of assessment shown by any person that –

(a)     the goods or services in respect of which the expenditure is incurred will never be received by or be rendered to such person; or

(b)     such person will never enjoy such other benefit in respect of which any expenditure is incurred,

such expenditure shall be allowed in such year, to the extent that such expenditure has been actually paid by such person.

Section 24BA (ITA) – Transactions where assets are acquired as consideration for shares issued

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24BA.  Transactions where assets are acquired as consideration for shares issued

(1)     For the purposes of this section, ‘asset’ means an asset as defined in paragraph 1 of the Eighth Schedule or a number of such assets.

(2)     Subject to subsection (4), this section applies where-

(a)     in terms of any transaction, a company, for consideration, acquires an asset from a person in exchange for the issue by that company to that person of shares in that company; and

(b)     the consideration contemplated in paragraph (a) is (before taking into account any other transaction, operation, scheme, agreement or understanding that directly or indirectly affects that consideration) different from the consideration that would have applied had that asset been acquired in exchange for the issue of those shares in terms of a transaction between independent persons dealing at arm’s length.

(3)     Notwithstanding paragraph 11(2)(b) of the Eighth Schedule, where a company acquires an asset from a person in exchange for the issue by that company to that person of shares in that company as contemplated in subsection (2) and the market value of-

(a)     that asset immediately before that disposal exceeds the market value of the shares immediately after that issue, the amount of the excess must-

(i)      be deemed to be a capital gain in respect of a disposal by that company of the shares; and

(ii)     where those shares are acquired by that person as-

(aa)   a capital asset, be applied to reduce any amount of expenditure incurred by that person in acquiring those shares that is allowable in terms of paragraph 20 of the Eighth Schedule; or

(bb)   trading stock, be applied to reduce any amount that must be takan into account by the person in respect of the shares in terms of section 11(a) or 22(1) or (2); or 

(b)     the shares immediately after that issue exceeds the market value of that asset immediately before the disposal, the amount of the excess must, for the purposes of Part VIII, be deemed to be a dividend as defined in section 64D that-

(i)      consists of a distribution of an asset in specie; and

(ii)     is paid by the company on the date of that issue.

(4)     This section must not apply where a company acquires an asset from a person as contemplated in subsection (2)(a) if-

(a)

(i)      that company and that person form part of the same group of companies immediately after that company acquires that asset; or

(ii)     that person holds all the shares in that company immediately after that company acquires that asset; or

(b)     paragraph 38 of the Eighth Schedule applies.