Category: PART I – Normal Tax (ITA)

Section 37F (ITA) – Determination of taxable income derived by persons previously assessable under certain other laws

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37F.  Determination of taxable income derived by persons previously assessable under certain other laws

 

Where it is necessary for any rule provided in this Act as to the inclusion in the income of any taxpayer for any year or as to the deduction or set–off of any amount from or against his income for such year, that regard shall be had to anything that has been done or has occurred in or in relation to a previous year of assessment, anything that has in fact been done or has in fact occurred in or in relation to a year of assessment during which the taxpayer was assessable for taxation purposes in terms of any law of a former self–governing territory declared under section 26 of the repealed Self–governing Territories Constitution Act, 1971 (Act No. 21 of 1971), to be a self–governing territory or of the former Republic of Transkei, Bophuthatswana, Venda or Ciskei for any year of assessment, shall, subject to such adjustments as may in the circumstances be appropriate, for the purposes of applying such rule be taken into account.

Section 35A (ITA) – Withholding of amounts from payments to non-resident sellers of immovable property

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35A.  Withholding of amounts from payments to non-resident sellers of immovable property

(1)     Any person (hereinafter referred to as ‘the purchaser’) who must pay any amount to any other person who is not a resident (hereinafter referred to as ‘the seller’), or to any other person for or on behalf of that seller, in respect of the disposal by that seller of any immovable property in the Republic must, subject to subsection (2), withhold from the amount which that person must so pay, an amount equal to-

(a)     7,5 per cent of the amount so payable, in the case where the seller is a natural person;

[Paragraph (a) substituted by section 10 of Act 14 of 2017 effective on 22 February 2017, applies in respect of any disposal on or after that date]

(b)     10 per cent of the amount so payable, in the case where the seller is a company;

[Paragraph (b) substituted by section 10 of Act 14 of 2017 effective on 22 February 2017, applies in respect of any disposal on or after that date and amended by section 47 of Act 17 of 2017 effective on 18 December 2017]

(c)     15 per cent of the amount so payable, in the case where the seller is a trust; and

[Paragraph (c) substituted by section 10 of Act 14 of 2017 effective on 22 February 2017, applies in respect of any disposal on or after that date and amended by section 47 of Act 17 of 2017 effective on 18 December 2017]

(d)     a percentage of the amount so payable as the Minister may announce in the national annual budget contemplated in section 27(1) of the Public Finance Management Act, with effect from a date mentioned in that Announcement.

[Paragraph (d) added by section 47 of Act 17 of 2017 effective on 18 December 2017]

(1A)   If the Minister makes an announcement contemplated in subsection (1)(d), that rate comes into effect on the date determined by the Minister in that announcement and continues to apply for a period of 12 months from that date subject to Parliament passing legislation giving effect to that announcement within that period of 12 months.

[Subsection (1A) inserted by section 47 of Act 17 of 2017 effective on 18 December 2017]

(2)     The seller may apply to the Commissioner, in the form and at the place as the Commissioner may determine, for a directive that no amount or a reduced amount be withheld by the purchaser in terms of subsection (1) solely having regard to-

 

(a)     any security furnished for the payment of any tax due on the disposal of the immovable property by the seller;

 

(b)     the extent of the assets of the seller in the Republic;

 

(c)     whether that seller is subject to tax in respect of the disposal of the immovable property; and

 

(d)     whether the actual liability of that seller for tax in respect of the disposal of the immovable property is less than the amount contemplated in subsection (1).

(3)    

(a)     The amount withheld from any payment to the seller in terms of subsection (1) is an advance in respect of that seller’s liability for normal tax for the year of assessment during which that property is disposed of by that seller.

 [Subsection renumbered as paragraph (a) by section 2 of Act 23 of 2015 effective on 8 January 2016]

(b)     If the seller does not submit a return in respect of that year of assessment within 12 months after the end of that year of assessment, the payment of the amount in terms of subsection (4) is a sufficient basis for an assessment in terms of section 95 of the Tax Administration Act.

[Paragraph (b) added by section 2 of Act 23 of 2015 and substituted by section 2 of Act 16 of 2016]

(4)     The amount withheld by a purchaser in terms of subsection (1), must be paid to the Commissioner-

 

(a)     where that purchaser is a resident, within 14 days after the date on which that amount was so withheld; or

 

(b)     where that purchaser is not a resident, within 28 days after the date on which that amount was so withheld.

(5)     If an amount has been withheld in terms of subsection (1) from any amount payable in a foreign currency, that amount so withheld must be translated to the currency of the Republic at the spot rate on the date that the amount is paid to the Commissioner.

(6)     The purchaser must, together with the payment contemplated in subsection (4), submit to the Commissioner a return.

(7)     A purchaser is person ally liable under the circumstances contemplated in section 157 of the Tax Administration Act, for the amount that must be withheld under subsection (1) only if the purchaser knows or should reasonably have known that the seller is not a resident and must pay that amount to the Commissioner not later than the date on which payment should have been made if the amount had in fact been withheld.

(8)     Subsection (7) does not apply if a property practitioner or conveyancer assists in the disposal of the immovable property and that property practitioner or conveyancer fails to notify the purchaser as contemplated in subsection (11).

[Subsection (8) substituted by section 33(a) by Act 17 of 2023]

(9)     If a purchaser fails to pay any amount contemplated in subsection (1) to the Commissioner within the period allowed for payment in terms of subsection (4), that purchaser must pay a penalty equal to ten per cent of the amount, in addition to any other penalty or charge for which he or she may be liable under this Act.

[Subsection (9) substituted by section 271 read with paragraph 43(c) of Schedule 1 of Act 28 of 2011 effective on 1 October, 2012 except to the extent that it relates to interest under this Act: Proclamation No. 51 in Government Gazette 35687 of 14 September, 2012]

[Subsection (9) substitution by section 271 read with paragraph 43(c) of Schedule 1 of Act 28 of 2011 has only partially commenced to the extent that the amendment relates to the penalty and not to the extent it relates to interest]

(9)     If a purchaser fails to pay any amount contemplated in subsection (1) to the Commissioner within the period allowed for payment in terms of subsection (4), that purchaser-

 

(a)     is liable for interest at the prescribed rate on any amount outstanding calculated from the day following the last date for payment to the date that the amount is received by the Commissioner; and

 

(b)     must pay a penalty equal to ten per cent of that amount, in addition to any other penalty or charge for which he or she may be liable under this Act.

(10)     ……….

(11)   Any property practitioner and any conveyancer who is entitled to any remuneration or other payment in respect of services rendered in connection with the disposal of the immovable property by the seller or the registration of transfer, as the case may be, must before any payment is made to the seller each notify the purchaser in writing of the fact that the seller is not a resident and that the provisions of this section may apply.

[Subsection (11) substituted by section 33(b) by Act 17 of 2023]

(12)   If a property practitioner or conveyancer knows or should reasonably have known that the seller is not a resident and fails to comply with subsection (11), that failing Property practitioner or conveyancer is jointly and severally liable for the payment of the amount which the purchaser is required to withhold and pay to the Commissioner in terms of this section, but limited to the amount of remuneration or other payment in respect of the services rendered in connection with the disposal of the immovable property by the seller or the registration of transfer, as the case may be.

[Subsection (12) substituted by section 33(c) by Act 17 of 2023]

(13)   The property practitioner or conveyancer who paid an amount in terms of subsection (12) is deemed to be a withholding agent for purposes of the Tax Administration Act.

[Subsection (13) substituted by section 271 read with paragraph 43(e) of Schedule 1 of Act 28 of 2011 and by section 33(d) by Act 17 of 2023]

(14)   This section does not apply-

 

(a)     if the amounts payable by the purchaser to the seller and to any other person for or on behalf of the seller, in respect of the acquisition by that purchaser of the immovable property, in aggregate do not exceed R2 million; or

 

(b)     in respect of any deposit paid by a purchaser for purposes of securing the disposal of the immovable property by the seller to that purchaser, until the agreement for that disposal has become unconditional, in which case any amount which would have been required to be withheld from the amount of that deposit, must be withheld from the first following payments made by that purchaser in respect of that disposal.

[Paragraph (b) substituted by section 57 of Act 25 of 2015 effective on 8 January 2016]

(15)   For purposes of this section-

‘conveyancer’ means a ‘conveyancer’ as defined in section 102 of the Deeds Registries Act, 1937 (Act No. 47 of 1937);

“estate agent”     . . . . . . 

[Definition of “estate agent” deleted by section 33(e) of Act 17 of 2023]

 

‘foreign currency’ means any currency other than the currency of the Republic;

 

“immovable property” means immovable property contemplated in paragraph 2(1)(b)(i) and (2) of the Eighth Schedule; and

[Definition of “immovable property” substituted by section 33(f) of Act 17 of 2023]

“property practitioner” means a property practitioner as defined in section 1 of the Property Practitioners Act, 2019 (Act 22 of 2019).

[Definition of “property practitioner” added by section 33(g) of Act 17 of 2023]

Section 37G (ITA) – Determination of taxable income derived from small business undertakings

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37G.    Determination of taxable income derived from small business undertakings

(1)     The Minister of Finance may make regulations to facilitate compliance with the provisions of this Act by natural persons who carry on business through small business undertakings, whether as sole proprietors or in partnership with other natural persons.

(2)     A regulation made under subsection (1) may –

(a)     prescribe what shall constitute a small business undertaking, having regard to –

(i)      the nature of the undertaking;

(ii)     the turnover, taxable income or profit of the undertaking;

(iii)    the number of persons employed in the undertaking;

(iv)    the nature and extent of other income derived by the proprietor or partners; and

(v)     any other feature which, in the opinion of the said Minister, indicates that an undertaking should be regarded as a small business undertaking;

(b)     provide for the variation of any provision of this Act relating to the determination of the taxable income derived from a small business undertaking, including –

(i)      the determination of taxable income having regard only to amounts actually received or expended;

(ii)     any variation in the manner in which the values of trading stock are taken into account;

(iii)    the manner in which expenditure of a capital nature incurred is to be treated; and

(iv)    any other provision which, save in so far as the timing of the receipt or accrual of income or the incurral of expenditure is concerned, will not result in a material variation in the determination of the taxable income derived by the undertaking over a period of time;

(c)     provide for the exemption from, or extension of time limits in, any provision of this Act relating to the preparation and submission of documents, accounts, returns or payments;

(d)     make such other provision as in the opinion of the said Minister will facilitate the carrying on of small business undertakings.


37H.      ……….

Section 36 (ITA) – Calculation of redemption allowance and unredeemed balance of capital expenditure in connection with mining operations

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 36.   Calculation of redemption allowance and unredeemed balance of capital expenditure in connection with mining operations

(1)     ……….

(2)     ……….

(3)     ……….

(4)     ……….

(5)     ……….

(6)     ……….

(7)     ……….

(7A)  ………..

(7B)   ……….

(7C)   Subject to the provisions of subsections (7E), (7F) and (7G), the amounts to be deducted under section 15(a) from income derived from the working of any producing mine shall be the amount of capital expenditure incurred.

(7D)  ………..

(7E)  The aggregate of the amounts of capital expenditure determined under subsection (7C) in respect of any year of assessment in relation to any mine or mines shall not exceed the taxable income (as determined before the deduction of any amount allowable under section 15(a), but after the set–off of any balance of assessed loss incurred by the taxpayer in relation to such mine or mines in any previous year which has been carried forward from the preceding year of assessment) derived by the taxpayer from mining, and any amount by which the said aggregate would, but for the provisions of this subsection, have exceeded such taxable income as so determined, shall be carried forward and be deemed to be an amount of capital expenditure incurred during the next succeeding year of assessment in respect of the mine or mines to which such capital expenditure relates.

(7EA) Subject to paragraph 12A(6)(a) to (d) and (f) of the Eighth Schedule, where a debt benefit, as defined in section 19, arises in respect of a debt that is owed by a person and that debt was used directly or indirectly to fund any amount of capital expenditure incurred, the debt benefit in respect of that debt must be applied to reduce any amount of capital expenditure incurred in the year of assessment that the debt benefit arises: Provided that any amount of the debt benefit that exceeds the capital expenditure incurred in the year of assessment that the debt benefit arises, must be treated as an amount received by or accrued to that person carrying on mining operations during that year of assessment in respect of a disposal of assets the cost of which has been included in capital expenditure incurred in respect of the mine to which that capital expenditure relates.

[Subsection (7EA) inserted by section 48 of Act 17 of 2017 effective on 1 January 2018, applies in respect of years of assessment commencing on or after that date]

(7F)  The aggregate of the amounts of capital expenditure determined under subsection (7C) in respect of any year of assessment in relation to any one mine shall, unless the Minister, after consultation with the Cabinet member responsible for mineral resources and having regard to any relevant fiscal, financial or technical implications, otherwise directs, not exceed the taxable income (as determined before the deduction of any amount allowable under section 15(a), but after the set-off of any balance of assessed loss incurred by the taxpayer in relation to that mine in any previous year which has been carried forward from the preceding year of assessment) derived by the taxpayer from mining on that mine, and any amount by which the said aggregate would, but for the provisions of this subsection, have exceeded such taxable income as so determined, shall be carried forward and be deemed to be an amount of capital expenditure incurred during the next succeeding year of assessment in respect of that mine: Provided that where the taxpayer was on 5 December 1984 carrying on mining operations on two or more mines, the said mines shall for the purposes of this subsection be deemed to be one mine.

(7G)

(a)     Where in the case of any mine in respect of which mining operations or any related operations were or are commenced by the taxpayer after 14 March 1990 (in this subsection referred to as a new mine) an amount of capital expenditure falls to be disallowed under the provisions of subsection (7F), there shall, notwithstanding the provisions of that subsection, be deducted from the total taxable income derived by the taxpayer from mining (as determined after the deduction of any capital expenditure which does not fall to be disallowed under the said provisions and after the set–off of any assessed loss incurred by him from mining operations in a previous year of assessment which has been carried forward) so much of the total amount of capital expenditure which has been so disallowed in relation to all producing new mines owned by the taxpayer as does not exceed 25 per cent of such taxable income.

(b)     The provisions of paragraph (a) shall not apply to capital expenditure incurred in respect of any new mine –

(i)      which has been disposed of by the taxpayer in the current or any previous year of assessment; or

(ii)     if the taxpayer is a company and its acquisition of the right to mine or the mineral rights in respect of such mine was financed wholly or partly by the issue of any share in respect of which any dividend or foreign divident is to be calculated by reference to that portion of the company’s profits which is attributable to the operation of such mine.

(8)     ……….

(9)     ……….

(10)   Where separate and distinct mining operations are carried on in mines that are not contiguous, the allowance for redemption of capital expenditure shall be computed separately.

Subsection 12 of section 36 of ITA

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(12)   The balance of capital expenditure unredeemed at the commencement of the first year of assessment chargeable under this Act shall be the balance shown to be unredeemed at the end of the last year of assessment chargeable under the Income Tax Act, 1941.

“Expenditure” definition of section 36 of ITA

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“expenditure” means net expenditure after taking into account any rebates or returns from expenditure, regardless of when such last-mentioned expenditure was incurred;

[Definition of “expenditure” subsitututed by section 21(d) of Act 65 of 1973 and amended by section 52(1)(b) of Act 15 of 2016 effective on 1 April, 2017 and applicable in respect of expenditure incurred during years of assessment commencing on or after that date]

“Capital expenditure incurred” definition of section 36 of ITA

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“capital expenditure incurred”, for the purpose of determining the amount of capital expenditure incurred during any period in respect of any mine, means the amount (if any) by which the expenditure that is incurred during such period in respect of such mine and is capital expenditure, exceeds the sum of the amounts received or accrued during the said period from disposals of assets the cost of which has in whole or in part been included in capital expenditure taken into account (whether under this Act or any previous Income Tax Act) for the purposes of any deduction in respect of such mine under section 15(a) of this Act or the corresponding provisions of any previous Income Tax Act;

Subsections 2, 3, 4, 5, 6, 7, 8, 9 and 10 of section 30B of ITA

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(2)     Subject to subsections (3) and (4), the Commissioner must approve an entity for the purposes of section 10(1)(d)(iii) or (iv) if-

(a)     that entity has submitted to the Commissioner a copy of the constitution or written instrument under which it has been established;

(b)     the constitution or written instrument contemplated in paragraph (a) provides that-

(i)      the entity must have a committee, board of management or similar governing body consisting of at least three natural persons, who are not connected persons in relation to each other, to accept the fiduciary responsibility of that entity;

[Subparagraph (i) substituted by section 8(a) of Act 18 of 2023]

(ii)     no single person may directly or indirectly control the decision-making powers relating to that entity;

(iii)    the entity may not directly or indirectly distribute any of its funds or assets to any person other than in the course of furthering its objectives;

(iv)    the entity is required to utilise substantially the whole of its funds for the sole or principal object for which it has been established;

(v)     no member may directly or indirectly have any personal or private interest in that entity;

(vi)    substantially the whole of the activities of the entity must be directed to the furtherance of its sole or principal object and not for the specific benefit of an individual member or minority group;

(vii)   the entity may not have a share or other interest in any business, profession or occupation which is carried on by its members;

(viii)  the entity must not pay to any employee, office bearer, member or other person any remuneration, as defined in the Fourth Schedule, which is excessive, having regard to what is generally considered reasonable in the sector and in relation to the service rendered;

(ix)    substantially the whole of the entity’s funding must be derived from its annual or other long-term members or from an appropriation by the government of the Republic in the national, provincial or local sphere;

(x)     the entity must as part of its dissolution transfer its assets to-

(aa)   another entity approved by the Commissioner in terms of this section;

(bb)   a public benefit organisation approved in terms of section 30;

(cc)   an institution, board or body which is exempt from tax under section 10(1)(cA)(i); or

(dd)   the government of the Republic in the national, provincial or local sphere;

(xi)    the persons contemplated in paragraph (b)(i) will submit any amendment of the constitution or written instrument of the entity to the Commissioner within 30 days of its amendment;

(xii)   the entity will comply with such reporting requirements as may be determined by the Commissioner from time to time; and

(xiii)   the entity is not knowingly and will not knowingly become a party to, and does not knowingly and will not knowingly permit itself to be used as part of, an impermissible avoidance arrangement contemplated in Part IIA of Chapter III, or a transaction, operation or scheme contemplated in section 103(5); and

[Subparagraph (xiii) amended by section 8(b) of Act 18 of 2023]

(c)     the Commissioner is satisfied that the association does not have a person acting in a fiduciary capacity, who 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.

[Paragraph (c) added by section 8(c) of Act 18 of 2023]

(3)     The requirements contained in subsection (2)(b)(iii) and (v) do not apply in respect of a mutual loan association.

(4)     Where the constitution or written instrument of an entity does not comply with subsection (2)(b), the Commissioner may deem it to so comply if the person who has accepted fiduciary responsibility for the funds and assets of that entity furnishes the Commissioner with a written undertaking that the entity will be administered in compliance with that subsection.

(5)     Where the Commissioner is-

(a)     satisfied that any entity approved in terms of subsection (2) has during any year of assessment in any material respect; or

(b)     during any year of assessment satisfied that any such entity has on a continuous or repetitive basis,

failed to comply with this section, or the constitution or written instrument under which it was established to the extent that it relates to this section, the Commissioner must notify the entity that he or she intends to withdraw approval of the entity if corrective steps are not taken by the entity within the period stated in the notice.

(6)     If no corrective steps are taken by the entity contemplated in subsection (5), the Commissioner must withdraw approval of that entity with effect from the commencement of the year of assessment contemplated in subsection (5).

(7)     If the Commissioner has withdrawn the approval of an entity as contemplated in subsection (6) the entity must within six months after the date of the withdrawal of approval (or such longer period as the Commissioner may allow) transfer, or take reasonable steps to transfer, its remaining assets to any entity, public benefit organisation, institution, board or body or the government of the Republic, contemplated in subsection (2)(b)(x).

(8)     If an entity is wound up or liquidated, the entity must, as part of the winding-up or liquidation, transfer its assets remaining after the satisfaction of its liabilities to any entity, public benefit organisation, institution, board or body or the government of the Republic, contemplated in subsection (2)(b)(x).

(9)     If an entity fails to transfer, or to take reasonable steps to transfer, its assets as contemplated in subsection (7) or (8), an amount equal to the market value of those assets which have not been transferred less an amount equal to the bona fide liabilities of that entity must for the purposes of this Act be deemed to be an amount of taxable income which accrued to that entity during the year of assessment in which the withdrawal of approval in terms of subsection (6) or the winding-up or liquidation contemplated in subsection (8) took place.

(10)   Any person who is in a fiduciary capacity responsible for the management or control of the income and assets of any approved association and who intentionally fails to comply with any provision of this section or of the constitution, or other written instrument under which such association is established to the extent that it relates to the provisions of this section, shall be guilty of an offence and liable on conviction to a fine or to imprisonment for a period not exceeding 24 months.

(11)   A person may not act in a fiduciary capacity 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.

[Subsection (11) inserted by section 8(d) of Act 18 of 2023]

(12)   A person who fails to comply with the provisions of subsection (11) shall be guilty of an offence and liable, on conviction, to a fine or to imprisonment for a period not exceeding 24 months.

. [Subsection (12) inserted by section 8(d) of Act 18 of 2023]

Section 37 (ITA) – Calculation of capital expenditure on sale, transfer, lease or cession of mining property

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37.     Calculation of capital expenditure on sale, transfer, lease or cession of mining property

 

(1)     For the purposes of this Act, but subject to subsection (1A), whenever a taxpayer-

 

(a)     sells, transfers, leases or cedes any mining property; and

 

(b)     disposes of any assets contemplated in section 36(11) (hereinafter referred to as ‘the capital assets’) in consequence of the sale, transfer, lease or cession contemplated in paragraph (a),

 

the person acquiring those capital assets shall be deemed to have acquired such capital assets at a cost equal to the effective value of those capital assets to that person on the effective date of that agreement of sale, transfer, lease or cession of the mining property, and the said cost shall be deemed to be expenditure that is incurred by that person during the period of assessment during which that agreement takes effect and to be capital expenditure which is in respect of such period required to be taken into account for the purposes of the definition of ‘capital expenditure incurred’ in section 36(11).

 

(1A)  Where any consideration is given by the person acquiring the assets disposed of by the taxpayer, as contemplated in subsection (1), and the effective value of all those assets (including any mining property) so acquired, exceeds that consideration, the amount of the cost and expenditure in respect of the capital assets shall, for the purposes of subsection ( 1), be deemed to be an amount which bears to the total amount of such consideration the same ratio as such effective value of those capital assets bears to the effective value to that person of all the assets (including any mining property) so disposed of to that person.

 

(2)     For the purposes of paragraph (j) of the definition of ‘gross income’ in section 1 and section 36, the taxpayer who disposes of any capital assets contemplated in subsection (1), shall be deemed to have disposed of such capital assets for a consideration equal in value to the cost of those capital assets to the person acquiring such capital assets as determined under subsection (1) and (1A), and such consideration shall be deemed to have been received by or to have accrued to the said taxpayer on the effective date of the agreement of sale, transfer, lease or cession.

 

(3)     If the value of the consideration given or the value of the property disposed of is in dispute, the value may, be fixed by the Commissioner and shall be determined –

 

(a)     in the case of any mining property, in the same manner as if transfer duty were payable; or

 

(b)     in the case of any capital asset, at the market value of such capital asset.

 

(4)     The effective value on the effective date of the agreement of sale, transfer, lease or cession, of all the assets disposed of, shall be determined by the Director General for Minerals and Energy who shall, notwithstanding the repeal of the Second Schedule to the Transvaal Mining Leases and Mineral Law Amendment Act, 1918 (Act No. 30 of 1918), for the purposes of such determination have all the powers which were conferred upon him by the provisions of that Schedule.

 

(5)     For the purpose of this section, ‘mining property’ means-

 

(a)     any land on which mining is carried on; or

 

(b)     any right to minerals (including any right to mine for minerals) and a lease or sub-lease of such a right.