Paragraph 30 (Eighth Schedule) – Time-apportionment base cost

Posted on October 15, 2015July 23, 2017 by admin_kmos

30. Time-apportionment base cost

(1) Subject to subparagraph (3), the time-apportionment base cost of a pre-valuation date asset is determined in accordance with the formula-

Y = B + [(P – B) x N]

T + N

where-

(a) “Y” represents the amount to be determined;

(b) “B” represents the amount of expenditure incurred prior to the valuation date in respect of that asset that is allowable before, on or after the valuation date in terms of paragraph 20;

(c) “P” represents the proceeds as determined in terms of paragraph 35, in respect of the disposal of that asset, or where subparagraph (2) applies, the amount of proceeds attributable to the expenditure in “B” as determined in accordance with subparagraph (2);

(d) “N” represents the number of years determine from the date that the asset was acquired to the day before valuation date, which number of years may not exceed 20 in the case where the expenditure allowable in terms of paragraph 20 in respect of that asset was incurred in more than one year of assessment prior to the valuation date;

(e) “T” represents the number of years determined from valuation date until the date the asset was disposed of after valuation date.

Provided that for purposes of items (d) and (e) a part of a year must be treated as a full year.

(2) Where a portion of the expenditure allowable in terms of paragraph 20 in respect of a pre-valuation date asset was incurred on or after the valuation date, the proceeds to be used in the determination of the time apportionment base cost of the asset must be determined in accordance with the formula-

P = R x B

(A + B)

where-

(a) “P” represents the proceeds attributable to B;

(b) “R” represents the total amount of proceeds as determined in terms of paragraph 35 in consequence of the disposal of the pre-valuation date asset;

(c) “A” represents the amount of expenditure allowable in terms of paragraph 20 in respect of the asset that is incurred on or after valuation date;

(d) “B” represents the amount of expenditure incurred prior to the valuation date in respect of that asset that is allowable before, on or after the valuation date in terms of paragraph 20;

(3) A person must determine the time-apportionment base cost of a pre-valuation date asset in terms of subparagraph (4) where –

(a) that person has incurred expenditure contemplated in paragraph 20(1)(a), (c) or (e) on or after the valuation date;

(b) any part of the expenditure contemplated in paragraph 20(1)(a), (c) or (e) incurred before, on or after the valuation date is or was allowable as a deduction in determining the taxable income of that person before the inclusion of any taxable capital gain; and

(c) the proceeds in respect of the disposal of that asset exceed the expenditure allowable in terms of paragraph 20 incurred before, on and after the valuation date in respect of that asset

(4) The time-apportionment base cost of a pre-valuation date asset referred to in subparagraph (3) is determined in accordance with the formulae-

Y = B + [(P₁ – B₁ x N]

T + N

and

P₁ = R₁ x B₁

(A₁ + B₁)

where –

(a) “Y” represents the time apportionment base cost of the asset;

(b) “P₁” represents the proceeds attributable to the expenditure in B₁;

(c) “A₁” represents the sum of the expenditure allowable in terms of paragraph 20 in respect of the asset that is incurred on or after valuation date and any amount of that expenditure that has been recovered or recouped as contemplated in paragraph 35(3)(a);

(d) ‘B₁’ represents the sum of the expenditure allowable in terms of paragraph 20 in respect of the asset that is incurred before valuation date, and any amount of that expenditure that has been recovered or recouped as contemplated in paragraph 35(3)(a).

(e) “B”, “N” and “T” bear the same meanings ascribed to those symbols in subparagraph (1); and

(f) ‘R₁’ represents the sum of the proceeds and any amount contemplated in paragraph 35(3)(a) in respect of that asset.

(5) For purposes of this paragraph –

(a) any selling expenses incurred on or after the valuation date must be deducted from the following amounts –

(i) in the case where subparagraph (2) or (3) applies, the amounts represented by the symbols ‘R’ and ‘R1’, respectively; and

(ii) in any other case, the amount represented by the symbol ‘P’;

(b) except for subparagraph (3)(c) any reference to expenditure allowable in terms of paragraph 20 must exclude selling expenses; and

(i) contemplated in paragraph 20(1)(c)(i) to (iv) incurred directly for the purposes of disposing of that asset; and

(ii) which would, but for the provisions of item (b), have constituted expenditure allowable in terms of paragraph 20.

Paragraph 37F (Eighth Schedule) – Determination of taxable income derived by persons previously assessable under certain other laws

Posted on October 15, 2015October 31, 2016 by admin_kmos

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.

Paragraph 31 (Eighth Schedule) – Market value

Posted on October 15, 2015June 6, 2018 by admin_kmos

31. Market value

(1) The market value of an asset on a specified date is in the case of –

(a) an asset which is a financial instrument listed on a recognised exchange and for which a price was quoted on that exchange, is the ruling price in respect of that financial instrument on that recognised exchange at close of business on the last business day before that date.

(b) an asset which is a long-term insurance policy, being a policy as defined in section 1 of the Long-term Insurance Act the greater of-

(i) the amount which would be payable to the policyholder upon the surrender of that policy on that day; or

(ii) the amount which according to the insurer is the fair market value of that policy should it run its remaining policy term as determined on that day;

(c) an asset which is not listed on a recognised exchange which constitutes a right of a holder of a participatory interest in –

(i) any portfolio of a collective investment scheme in securities, or any portfolio of a collective investment scheme in property, carried on in the Republic, the price at which a participatory interest can be sold to the management company of the scheme on that date; or

(ii) any arrangement or scheme contemplated in paragraph (e)(ii) of the definition of ‘company’, the price at which a participatory interest can be sold to the management company of the scheme on that date or where there is not a management company the price which could have been obtained upon a sale of the asset between a willing buyer and a willing seller dealing at arm’s length in an open market on that date;

(d) a fiduciary, usufructuary or other similar interest in any asset, an amount determined by capitalizing at 12 per cent the annual value of the right of enjoyment of the asset subject to that fiduciary, usufructuary or other like interest, as determined in terms of subparagraph (2), over the expectation of life of the person to whom that interest was granted, or if that right of enjoyment is to be held for a lesser period than the life of that person, over that lesser period;

(e) any asset which is subject to a fiduciary, usufructuary or other similar interest in favour of any person, the amount by which the market value of the full ownership of that asset exceeds the value of that fiduciary, usufructuary or other like interest determined in accordance with item (d);

(f) any asset which constitutes immovable property on which a bona fide farming undertaking is being carried on, subject to subparagraph (4), either-

(i) the value of that property determined as contemplated in paragraph (b) of the definition of “fair market value” in section 1 of the Estate Duty Act; or

[Subitem (i) substituted by section 86 of Act 43 of 2014 effective on 20 January 2015]

(ii) the price contemplated in item (g);

(g) any other asset, the price which could have been obtained upon a sale of the asset between a willing buyer and a willing seller dealing at arm’s length in an open market.

(2) For purposes of subparagraph (1)(d) –

(a) the annual value of the right of enjoyment of any asset which is subject to any fiduciary, usufructuary or other like interest, means an amount equal to 12 per cent of the market value of the full ownership of the asset: Provided that where the asset which is subject to that interest cannot reasonably be expected to produce an annual yield equal to 12 per cent on that value of the asset, the Commissioner must decide, on application by the taxpayer, such sum as reasonably represents the annual yield, and the sum so fixed must for the purposes of subparagraph (1)(d) be treated as being the annual value of the right of enjoyment of that asset; and

[Item (a) substituted by section 110 of Act 25 of 2015 effective on 8 January 2016]

(b) the expectation of life of a person to whom an interest was granted-

(i) in the case of a natural person, must be determined in accordance with the provisions applicable in determining the expectation of life of a person for estate duty purposes, as contemplated in the regulations issued in terms of section 29 of the Estate Duty Act, 1955; and

[Subitem (i) substituted by section 86 of Act 43 of 2014 effective on 20 January 2015]

(ii) in the case of a person other than a natural person, is a period of fifty years.

(3) The market value of any shares of a person in a company not listed on a recognised exchange must be determined at a value equal to the price which could have been obtained upon a sale of the share between a willing buyer and a willing seller dealing at arm’s length in an open market subject to the following-

(a) no regard shall be had to any provision-

(i) restricting the transferability of the shares therein, and it shall be assumed that those shares were freely transferable; or

(ii) whereby or whereunder the value of the shares is to be determined;

(b) if upon the winding-up of the company that person would have been entitled to share in the assets of the company to an extent that is not in proportion to that person’s holding of shares, the value of the shares held by that holder of shares must not be less than the amount to which that holder of shares would have been so entitled if the company had been in the course of winding-up and the said amount had been determined as at valuation date.

(4) The value contemplated in subparagraph (1)(f)(i) may only be used on the death of a person or when the immovable property is disposed of by way of donation or non-arm’s length transaction, if-

(a) that value was used for the purposes of paragraph 26 or 27; or

(b) the person acquired the immovable property by way of donation or inheritance or non-arm’s length transaction at that value.

Sub-paragraphs 2, 3, 4, 5, 6, 7 of paragraph 12A of ITA

Posted on October 15, 2015January 15, 2025 by admin_kmos

(2) Subject to subparagraph (6), this paragraph applies where-

(a) a debt benefit in respect of a debt owed by a person arises in respect of a year of assessment by reason or as a result of a concession or compromise in respect of that debt during that year of assessment; and

[Item (a) substituted by section 77 of Act 23 of 2018 effective on 1 January 2018, applies in respect of years of assessment commencing on or after that date]

(b) the amount of that debt is owed by that person in respect of, or was used by that person to fund, directly or indirectly, any expenditure, other than expenditure in respect of trading stock in respect of which a deduction or allowance was granted in terms of this Act.

[Item (b) substituted by section 77(1)(e) of Act 23 of 2018, by section 47 of Act 23 of 2020 and by section 44(1)(b) of Act 20 of 2021]

(3) Where-

(a) a debt benefit arises in respect of a debt owed by a person as contemplated in subparagraph (2); and

(b) the amount of that debt is owed in respect of or was used as contemplated in item (b) of that subparagraph to fund expenditure incurred in respect of an asset that was not disposed of by that person in a year of assessment prior to that in which that debt benefit arises,

[Item (b) substituted by section 77 of Act 23 of 2018 effective on 1 January 2018, applies in respect of years of assessment commencing on or after that date]

the amount of expenditure so incurred in respect of that asset must, for the purposes of paragraph 20, be reduced by the debt benefit in respect of that debt.

(4) Where-

(a) a debt benefit arises in respect of a debt owed by a person as contemplated in subparagraph (2); and

(b) the amount of that debt is owed in respect of or was used as contemplated in item (b) of that subparagraph to fund expenditure incurred in respect of an asset that was disposed of in a year of assessment prior to that in which that debt benefit arises, that person must if the amount determined in respect of that disposal as-

(i) a capital gain; or

(ii) a capital loss,

differs from the amount that would have been determined, whether as a capital gain or as a capital loss, in respect of that disposal had that debt benefit been taken into account in the year of the disposal of that asset, treat that absolute difference as a capital gain to be taken into account in respect of the year of assessment in which the debt benefit arises: Provided that in taking that debt benefit into account in respect of the year of disposal of that asset that person must take into account the extent to which the expenditure in respect of that asset has been reduced by any other debt benefit taken into account, in terms of this subparagraph, in respect of that disposal.

[Item (b) and the words following item (b) substituted by section 77 of Act 23 of 2018 effective on 1 January 2019, applies in respect of years of assessment commencing on or after that date]

(5) Where subparagraph (3) or (4) applies in respect of a debt that was used to fund expenditure in respect of a pre-valuation date asset of a person, for the purposes of determining the date of acquisition of that asset and the expenditure incurred in respect of that asset, that person must be treated as having-

(a) disposed of that asset at a time immediately before that debt benefit arose as contemplated in subparagraph (3)(a) or (4)(a), as the case may be, for an amount equal to the market value of that asset at that time; and

(b) immediately reacquired that asset at that time at an expenditure equal to that market value-

(i) less any capital gain, and

(ii) increased by any capital loss,

that would have been determined had the asset been disposed of at market value at that time, which expenditure must be treated as an amount of expenditure actually incurred at that time for the purposes of paragraph 20(1)(a).

(6) This paragraph must not apply to a debt benefit in respect of any debt owed by a person-

(a) that is an heir or legatee of a deceased estate, to the extent that-

(i) the debt is owed to that deceased estate;

(ii) the debt is reduced by the deceased estate; and

(iii) the amount by which the debt is reduced by the deceased estate forms part of the property of the deceased estate for the purposes of the Estate Duty Act;

(b) to the extent that the debt is reduced by way of-

(i) donation as defined in section 55(1); or

(ii) any transaction to which section 58 applies,

in respect of which donations tax is payable;

[Item (b) substituted by section 77 of Act 23 of 2018 effective on 1 January 2019, applies in respect of years of assessment commencing on or after that date]

(c) to an employer of that person, to the extent that the debt is reduced in the circumstances contemplated in paragraph 2(h) of the Seventh Schedule;

(d) to another person where the person that owes that debt is a company, if-

(i) that company owes that debt to a company that forms part of the same group of companies as that company; and

(ii) that company has not carried on any trade,

during the year of assessment during which that debt benefit arises and the immediately preceding year of assessment: Provided that this subitem must not apply in respect of any debt-

(aa) incurred, directly or indirectly by that company to fund expenditure incurred in respect of any asset that is disposed of by that company, before or after that debt benefit arises, by way of an asset-for-share, intra-group or amalgamation transaction or a liquidation distribution in respect of which the provisions of section 42, 44, 45 or 47, as the case may be, applied; or

[Paragraph (aa) substituted by section 41(1)(a) of Act 17 of 2023 with effect from 1 January, 2024 and applicable in respect of any disposal of an asset on or after that date]

(bb) incurred or assumed by that company in order to settle, take over, refinance or renew, directly or indirectly, any debt incurred by-

(A) any other company that forms part of the same group of companies; or

(B) any company that is a controlled foreign company in relation to any company that forms part of the same group of companies;

Provided further that, for purposes of this paragraph, where a debt benefit arises prior to the disposal of an asset, that debt benefit must be treated as a debt benefit that arose immediately before that disposal;

[Subparagraph (d) amended by section 41(1)(b) of Act 17 of 2023 with effect from 1 January, 2024 and applicable in respect of any disposal of an asset on or after that date]

(e) that is a company, where-

(i) that debt is reduced in the course, or in anticipation, of the liquidation, winding up, deregistration or final termination of the existence of that company; and

(ii) the person to whom the debt is owed is a connected person in relation to that company,

to the extent that debt benefit in respect of that debt does not, at the time that the debt benefit arises, exceed the amount of expenditure contemplated in paragraph 20 incurred in respect of that debt by the connected person: Provided that this subitem must not apply-

(a) if-

(i) the debt was reduced as part of any transaction, operation or scheme entered into to avoid any tax imposed by this Act; and

(ii) that company became a connected person in relation to the person to whom the debt is owed after the debt (or any debt issued in substitution of that debt) arose; or

(b) if that company-

(i) has not, within 36 months of the date on which the debt is reduced or such further period as the Commissioner may allow, taken the steps contemplated in section 41(4) to liquidate, wind up, deregister or finally terminate its existence;

(ii) has at any stage withdrawn any step taken to liquidate, wind up, deregister or finally terminate its corporate existence; or

(iii) does anything to invalidate any step contemplated in subparagraph (i), with the result that the company is or will not be liquidated, wound up, deregistered or finally terminate its existence;

[Item (e) amended by section 77(1)(i) of Act 23 of 2018 deemed effective on 1 January, 2018 and applicable in respect of years of assessment commencing on or after that date. Subparagraph (iii) substituted by section 44(1)(c) of Act 20 of 2021]

(f) to another person where the person that owes that debt is a company that-

(i) owes that debt to a company that forms part of the same group of companies as that company; and

(ii) reduces or settles that debt, directly or indirectly, by means of shares issued by that company:

Provided that this subitem must not apply in respect of any debt that was incurred or assumed by that company in order to settle, take over, refinance or renew, directly or indirectly, any debt incurred by another company which-

(aa) did not form part of that same group of companies at the time that that other company incurred that debt; or

(bb) does not form part of that same group of companies at the time that company reduces or settles that debt, directly or indirectly, by means of shares issued by that company; or

[Item (f) amended by section 77(1)(i) of Act 23 of 2018 deemed effective on 1 January, 2018 and applicable in respect of years of assessment commencing on or after that date]

(g) to the extent that the debt so owed-

(i) is settled by means of an arrangement described in paragraph (b) of the definition of ‘concession or compromise’; and

(ii) does not consist of or represent an amount owed by that person in respect of any interest as defined in section 24J incurred by that person during any year of assessment.

[Sub-item (ii) substituted by section 44(1)(d) of Act 20 of 2021 effective on 1 January, 2022 and applicable in respect of years of assessment commencing on or after that date]

[Item (g) inserted by section 77 of Act 23 of 2018 effective on 1 January 2018, applies in respect of years of assessment commencing on or after that date]

(7) Any tax which becomes payable as a result of the application of paragraph (b) of the proviso to subparagraph (6)(e) must be recovered from the company and the connected person contemplated in that subparagraph who must be jointly and severally liable for that tax.

[Paragraph 12A inserted by section 108 of Act 22 of 2012, amended by section 127 of Act 31 of 2013, section 82 of Act 43 of 2014, section 106 of Act 25 of 2015 and substituted by section 70 of Act 17 of 2017 effective on 1 January 2018 and applies in respect of years of assessment commencing on or after that date]

Paragraph 32 (Eighth Schedule) – Base cost of identical assets

Posted on October 15, 2015July 23, 2017 by admin_kmos

32. Base cost of identical assets

(1) This paragraph applies to assets which form part of a holding of identical assets.

(2) For the purposes of this paragraph “identical assets” means a group of similar assets which-

(a) if any one of them were disposed of, would realise the same amount regardless of which of them was so disposed of; and

(b) are not able to be individually distinguished apart from any identifying numbers which they may bear.

(3) Subject to subparagraphs (3A) and (3B), the base cost of identical assets must be determined by using one of the following methods-

(a) specific identification; or

(b) the first in first out method.

(3A) The weighted average method of determining base cost of assets, as contemplated in subparagraph (4), may be used for identical assets that do not constitute assets contemplated in subparagraph (3B) and which-

(a) from the date of acquisition to the date of disposal constituted assets contemplated in paragraph 31(1)(a), other than instruments contemplated in item (d);

(b) constitute participatory interests –

(i) contemplated in paragraph 31(1)(c), where the prices of these participatory interests or shares are regularly published in a national or international newspaper;

(ii) in any portfolio comprised in any collective investment scheme managed or carried on by a company registered as a manager under section 42 of the Collective Investment Schemes Control Act for purposes of Parts IV an V of that Act; or

(iii) in any arrangement or scheme contemplated in paragraph (e)(ii) of the definition of ‘company’ in section 1 of the Act, which is approved in terms of section 65 of the Collective Investment Schemes Control Act by the Registrar as defined in section 1 of the latter Act;

(c) constitute coins made mainly from gold or platinum, where the prices of these coins are regularly published in a national or international newspaper; or

(d) from the date of acquisition to the date of disposal constituted instruments as defined in section 24J that were listed on a recognised exchange and for which a price was quoted on that exchange,

and where a person uses the weighted average method for any identical asset contemplated in item (a), (b), (c) or (d), that method must be used for all identical assets, contemplated in that item, held by that person.

(3B) The weighted average method of determining base cost of assets, as contemplated in subparagraph (4), must be used for identical assets that are, in terms of section 29A, allocated to all the policyholder funds of an insurer as defined in that section: Provided that this subparagraph must not apply to any asset-

(a) that constitutes-

(i) an instrument as defined in section 24J(1);

(ii) an interest rate agreement as defined in section 24K(1);

(iii) a contractual right or obligation the value of which is determined directly or indirectly with reference to-

(aa) an instrument contemplated in subparagraph (i);

(bb) an interest rate agreement contemplated in subparagraph (ii); or

(cc) any specified rate of interest;

(iv) trading stock; or

(v) a policy of reinsurance; or

(b) held by an insurer if that insurer is a Category III Financial Services Provider as defined in section 29B(1) and that asset is held by that insurer in its capacity as a Category III Financial Services Provider.

(4) In applying the weighted average method of determining base cost-

(a) the weighed average base cost, on valuation date, of identical assets acquired and not disposed of before valuation date is equal to the valuation date value of those identical assets, as contemplated in paragraph 28, or the market value of those identical assets, as contemplated in paragraph 29, divided by the number of those identical assets; and

(b) the weighted average base cost, thereafter, of identical assets must be calculated by-

(i) adding expenditure allowable in terms of paragraph 20 in respect of identical assets to the base cost of identical assets acquired and not disposed of before that expenditure was incurred; and

(ii) dividing that amount by the number of identical assets acquired and not disposed of after that expenditure was incurred.

(5) ……….

(6) Once a person has adopted one of the methods specified in this paragraph in respect of a class of identical assets contemplated in subparagraph (3A), that method must be used until all those identical assets have been disposed of.

Paragraph 33 (Eighth Schedule) – Part-disposals

Posted on October 15, 2015January 14, 2017 by admin_kmos

33. Part-disposals

(1) Subject to subparagraphs (2), (3), (4) and (5), where part of an asset is disposed of-

(a) the proportion of the expenditure attributable to the part disposed of is an amount which bears to the expenditure allowable in terms of paragraph 20 in respect of the entire asset the same proportion as the market value of the part disposed of bears to the market value of the entire asset immediately prior to that disposal; and

(b) the market value on valuation date attributable to the part disposed of is an amount which bears to the market value adopted or determined in terms of paragraph 29(4) in respect of the entire asset the same proportion as the market value of the part disposed of bears to the market value of the entire asset immediately prior to that disposal.

(2) Subject to subparagraph (4), where a part of the expenditure allowable in terms of paragraph 20 or the market value adopted or determined in terms of paragraph 29(4) in respect of an asset can be directly attributed to the part of the asset that is disposed of or retained then the apportionment contemplated in subparagraph (1) does not apply in respect of that part of that expenditure or market value as the case may be.

(3) For the purposes of subparagraph (1) and (2) there is no part-disposal of an asset by a person in respect of-

(a) the granting of an option by that person in respect of an asset;

(b) the granting, variation or cession of a right of use or occupation of that asset by that person in respect of which no proceeds are received by or accrue to that person;

(d) the replacement of part of that asset in repairing that asset.

(4) Where proceeds are received by or accrue to a person in respect of the granting, variation or cession of a right of use or occupation of an asset by that person, the portion of the expenditure allowable in terms of paragraph 20 or market value adopted or determined in terms of paragraph 29(4) attributable to the part of the asset in respect of which those proceeds were received or accrued is an amount which bears to that expenditure or market value as the case may be of the entire asset the same proportion as those proceeds bear to the market value of the entire asset immediately prior to that disposal.

(5) Where a person has adopted the 20 percent of proceeds method contemplated in paragraph 26(1)(b) in determining the valuation date value of a part of an asset that has been disposed of, that person must adopt that method in determining the valuation date value of any remaining part of that asset.

Part V – Base cost

Posted on October 15, 2015May 25, 2017 by admin_kmos

PART V

Base cost

Paragraph 34 (Eighth Schedule) – Debt substitution

Posted on October 15, 2015February 5, 2022 by admin_kmos

34. Debt substitution

Where a person reduces or discharges a debt owed by that person to a creditor by disposing of an asset to that creditor, that asset must be treated as having been acquired by the creditor at a cost equal to the market value of that asset at the time of that disposal, which cost must be treated as an amount of expenditure actually incurred for the purposes of paragraph 20(1)(a).

[Paragraph 34 substituted by section 85(1) of Act 60 of 2001 and by section 49 of Act 23 of 2020]

Paragraph 20 (Eighth Schedule) – Base cost of asset

Posted on October 15, 2015April 7, 2021 by admin_kmos

20. Base cost of asset

(1) Despite section 23(b) and (f), but subject to paragraphs 24, 25 and 32 and subparagraphs (2) and (3), the base cost of an asset acquired by a person is the sum of-

(a) the expenditure actually incurred in respect of the cost of acquisition or creation of that asset;

(b) the expenditure actually incurred in respect of the valuation of the asset for the purpose of determining a capital gain or capital loss in respect of the asset;

(c) the following amounts actually incurred as expenditure directly related to the acquisition or disposal of that asset namely-

(i) the remuneration of a surveyor, valuer, auctioneer, accountant, broker, agent, consultant or legal advisor, for services rendered;

(ii) transfer costs;

(iii) stamp duty, transfer duty, tax payable in terms of the Securities Transfer Tax Act, 2007 (Act No. 25 of 2007), or similar duty or tax;

[Subitem (iii) substituted by section 108 of Act 25 of 2015 effective on 8 January 2016]

(iv) advertising costs to find a seller or to find a buyer;

(v) the cost of moving that asset from one location to another;

(vi) the cost of installation of that asset, including the cost of foundations and supporting structures;

(vii) despite section 23(d), in the case of a disposal of an asset by a person by way of a donation as contemplated in paragraph 38, so much of any donations tax payable by that person in respect of that donation, as determined in accordance with paragraph 22;

(viii) despite section 23(d), if that person acquired that asset by way of a donation and the donations tax levied in respect of that donation was paid by that person, so much of the donations tax which bears to the full amount of the donations tax so payable the same ratio as the capital gain of the donor determined in respect of that donation, bears to the market value of that asset on the date of that donation; and

(ix) if that asset was acquired or disposed of by the exercise of an option (other than the exercise of an option contemplated in item (f)), the expenditure actually incurred in respect of the acquisition of the option;

(d) the expenditure actually incurred for purposes of establishing, maintaining or defending a legal title to or right in that asset;

(e) the expenditure actually incurred in effecting an improvement to or enhancement of the value of that asset;

[Item (e) substituted by section 56(1)(a) of Act 34 of 2019]

(f) if that asset was acquired or disposed of by the exercise on or after valuation date of an option acquired prior to the valuation date, the valuation date value of that option, which value must be treated as expenditure actually incurred in respect of that asset on valuation date for the purposes of this Part;

(g) one-third of the interest as contemplated in section 24J excluding any interest contemplated in section 24O on money borrowed to finance the expenditure contemplated in items (a) or (e) in respect of a share listed on a recognised exchange or a participatory interest in a portfolio of a collective investment scheme (including money borrowed to refinance those borrowings);

(h) in the case of-

(i) a marketable security or an equity instrument, the acquisition or vesting, as the case may be, of which resulted in the determination of any gain or loss to be included in or deducted from any person’s income in terms of section 8A or 8C, the market value of that marketable security or equity instrument or amount received or accrued from the disposal thereof, as the case may be, that was taken into account in determining the amount of that gain or loss (including where the gain and loss so determined was nil);

(ii) any other asset –

(aa) so much of an amount that has been included in that person’s income in terms of section 8(5), as having been applied towards the reduction of the purchase price of that asset;

(bb) where an amount has been included in any person’s gross income in terms of paragraph (i) of the definition of “gross income” in section 1, the value placed on the asset under the Seventh Schedule for purposes of determining the amount so included in that person’s gross income;

(cc) where an amount has been included in that person’s gross income in terms of paragraph (h) of the definition of “gross income” in section 1 in respect of that asset, so much of that amount so included as exceeds the amount of any allowance granted to that person in terms of section 11(h); or

(dd) where an amount has been included in that person’s gross income in terms of paragraph (c) of the definition of ‘gross income’ in section 1, the value placed on the asset for the purposes of determining the amount so included in that person’s gross income;

(iii)

(aa) a right in a controlled foreign company held directly by a resident, an amount equal to the proportional amount of the net income (without having regard to the percentage adjustments contemplated in paragraph 10) of that company and of any other controlled foreign company in which that controlled foreign company and that resident directly or indirectly have an interest, which was included in the income of that resident in terms of section 9D during any year of assessment, reduced by the amount of any foreign dividend distributed by that company to that resident during any year of assessment which was exempt from tax in terms of section 10B(2)(a) or (c); or

[Subitem (aa) substituted by section 77 of Act 60 of 2008, section 110 of Act 24 of 2011 and section 108 of Act 25 of 2015 effective on 8 January 2016]

(bb) a right in a controlled foreign company held directly by another controlled foreign company, an amount equal to the proportional amount of the net income (without having regard to the percentage adjustments contemplated in paragraph 10) of that first-mentioned controlled foreign company and of any other controlled foreign company in which both the first- and second-mentioned controlled foreign companies directly or indirectly have an interest, which during any year of assessment would have been included in the income of that second-mentioned controlled foreign company in terms of section 9D had it been a resident, reduced by the amount of any foreign dividend distributed by that first-mentioned controlled foreign company to the second-mentioned controlled foreign company if that dividend would have been exempt from tax in terms of section 10B(2)(a) or (c) had that second-mentioned controlled foreign company been a resident;

[Subitem (iii) substituted by section 26 of Act 19 of 2001, section 75 of Act 60 of 2001, section 71 of Act 74 of 2002, section 95 of Act 45 of 2003, section 68 of Act 31 of 2005, section 73 of Act 35 of 2007, section 52 of Act 3 of 2008 and section 110 of Act 24 of 2011 and section 108 of Act 25 of 2015 effective on 8 January 2016]

(iv) a value shifting arrangement, an amount determined in accordance with paragraph 23, which must for the purposes of this Part be treated as expenditure incurred in respect of that asset.

(v) an asset which was acquired by a resident by way of inheritance from the deceased estate of a person who at the time of his or her death was not resident –

(aa) the market value of that asset immediately before the death of that deceased person; and

(bb) any expenditure contemplated in this paragraph incurred by the executor of that deceased estate in respect of that asset in the process of liquidation or distribution of that deceased estate:

Provided that this subitem does not apply in respect of any asset so acquired which constituted an asset of that deceased person as contemplated in paragraph 2(1)(b);

(vi) an asset which was acquired on or after the valuation date by a person from a person who at the time of that acquisition was not a resident by means of a donation or for a consideration not measurable in money or where the person acquiring the asset is a connected person in relation to the person that is not a resident, for a consideration which does not reflect an arm’s length price, the market value of that asset on the date of its acquisition:

[Subitem (vi) inserted by section 77 of Act 60 of 2008 and substituted by section 84 of Act 43 of 2014 effective on 20 January 2015]

Provided that where subitem (i), (ii)(bb) or (dd) applies, that person must for purposes of this paragraph disregard any expenditure actually incurred by that person in respect of that asset prior to the date on which –

(a) the market value or value placed on the asset under the Seventh Schedule, as the case may be, is determined; or

(b) the asset was disposed of, where the amount received or accrued from the disposal is taken into account in determining the gain or loss in terms of section 8C.

(2) The expenditure incurred by a person in respect of an asset does not include any of the following amounts-

(a) borrowing costs, including any interest as contemplated in section 24J, raising fees, bond registration costs or bond cancellation costs;

[Item (a) amended by section 26(1)(f) of Act 19 of 2001 and substituted by section 56(1)(b) of Act 34 of 2019]

(b) expenditure on repairs, maintenance, protection, insurance, rates and taxes, or similar expenditure, other than borrowing costs and expenditure contemplated in subparagraph (1)(g); and

(3) The expenditure contemplated in subparagraph (1)(a) to (g), incurred by a person in respect of an asset must be reduced by any amount which –

(a)

(i) is or was allowable or is deemed to have been allowed as a deduction in determining the taxable income of that person; and

(ii) is not included in the taxable income of that person in terms of section 9C(5),

before the inclusion of any taxable capital gain; or

(b) has for any reason been reduced or recovered or become recover able from or has been paid by any other person (whether prior to or after the incurral of the expense to which it relates), to the extent that such amount is not-

(i) taken into account as a recoupment in terms of section 8(4)(a) or paragraph (j) of the definition of ‘gross income’;

(ii) reduced in terms of section 12P; or

(iii) applied to reduce an amount of expenditure incurred in respect of-

(aa) trading stock as contemplated in section 19(3); or

(bb) any other asset as contemplated in paragraph 12A(3); or

[Sub item (iii) substituted by section 56(1)(c) of Act 34 of 2019 deemed effective on 1 January, 2018 and applicable in respect of years of assessment commencing on or after that date]

(c) is exempt from tax in terms of section 10(1)(yA) and is granted or paid for purposes of the acquisition of that asset.

(4) A person who-

(a) disposed of an asset to another person in terms of an agreement; and

(b) reacquired that asset from that other person by reason of the cancellation or termination of that agreement and the restoration of both persons to the position they were in prior to entering into that agreement,

must be treated as having acquired that asset for an amount equal to-

(i) the base cost of that asset prior to that disposal; and

(ii) so much of any expenditure incurred in respect of that asset by that other person that has been recovered from that person as would have constituted expenditure contemplated in subparagraph (1)(e) had it been incurred by that person.

[Subparagraph (4) added by section 45 of Act 20 of 2006, substituted by section 60 of Act 8 of 2007, deleted by section 130 of Act 31 of 2013, re-inserted by section 108 of Act 25 of 2015 effective on 1 January 2016]

Part VI – Proceeds