Category: Eighth Schedule – Determination of taxable capital gains and assessed capital losses

EIGHTH SCHEDULE

 

Eighth Schedule inserted by section 38 of Act 5 of 2001.

Paragraph 37A (Eighth Schedule) – Closure rehabilitation company or trust

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37A.     Closure rehabilitation company or trust

 

(1)     For purposes of determining the taxable income derived by a person from carrying on any trade, any cash paid during any year of assessment commencing on or after 2 November 2006 by that person to a company or trust shall be deducted from that person’s income if –

 

(a)     the sole object of that company or trust is to apply its property solely for rehabilitation upon premature closure, decommissioning and final closure, and post closure coverage of any latent and residual environmental impacts on the area covered in terms of any permit, right, reservation or permission contemplated in paragraph (d)(i)(aa) to restore one or more areas to their natural or predetermined state, or to a land use which conforms to the generally accepted principle of sustainable development;

 

(b)     that company or trust holds assets solely for purposes contemplated in paragraph (a);

 

(c)     that company or trust makes distributions solely for purposes contemplated in paragraph (a), or subsection (3) or (4); and

 

(d)     that person –

 

(i)

 

(aa)   holds a permit or right in respect of prospecting, exploration, mining or production, an old order right or OP26 right as defined in item 1 of Schedule II or any reservation or permission for or right to the use of the surface of land as contemplated in item 9 of Schedule II to the Mineral and Petroleum Resources Development Act, 2002 (Act No. 28 of 2002); or

 

(bb)   is engaged in prospecting, exploration, mining or production in terms of any permit, right, reservation or permission as contemplated in item (aa); or

 

(ii)     after approval by the Commissioner, paid any cash to that company or trust and that payment was not part of any transaction, operation or scheme designed solely or mainly for purposes of shifting the deduction contemplated in this subsection from another person to that person.

 

(2)     The company or trust contemplated in subsection (1) may only hold –

 

(a)     financial instruments issued by any –

 

(i)      collective investment scheme as regulated in terms of the Collective Investment Schemes Control Act, 2002 (Act No 45 of 2002);

 

(ii)     long-term insurer as regulated in terms of the Long-Term Insurance Act, 1998 (Act No. 52 of 1998);

 

(iii)    bank as regulated in terms of the Banks Act, 1990 (Act No. 94 of 1990); or

 

(iv)    mutual bank as regulated in terms of the Mutual Banks Act 1993 (Act No. 124 of 1993);

 

(b)     financial instruments of a listed company unless –

 

(i)      those financial instruments are issued by a person contemplated in subsection (1)(d); or

 

(ii)     those financial instruments are issued by a person that is a connected person in relation to a person contemplated in subsection (1)(d);

 

(c)     financial instruments issued by any sphere of government in the Republic; or

 

(d)     any other investments which were held by that company or trust before 18 November 2003.

 

(3)     To the extent that the Minister of Minerals and Energy is satisfied that all of the areas in terms of any permit, right, reservation or permission contemplated in subsection (1)(d)(i)(aa) that have been rehabilitated as contemplated in subsection (1)(a), the company or trust in respect of those areas must be wound-up or liquidated and its assets remaining after the satisfaction of its liabilities must be transferred to –

 

(a)     another company or trust as contemplated in this section as approved by the Commissioner; or

 

(b)     if no such company or trust has been established, to an account or trust prescribed by the Minister of Minerals and Energy as approved of by the Commissioner if the Commissioner is satisfied that such company or trust satisfies the objects of subsection (1)(a).

 

(4)     If the Minister of Minerals and Energy is satisfied that a company or trust as contemplated in subsection (1)(a) –

 

(a)     will be able to satisfy all of the liabilities of that company or trust; and

 

(b)     such company or trust has sufficient assets to rehabilitate and restore, as contemplated in subsection (1)(a), all areas to which any permit, right, reservation or permission contemplated in subsection (1)(d)(i)(aa) relates, as the case may be,

 

that company or trust may transfer assets not required for purposes of paragraphs (a) and (b) to another company or trust established in terms of this section as approved by the Commissioner,

 

(5)

 

(a)     The constitution of a company or the instrument establishing a trust contemplated in this section must incorporate the provisions of this section and any amendments thereto.

 

(b)     Where the constitution of a company or the instrument establishing a trust contemplated in this section does not comply with this section, it shall be deemed to comply for a period not exceeding two years, if the person responsible in a fiduciary capacity for the funds and the assets of that company or trust, furnishes the Commissioner with a written undertaking that that company or trust will be administered in compliance with this section.

 

(6)     If a company or trust contemplated in this section contravenes any provision of subsection (2) during any year of assessment by holding property other than property contemplated in that subsection –

 

(a)     an amount of taxable income is deemed to accrue equal to the market value of that other property on the first date that company or trust held that other property; and

 

(b)     the deemed amount contemplated in paragraph (a) shall be included in the income of the person contemplated in subsection (1)(d) for the year of assessment of that person during which that contravention occurred to the extent that other property is (directly or indirectly) derived from cash paid by that person to that company or trust.

 

(7)     If the company or trust contemplated in this section contravenes any provision of subsection (1)(a) during any year of assessment by distributing property from that company or trust for a purpose other than –

 

(a)     rehabilitation upon premature closure;

 

(b)     decommissioning and final closure;

 

(c)     post closure coverage of any latent or residual environmental impacts; or

 

(d)     transfer to another company, trust, or account established for the purposes contemplated in subsection (1)(a),

 

an amount equal to the market value of property that was so distributed must for purposes of this Act be deemed to be an amount of taxable income which accrued to such company or trust during the year of assessment in which that distribution occurred.

 

(8)     Where the Commissioner is satisfied that a company or trust contemplated in this section has contravened any provision of this section during any year of assessment, the Commissioner may –

 

(a)     include an amount equal to twice the market value of all of the property held in that company or trust on the date of that contravention as taxable income; and

 

(b)     include the amount contemplated in paragraph (a) in the income of the person contemplated in subsection (1)(d) for the year of assessment of that person during which the Commissioner is satisfied the contravention occurred to the extent that property is (directly or indirectly) derived from cash paid by that person to that company or trust

 

Provided that the Commissioner may reduce the amount of taxable income contemplated under this subsection as the Commissioner may think fit.

Paragraph 67D (Eighth Schedule) – Communications licence conversions

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67D.    Communications licence conversions

 

(1)     Where existing licences referred to in Chapter 15 of the Electronic Communications Act, 2005 (Act No. 36 of 2005), are converted to new licences in terms of section 93 of that Act, a licensee of an existing licence or licences is deemed to have disposed of the existing-

 

(a)     licence for an amount equal to the base cost of the licence; or

 

(b)     licences for an amount equal to the aggregate of the base cost of the licences,

 

on the date of the conversion.

 

(2)     The licensee of a new licence contemplated in subparagraph (1) –

 

(a)     is deemed to have acquired the new licence –

 

(i)      in the case where an existing licence is converted to a new licence, at a cost, recognised as such for the purposes of paragraph 20, equal to the expenditure incurred in respect of the existing licence;

 

(ii)     in the case where two or more existing licences are converted to a new licence, at a cost, recognised as such for the purposes of paragraph 20, equal to the aggregate of the expenditure incurred in respect of the existing licences; and

 

(iii)    in the case where an existing licence is converted to two or more new licences, at a cost, recognised as such for the purposes of paragraph 20, that bears to the expenditure incurred in respect of the existing licence the same ratio as the value of that new licence bears to the aggregate value of the new licences,

 

which cost must be treated as expenditure actually incurred by the licensee in respect of the new licence or licences for the purposes of paragraph 20; and

 

(b)     is deemed to have incurred the cost contemplated in item (a) on the day immediately after the conversion.

Paragraph 63A (Eighth Schedule) – Public benefit organisations

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63A.    Public benefit organisations

 

A public benefit organisation approved by the Commissioner in terms of section 30(3) must disregard any capital gain or capital loss determined in respect of the disposal of an asset if –

 

(a)     that public benefit organisation did not use that asset on or after valuation date in carrying on any business undertaking or trading activity; or

 

(b)     substantially the whole of the use of that asset by that public benefit organisation on and after valuation date was directed at –

 

(i)      a purpose other than carrying on a business undertaking or trading activity; or

 

(ii)     carrying on a business undertaking or trading activity contemplated in section 10(1)(cN)(ii)(aa), (bb) or (cc).

Paragraph 43B (Eighth Schedule) – Base cost of assets of controlled foreign companies

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43B.   Base cost of assets of controlled foreign companies

 

Where the functional currency of a controlled foreign company –

 

(a)     was the currency of a country which-

 

(i)      abandoned its currency; and

 

(ii)     had an official rate of inflation of 100 per cent or more for the foreign tax year preceding the abandonment of the currency; and

 

(b)     the controlled foreign company adopted a new functional currency as a consequence of the abandonment contemplated in subparagraph (a)(i),

 

the controlled foreign company must, for the purposes of determining the base cost of an asset of the controlled foreign company, be deemed to have acquired the asset in that new currency-

 

(A)    on the first day of the foreign tax year of the controlled foreign company in which; and

 

(B)     for an amount equal to the market value of the asset on the date on which,

 

the new currency was adopted by the controlled foreign company.

Paragraph 53 (Eighth Schedule) – Personal-use assets

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53.    Personal-use assets

 

(1)     A natural person or a special trust must disregard a capital gain or capital loss determined in respect of the disposal of a personal-use asset as contemplated in subparagraph (2).

 

(2)     A personal-use asset is an asset of a natural person or a special trust that is used mainly for purposes other than the carrying on of a trade.

 

(3)     Personal use assets do not include-

 

(a)     a coin made mainly from gold or platinum of which the market value is mainly attributable to the material from which it is minted or cast;


(b)     immovable property;


(c)     an aircraft, the empty mass of which exceeds 450 kilograms;


(d)     a boat exceeding ten metres in length;


(e)     a financial instrument;


(f)      any fiduciary, usufructuary or other like interest, the value of which decreases over time;


(g)     any contract in terms of which a person, in return for payment of a premium, is entitled to policy benefits upon the happening of a certain event and includes a reinsurance policy in respect of such a contract, but excludes any short-term policy contemplated in the Short-term Insurance Act;


(h)     any short-term policy contemplated in the Short-term Insurance Act to the extent that it relates to any asset which is not a personal-use asset; and


(i)      a right or interest of whatever nature to or in an asset envisaged in items (a) to (h).

 

(4)     For the purposes of subparagraph (2), an asset of a natural person or a special trust to whom an allowance is or was paid or payable in respect of the use of that asset for business purposes, must be treated as being used mainly for purposes other than the carrying on of a trade.

Paragraph 64 (Eighth Schedule) – Asset used to produce exempt income

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64.    Asset used to produce exempt income

 

A person must disregard any capital gain or capital loss in respect of the disposal of an asset which is used by that person solely to produce amounts which are exempt from normal tax in terms of –

 

(a)     section 10, other than receipts and accruals contemplated in paragraphs (cN), (cO), (i) and (k) of subsection (1) thereof; or

 

(b)     section 12K.