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 51 (Eighth Schedule) – Transfer of residence from company or trust

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51.    Transfer of residence from company or trust

 

(1)     Where an interest in a residence has been transferred from a company or a trust to a natural person as contemplated in subparagraph (2) –

 

(a)     that company or trust must be deemed to have disposed of that interest for an amount equal to the base cost of that interest on the date of transfer thereof;

 

(b)     that company or trust and that natural person must, for purposes of determining any capital gain or capital loss in respect of the transfer of that interest, be deemed to be one and the same person with respect to-

 

(i)      the date of acquisition of that interest by that company or trust and the amount and date of incurral by that company or trust of any expenditure in respect of that interest allowable in terms of paragraph 20; and

 

(ii)     any valuation of that interest effected by that company or trust as contemplated in paragraph 29(4);

 

(c)     no allowance or deduction allowed to that company or trust in respect of that interest must be recovered or recouped by that company or trust or be included in the income of that company or trust in the year in which the transfer takes place; and

 

(d)     that company or trust and that natural person must be deemed to be one and the same person for purposes of determining the amount of any allowance or deduction that is to be recovered or recouped by or included in the income of that natural person in respect of that interest.

 

(2)     Subparagraph (1) applies where –

 

(a)     that natural person acquires that interest from the company or trust no later than 30 September 2010;

 

(b)     that natural person –

 

(i)      alone or together with his or her spouse directly held all the share capital or members interest in that company from 11 February 2009 to the date of registration in the deeds registry of that residence in the name of that natural person or his or her spouse or in their names jointly; or

 

(ii)     disposed of that residence to that trust by way of donation, settlement or other disposition or financed all the expenditure, as contemplated in paragraph 20, actually incurred by the trust to acquire and to improve the residence; and

 

(c)     that natural person alone or together with his or her spouse personally and ordinarily resided in that residence and used it mainly for domestic purposes as his or her or their ordinary residence from 11 February 2009 to the date of the registration contemplated in item (b)(i);

 

Provided that this paragraph applies only in respect of the portion of the property contemplated in paragraph 46.

Paragraph 61 (Eighth Schedule) – Portfolios of collective investment schemes other than portfolios of collective investment schemes in property

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61.    Portfolios of collective investment schemes other than portfolios of collective investment schemes in property

 

(1)     A holder of a participatory interest in a portfolio of a collective investment scheme, other than a portfolio of a collective investment scheme in property, must determine a capital gain or capital loss in respect of the participatory interest only upon the disposal of that participatory interest.

 

(2)     The capital gain or capital loss to be determined in terms of subparagraph (1) must be determined with reference to the proceeds from the disposal of that participatory interest and its base cost.

 

(3)      Any capital gain or capital loss in respect of a disposal by a portfolio of a collective investment scheme, other than a portfolio of a collective investment scheme in property, must be disregarded.

Paragraph 51A (Eighth Schedule) – Disposal of residence by company or trust and liquidation, winding up, deregistration or termination of company or trust

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51A.  Disposal of residence by company or trust and liquidation, winding up, deregistration or termination of company or trust

 

(1)     Subject to subparagraph (6), this paragraph applies where a company or trust disposes of an interest in a residence and-

 

(a)     the disposal takes place on or before 31 December 2012;

 

(b)     the residence to which that interest relates is mainly used for domestic purposes during the period commencing on 11 February 2009 and ending on the date of the disposal contemplated in item (a) by one or more natural persons who are connected persons in relation to the company or trust at the time of that disposal; and

 

(c)     ……….

 

(d)     within a period of six months commencing on the date of the disposal contemplated in item (a)-

 

(i)      in the case of a company making the disposal, that company has taken steps to liquidate, wind up or deregister as contemplated in section 41(4); or

 

(ii)     in the case of a trust making the disposal, steps have been taken to terminate the trust.

 

(2)     Where a company or a trust makes a disposal of an interest in a residence as contemplated in subparagraph (1), that company or trust must be deemed to have made that disposal for an amount equal to the base cost of that interest as at the date of that disposal.

 

(3)     Where-

 

(a)     an interest in a residence has been acquired by a person as a result of a disposal by a company of that interest to that person as contemplated in subparagraph (1);

 

(b)     that person (together with all other persons holding shares in that company) acquired all the shares in the company subsequent to the date of acquisition by the company of that interest; and

 

(c)     90 per cent or more of the market value of the assets held by the company during the period commencing on 11 February 2009 and ending on the date of the disposal contemplated in subparagraph (1)(a) is attributable to that interest,

 

that person must-

 

(i)      disregard the disposal of all shares held by that person in that company for purposes of determining his or her taxable income, assessed loss, aggregate capital gain or aggregate capital loss if that disposal is made in anticipation of or in the course of the liquidation, winding up or deregistration of that company; and

 

(ii)     be deemed to have acquired that interest at a cost equal to the base cost of the shares contemplated in subitem (i) as at the date of the acquisition by the person of those shares plus the cost of any improvements effected in respect of that interest subsequent to that date of acquisition.

 

(4)     Where an interest in a residence has been acquired by a person as a result of a disposal by a company of that interest to that person as contemplated in subparagraph (1) and where subparagraph (3) does not apply-

 

(a)     that person must disregard the disposal of any share in that company for purposes of determining his or her taxable income, assessed loss, aggregate capital gain or aggregate capital loss if that disposal is made in anticipation of or in the course of the liquidation, winding up or deregistration of that company; and

 

(b)     that person and that company must be deemed to be one and the same person with respect to-

 

(i)      the date of acquisition of that interest by that company;

 

(ii)     the amount and date of incurral by that company of any expenditure in respect of that interest allowable in terms of paragraph 20; and

 

(iii)    any valuation of that interest effected by that company as contemplated in paragraph 29(4).

 

(5)     Where an interest in a residence has been acquired by a person as a result of a disposal by a trust of that interest to that person as contemplated in subparagraph (1), that person and that trust must for purposes of determining any capital gain or capital loss in respect of the disposal by that person of that interest so acquired be deemed to be one and the same person with respect to-

 

(a)     the date of acquisition of that interest by that trust;

 

(b)     the amount and date of incurral by that trust of any expenditure in respect of that interest allowable in terms of paragraph 20; and

 

(c)     any valuation of that interest effected by that trust as contemplated in paragraph 29(4).

 

(6)     This paragraph does not apply to any disposal made to a person unless-

 

(a)     within a period of six months commencing on the date of that disposal-

 

(i)      where that person is a company, that company has taken steps to liquidate, wind up or deregister as contemplated in section 41(4); or

 

(ii)     where that person is a trust, steps have been taken to terminate the trust.

 

(b)     one or more natural persons contemplated in subparagraph (1)(b) acquire the residence contemplated in that subparagraph on or before 31 December 2012.

 

(7)     ……….

Paragraph 62 (Eighth Schedule) – Donations and bequests to public benefit organisations and exempt persons

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62.    Donations and bequests to public benefit organisations and exempt persons

 

A person must disregard a capital gain or capital loss determined in respect of the donation or bequest of an asset by that person to-

 

(a)     the government of the Republic in the national, provincial or local sphere, as contemplated in section 10(1)(a);

 

(b)     a public benefit organisation contemplated in paragraph (a) of the definition of ‘public benefit organisation’in section 30(1) that has been approved by the Commissioner in terms of section 30(3);

 

(c)     a person contemplated in section 10(1)(cA) or (d)(iv);

 

(d)     a person referred to in section 10(1)(cE) or (e); or

 

(e)     a recreational club which is a company, society or other organisation as contemplated in the definition of ‘recreational club’ in section 30A(1) that has been approved by the Commissioner in terms of section 30A.

Paragraph 67C (Eighth Schedule) – Mineral rights conversions and renewals

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67C.    Mineral rights conversions and renewals

 

Notwithstanding paragraph 11, there is no disposal where-

 

(a)     any old order right or OP26 right as defined in Schedule II of the Mineral and Petroleum Resources Development Act wholly or partially continues in force or is wholly or partially converted into a new right pursuant to the same Schedule; or

 

(b)     any prospecting right, mining right, exploration right, production right, mining permit, retention permit or reconnaissance permit, as defined in section 1 of the Mineral and Petroleum Resources Development Act is wholly or partially renewed in terms of that Act,

 

and the continued, converted or renewed right or permit will be treated as one and the same asset as the right or permit before continuation, conversion or renewal for purposes of this Act.

Paragraph 80 (Eighth Schedule) – Capital gain attributed to beneficiary

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80. Capital gain attributed to beneficiary

 

(1)     Subject to paragraphs 68, 69 and 71, where a trust vests an asset in a beneficiary of that trust (other than any person contemplated in paragraph 62(a) to (e) or a person who acquires that asset as an equity instrument as contemplated in section 8C(1)) who is a resident, and determines a capital gain in respect of that disposal or, if that trust is not a resident, would have determined a capital gain in respect of that disposal had it been a resident-

 

(a)     that capital gain must be disregarded for the purpose of calculating the aggregate capital gain or aggregate capital loss of the trust; and

 

(b)     that capital gain or the amount that would have been determined as a capital gain must be taken into account as a capital gain for the purpose of calculating the aggregate capital gain or aggregate capital loss of the beneficiary to whom that asset was so disposed of.

 

(2)     Subject to paragraphs 64E, 68, 69 and 71, where a trust determines a capital gain in respect of the disposal of an asset in a year of assessment during which a beneficiary of that trust (other than any person contemplated in paragraph 62(a) to (e)) who is a resident has a vested right or acquires a vested right (including a right created by the exercise of a discretion) to an amount derived from that capital gain but not to the asset disposed of, an amount that is equal to so much of the amount to which that beneficiary of that trust is entitled in terms of that right—

 

(a)     must be disregarded for the purpose of calculating the aggregate capital gain or aggregate capital loss of the trust; and

 

(b)     must be taken into account as a capital gain for the purpose of calculating the aggregate capital gain or aggregate capital loss of that beneficiary.

[Subparagraph (2) substituted by section 52(a) of Act 23 of 2020]

 

(2A)

 

(a)     Subject to paragraphs 64E, 68, 69 and 71, this subparagraph applies where—

 

(i)      a beneficiary who is a resident (other than any person contemplated in paragraph 62(a) to (e)) derives an amount through vesting during a year of assessment from a trust that is not a resident; and

 

(ii)     that amount was derived directly or indirectly from that trust or another trust which is not a resident in respect of the disposal of an asset during the same year of assessment and that amount would have constituted a capital gain had the trust that disposed of the asset been a resident.

 

(b)    Where item (a) applies, the amount derived by the beneficiary must be taken into account as a capital gain for the purpose of calculating that beneficiary’s aggregate capital gain or aggregate capital loss for that year of assessment.

[Subparagraph (2A) inserted by section 52(b) of Act 23 of 2020]

 

(3)     Where during any year of assessment any resident acquires a vested right to any amount representing capital of any trust which is not a resident, and-

 

(a)     that capital consists of or is derived, directly or indirectly, from an amount-

 

(i)      determined as a capital gain of that trust; or

 

(ii)     which would have been determined as a capital gain of that trust had that trust been a resident,

 

in any previous year of assessment during which that resident had a contingent right to that capital; and

 

(b)     that capital gain or the amount that would have been determined as a capital gain has not been subject to tax in the Republic in terms of the provisions of this Act,

 

that amount must be taken into account as a capital gain when determining the aggregate capital gain or aggregate capital loss of that resident in respect of the year of assessment in which that resident acquired that vested right.

 

(4)     In determining, for purposes of subparagraph (1), (2A) or (3), whether an amount would have constituted a capital gain had the trust been a resident, the provisions of paragraph 64B(1) and (4) must be disregarded in respect of an amount derived by that trust, directly or indirectly, from the disposal or in respect of an equity share in a foreign company if-

 

(a)     more than 50 per cent of the total participation rights, as defined in section 9D(1), or of the voting rights in that company are directly or indirectly held or are exercisable, as the case may be, by that trust whether alone or together with any one or more persons that are connected persons in relation to that trust; and

 

(b)     to the extent to which that amount is not derived from an amount that must be included in the income of or attributed to—

 

(i)      the resident to whom an amount is attributed in terms of subparagraph (1), (2A) or (3); or

 

(ii)     a resident who is a connected person in relation to the resident referred to in subitem (i).

[Subparagraph (4) amended by section 64 of Act 34 of 2019 and substituted by section 36 of Act 42 of 2024]

 [Paragraph 80 amended by section 108(1) of Act 60 of 2001, by section 58 of Act 20 of 2006, by section 62 of Act 3 of 2008, by section 86(a)-(b) of Act 60 of 2008, by section 80 of Act 17 of 2009, by section 150(a)-(b) of Act 31 of 2013, by section 123(1)(a)-(b) of Act 25 of 2015 and by section 75(1)(a)-(b) of Act 17 of 2017 and substituted by section 87(1) of Act 23 of 2018 effective on 1 March, 2019 and applicable in respect of disposals on or after that date] 

Paragraph 68 (Eighth Schedule) – Attribution of capital gain to spouse

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68.    Attribution of capital gain to spouse

 

(1)     Where a person’s capital gain or a capital gain that has vested in or is treated as having vested in that person during the year of assessment in which it arose can be attributed wholly or partly to-

 

(a)     any donation, settlement or other disposition; or

 

(b)     any transaction, operation or scheme, made, entered into or carried out by that person’s spouse mainly for purposes of reducing, postponing or avoiding that spouse’s liability for any tax, duty or levy which would otherwise have become payable under any Act administered by the Commissioner, so much of the gain as can be so attributed must be disregarded when determining that person’s aggregate capital gain or aggregate capital loss and taken into account when determining the aggregate capital gain or aggregate capital loss of that person’s spouse.

 

(2)     Where a person’s capital gain is derived from-

 

(a)     any trade carried on by that person in partnership or association with that person’s spouse or which is in any way connected with any trade carried on by that spouse; or

 

(b)     that person’s spouse or any partnership or private company at a time when that spouse was a member of that partnership or the sole, main or one of the principal holders of shares in that company,

 

so much of that gain as exceeds the amount to which that person would reasonably be entitled having regard to the nature of the relevant trade, the extent of that person’s participation therein, the services rendered by that person or any other relevant factor, must be disregarded when determining that person’s aggregate capital gain or aggregate capital loss and taken into account when determining the aggregate capital gain or aggregate capital loss of that person’s spouse.

Paragraph 69 (Eighth Schedule) – Attribution of capital gain to parent of minor child

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69.    Attribution of capital gain to parent of minor child

 

Where a minor child’s capital gain or a capital gain that has vested in or is treated as having vested in or that has been used for the benefit of that child during the year of assessment in which it arose can be attributed wholly or partly to any donation, settlement or other disposition-

 

(a)     made by a parent of that child; or

 

(b)     made by another person in return for any donation, settlement or other disposition or some other consideration made or given by a parent of that child in favour directly or indirectly of that person or his or her family, so much of that gain as can be so attributed must be disregarded when determining that child’s aggregate capital gain or aggregate capital loss and must be taken into account in determining the aggregate capital gain or aggregate capital loss of that parent.