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.

“Debt benefit” definition of paragraph 12A of Eighth Schedule

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‘debt benefit’, in respect of a debt owed by a person to another person, means-

(a)     in the case of an arrangement described in paragraph (a)(i) of the definition of ‘concession or compromise’, the amount cancelled or waived;

(b)     in the case of the extinction of that debt by means of an arrangement described in paragraph (a)(ii) of the definition of ‘concession or compromise’, the amount by which the face value of the claim in respect of that debt held by the person to whom the debt is owed prior to the entering into of that arrangement exceeds the expenditure incurred in respect of-

(i)     the redemption of that debt; or

(ii)    the acquisition of the claim in respect of that debt;

(c)     in the case of the settling of that debt by means of an arrangement described in paragraph (b) of the definition of ‘concession or compromise’, where the person who acquired shares in a company in terms of that arrangement held no effective interest in the shares of that company prior to the entering into of that arrangement, the amount by which the face value of the claim held in respect of that debt prior to the entering into of that arrangement exceeds the market value of the shares acquired by reason or as a result of the implementation of that arrangement; or

(d)     in the case of the settling of that debt by means of an arrangement described in paragraph (b) of the definition of ‘concession or compromise’, where the person who acquired shares in a company in terms of that arrangement held an effective interest in the shares of that company prior to the entering into of that arrangement, the amount by which the face value of the claim held in respect of that debt prior to the entering into of that arrangement exceeds the amount by which the market value of the effective interest held by that person in the shares of that company immediately after the implementation of that arrangement exceeds, solely as a result of the implementation of that arrangement, the market value of the effective interest held by that person in the shares of that company immediately prior to the entering into of that arrangement;

[Definition of ‘debt benefit’ 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]

“Concession or compromise” definition of paragraph 12A of Eighth Schedule

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‘concession or compromise’ means any arrangement in terms of which-

(a)     a debt is-

(i)      cancelled or waived; or

(ii)     extinguished by-

(aa)   redemption of the claim in respect of that debt by the person owing that debt or by any person that is a connected person in relation to that person; or

(bb)   merger by reason of the acquisition, by the person owing that debt, of the claim in respect of that debt,

otherwise than as the result or by reason of the implementation of an arrangement described in paragraph (b);

(b)     a debt owed by a company to a person is settled, directly or indirectly-

(i)      by being converted to or exchanged for shares in that company; or

(ii)     by applying the proceeds from shares issued by that company;

[Definition of ‘concession or compromise’ 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]

Paragraph 64D (Eighth Schedule) – Land donated in terms of land reform measures

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64D.  Land donated in terms of land reform measures

A person must disregard any capital gain or capital loss in respect of the disposal by way of a donation of land or right to land by virtue of the measures as contemplated in Chapter 6 of the National Development Plan: Vision 2030 of 11 November 2011 released by the National Planning Commission, Presidency of the Republic of South Africa.

[Paragraph 64D inserted by section 77 of Act 15 of 2016 effective on 29 February 2016, applies in respect of years of assessment ending on or after that date]

Paragraph 63C (Eighth Schedule) – Disposal of equity instruments

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64C.    Disposal of restricted equity instruments

A person must disregard any capital gain or capital loss determined in respect of the disposal of any restricted equity instrument as contemplated in section 8C(4)(a), (5)(a) or (c).

[Paragraph 64C inserted by section 118 of Act 25 of 2015 effective on 1 March 2016]

Paragraph 63B (Eighth Schedule) – Small business funding entities

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63B.    Small business funding entities

(1)       A small business funding entity approved by the Commissioner in terms of section 30C must disregard any capital gain or capital loss determined in respect of the disposal of an asset if-

(a)     that small business funding entity did not use that asset in carrying on any business undertaking or trading activity; or

(b)     substantially the whole of the use of that asset by that small business funding entity 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)(cQ)(ii)(aa), (bb) or (cc).

[Paragraph 63B inserted by section 90 of Act 43 of 2014 effective on 1 March 2015]

Sub-paragraphs 2 and 3 of paragraph 67B of Eighth Schedule

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(2)     This paragraph applies where a person who holds a right of use of a part of the immovable property of a share block company, which right is conferred by reason of the ownership of a share by that person in that share block company, acquires ownership of that part of immovable property from that share block company as part of any transaction in terms of which a disposal of that part of immovable property is made by that share block company.

 

(3)     Where a person who owns a share in a share block company acquires ownership of immovable property as part of any transaction in terms of which a disposal is made by that share block company as contemplated in subparagraph (2)-

 

(a)     the share block company must disregard any capital gain or capital loss determined in respect of that disposal; and

 

(b)     that person must-

 

(i)      disregard any capital gain or capital loss determined in respect of any disposal of that share as a result of that disposal; and

 

(ii)     be treated as having-

 

(aa)   acquired that immovable property for an amount equal to the expenditure contemplated in paragraph 20 incurred by the person in acquiring that share;

 

(bb)   incurred the expenditure contemplated in subsubitem (aa) on the same date that the expenditure was incurred by the person in acquiring that share;

 

(cc)   effected improvements to that immovable property for an amount equal to the expenditure contemplated in paragraph 20 incurred by that person in effecting improvements to the part of the immovable property of the share block company in respect of which the person had a right of use as a result of the ownership of that share;

 

(dd)   incurred the expenditure contemplated in subsubitem (cc) on the same date that the expenditure was incurred by the person in effecting the improvements to the part of the immovable property of the share block company in respect of which the person had a right of use as a result of the ownership of that share;

 

(ee)   acquired that immovable property on the date that the share was acquired by the person; and

 

(ff)     used that immovable property in the same manner as the person used the immovable property in respect of which the person had a right of use as a result of the ownership of that share; and

 

(c)     any valuation of that share which was done by that person within the period prescribed by paragraph 29(4) must be deemed to have been done by that person in respect of that immovable property.