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 26 (Eighth Schedule) – Valuation date value where proceeds exceed expenditure or where expenditure in respect of an asset cannot be determined

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26.    Valuation date value where proceeds exceed expenditure or where expenditure in respect of an asset cannot be determined

 

(1)     Where the proceeds from the disposal of a pre-valuation date asset (other than an asset contemplated in paragraph 28 or in respect of which paragraph 32(3A) has been applied) exceed the expenditure allowable in terms of paragraph 20 incurred before, on and after the valuation date in respect of that asset, the person who disposed of that asset must, subject to subparagraph (3), adopt any of the following as the valuation date value of that asset-

 

(a)     the market value of the asset on the valuation date as contemplated in paragraph 29;

 

(b)     20 per cent of the proceeds from disposal of the asset, after deducting from those proceeds an amount equal to the expenditure allowable in terms of paragraph 20 incurred on or after the valuation date; or

 

(c)     the time-apportionment base cost of the asset as contemplated in paragraph 30.

 

(2)     Where the expenditure incurred before valuation date in respect of a pre-valuation date asset cannot be determined by the person who disposed of that asset or the Commissioner, that person must adopt any of the following as the valuation date value of that asset-

 

(a)     the market value of the asset on the valuation date as contemplated in paragraph 29; or

 

(b)     20 per cent of the proceeds from disposal of the asset, after deducting from those proceeds an amount equal to the expenditure allowable in terms of paragraph 20 incurred on or after the valuation date.

 

(3)     Where a person has adopted the market value as the valuation date value of an asset, as contemplated in subparagraph (1)(a), and the proceeds from the disposal of that asset do not exceed that market value, that person must substitute as the valuation date value of that asset, those proceeds less the expenditure allowable in terms of paragraph 20 incurred on or after the valuation date in respect of that asset.

Paragraph 15 (Eighth Schedule) – Personal-use aircraft, boats, and certain rights and interests

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15.     Personal-use aircraft, boats and certain rights and interests

A capital loss in respect of the following assets of a person must be disregarded in determining the aggregate capital gain or aggregate capital loss of a person, to the extent that the assets are used for purposes other than the carrying on of a trade:

(a)     An aircraft with an empty mass exceeding 450 kg;

(b)     a boat exceeding ten metres in length;

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

(d)     any lease of immovable property;

(e)     any-

(i)      time-sharing interest as defined in section 1 of the Property Time-sharing Control Act, 1983 (Act No. 75 of 1983); or


(ii)     share in a share block company, as defined in section 1 of the Share Blocks Control Act,

[Item (ii) substituted by section 83 of Act 43 of 2014 effective on 20 January 2015]

(f)      any right or interest of whatever nature to or in an asset contemplated in items (a), (b), (c), (d) or (e).

Paragraph 27 (Eighth Schedule) – Valuation date value where proceeds do not exceed expenditure

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27.     Valuation date value where proceeds do not exceed expenditure

 

(1)     Subject to subparagraph (2), where the proceeds from the disposal of a pre-valuation date asset do not exceed the expenditure allowable in terms of paragraph 20 incurred before, on and after the valuation date in respect of that asset, the valuation date value of that asset must be determined in terms of this paragraph.

 

(2)     This paragraph does not apply in respect of any asset contemplated in paragraph 28 or in respect of which paragraph 32(3A) has been applied.

 

(3)     Where a person has determined the market value of an asset on the valuation date, as contemplated in paragraph 29, or the market value of an asset has been published in terms of that paragraph, and-

 

(a)     the expenditure allowable in terms of paragraph 20 incurred before the valuation date in respect of that asset-

 

(i)      is equal to or exceeds the proceeds from the disposal of that asset; and

 

(ii)     exceeds the market value of that asset on valuation date, the valuation date value of that asset must be the higher of-

 

(aa)   that market value; or

 

(bb)   those proceeds less the expenditure allowable in terms of paragraph 20 incurred on or after the valuation date in respect of that asset; or

 

(b)     the provisions of item (a) do not apply, the valuation date value of that asset must be the lower of-

 

(i)      that market value; or

 

(ii)     the time-apportionment base cost of that asset as contemplated in paragraph 30.

 

(4)     Where the provisions of subparagraph (3) do not apply, the valuation date value of that asset, contemplated in subparagraph (1), is the time-apportionment base cost of that asset, as contemplated in paragraph 30.

Paragraph 16 (Eighth Schedule) – Intangible assets acquired prior to valuation date

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16.     Intangible assets acquired prior to valuation date

 

(1)     A person must, in determining the aggregate capital gain or aggregate capital loss of that person, disregard any capital loss determined in respect of the disposal of an intangible asset acquired prior to valuation date-

 

(a)     from a connected person in relation to that person; or


(b)     which was associated with a business taken over by that person or any connected person in relation to that person.

 

(2)     For the purposes of subparagraph (1), ‘intangible asset’ means-

 

(a)     goodwill;


(b)     any patent as defined in the Patents Act or any design as defined in the Designs Act or any trade mark as defined in the Trade Marks Act or any copyright as defined in the Copyright Act or any rights recognised under the Plant Breeders’ Rights Act 1976 (Act No. 15 of 1976), or any model, pattern, plan, formula or process or any other property or right of a similar nature;


(c)     any intellectual property right or property or right of a similar nature in respect of which a proprietary interest may be established in terms of the common law of the Republic of South Africa, or

 

(d)     any other intangible property except any financial instrument.

Paragraph 28 (Eighth Schedule) – Valuation date value of an instrument

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28.     Valuation date value of an instrument

 

(1)     Despite paragraph 29, the valuation date value of an instrument as defined in section 24J must be-

 

(a)     the adjusted initial amount as determined in terms of that section on valuation date; or


(b)     the price which could have been obtained upon a sale of that instrument between a willing buyer and a willing seller dealing at arm’s length in an open market-


(i)      in the case of an instrument which is listed on a recognised exchange, on the last trading day before valuation date; or


(ii)     in any other case, on valuation date.

 

(2)     Where a person has adopted the adjusted initial amount as the valuation date value of an instrument (other than an instrument listed on a recognised exchange), as contemplated in subparagraph (1)(a), and the proceeds from the disposal of that instrument are less than that adjusted initial amount, the valuation date value of that instrument must be the time-apportionment base cost of that instrument, as contemplated in paragraph 30.

Paragraph 17 (Eighth Schedule) – Forfeited deposits

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17.     Forfeited deposits

 

(1)     Where-

 

(a)     a person has made a deposit for the purpose of acquiring an asset which is not intended for use wholly and exclusively for business purposes, and

 

(b)     that deposit has been forfeited, the capital loss determined in respect of that forfeiture must be disregarded when determining that person’s aggregate capital gain or aggregate capital loss.

 

(2)     Subparagraph (1) does not apply in respect of-

 

(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, other than immovable property intended to be the primary residence of that person;

 

(c)     a financial instrument; or

 

(d)     any right or interest in any asset contemplated in items (a), (b) or (c).

Paragraph 29 (Eighth Schedule) – Market value on valuation date

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29.     Market value on valuation date

(1)     The market value on the valuation date of-

(a)     a financial instrument listed on a recognised exchange and for which a price was quoted on that exchange both before and after the valuation date is, subject to subparagraph (2) and (2A), in the case of a financial instrument listed on an exchange-

(i)      in the Republic, the price published by the Commissioner in the Gazette, which is the aggregate value of all transactions in that financial instrument as traded on that recognised exchange during the five business days preceding the valuation date, divided by the total quantity of that financial instrument traded during the same period; and

(ii)     outside the Republic and which is not listed on any exchange in the Republic, the ruling price in respect of that financial instrument on that recognised exchange on the last business day before valuation date;

(b)     an asset which is not listed on a recognised exchange and which constitutes a right of a unit holder or holder of a participatory interest, as the case may be, in-

(i)      any company contemplated in paragraph (e)(i) of the definition of “company” in section 1 of the Act, or any unit portfolio comprised in any unit trust scheme in property shares carried on in the Republic, the price published by the Commissioner in the Gazette, which is the average of the price at which a unit could be sold to the management company of the scheme for the last five trading days before valuation date; or

(ii)     any arrangement or scheme contemplated in paragraph (e)(ii) of the definition of “company”, the last price published before valuation date at which a participatory interest could be sold to the management company of the scheme 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 valuation date;

(c)     any other asset, the market value determined in terms of paragraph 31 on valuation date.

(2)   Where-

(a)     a person holds a controlling interest in a company the shares of which are listed on a recognised exchange, and that entire controlling interest is disposed of to another person (who is not a connected person in relation to that person), who acquires that entire controlling interest; and

(b)     the price per share for which that controlling interest has been so disposed of deviates from the ruling price in respect of that share on the date prior to the announcement of the transaction,

the valuation date market value of that share so disposed of, as determined in terms of subparagraph (1)(a), must be increased or decreased, as the case may be, by an amount which bears to that market value the same ratio as the deviation bears to that ruling price.

(2A)  Where-

(i)      a financial instrument listed on an exchange in the Republic was not traded during the last five business days preceding valuation date;

(ii)     a financial instrument listed on an exchange in the Republic is suspended for any period during September 2001; or

(iii)    the market value of a financial instrument determined in terms of subparagraph (1)(a)(i), exceeds the average of the ruling price of that financial instrument, determined for the first 14 business days of the month of September 2001, by five per cent or more,

the Commissioner must, after consultation with the recognised exchange and the Financial Services Board, determine the market value of that financial instrument having regard to the value of the financial instrument, circumstances surrounding the suspension of that financial instrument or reasons for the increase in the value of that financial instrument.

[Words following item (iii) substituted by section 85 of Act 43 of 2014 effective on 20 January 2015]

(3)     For the purposes of this paragraph “controlling interest” in a company means an interest in more than 35 per cent of the equity shares in that company.

(4)     For the purposes of paragraphs 26(1)(a) and 27(3), a person may only adopt or determine the market value as the valuation date value of that asset if –

(a)     in the case where the valuation date is 1 October 2001 –

(i)      that person has valued that asset on or before 30 September 2004;

(ii)     the price of that asset has been published by the Commissioner in terms of this paragraph in the Gazette; or

(iii)     that person has acquired that asset from that person’s spouse as contemplated in section 9HB and the transferor spouse had adopted or determined a market value in terms of this paragraph and for this purpose the transferee spouse must be treated as having adopted or determined that same market value; or

[Sub­item (iii) substituted by section 57 of Act 34 of 2019]

(b)     in the case where the valuation date is after 1 October 2001 –

(i)      that person has valued that asset within two years after valuation date; or

(ii)     that asset is one contemplated in paragraph 31(1)(a) or (c)(i) and the market value of that asset on valuation date is determined in terms of one of those paragraphs.

(5)     Despite subparagraph (4), where a person has valued an asset and-

(a)     the market value of that asset exceeds R10 million;

(b)     that asset is an intangible asset (excluding financial instruments) and the market value thereof exceeds R1 million, or

(c)     that asset is an unlisted share in a company and the market value of all the shares held by that person in that company exceeds R10 million,

that person may only adopt the market value as the valuation date value of that asset if that person has furnished proof of that valuation to the Commissioner in the form as the Commissioner may prescribe, with the first return submitted by that person after the date or period contemplated in subparagraph (4).

[Words following item (c) substituted by section 13 of Act 44 of 2014 and section 109 of Act 25 of 2015 effective on 8 January 2016]

(6)     Where a person disposes of-

(a)     an asset contemplated in subparagraph (5)(a), (b) or (c) which has been valued before proof of valuation is submitted as contemplated in that subparagraph; or

(b)     any other asset which has been valued,

that person must retain proof of that valuation.

[Words following item (b) substituted by section 13 of Act 44 of 2014 effective on 20 January 2015]

(7)     The Commissioner may, notwithstanding any proof of valuation submitted by a person to the Commissioner as contemplated in subparagraph (5) or (6)-

(a)     request any such further information or documents relating to that valuation; or

(b)     where the Commissioner is not satisfied with any value at which an asset has been valued, the Commissioner may adjust the value accordingly.

(8)     Where the valuation date of a person is after 1 October 2001 the provisions of subparagraphs (1)(a), (1)(b)(i), (2), (2A), (3), (5) and (6)(a) do not apply.

Paragraph 37C (Eighth Schedule) – Deductions in respect of environmental conservation and maintenance

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37C.     Deductions in respect of environmental conservation and maintenance

 

(1)     Expenditure actually incurred by a taxpayer to conserve or maintain land is deemed to be expenditure incurred in the production of income and for purposes of a trade carried on by that taxpayer, if-

 

(a)     the conservation or maintenance is carried out in terms of a biodiversity management agreement that has a duration of at least five years entered into by the taxpayer in terms of section 44 of the National Environmental Management: Biodiversity Act, 2004 (Act No. 10 of 2004); and

 

(b)     land utilised by the taxpayer for the production of income and for purposes of a trade consists of, includes or is in the immediate proximity of the land that is the subject of the agreement contemplated in paragraph (a).

 

(2)

 

(a)     Any deduction of expenditure contemplated in subsection (1) must not be allowed to the extent that the expenditure exceeds the income of the taxpayer derived from trade carried on by the taxpayer on land utilised as contemplated in subsection (1)(b) in any year of assessment.

 

(b)     The amount by which the deduction exceeds the income of the taxpayer so derived must be deemed to be expenditure incurred by the taxpayer in the following year of assessment.

 

(3)     An amount equal to the expenditure actually incurred by a taxpayer to conserve or maintain land owned by the taxpayer is for purposes of section 18A deemed to be a donation by the taxpayer actually paid or transferred during the year to the Government for which a receipt has been issued in terms of section 18A(2), if the conservation or maintenance is carried out in terms of a declaration that has a duration of at least 30 years in terms of section 20, 23 or 28 of the National Environmental Management: Protected Areas Act, 2003 (Act No. 57 of 2003).

 

(4)     If during the current or any previous year of assessment a deduction is or was allowed to the taxpayer in terms of subsection (1) or (3) in respect of expenditure incurred to conserve or maintain land in terms of an agreement or declaration contemplated in those subsections, and the taxpayer subsequently is in breach of that agreement or violates that declaration, an amount equal to the deductions allowed in respect of expenditure incurred within the period of five years preceding the breach or violation must be included in the income of the taxpayer for the current year of assessment.

 

(6)     If-

 

(a)     land is declared a national park or nature reserve in terms of an agreement under section 20(3) or 23(3) of the National Environmental Management: Protected Areas Act, 2003 (Act No. 57 of 2003); and

 

(b)     the declaration is endorsed on the title deed of the land and has a duration of at least 99 years,

 

an amount equal to 10 per cent of the lesser of the cost or market value of the land without regard to any right of use retained by any taxpayer is for purposes of section 18A and paragraph 62 of the Eighth Schedule deemed to be a donation paid or transferred to the Government for which a receipt has been issued in terms of section 18A(2), in the year of assessment in which the land is so declared and each of the succeeding nine years of assessment.

 

(6)     If the taxpayer retains a right of use of land contemplated in subsection (5), the amount deemed to be a donation in terms of that subsection is an amount that bears to the amount determined in terms of that subsection the same ratio as the market value of the land subject to the right of use bears to the market value of the land had that land not been subject to the right of use.

 

(7)     If during the current or any previous year of assessment a deduction is or was allowed to the taxpayer in terms of subsection (5) in respect of a deemed donation in terms of a declaration contemplated in that subsection, and the taxpayer subsequently violates that declaration, an amount equal to the deduction allowed in respect of the deemed donation within the period of five years preceding the violation must be included in the income of the taxpayer for the current year of assessment.

 

37D.    ……….

 

37E.     ……….

Paragraph 18 (Eighth Schedule) – Disposal of options

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18.     Disposal of options

 

(1)     Where a person who is entitled to exercise an option-

 

(a)     to acquire an asset not intended for use wholly and exclusively for business purposes; or


(b)     to dispose of an asset not used wholly and exclusively for business purposes, has abandoned that option, allowed that option to expire, or in any other manner disposed of that option other than by way of the exercise thereof, any capital loss of that person determined in respect of that expiry shall be disregarded.

 

(2)     Subparagraph (1) does not apply in respect of an option to acquire or dispose of-

 

(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, other than immovable property-

 

(i)      in the case of subparagraph (1)(a), which is intended to be the primary residence of the person entitled to exercise the option; or


(ii)     in the case of subparagraph (1)(b), is the primary residence of the person entitled to exercise the option;

 

(c)     a financial instrument; or


(d)     any right or interest in those assets contemplated in items (a), (b) and (c).