(2)     Any amount received or accrued (other than a dividend or foreign dividend) or any expenditure incurred in respect of an equity share must be deemed to be of a capital nature if that equity share had, at the time of the receipt or accrual of that amount or incurral of that expenditure, been held for a period of at least three years.

[Subsection (2) substituted by section 7 of Act 3 of 2008. section 24 of Act 24 of 2011 and section 12 of Act 25 of 2015 effective on 1 January 2016]

(2A)  Subsection (2) does not apply in respect of so much of the amount received or accrued in respect of the disposal of an equity share contemplated in that subsection, other than an equity share held for longer than five years, as does not exceed the expenditure allowed in respect of that share in terms of section 12J(2).

[Subsection (2A) inserted by section 12 of Act 60 of 2008 and substituted by section 24 of Act 24 of 2011, section 12 of Act 25 of 2015 and section 17 of Act 23 of 2018 effective on 17 January 2019]

(3)     The provisions of this section shall not apply to any equity share if at the time of the receipt or accrual of any amount (other than an amount constituting a dividend or foreign dividend) in respect of that share the taxpayer was a connected person in relation to the company that issued that share and-

(a)     more than 50 per cent of the market value of the equity shares of that company was attributable directly or indirectly to immovable property other than-

(i)      immovable property held directly or indirectly by a person that is not a connected person in relation to the taxpayer; or

(ii)     immovable property held directly or indirectly for a period of at least three years immediately prior to that receipt or accrual; or

(b)     that company acquired any asset during the period of three years immediately prior to that receipt or accrual and amounts were paid or payable by any person to any person other than that company for the use of that asset while that asset was held by that company during that period.

[Subsection (3) substituted by section 7 of Act 3 of 2008, amended by section 24 of Act 24 of 2011 and section 12 of Act 25 of 2015 and substituted by section 17 of Act 23 of 2018 effective on 17 January 2019]

(4)     For purposes of this section, where any share has been transferred by a lender to a borrower in terms of a securities lending arrangement, and an identical share has been returned by the borrower to the lender, in terms of that securities lending arrangement, that share and that other share shall be deemed to be one and the same share in the hands of the lender.

[Subsection (4) substituted by section 12 of Act 25 of 2015 effective on 1 January 2016]

(4A)  For purposes of this section, where any share has been transferred by a transferor to a transferee in terms of a collateral arrangement and an identical share has in turn been transferred by the transferee to the transferor in terms of that collateral arrangement, that share and that other share shall be deemed to be one and the same share in the hands of the transferor.

[Subsection (4A) inserted by section 12 of Act 25 of 2015 effective on 1 January 2016]

(5)     There shall in the year of assessment in which any equity share held for a period of at least three years is disposed of by the taxpayer be included in the taxpayer’s income any expenditure or losses incurred in respect of such equity share and allowed as a deduction from the income of the taxpayer during that or any previous year of assessment in terms of section 11.

[Words preceding the proviso substituted by section 12 of Act 25 of 2015 effective on 1 January 2016]

: Provided that this subsection must not apply-

(a)     in respect of any expenditure or loss to the extent that the amount of that expenditure or loss is taken into account in terms of section 8(4)(a) or section 19; or

(b)     to expenditure in respect of equity shares in a REIT or a controlled company, as defined in section 25BB(1), that is a resident except to the extent that such amount was taken into account in determining the cost price or value of trading stock under section 11(a), 22(1) or (2).

[Paragraph (b) substituted by section 14 of Act 17 of 2017 effective on 18 December 2017]

[Proviso to subsection (5) added by section 13 of Act 22 of 2012 and substituted by section 19 of Act 15 of 2016 effective on 1 January 2016, applies in respect of years of assessment ending on or after that date.]

(6)     Where the taxpayer holds shares of the same class in the same company which were acquired by the taxpayer on different dates and the taxpayer has disposed of any of those shares, the taxpayer shall for the purposes of this section be deemed to have disposed of the shares held by the taxpayer for the longest period of time.

[Subsection (6) substituted by section 24 of Act 24 of 2011 and section 12 of Act 25 of 2015 effective on 1 January 2016]

(7)     The provisions of section 22(8) shall not apply on or after the date that an equity share has been held for a period exceeding three years.

[Subsection (7) substituted by section 12 of Act 25 of 2015 effective on 1 January 2016]

(8)     For the purposes of this section, where a company issues shares to a person in substitution of previously held shares in that company by reason of a subdivision, consolidation or similar arrangement or a conversion contemplated in section 40A or 40B, such share and such previously held shares shall be deemed to be one and the same share if –

(i)      the participation rights and interests of that person in that company remain unaltered; and

(ii)     no consideration whatsoever passes directly or indirectly from that person to that company in relation to the issued shares.