Category: PART IX – Roll-overs

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

Posted on by admin_kmos

(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.

Paragraph 65 (Eighth Schedule) – Involuntary disposal

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65.     Involuntary disposal

(1)     A person may elect that this paragraph applies in respect of the disposal of an asset (other than a financial instrument), where-

(a)     that asset is disposed of by way of operation of law, theft or destruction;

(b)     proceeds accrue to that person by way of compensation in respect of that disposal;

(c)     those proceeds are equal to or exceed the base cost of that asset;

(d)

 

(i)      an amount at least equal to the receipts and accruals from that disposal has been or will be expended to acquire one or more asset (hereinafter referred to as the ‘replacement asset or assets’);

(ii)     all the replacement assets constitute assets contemplated in section 9(2)(j) or (k);

[Subitem (ii) substituted by section 124(1)(a) of Act 22 of 2012, section 124(1)(b) of Act 22 of 2012 and section 119 of Act 25 of 2015 effective on 1 January 2012]

(iii)    the contracts for the acquisition of the replacement asset or assets have all been or will be concluded within 12 months after the date of the disposal of that asset; and

(iv)    the replacement asset or assets will all be brought into use within three years of the disposal of that asset: Provided that the Commissioner may, on application by the taxpayer, decice to extend the period within which the contract must be concluded or asset brought into use by no more than six months if all reasonable steps were taken to conclude those contracts or bring those assets into use; and

[Proviso substituted by section 119 of Act 25 of 2015 effective on 8 January 2016]

(e)     that asset is not deemed to have been disposed of and to have been reacquired by that person.

(2)     Where a person has elected in terms of subparagraph (1) that this paragraph must apply in respect of the disposal of an asset, any capital gain determined in respect of that disposal must, subject to subparagraphs (4), (5) and (6) be disregarded when determining that person’s aggregate capital gain or aggregate capital loss.

(3)     Where a person acquires more than one replacement asset as contemplated in subparagraph (1), that person must, in applying subparagraphs (4) and (5), apportion the capital gain derived from the disposal of that asset to each replacement asset in the same ratio as the receipts and accruals from that disposal respectively expended in acquiring each of those replacement assets bear to the total amount of those receipts and accruals expended in acquiring all those replacement assets.

(4)     Where a replacement asset contemplated in subparagraph (1) constitutes a depreciable asset, the person must treat as a capital gain for a year of assessment, so much of the disregarded capital gain contemplated in subparagraph (3), as bears to the total amount of that disregarded gain apportioned to that replacement asset as contemplated in subparagraph (3) the same ratio as the amount of any deduction or allowance allowed in that year in respect of the replacement asset bears to the total amount of the deduction or allowance (determined with reference to the cost or value of that asset at the time of acquisition thereof) which is allowable for all years of assessment in respect of that replacement asset.

 

(5)     Where a person during any year of assessment disposes of a replacement asset and any portion of the disregarded capital gain which is apportioned to that asset, has not otherwise been treated as a capital gain in terms of this paragraph, that person must treat that portion of disregarded capital gain as a capital gain from the disposal of that replacement asset in that year of assessment.

(6)     Where a person fails to conclude a contract or fails to bring any replacement asset into use within the period prescribed in subparagraph (1)(d)(iii) or (iv), subparagraph (2) shall not apply and that person must-

(a)     treat the capital gain contemplated in subparagraph (2) as a capital gain on the date on which the relevant period ends;

(b)     determine interest at the prescribed rate on that capital gain from the date of that disposal to the date contemplated in item (a); and

(c)     treat that interest as a capital gain on the date contemplated in item (a) when determining that person’s aggregate capital gain or aggregate capital loss.

(7)     Where a replacement asset or assets constitute personal use assets, the provisions of this paragraph shall not apply.

Paragraph 65B (Eighth Schedule) – Disposal by recreational club

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65B.    Disposal by recreational club

 

(1)     A recreational club approved in terms of section 30A may elect that this paragraph applies in respect of the disposal of an asset the whole of which was used mainly for purposes of providing social and recreational facilities and amenities for members of that club, where –

 

(a)     proceeds accrue to that club in respect of that disposal;


(b)     those proceeds are equal to or exceed the base cost of that asset;


(c)


(i)      an amount at least equal to the receipts and accruals from that disposal has been or will be expended to acquire one or more replacement assets all of which will be used mainly for such purposes;

 

(ii)     the contracts for the acquisition of the replacement asset or assets have all been or will be concluded within 12 months after the date of the disposal of that asset; and

 

(iii)    the replacement asset or assets will all be brought into use within three years of the disposal of that asset:
Provided that the Commissioner may extend the period within which the contract must be concluded or asset brought into use by no more than six months if all reasonable steps were taken to conclude those contracts or bring those assets into use; and

 

(d)     that asset is not deemed to have been disposed of and to have been reacquired by that club.

 

(2)     Where a club has elected in terms of subparagraph (1) that this paragraph must apply in respect of the disposal of an asset, any capital gain determined in respect of that disposal must, subject to subparagraphs (3), (4) and (5) be disregarded when determining that club’s aggregate capital gain or aggregate capital loss.

 

(3)     Where a club acquires more than one replacement asset as contemplated in subparagraph (1), that club must, in applying subparagraphs (4) and (5), apportion the capital gain derived from the disposal of that asset to each replacement asset in the same ratio as the receipts and accruals from that disposal respectively expended in acquiring each of those replacement assets bear to the total amount of those receipts and accruals expended in acquiring all those replacement assets.

 

(4)     Where a club during any year of assessment disposes of a replacement asset and any portion of the disregarded capital gain which is apportioned to that asset, has not otherwise been treated as a capital gain in terms of this paragraph, that club must treat that portion of disregarded capital gain as a capital gain from the disposal of that replacement asset in that year of assessment.

 

(5)     Where a club fails to conclude a contract or fails to bring any replacement asset into use within the period prescribed in subparagraph (1)(c)(ii) and (iii), that club must –

 

(a)     treat the capital gain contemplated in subparagraph (2) as a capital gain on the date on which the relevant period ends;


(b)     determine interest at the prescribed rate on that capital gain from the date of that disposal to the date contemplated in item (a); and


(c)     treat that interest as a capital gain on the date contemplated in item (a) when determining that club’s aggregate capital gain or aggregate capital loss.

Paragraph 66 (Eighth Schedule) – Reinvestment in replacement assets

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66.  Reinvestment in replacement assets

(1)     A person may elect that this paragraph applies in respect of the disposal of an asset, where-

(a)     that asset qualified for a deduction or allowance in terms of section 11(e), 11D(2), 12B, 12BA, 12C, 12DA, 12E, 14, 14bis or 37B;

[Item (a) substituted by section 67(1)(a) of Act 8 of 2007, by section 79(a) of Act 35 of 2007 and by section 43(1)(a) of Act 17 of 2023 effective on 1 March, 2023 and applicable in respect of assets brought into use on or after that date]

(b)     the proceeds received or accrued from that disposal are equal to or exceed the base cost of that asset;

(c)     an amount at least equal to the receipts and accruals from that disposal has been or will be expended to acquire one or more assets (hereinafter referred to as the “replacement asset or assets”), all of which will qualify for a capital deduction or allowance in terms of section 11(e), 11D(2), 12B, 12BA, 12C, 12DA, 12E or 37B;

[Item (c) substituted by section 67(1)(b) of Act 8 of 2007, by section 79(b) of Act 35 of 2007 and by section 43(1)(b) of Act 17 of 2023 effective on 1 March, 2023 and applicable in respect of assets brought into use on or after that date]

(d)     all the replacement assets constitute assets contemplated in section 9(2)(j) or (k);

[Item (d) substituted by section 125 of Act 22 of 2012 and section 78 of Act 15 of 2016 effective on 1 January 2012, applies in respect of disposals made during years of assessment commencing on or after that date]

(e)     the contracts for the acquisition of a replacement asset or assets are or will be concluded within 12 months after the asset contemplated in item (a) is disposed of and are all brought into use within three years after that disposal: Provided that the Commissioner may, on application by the taxpayer, decide to extend the period by which the contracts must be concluded or assets brought into use by no more than six months if all reasonable steps were taken to conclude those contracts or bring those assets into use; and

[Proviso substituted by section 120 of Act 25 of 2015 effective on 8 January 2016]

(f)      that asset is not deemed to have been disposed of and to have been reacquired by that person.

(2)     Where a person has elected in terms of subparagraph (1) that this paragraph must apply in respect of the disposal of an asset, any capital gain determined in respect of that disposal must, subject to subparagraphs (4), (5), (6) and (7), be disregarded when determining that person’s aggregate capital gain or aggregate capital loss.

(3)     Where a person acquires more than one replacement asset as contemplated in subparagraph (1), that person must, in applying subparagraphs (4), (5) and (6), apportion the capital gain derived from the disposal of that asset to each replacement asset in the same ratio as the receipts and accruals from that disposal respectively expended in acquiring each of those replacement assets bear to the total amount of those receipts and accruals expended in acquiring all those replacement assets.

(4)     A person must treat as a capital gain for a year of assessment so much of the disregarded capital gain contemplated in subparagraph (2), as bears to the total amount of that disregarded capital gain apportioned to that replacement asset as contemplated in subparagraph (3) the same ratio as the amount of any deduction or allowance allowed in that year in terms of section 11(e), 11D(2), 12B, 12BA, 12C, 12DA, 12E or 37B in respect of the replacement asset bears to the total amount of the deduction or allowance in terms of that section (determined with reference to the cost of value of that asset at the time of acquisition thereof) which is allowable for all years of assessment in respect of that replacement asset.

[Subparagraph (4) substituted by section 67(1)(c) of Act 8 of 2007, by section 79(c) of Act 35 of 2007 and by section 43(1)(c) of Act 17 of 2023 effective on 1 March, 2023 and applicable in respect of assets brought into use on or after that date]

(5)     Where a person during any year of assessment disposes of a replacement asset and any portion of the disregarded capital gain which is apportioned to that asset as contemplated in subparagraph (3), has not been treated as a capital gain in terms of subparagraph (4) or (6), that person must treat that portion of disregarded capital gain as a capital gain from the disposal of that replacement asset in that year of assessment.

(6)     Where during any year of assessment a person ceases to use a replacement asset for the purposes of that person’s trade and any portion of the disregarded capital gain which is apportioned to that asset as contemplated in subparagraph (3), has not been treated as a capital gain in terms of subparagraph (4) or (5), that person must treat that portion of disregarded capital gain as a capital gain for that year of assessment.

(7)     Where a person fails to conclude a contract or to bring any replacement asset into use within the period prescribed in subparagraph (1)(e), subparagraph (2) shall not apply and that person must-

(a)     treat the capital gain contemplated in subparagraph (2) as a capital gain on the date that the relevant period ends;

(b)     determine interest at the prescribed rate on that capital gain from the date of that disposal to the date contemplated in item (a); and

(c)     treat that interest as a capital gain on the date contemplated in item (a) when determining that person’s aggregate capital gain or aggregate capital loss.