(2)     There must be exempt from normal tax the receipts and accruals in respect of income derived from the exploitation rights of a film-

(a)     if the National Film and Video Foundation has approved the film in terms of section 3(c) read with section 4(1) of the National Film and Video Foundation Act, 1997 (Act No. 73 of 1997), as a local production or co-production whereby a film is co-produced in terms of an international co-production agreement between the government of the Republic and the government of another country, which agreement must be subject to the Constitution;

(b)     if income is derived from the exploitation rights of the film-

(i)      by a person who acquired the exploitation rights in respect of that film prior to the date that the principal photography of that film commenced; or

(ii)     by a person who acquired the exploitation rights in respect of that film after the date that principal photography of that film commenced but before the completion date of that film if consideration for those exploitation rights was not directly or indirectly paid or applied for the benefit of a person contemplated in subparagraph (i); and

(c)     to the extent that the income is received or accrues within a period of 10 years after the completion date of that film.

(3)     No exemption shall be allowed under this section to a person that is a broadcaster as defined in section 1 of the Broadcasting Act, 1999 (Act No. 4 of 1999), or any person that is a connected person in relation to that broadcaster.

(4)

(a)     Any-

(i)      special purpose corporate vehicle; or

(ii)     collection account manager that-

(aa)    manages exploitation rights under a collection account management agreement; and

(bb)   is approved by the Minister for the purpose of this section by notice in the Gazette,

must provide a report to the National Film and Video Foundation containing such information, within such time and in such manner as is prescribed by the Minister when income arising from exploitation rights of a film is distributed to a person within a period of 10 years commencing from the completion date of the film.

(b)     The National Film and Video Foundation must provide a report annually to the Minister in respect of all films approved in terms of subsection (2)(a) containing such information, within such time and in such manner as is prescribed by the Minister for a period of 10 years commencing from the completion date of a film if-

(i)      any income is received or accrues in respect of the film; and

(ii)     the income is eligible for the exemption under subsection (2).

(5)

(a)     Notwithstanding section 23(f), a taxpayer may deduct from the income of the taxpayer an amount in respect of any expenditure incurred to acquire exploitation rights in respect of a film in accordance with paragraph (b).

[Paragraph (a) substituted by section 25 of Act 25 of 2015 effective on 1 January 2012, applies in respect of receipts and accruals in respect of films of which principal photography commences on or after that date but before 1 January 2022]

(b)     The amount of the deduction contemplated in paragraph (a) is equal to the amount of any expenditure incurred as contemplated in that paragraph less any amount received or accrued during any year of assessment in respect of that film.

(c)     No deduction may be made under this subsection to the extent that the expenditure was funded from a loan, credit or similar financing.

(d)     The deduction contemplated in paragraph (a) may only be made in any year of assessment commencing at least two years after the completion date of the film to the extent that the amount of expenditure incurred exceeds the total amount received by or accrued to that taxpayer in respect of the exploitation rights.

(e)     Subsection (2) and paragraph (a) of this subsection cease to apply to any income derived from a film in any year of assessment subsequent to the date of a deduction made under paragraph (a) in respect of that film.

(6)

(a)     In addition to the exemption under subsection (2), any amount received by or accrued to a special purpose corporate vehicle by way of a grant payable by the State under the South African Film and Television Production and Co-production Incentive administered by the Department of Trade and Industry shall be exempt from normal tax subject to section 8(4).

(b)     Where a special purpose corporate vehicle that received a grant contemplated in paragraph (a), or to whom such grant has accrued, pays the whole or any portion of the amount of the grant to another person pursuant to any exploitation rights in respect of that film, the exemption under this paragraph must also apply to the amount received by or accrued to that other person to the extent that the amount does not exceed any amount that the other person contributed to the production of the film.