(11) For the purposes of this section –
“capital expenditure” means –
(a) expenditure (other than interest or finance charges) on shaft sinking and mine equipment (other than expenditure referred to in paragraphs (d) and (dA));
[Paragraph (a) substituted by section 28(1)(b) of Act 85 of 1974, by section 14(a) of Act 70 of 1989, by section 30 of Act 129 of 1991, by section 26(a) of Act 20 of 2006 and by section 34(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) expenditure on development, general administration and management (including any interest and other charges payable after the thirty–first day of December, 1950, on loans utilized for mining purposes) prior to the commencement of production or during any period of non–production; and
(c) in the case of any post-1973 gold mine or any post-1990 gold mine, an allowance calculated at the rate of 10 per cent per annum in the case of a post-1973 gold mine or 12 per cent per annum in the case of any post-1990 gold mine on the amount of the aggregate of –
(i) the expenditure referred to in paragraphs (a) and (b), excluding any interest and other charges on loans referred to in paragraph (b), if the mine is a post-1973 gold mine or a post-1990 gold mine;
(ii) the amount (if any) allowed to rank as capital expenditure in terms of section 37;
(iii) any expenditure incurred during any period of production on development on any reef on which at the date of such development stoping has not yet commenced;
(iv) the instalments of expenditure referred to in paragraph (d); and
(v) the unredeemed balance of the aggregate determined in terms of this paragraph up to the end of the year of assessment immediately preceding the year of assessment under charge and which shall include the capital allowance determined in terms of this paragraph for such preceding year of assessment,
if the mine is a post–1973 gold mine or a post–1990 gold mine, for the period from the end of the month in which the expenditure is actually incurred up to the end of the year of assessment immediately preceding the first year of assessment in respect of which the determination of the taxable income derived from the working of such mine does not result in an assessed loss or nil: Provided that-
(aa) the amount under this paragraph shall not be calculated for any period during which mining operations are not carried on in accordance with the terms of the relevant –
(A) mining authorization issued under the Minerals Act, 1991 (Act No. 50 of 1991); or
(B) mining right or mining permit issued in terms of the Mineral and Petroleum Resources Development Act;
[Subparagraph (B) substituted by section 83 of Act 31 of 2013 and section 51 of Act 43 of 2014 effective on 1 May 2004]
(bb) notwithstanding anything to the contrary in any law contained, the amount under this paragraph shall not be taken into account for the purpose of –
(A) calculating the allowance provided for in section 25(2) of the Mining Rights Act, 1967;
(B) determining the profits of which a share is payable to the State in terms of any mining authorization issued under the Minerals Act, 1991 (Act No. 50 of 1991);
(C) determining the amounts payable to the State in terms of the transitional mineral and petroleum provisions contemplated in Schedule 3 of the Taxation Laws Amendment Act, 2004 (Act No. 16 of 2004);
(cc) the unredeemed balance of the aggregate of the amounts referred to in subparagraphs (i) to (v), inclusive, of this paragraph, shall be determined by the deduction from such aggregate at the end of every year of assessment –
(i) of the taxable income derived from the working of such mine for such year of assessment, as determined before the deduction of any amount allowable under section 15(a) in relation to such mine and before the set–off in terms of section 20(1)(a) of any balance of assessed loss which is attributable to any deduction made under section 15(a) in relation to such mine; and
(ii) where the mine concerned is a mine to which subsection (7G) applies, an amount equal to that portion of the capital expenditure of such mine which has been set off against the taxable income of another mine or mines during such year of assessment;
(dd) the sum of the expenditure contemplated in this paragraph shall be reduced by the sum of the amounts received or accrued during the said relevant period from disposals of assets contemplated in the definition of “capital expenditure incurred”;
(ee) ……….
(ff) ……….
(gg) notwithstanding anything to the contrary in this paragraph, the instalment of expenditure which is in terms of paragraph (d) deemed to be payable during a year of assessment shall qualify for the calculation of the amount under this paragraph as from the first day of the year of assessment following the said year of assessment;
(hh) where a sale, transfer, lease or cession of any mining property, as contemplated in section 37, occurs which results in the disposal of an asset in respect of which the provisions of paragraph (d) are applicable, so much of the effective value as relates to the asset so disposed of shall qualify for the calculation of the amount under this paragraph as from the first day of the year of assessment following the year of assessment during which the agreement of sale, transfer, lease or cession of that mining property takes effect; and
(d) expenditure (excluding the cost of land, surface rights and servitudes) the payment of which has become due on or after 1 July 1989 in respect of the acquisition, erection, construction, improvement or laying out of –
(i) housing for residential occupation by the taxpayer’s employees (other than housing intended for sale) and furniture for such housing;
(ii) infrastructure in respect of residential areas developed for sale to the taxpayer’s employees;
(iii) any hospital, school, shop or similar amenity (including furniture and equipment) owned and operated by the taxpayer mainly for the use of his employees or any garage or carport for any motor vehicle referred to in subparagraph (vi);
(iv) recreational buildings and facilities owned and operated by the taxpayer mainly for the use of his employees;
(v) any railway line or system having a similar function for the transport of minerals from the mine to the nearest public transport system or outlet;
(vi) motor vehicles intended for the private or partly private use of the taxpayer’s employees:
Provided that –
(aa) such expenditure shall for the purposes of this definition be deemed to be payable in ten successive equal annual instalments or, where subparagraph (vi) is applicable, five successive equal annual instalments, the first of which shall be deemed to be payable on the date on which payment of the relevant expenditure became due and the successeding instalments on the appropriate anniversaries of that date, but if any such anniversary falls on a date after the asset to which such expenditure relates has been sold, disposed of or scrapped by the taxpayer, the instalment of such expenditure so deemed to be payable on such anniversary shall be disregarded;
(bb) where it is shown to the satisfaction of the Commissioner that the life of the relevant mine will extend over a period which is shorter than the period during which the said instalments are so deemed to be payable, the Commissioner may reduce the number of instalments relating to the expenditure not yet redeemed and the amount of each instalment shall be determined by dividing the amount of the expenditure remaining to be redeemed by the number of years in the remainder of the life of the mine;
(cc) where any asset the expenditure in respect of which has qualified as capital expenditure under this paragraph is sold, disposed of or scrapped by the taxpayer during any year of assessment, an allowance shall be made in respect of that asset, equal to the amount by which the full amount of the expenditure incurred by the taxpayer in respect of that asset, as contemplated in this paragraph, exceeds the total amount of all the instalments of such expenditure which are deemed by paragraph (aa) of this proviso to be payable before the asset was sold, disposed of or scrapped, and in such case the amount of the said allowance shall be deemed to be the final instalment of the said expenditure made on the date on which the asset was sold, disposed of or scrapped;
(dd) where a taxpayer completes an improvement as contemplated in section 12N in respect of the items contemplated in subparagraph (i), (ii), (iii), (iv) or (v), the expenditure incurred by the taxpayer to complete the improvement shall be deemed to be expenditure for the purposes of this section;
(dA) 125 per cent of the expenditure (excluding finance charges) for the acquisition of any new and unused machinery, plant, implement, utensil, or article owned by the taxpayer or acquired by the taxpayer as purchaser in terms of an agreement contemplated in paragraph (a) of the definition of ‘instalment credit agreement’ in section 1 of the Value-Added Tax Act and which was or is brought into use for the first time by that taxpayer for the purpose of that taxpayer’s trade on or after 1 March 2023 and before 1 March 2025 to be used by that taxpayer in the generation of electricity in the Republic from-
(i) wind power;
(ii) photovoltaic solar energy;
(iii) concentrated solar energy;
(iv) hydropower; or
(v) biomass comprising organic wastes, landfill gas or plant material:
Provided that where any machinery, plant, implement, utensil or article for which a deduction is allowed under this section is mounted on or affixed to any concrete or other foundation or supporting structure and-
(i) the foundation or supporting structure is designed for such machinery, plant, implement, utensil or article and constructed in such manner that it is or should be regarded as being integrated with the machinery, plant, implement, utensil or article; and
(ii) the useful life of the foundation or supporting structure is or will be limited to the useful life of the machinery, plant, implement, utensil or article mounted thereon or affixed thereto,
the foundation or supporting structure shall be deemed to be part of the machinery, plant, implement, utensil or article mounted thereon or affixed thereto;
[Paragraph (dA) inserted by section 34(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]
(e) where that trade constitutes mining, any expenditure incurred in terms of a mining right pursuant to the Mineral and Petroleum Resources Development Act other than in respect of infrastructure or environmental rehabilitation;
(eA) expenditure (excluding the cost of land, surface rights and servitudes) actually incurred and paid during a year of assessment in respect of a social and labour plan for the purposes of the contributions by holders of mining rights towards the socioeconomic development of the areas in which those holders are operating and that expenditure is in respect of the acquisition, erection, construction, improvement or laying out of-
(i) housing for residential occupation (other than housing intended for sale) and furniture for such housing;
(ii) infrastructure in respect of residential areas developed;
(iii) any hospital, school, shop or similar amenity (including furniture and equipment); or
(iv) recreational buildings and facilities:
Provided that-
(aa) such expenditure shall for the purposes of this definition be deemed to be paid in ten successive equal annual instalments, the first of which shall be deemed to be paid on the date on which payment of the relevant expenditure was made and the succeeding instalments on the appropriate anniversaries of that date, but if any such anniversary falls on a date after the asset to which such expenditure relates has been sold, disposed of or scrapped by the taxpayer, the instalment of such expenditure so deemed to be paid on such anniversary shall be disregarded;
(bb) where it is shown to the satisfaction of the Commissioner that the life of the relevant mine will extend over a period which is shorter than the period during which the said instalments are so deemed to be paid, the Commissioner may reduce the number of instalments relating to the expenditure not yet redeemed and the amount of each instalment shall be determined by dividing the amount of the expenditure remaining to be redeemed by the number of years in the remainder of the life of the mine; and
(cc) where any asset the expenditure in respect of which has qualified as capital expenditure under this paragraph is sold, disposed of or scrapped by the taxpayer during any year of assessment, an allowance shall be made in respect of that asset, equal to the amount by which the full amount of the expenditure paid by the taxpayer in respect of that asset, as contemplated in this paragraph, exceeds the total amount of all the instalments of such expenditure which are deemed by paragraph (aa) of this proviso to be paid before the asset was sold, disposed of or scrapped, and in such case the amount of the said allowance shall be deemed to be the final installment of the said expenditure made on the date on which the asset was sold, disposed of or scrapped;
[Paragraph (eA) inserted by section 52(1)(a) of Act 15 of 2016 effective on 1 April, 2017 and applicable in respect of expenditure incurred during years of assessment commencing on or after that date]
(f) in respect of the disposal of any low-cost residential unit of the taxpayer, an amount equal to 10 per cent of any amount owing to the taxpayer or an ‘associated institution’, as defined in the Seventh Schedule, in relation to the taxpayer by the employee in respect of the unit at the end of the taxpayer’s year of assessment: Provided that no amount shall be taken into account in terms of this paragraph in the eleventh and subsequent years of assessment, and that this paragraph shall not apply in respect of any disposal by the taxpayer if-
(i) the disposal is subject to any condition other than a condition in terms of which the employee is required-
(aa) on termination of employment; or
(bb) in the case of consistent failure for a period of three months on the part of the employee to pay an amount owing to the taxpayer or an ‘associated institution , as defined in the Seventh Schedule, in relation to the taxpayer in respect of a low-cost residential unit,
to dispose of the low-cost residential unit to the taxpayer (or any associated institution, as defined in the Seventh Schedule, in relation to the taxpayer) for an amount equal to the actual cost (other than borrowing or finance costs) to the employee of the unit and the land on which the unit is erected;
(ii) the employee must pay interest to the taxpayer in respect of the amount owing to the taxpayer by the employee in respect of the unit; or
(iii) the disposal is for an amount that exceeds the actual cost (other than borrowing or finance costs) to the taxpayer of the unit and the land on which the unit is erected:
Provided further that if the amount owing or any part thereof is paid to the taxpayer, the taxpayer is deemed to have recovered or recouped an amount equal to the lesser of-
(i) the amount so paid; or
(ii) the amount of the expenditure in terms of this section in the current and any previous year of assessment;