(2) Any dividend or foreign dividend received by or accrued to a person during any year of assessment in respect of a share or equity instrument must be deemed in relation to that person to be an amount of income received by or accrued to that person if that share or equity instrument constitutes a third-party backed share at any time during that year of assessment.
[Subsection (2) substituted by section 15 of Act 15 of 2016 effective on 1 January 2017, applies in respect of years of assessment ending on or after that date]
(2A) Where a preference share that was issued in terms of an agreement, all the terms of which were finally agreed to before 1 April 2012 by all the parties to that agreement, constitutes a third-party backed share solely by reason of an enforcement right acquired in accordance with the terms of that agreement and that enforcement right is cancelled on or after 26 October 2016 and on or before 31 December 2017, the provisions of subsection (2) will not apply in respect of any dividend or foreign dividend that accrues in respect of that share after the date of cancellation of that enforcement right.
[Subsection (2A) inserted by section 15 of Act 15 of 2016 and substituted by section 13 of Act 23 of 2018 effective on 17 January 2019]
(3)
(a) Where the funds derived from the issue of a preference share were applied for a qualifying purpose, in determining whether an enforcement right is exercisable in respect of that share, no regard must be had to any arrangement in terms of which the holder of that share has an enforcement right in respect of that share and that right is exercisable, against the persons contemplated in paragraph (b).
[Paragraph (a) substituted by section 9(c) of Act 34 of 2019]
(b) For the purposes of the determination contemplated in paragraph (a) no regard must be had to the following persons:
(i) The operating company to which that qualifying purpose relates;
(ii) any issuer of a preference share if that preference share was issued for a qualifying purpose;
[Subparagraph (ii) substituted by section 7 of Act 43 of 2014 effective on 1 January 2013]
(iii) any other person that directly or indirectly holds at least 20 per cent of the equity shares in-
(aa) the operating company contemplated in subparagraph (i); or
(bb) the issuer contemplated in subparagraph (ii);
(iv) any company that forms part of the same group of companies as-
(aa) the operating company contemplated in subparagraph (i);
(bb) the issuer contemplated in subparagraph (ii); or
(cc) the other person that directly or indirectly holds at least 20 per cent of the equity shares in the operating company contemplated in subparagraph (i) or the issuer contemplated in subparagraph (ii);
(v) any natural person;
[Subparagraph (v) amended by section 7 of Act 43 of 2014 effective on 1 January 2013]
(vi) any organisation-
(aa) which is-
(A) a non-profit company as defined in section 1 of the Companies Act; or
(B) a trust or association of persons; and
(bb) if-
(A) all the activities of that organisation are carried on in a non-profit manner; and
(B) none of the activities of that organisation are intended to directly or indirectly promote the economic self-interest of any fiduciary or employee of that organisation, otherwise than by way of reasonable remuneration payable to that fiduciary or employee; or
[Subparagraph (vi) amended by section 7 of Act 43 of 2014 effective on 1 January 2013]
(vii) any person that holds equity shares in an issuer contemplated in subparagraph (ii) if the enforcement right exercisable against that person is limited to any rights in and claims against that issuer that are held by that person.
[Subparagraph (vii) added by section 7(1)(d) of Act 43 of 2014 and substituted by section 10(1) of Act 17 of 2017 and by section 9(d) of Act 34 of 2019]
Provided that where an equity share in an operating company is acquired by any person as contemplated in paragraph (a) or (b) of the definition of “qualifying purpose” and the share so acquired is no longer held directly or indirectly by that person at the time of the receipt or accrual of that dividend or foreign dividend in respect of the preference share, this subsection must not apply, unless-
(a) that equity share in the operating company was disposed of and the funds derived from that disposal are used by the issuer of the preference share for the redemption of that preference share within 90 days of that disposal; or
(b) that equity share in the operating company was a listed share and substituted for a listed share in terms of an arrangement that is announced and released as a corporate action as contemplated in the JSE Limited Listings Requirements in the SENS (Stock Exchange News Service) as defined in the JSE Limited Listings Requirements or a corporate action as contemplated in the listings requirements of any other exchange, licensed under the Financial Markets Act, that are substantially the same as the requirements prescribed by the JSE Limited Listings Requirements, where that corporate action complies with the applicable requirements of that exchange.
[Section 8EA (section 21(1) of Act 24 of 2011 repealed by section 165(1) of Act 22 of 2012 effective on 10 January, 2012) inserted by section 12(1) of Act 22 of 2012 with effect from (a) in the case of dividends or foreign dividends received in cash by any person during any year of assessment of that person that commences on or after 1 January, 2013, on 1 April, 2012 and applicable in respect of any dividend or foreign dividend so received if that dividend or foreign dividend (i) accrued to that person on or after 1 April, 2012; and (ii) is received by that person on or after a date three months after the date on which that dividend or foreign dividend accrued to that person; or (b) in the case of dividends or foreign dividends (i) received by or accrued to any person; and (ii) that are not received by and accrued to that person as contemplated in (a), on 1 January, 2013 and applicable in respect of any dividend or foreign dividend so received and accrued during years of assessment of that person that commence on or after that date. Subsection (3) added by section 11(1)(d) of Act 31 of 2013 and amended by section 5(1) of Act 17 of 2023 with effect from 1 January, 2024 and applicable in respect of any dividend or foreign dividend received or accrued during years of assessment commencing on or after the date]