12N.    Deductions in respect of improvements not owned by taxpayer

 

(1)     If a taxpayer-

 

(a)     holds a right of use or occupation of land or a building;

 

(b)     effects an improvement on the land or to the building in terms of-

 

(i)      a Public Private Partnership;

 

(ii)     an agreement in terms of which the right of use or occupation is granted, if the land or building is owned by-

 

(aa)    the government of the Republic in the national, provincial or local sphere; or

 

(bb)   any entity of which the receipts and accruals are exempt from tax in terms of section 10(1)(cA) or (t); or

 

(iii)    the Independent Power Producer Procurement Programme administered by the Department of Energy;

 

(c)     incurs expenditure to effect the improvement contemplated in paragraph (b); and

 

(d)     ……….

 

(e)     uses or occupies the land or building for the production of income or derives income from the land or building,

 

the taxpayer must for purposes of any deduction contemplated in section 11D, 12B, 12BA, 12C, 12D, 12F, 12I, 12S, 13, 13ter, 13quat, 13quin, 13sex, or 36, and for the purposes of the Eighth Schedule, be deemed to be the owner of the improvement so completed.

[Subsection (1) amended by section 31(1)(d) of Act 22 of 2012, by section 40(1)(d) of Act 31 of 2013, by section 24(1) of Act 43 of 2014 and by section 30 of Act 23 of 2018. Para (e) amended by section 18(1) of Act 17 of 2023 effective on 1 March, 2023 and applicable in respect of assets brought into use on or after that date]

 

(2)

 

(a)     When the right of use or occupation terminates, the taxpayer must be deemed to have disposed of the improvement to the owner of the land or building on the later of the date when-

 

(i)      the right of use or occupation terminated; or

 

(ii)     the use or occupation ended.

 

(b)     If the right of use or occupation terminates and the taxpayer-

 

(i)      continues to use or occupy the land or building; or

 

(ii)     renews the right of use or occupation,

 

the renewed right of use or occupation must be deemed to be the same right of use or occupation as the right of use or occupation previously held by the taxpayer.

 

(3)     This section does not apply if the taxpayer-

 

(a)     is a person carrying on any banking, financial services or insurance business; or

 

(b)     enters into an agreement whereby the right of use or occupation of the land or building is granted to any other person, unless-

 

(i)      the land or building is occupied by that other person and that other person is a company that is a member of the same group of companies as that taxpayer in terms of such an agreement;

 

(ii)     the cost of maintaining the land or building and of carrying out repairs thereto required in consequence of normal wear and tear is borne by the taxpayer; and

 

(iii)    subject to any claim that the taxpayer may have against the other person by reason of the other person’s failure to take proper care of the land or building, the risk of destruction or loss of or other disadvantage to the land or building is not assumed by that other person.