Reproduced under Goverment Printer’s Authorisation (Authorisation No. 11779) dated 25 August 2017.

Please remember to periodically “Check for Updates”!

INCOME TAX ACT 58 OF 1962

[English text signed by the State President]

[Assented To: 25 May 1962]

[Commencement Date: 1 July 1962]

as amended by:

Rates and Monetary Amounts and Amendment of Revenue Laws Act 42 of 2014

Taxation Laws Amendment Act 43 of 2014

Tax Administration Laws Amendment Act 44 of 2014

Rates and Monetary Amounts and Amendment of Revenue Laws Act 13 of 2015

Tax Administration Laws Amendment Act 23 of 2015

Taxation Laws Amendment Act 25 of 2015

Revenue Laws Amendment Act 2 of 2016

Rates and Monetary Amounts and Amendment of Revenue Laws Act 13 of 2016

Taxation Laws Amendment Act 15 of 2016

Tax Administration Laws Amendment Act 16 of 2016

Tax Administration Laws Amendment Act 13 of 2017

Rates and Monetary Amounts and Amendment of Revenue Laws Act 14 of 2017

Taxation Laws Amendment Act 17 of 2017

Rates and Monetary Amounts and Amendment of Revenue Laws Act 21 of 2018

Tax Administration Laws Amendment Act 22 of 2018

Taxation Laws Amendment Act 23 of 2018

Rates and Monetary Amounts and Amendment of Revenue Laws Act 32 of 2019

Tax Administration Laws Amendment Act 33 of 2019

Taxation Laws Amendment Act 34 of 2019

Rates and Monetary Amounts and Amendment of Revenue Laws Act 22 of 2020

Taxation Laws Amendment Act 23 of 2020

Tax Administration Laws Amendment Act 24 of 2020

Tax Administration Laws Amendment Act 16 of 2022

Rates and Monetary Amounts and Amendment of Revenue Laws Act 19 of 2022

Taxation Laws Amendment Act 20 of 2022

Latest 2024 Live Updates: COMPLETED (including 1 April 2024 amendments)!

Taxation Laws Amendment Act 17 of 2023

Tax Administration Laws Amendment Act 18 of 2023

Rates and Monetary Amounts and Amendment of Revenue Laws Act 19 of 2023

To report an issue, please contact us at service@hApp-e-tax.co.za

ACT

To consolidate the law relating to the taxation of incomes and donations, to provide for the recovery of taxes on persons, to provide for the deduction by employers of amounts from the remuneration of employees in respect of certain tax liabilities of employees, and to provide for the making of provisional tax payments and for the payment into the National Revenue Fund of portions of the normal tax and interest and other charges in respect of such taxes, and to provide for related matters.

ARRANGEMENT OF SECTIONS

PRELIMINARY

Section 1 – Interpretation

CHAPTER I

ADMINISTRATION

Section 2 – Administration of Act

Section 3 – Exercise of powers and performance of duties

Section 4 – [Repealed]

Section 4A – Exercise of powers and performance of duties by Minister

CHAPTER II

THE TAXES

PART I

Normal Tax

Section 5 – Levy of normal tax and rates thereof

Section 6 – Normal tax rebates

Section 6A – Medical scheme fees tax credit

Section 6B – Additional medical expenses tax credit

Section 6C – Solar energy tax credit

Section 6quat – Rebate or deduction in respect of foreign taxes on income

Section 6quin – Rebate in respect of foreign taxes on income from source within Republic

Section 7 – When income is deemed to have accrued or to have been received

Section 7A – Date of receipt or accrual of antedated salaries or pensions and of certain retirement gratuities

Section 7B – Timing of accrual and incurral of variable remuneration

Section 7C – Loan, advance or credit granted to trust by connected person

Section 7D – Calculation of amount of interest

Section 7E – Time of accrual of interest payable by SARS

Section 7F – Deduction of interest repaid to SARS

Section 8 – Certain amounts to be included in income or taxable income

Section 8A – Gains made by directors of companies or by employees in respect of rights to acquire marketable securities

Section 8B – Taxation of amounts derived from broad-based employee share plan

Section 8C – Taxation of directors and employees on vesting of equity instruments

Section 8E – Dividends derived from certain shares and equity instruments deemed to be income in relation to recipients thereof

Section 8EA – Dividends on third-party backed shares deemed to be income in relation to recipients thereof

Section 8F – Interest on hybrid debt instruments deemed to be dividends in specie

Section 8FA – Hybrid interest deemed to be dividends in specie

Section 8G – Determination of contributed tax capital in respect of shares issued to a group company

Section 9 – Source of income

Section 9A – Blocked foreign funds

Section 9B – [Repealed]

Section 9C – Circumstances in which certain amounts received or accrued from disposal of shares are deemed to be of a capital nature

Section 9D – Net income of controlled foreign companies

Section 9E – [Repealed]

Section 9F – [Repealed]

Section 9G – [Repealed]

Section 9H – Change of residence, ceasing to be controlled foreign company or becoming headquarter company

Section 9HA – Disposal by deceased person

Section 9HB – Transfer of asset between spouses

Section 9I – Headquarter companies

Section 9J – Interest of non-resident persons in immovable property

Section 9K – Listing of security on exchange outside Republic

Section 10 – Exemptions

Section 10A – Exemption of capital element of purchased annuities

Section 10B – Exemption of foreign dividends and dividends paid or declared by headquarter companies

Section 10C – Exemption of non-deductible element of qualifying annuities

Section 11 – General deductions allowed in determination of taxable income

Section 11A – Deductions in respect of expenditure and losses incurred prior to commencement of trade

Section 11B – [Repealed]

Section 11C – [Repealed]

Section 11D – Deductions in respect of scientific or technological research and development

Section 11E – Deduction of certain expenditure incurred by sporting bodies

Section 11F – Deduction in respect of contributions to retirement funds

Section 11sex – Deduction of compensation for railway operating losses

Section 12 – [Repealed]

Section 12A – [Repealed]

Section 12B – Deduction in respect of certain machinery, plant, implements, utensils and articles used in farming or production of renewable energy

Section 12BA – Enhanced deduction in respect of certain machinery, plant, implements, utensils and articles used in production of renewable energy

Section 12C – Deduction in respect of assets used by manufacturers or hotelkeepers and in respect of aircraft and ships, and in respect of assets used fo storage and packing of agricultural products

Section 12D – Deduction in respect of certain pipelines, transmission lines and railway lines

Section 12DA – Deduction in respect of rolling stock

Section 12E – Deductions in respect of small business corporations

Section 12F – Deduction in respect of airport and port assets

Section 12G – [Repealed]

Section 12H – Additional deduction in respect of learnership agreements

Section 12I – Additional investment and training allowances in respect of industrial policy projects

Section 12J – Deductions in respect of expenditure incurred in exchange for issue of venture capital company shares

Section 12K – [Repealed]

Section 12L – Deduction in respect of energy efficiency savings

Section 12M – Deduction of medical lump sum payments

Section 12N – Deductions in respect of improvements not owned by taxpayer

Section 12NA – Deductions in respect of improvements on property in respect of which government holds a right of use or occupation

Section 12O – Exemption in respect of films

Section 12P – Exemption of amounts received or accrued in respect of government grants

Section 12Q – Exemption of income in respect of ships used in international shipping

Section 12R – Special economic zones

Section 12S – Deduction in respect of buildings in special economic zones

Section 12T – Exemption of amounts received or accrued in respect of tax free investments

Section 12U – Additional deduction in respect of roads and fences in respect of production of renewable energy

Section 13 – Deductions in respect of buildings used in a process of manufacture

Section 13bis – Deductions in respect of buildings used by hotel keepers

Section 13ter – Deductions in respect of residential buildings

Section 13quat – Deductions in respect of erection or improvement of buildings in urban development zones

Section 13quin – Deduction in respect of commercial buildings

Section 13sex – Deduction in respect of certain residential units

Section 13sept – Deduction in respect of sale of low-cost residential units on loan account

Section 14 – [Repealed]

Section 15 – Deductions from income derived from mining operations

Section 15A – Amounts to be taken into account in respect of trading stock derived from mining operations

Section 16 – [Repealed]

Section 17 – [Repealed]

Section 17A – Expenditure incurred by a lessor of land let for farming purposes, in respect of soil erosion works

Section 18 – [Repealed]

Section 18A – Deduction of donations to certain organisations

Section 19 – Concession or compromise in respect of debt

Section 20 – Set–off of assessed losses

Section 20A – Ring-fencing of assessed losses of certain trades

Section 20B – Limitation of losses from disposal of certain assets

Section 20C – Ring-fencing of interest and royalties incurred by headquarter companies

Section 21 – Deduction of alimony, allowance or maintenance

Section 22 – Amounts to be taken into account in respect of values of trading stocks

Section 22A – Schemes of arrangement involving trading stock

Section 22B – Dividends treated as income on disposal of certain shares

Section 23 – Deductions not allowed in determination of taxable income

Section 23A – Limitation of allowances granted to lessors of certain assets

Section 23B – Prohibition of double deductions

Section 23C – Reduction of cost or market value of certain assets

Section 23D – Limitation of allowances granted in respect of certain assets

Section 23E – [Repealed]

Section 23F – Acquisition or disposal of trading stock

Section 23G – Sale and leaseback arrangements

Section 23H – Limitation of certain deductions

Section 23I – Prohibition of deductions in respect of certain intellectual property

Section 23J – [Repealed]

Section 23K – Limitation of deductions in respect of reorganisation and acquisition transactions

Section 23L – Limitation of deductions in respect of certain short-term insurance policies

Section 23M – Limitation of interest deductions in respect of debts owed to persons not subject to tax

Section 23N – Limitation of interest deductions in respect of reorganisation and acquisition transactions

Section 23O – Limitation of deductions by small, medium or micro-sized enterprises in respect of amounts received or accrued from small business funding entities

Section 24 – Credit agreements and debtors allowance

Section 24A – Transactions whereby fixed property is or company shares are exchanged for shares

Section 24B – [Repealed]

Section 24BA – Transactions where assets are acquired as consideration for shares issued

Section 24C – Allowance in respect of future expenditure on contracts

Section 24D – Deduction of certain expenditure incurred in respect of any National Key Point or specified important place or area

Section 24E – Allowance in respect of future expenditure by sporting bodies

Section 24F – [Repealed]

Section 24G – Taxable income of toll road operators

Section 24H – Persons carrying on trade or business in partnership

Section 24I – Gains or losses on foreign exchange transactions

Section 24J – Incurral and accrual of interest

Section 24JA – Sharia compliant financing arrangements

Section 24JB – Taxation in respect of financial assets and liabilities of certain persons

Section 24K – Incurral and accrual of amounts in respect of interest rate agreements

Section 24L – Incurral and accrual of amounts in respect of option contracts

Section 24M – Incurral and accrual of amounts in respect of assets acquired or disposed of for unquantified amount

Section 24N – Incurral and accrual of amounts in respect of disposal or acquisition of equity shares

Section 24O – Incurral of interest in terms of certain debts deemed to be in production of income

Section 24P – Allowance in respect of future repairs to certain ships

Section 25 – Taxation of deceased estates

Section 25A – Determination of taxable incomes of permanently separated spouses

Section 25B – Taxation of trusts and beneficiaries of trusts

Section 25BA – Amounts received by or accrued to certain portfolios of collective investment schemes and holders of participatory interests in portfolios

Section 25BB – Taxation of REITs

Section 25C – Income of insolvent estates

Section 25D – Determination of taxable income in foreign currency

Section 26 – Determination of taxable income derived from farming

Section 26A – Inclusion of taxable capital gain in taxable income

Section 26B – Taxation of oil and gas companies

Section 27 – Determination of taxable income of co–operative societies and companies

Section 28 – Taxation of short-term insurance business

Section 28bis – [Repealed]

Section 29 – [Repealed]

Section 29A – Taxation of long–term insurers

Section 29B – Mark-to-market taxation in respect of long-term insurers

Section 30 – Public benefit organizations

Section 30A – Recreational clubs

Section 30B – Associations

Section 30C – Small business funding entities

Section 31 – Taxable income in respect of international transactions to be based on arm’s length principle

Section 32 – [Repealed]

Section 33 – Assessment of owners or charterers of ships or aircraft who are not residents of the Republic

Section 34 – [Repealed]

Section 35 – [Repealed]

Section 35A – Withholding of amounts from payments to non-resident sellers of immovable property

Section 36 – Calculation of redemption allowance and unredeemed balance of capital expenditure in connection with mining operations

Section 37 – Calculation of capital expenditure on sale, transfer, lease or cession of mining property

Section 37A – Closure rehabilitation company or trust

Section 37B – Deductions in respect of environmental expenditure

Section 37C – Deductions in respect of environmental conservation and maintenance

Section 37D – Allowance in respect of land conservation in respect of nature reserves or national parks

Section 37E – [Repealed]

Section 37F – Determination of taxable income derived by persons previously assessable under certain other laws

Section 37G – Determination of taxable income derived from small business undertakings

Section 37H – [Repealed]

PART IA

Withholding tax on interest

Section 37I – [Repealed]

Section 37J – [Repealed]

Section 37K – [Repealed]

Section 37L – [Repealed]

Section 37M – [Repealed]

Section 37N – [Repealed]

Section 37O – [Repealed]

PART II

Special Provisions relating to Companies

Section 38 – Classification of companies

Section 39 – Redetermination of company’s status

Section 40 – [Repealed]

Section 40A – Close corporations

Section 40B – Conversion of co–operative to company

Section 40C – Issue of shares or granting of options for no consideration

Section 40CA – Acquisitions of assets in exchange for shares

Section 40D – Communications licence conversions

Section 40E – Ceasing to be a controlled foreign company

PART III

Special rules relating to asset-for-share transactions, substitutive share-for-share transactions, amalgamation transactions, intra-group transactions, unbundling transactions and liquidation distributions

Section 41 – General

Section 42 – Asset-for-share transactions

Section 43 – Substitutive share-for-share transactions

Section 44 – Amalgamation transactions

Section 45 – Intra-group transactions

Section 46 – Unbundling transactions

Section 46A – Limitation of expenditure incurred in respect of shares held in an unbundling company

Section 47 – Transactions relating to liquidation, winding-up and deregistration

PART IIIA

Taxation of foreign entertainers and sportspersons

Section 47A – Definitions

Section 47B – Imposition of tax

Section 47C – Liability for payment of tax

Section 47D – Withholding of amounts of tax

Section 47E – Payment of amounts of tax deducted or withheld

Section 47F – Submission of return

Section 47G – Personal liability of resident

Section 47H – [Repealed]

Section 47I – [Repealed]

Section 47J – Currency of payments made to Commissioner

Section 47K – Notification of specified activity

PART IV

Turnover tax payable by micro businesses

Section 48 – Definitions

Section 48A – Imposition of tax

Section 48B – Rates

Section 48C – Transitional Provisions

Section 49 – [Repealed]

PART IVA

Withholding tax on royalties

Section 49A – Definitions

Section 49B – Levy of withholding tax on royalties

Section 49C – Liability for tax

Section 49D – Exemption from withholding tax on royalties

Section 49E – Withholding of withholding tax on royalties by payers of royalties

Section 49F – Payment and recovery of tax

Section 49G – Refund of withholding tax on royalties

Section 49H – Currency of payments made to Commissioner

Section 50 – [Repealed]

PART IVB

Withholding tax on interest

Section 50A – Definitions

Section 50B – Levy of withholding tax on interest

Section 50C – Liability for tax

Section 50D – Exemption from withholding tax on interest

Section 50E – Withholding of withholding tax on interest by payers of interest

Section 50F – Payment and recovery of tax

Section 50G – Refund of withholding tax on interest

Section 50H – Currency of payments made to Commissioner

Section 51 – [Repealed]

PART IVC

Withholding tax on service fees

Section 51A – [Repealed]

Section 51B – [Repealed]

Section 51C – [Repealed]

Section 51D – [Repealed]

Section 51E – [Repealed]

Section 51F – [Repealed]

Section 51G – [Repealed]

Section 51H – [Repealed]

Section 52 – [Repealed]

Section 53 – [Repealed]

PART V

Donations Tax

Section 54 – Levy of donations tax

Section 55 – Definitions for purposes of this Part

Section 56 – Exemptions

Section 57 – Disposals by companies under donations at the instance of any person

Section 57A – Donations by spouse married in community of property

Section 57B – Disposal of the right to receive an asset which would otherwise have been acquired in consequence of services rendered or to be rendered

Section 58 – Property disposed of under certain transactions deemed to have been disposed of under a donation

Section 59 – Persons liable for the tax

Section 60 – Payment and assessment of the tax

Section 61 – Extension of scope of certain provisions of Act for purposes of donations tax

Section 62 – Value of property disposed of under donations

Section 63 – [Repealed]

Section 64 – Rate of donations tax

PART VII

Secondary Tax on Companies

Section 64B – [Repealed]

Section 64C – [Repealed]

PART VIII

Dividends Tax

Section 64D – Definitions

Section 64E – Levy of Tax

Section 64EA – Liability for tax

Section 64EB – Deemed beneficial owners of dividends

Section 64F – Exemption from tax in respect of dividends other than dividends comprising distribution of assets in specie

Section 64FA – Exemption from and reduction of tax in respect of dividends in specie

Section 64G – Withholding of dividends tax by companies declaring and paying dividends

Section 64H – Withholding of dividends tax by regulated intermediaries

Section 64I – Withholding of dividends tax by insurers

Section 64J – [Repealed]

Section 64K – Payment and recovery of tax

Section 64L – Refund of tax in respect of dividends declared and paid by companies

Section 64LA – Refund of tax in respect of dividends in specie

Section 64M – Refund of tax in respect of dividends paid by regulated intermediaries

Section 64N – Rebate in respect of foreign taxes on dividends

CHAPTER III

GENERAL PROVISIONS

PART I

Returns

Section 65 – [Repealed]

Section 66 – Notice by Commissioner requiring returns for assessment of normal tax under this Act

Section 67 – Registration as taxpayer

Section 68 – Income and capital gain of married persons and minor children

Section 69 – [Repealed]

Section 70 – [Repealed]

Section 71 – [Repealed]

Section 72 – [Repealed]

Section 72A – Return relating to controlled foreign company

Section 73 – [Repealed]

Section 74 – [Repealed]

Section 75 – [Repealed]

Section 76 – [Repealed]

PART IA

Advance Pricing Agreements

Section 76A – Definitions

Section 76B – Purpose

Section 76C – Persons eligible to apply

Section 76D – Fees for advance pricing agreements

Section 76E – Pre-application consultation

Section 76F – Application for advance pricing agreement

Section 76G – Amendments to advance pricing agreement application

Section 76H – Withdrawal of advance pricing agreement application

Section 76I – Rejection of advance pricing agreement application

Section 76J – Processing of advance pricing agreement application

Section 76K – Finalisation of advance pricing agreement

Section 76L – Compliance report

Section 76M – Extension of advance pricing agreement

Section 76N – Termination of advance pricing agreement

Section 76O – Record retention

Section 76P – Procedures and guidelines

PART II

Assessments

Section 77 – [Repealed]

Section 78 – [Repealed]

Section 79 – [Repealed]

Section 80 – [Repealed]

PART IIA

Tax avoidance

Section 80A – Impermissible tax avoidance arrangements

Section 80B – Tax consequences of impermissible tax avoidance

Section 80C – Lack of commercial substance

Section 80D – Round trip financing

Section 80E – Accommodating or tax-indifferent parties

Section 80F – Treatment of connected persons and accommodating or tax-indifferent parties

Section 80G – Presumption of purpose

Section 80H – Application to steps in or parts of an arrangement

Section 80I – Use in the alternative

Section 80J – Notice

Section 80K – Interest

Section 80L – Definitions

PART III

Objections and Appeals

Section 81 – [Repealed]

Section 82 – [Repealed]

Section 83 – [Repealed]

Section 84 – [Repealed]

Section 85 – [Repealed]

Section 86 – [Repealed]

Section 87 – [Repealed]

Section 88 – Payment of tax pending objection and appeal

PART IV

Payment and Recovery of Tax

Section 89 – Appointment of day for payment of tax and interest on overdue payments

Section 89bis – Payments of employees’ tax and provisional tax and interest on overdue payments of such taxes

Section 89quat – Interest on underpayments and overpayments of tax

Section 89quin – Calculation of interest payable under this Act

Section 90 – Persons by whom normal tax payable

Section 91 – Recovery of tax

Section 92 – [Repealed]

Section 93 – [Repealed]

Section 94 – [Repealed]

PART V

Representative Taxpayers

Section 95 – [Repealed]

Section 96 – [Repealed]

Section 97 – [Repealed]

Section 98 – [Repealed]

Section 99 – [Repealed]

Section 100 – [Repealed]

Section 101 – [Repealed]

PART VI

Miscellaneous

Section 102 – Refunds

Section 103 – Transactions, operations or schemes for purposes of avoiding or postponing liability for or reducing amounts of taxes on income

Section 104 – [Repealed]

Section 105 – [Repealed]

Section 105A – [Repealed]

Section 106 – [Repealed]

Section 107 – Regulations

Section 108 – Prevention of or relief from double taxation

Section 109 – [Repealed]

Section 110 – [Repealed]

Section 111 – Repeal of laws

Section 112 – Short title and commencement

First Schedule – Computation of taxable income derived from pastoral, agricultural or other farming operations

Second Schedule – Computation of gross income derived by way of lump sum benefits

Third Schedule – Laws repealed

Fourth Schedule – Amounts to be deducted or withheld by employers and provisional payments in respect of normal tax

Fifth Schedule – [Repealed]

Sixth Schedule – Determination of turnover tax payable by micro businesses

Seventh Schedule – Benefits or advantages derived by reason of employment or the holding of any office

Eighth Schedule – Determination of taxable capital gains and assessed capital losses

Ninth Schedule – Public benefit activities

Tenth Schedule – Oil and gas activities

Eleventh Schedule – Government grants exempt from normal tax

PRELIMINARY

1.     Interpretation

(1)     In this Act, unless the context otherwise indicates –

“agent” includes any partnership or company or any other body of persons corporate or unincorporate acting as an agent;

“aggregate capital gain” means an amount determined in terms of paragraph 6 of the Eighth Schedule;

“aggregate capital loss” means an amount determined in terms of paragraph 7 of the Eighth Schedule;

“assessed capital loss” means an amount determined in terms of paragraph 9 of the Eighth Schedule;

“assessment” has the meaning assigned under section 1 of the Tax Administration Act, and includes a determination by the Commissioner-

(a)      ………

(b)      ………

(c)       of any loss ranking for set-off;

(d)       of any assessed capital loss determined in terms of paragraph 9 of the Eighth Schedule; or

(e)       of any amounts to be taken into account in the determination of tax payable on income in future years;

“average exchange rate” in relation to a year of assessment means the average determined by using the closing spot rates at the end of daily or monthly intervals during that year of assessment which must be consistently applied within that year of assessment;

“Banks Act” means the Banks Act, 1990 (Act No. 94 of 1990);

“beneficiary” in relation to a trust means a person who has a vested or contingent interest in all or a portion of the receipts or accruals or the assets of that trust;

“benefit fund” means –

(a)     any friendly society registered under the Friendly Societies Act, 1956 (Act No. 25 of 1956), or any fund established before 13 June 1986 which is not so registered solely because of the provisions of section 2(2)(a) of that Act; or

(b)     any medical scheme registered under the provisions of the Medical Schemes Act;

 “bonus debentures or securities” means debentures or securities issued by a company, whether by way of a bonus award or otherwise, in such manner that the company’s reserves or unappropriated profits are in whole or in part applied in paying up such debentures or securities;

“capital gain” means an amount determined in terms of paragraph 3 of the Eighth Schedule;

“capital loss” means an amount determined in terms of paragraph 4 of the Eighth Schedule;

“child”, in relation to any person, includes any person adopted by him or her –

(a)     under the law of the Republic; or

(b)     under the law of any country other than the Republic, provided the adopted person is under such law accorded the status of a legitimate child of the adoptive parent and the adoption was made at a time when the adoptive parent was ordinarily resident in such country;

“close corporation” means a close corporation within the meaning of the Close Corporations Act, 1984 (Act No. 69 of 1984);

“collateral arrangement” means a collateral arrangement as defined in section 1 of the Securities Transfer Tax Act, 2007 (Act No. 25 of 2007);

[Definition of “collateral arrangement” inserted by section 3 of Act 25 of 2015 effective on 1 January 2016]

Collective Investment Schemes Control Act” means the Collective Investment Schemes Control Act, 2002 (Act No. 45 of 2002);

“Commissioner” means the Commissioner for the South African Revenue Service appointed in terms of section 6 of the South African Revenue Service Act, 1997 (Act No. 34 of 1997), or the Acting Commissioner designated in terms of section 7 of that Act;

“Companies Act” means the Companies Act, 2008 (Act No. 71 of 2008);

“company” includes –

(a)    any association, corporation or company (other than a close corporation) incorporated or deemed to be incorporated by or under any law in force or previously in force in the Republic or in any part thereof, or any body corporate formed or established or deemed to be formed or established by or under any such law; or

(b)     any association, corporation or company incorporated under the law of any country other than the Republic or any body corporate formed or established under such law; or

(c)     any co-operative; or

(d)     any association (not being an association referred to in paragraph (a) or (f) formed in the Republic to serve a specified purpose, beneficial to the public or a section of the public; or

(e)     any –

(i)      ……….
 

(ii)   portfolio comprised in any investment scheme carried on outside the Republic that is comparable to a portfolio of a collective investment scheme in participation bonds or a portfolio of a collective investment scheme in securities in pursuance of any arrangement in terms of which members of the public (as defined in section 1 of the Collective Investment Schemes Control Act) are invited or permitted to contribute to and hold participatory interests in that portfolio through shares, units or any other form of participatory interest; or
 

(iii)    portfolio of a collective investment scheme in property that qualifies as a REIT as defined in the listing requirements of an exchange, as defined in section 1 of the Financial Markets Act and licensed under section 9 of that Act, where those listing requirements have been approved in consultation with the Director-General of the National Treasury and published by the appropriate authority, as contemplated in section 1 of the Financial Markets Act, in terms of section 11 of that Act or by the Financial Sector Conduct Authority; or

[Subparagraph (iii) added by section 2(1)(a) of Act 22 of 2012 and substituted by section 4(1)(f) of Act 31 of 2013, by section 1(1)(a) of Act 43 of 2014, by section 3(1)(b) of Act 25 of 2015, by section 1(1)(a) of Act 23 of 2018 and by section 4(1)(a) of Act 20 of 2021]

(f)      a close corporation,
 

but does not include a foreign partnership;

connected person” means –

(a)     in relation to a natural person –

(i)      any relative; and

(ii)     any trust (other than a portfolio of a collective investment scheme) of which such natural person or such relative is a beneficiary;

[Subparagraph (ii) substituted by section 7 of Act 17 of 2009, section 2 of Act 22 of 2012 and section 3 of Act 25 of 2015 effective on 8 January 2016]

(b)     in relation to a trust (other than a portfolio of a collective investment scheme)-

[Words preceding subparagraph (i) substituted by section 7 of Act 17 of 2009, section 2 of Act 22 of 2012 and section 3 of Act 25 of 2015 effective on 8 January 2016]

(i)      any beneficiary of such trust; and

(ii)     any connected person in relation to such beneficiary;

(bA)  in relation to a connected person in relation to a trust (other than a portfolio of a collective investment scheme), any other person who is a connected person in relation to such trust;

 [Paragraph (bA) inserted by section 19 of Act 30 of 98 and substituted by section 6 of Act 74 of 2002, section 7 of Act 17 of 2009, section 2 of Act 22of 2012, section 3 of Act 25 of 2015 and section 5 of Act 15 fo 2016 effective on 19 January 2017]

(c)     in relation to a member of any partnership or foreign partnership –

(i)      any other member; and

(ii)     any connected person in relation to any member of such partnership or foreign partnership;

(d)     in relation to a company –

(i)      any other company that would be part of the same group of companies as that company if the expression ‘at least 70 per cent of the equity shares in’ in paragraphs (a) and (b) of the definition of ‘group of companies’ in this section were replaced by the expression ‘more than 50 per cent of the equity shares or voting rights in’;

(ii)     ……….

(iii)    ……….

(iv)    any person, other than a company as defined in section 1 of the Companies Act that alone or together with any connected person in relation to that person, holds, directly or indirectly, at least 20 per cent of-

(aa)    the equity shares in the company; or

(bb)    the voting rights in the company;

[Subparagraph (iv) substituted by section 2(1)(a) of Act 21 of 1994, by section 2(1)(b) of Act 28 of 1997 and by section 6(1)(e) of Act 7 of 2010 and amended by section 4(1)(i) of Act 31 of 2013 and by section 4(1)(b) of Act 20 of 2021]

(v)     any other company if at least 20 per cent of the equity shares or voting rights in the company are held by that other company, and no holder of shares holds the majority voting rights in the company;

(vA)  any other company if such other company is managed or controlled by –

(aa)   any person who or which is a connected person in relation to such company; or

(bb)   any person who or which is a connected person in relation to a person contemplated in item (aa); and

(vi)    where such company is a close corporation –

(aa)   any member;

(bb)   any relative of such member or any trust (other than a portfolio of a collective investment scheme) which is a connected person in relation to such member; and

[Item (bb) substituted by section 7 of Act 17 of 2009, section 2 of Act 22 of 2012 and section 3 of Act 25 of 2015 effective on 8 January 2016]

(cc)    any other close corporation or company which is a connected person in relation to –

(i)      any member contemplated in item (aa); or

(ii)     the relative or trust contemplated in item (bb); and

(e)    in relation to any person who is a connected person in relation to any other person in terms of the foregoing provisions of this definition, such other person;

: Provided that for the purposes of this definition, a company includes a portfolio of a collective investment scheme.

[Proviso added by section 7 of Act 17 of 2009 and substituted by section 2 of Act 17 of 2017 effective on 18 December 2017]

“contributed tax capital”, in relation to a class of shares in a company, means-

[Words preceding paragraph (a) substituted by section 1 of Act 43 of 2014 effective on 20 January 2015]

(a)     in relation to a class of shares issued by a company, in the case of a foreign company that becomes a resident on or after 1 January 2011, an amount equal to the sum of-

[Words preceding subparagraph (i) substituted by section 4 of Act 31 of 2013 and section 1 of Act 43 of 2014 effective on 20 January 2015]

(i)     the market value of all the shares in that company of that class immediately before the date on which that company becomes a reside:  Provided that the market value must be reduced by an amount equal to the difference between-

(aa)   the market value of the shares held by that foreign company in; and

(bb)   an amount equal to the percentage of shares held by that foreign company in a resident company, of the aggregate contributed tax capital in respect of each class of shares of,

each resident company in which that foreign company directly holds at least 50 per cent of the equity shares or voting rights immediately before the date on which that foreign company becomes a resident;

[Subparagraph (i) amended by section 1(1)(d) of Act 43 of 2014 and by section 1(1)(a) of Act 17 of 2023 with effect from 1 January 2024 and applicable in respect of any company that becomes a resident on or after that date]

(ii)     the consideration received by or accrued to that company for the issue of shares of that class on or after the date on which that company becomes a resident; and

[Subparagraph (ii) amended by section 1 of Act 43 of 2014 effective on 20 January 2015]

(iii)    if the shares of that class include or consist of shares that were converted from another class of shares of that company to that class of shares-

(aa)   any consideration received by or accrued to that company in respect of that conversion; and

(bb)   the amount contemplated in subparagraph (cc) that was determined in respect of shares of the other class of shares that were so converted,

[Subparagraph (iii) added by section 1 of Act 43 of 2014 effective on 20 January 2015]

reduced by so much of that amount as –

(aa)   the company has transferred on or after the date on which the company becomes a resident for the benefit of any person holding a share in that company of that class in respect of that share;

[Subparagraph (aa) substituted by section 1 of Act 43 of 2014 effective on 20 January 2015]

(bb)   has by the date of the transfer been determined by the directors of the company or by some other person or body of persons with comparable authority to be an amount so transferred; and

[Subparagraph (bb) substituted by section 1 of Act 43 of 2014 effective on 20 January 2015]

(cc)   in the case of a convertible class of shares some of the shares of which have been converted to another class of shares, so much of the amount contemplated in this paragraph in respect of that convertible class of shares immediately prior to that conversion as bears to that amount the same ratio as the number of shares so converted bears to the total number of that convertible class of shares prior to that conversion; or

[Subparagraph (cc) added by section 1 of Act 43 of 2014 effective on 20 January 2015]

(b)     in relation to a class of shares issued by a company, in the case of any other company, an amount equal to the sum of-

[Words preceding subparagraph (i) substituted by section 1 of Act 43 of 2014 effective on 20 January 2015]

(i)      the stated capital or share capital and share premium of that company immediately before 1 January 2011 in relation to shares in that company of that class issued by that company before that date, less so much of that stated capital or share capital and share premium as would have constituted a dividend, as defined before that date, had that stated capital or share capital and share premium been distributed by that company immediately before that date;

[Subparagraph (i) amended by section 1 of Act 43 of 2014 effective on 20 January 2015]

(ii)     the consideration received by or accrued to that company for the issue of shares of that class on or after 1 January 2011; and

[Subparagraph (ii) amended by section 1 of Act 43 of 2014 effective on 20 January 2015]

(iii)     if the shares of that class include or consist of shares that were converted from another class of shares of that company to that class of shares-

(aa)   any consideration received by or accrued to that company in respect of that conversion; and

(bb)   the amount contemplated in subparagraph (cc) that was determined in respect of shares of the other class of shares that were so converted,

[Subparagraph (iii) added by section 1 of Act 43 of 2014 effective on 20 January 2015]

reduced by so much of that amount as –

(aa)   the company has transferred on or after 1 January 2011 for the benefit of any person holding a share in that company of that class in respect of that share;

[Subparagraph (aa) substituted by section 1 of Act 43 of 2014 effective on 20 January 2015]

(bb)   has by the date of the transfer been determined by the directors of the company or by some other person or body of persons with comparable authority to be an amount so transferred; and

[Subparagraph (bb) substituted by section 1 of Act 43 of 2014 effective on 20 January 2015]

(cc)   in the case of a convertible class of shares some of the shares of which have been converted to another class of shares, so much of the amount contemplated in this paragraph in respect of that convertible class of shares immediately prior to that conversion as bears to that amount the same ratio as the number of shares so converted bears to the total number of that convertible class of shares prior to that conversion:

[Subparagraph (cc) added by section 1 of Act 43 of 2014 effective on 20 January 2015]

Provided that the amount transferred by a company as contemplated in paragraph (a) or (b) for the benefit of a person holding shares of any class of shares of that company must not exceed an amount that bears to the total of the amount of contributed tax capital attributable to that class of shares immediately before the transfer the same ratio as the number of shares of that class held by that person bears to the total number of shares of that class: Provided further that an amount transferred by a company as contemplated in paragraph (a) or (b) must not comprise a transfer of contributed tax capital only where-

(i)     the shares in a class of shares, in respect of which—

(aa)   a distribution is made; or

(bb)   consideration for the acquisition, cancellation or redemption is paid or payable by that company,

are each transferred an equal amount of contributed tax capital in respect of that class of shares; and

(ii)     the amount of that transfer per share does not exceed the total amount of contributed tax capital in respect of that class of shares divided by the total number of issued shares within that class of shares;

[Definition of “contributed tax capital” inserted by section 4(1)(b) of Act 60 of 2008, amended by section 7(1)(g) of Act 17 of 2009, substituted by section 6(1)(f) of Act 7 of 2010 and by section 7(1)(b) and (c) of Act 24 of 2011 and amended by section 1(1)(b) of Act 43 of 2014 and by section 4(1)(c) of Act 20 of 2021 (as substituted by section 41(1) of Act 20 of 2022, deemed to have come into operation on 19 January 2022) effective on 1 January 2023]

“controlled foreign company” means a controlled foreign company as defined in section 9D;

[Definition of “controlled foreign company” inserted by section 6(1)(d) of Act 74 of 2002, deleted by section 2(1)(a) of Act 23 of 2020 and inserted by section 2(1)(b) of Act 23 of 2020]

“controlled group company” means a controlled group company contemplated in the definition of “group of companies”;

“controlling group company” means a controlling group company contemplated in the definition of “group of companies”;

co-operative” means any association of persons registered in terms of section 27 of the Co-operatives Act, 1981 (Act No, 91 of 1981) or section 7 of the Co-operatives Act, 2005 (Act No. 14 of 2005);

“Copyright Act” means the Copyright Act, 1978 (Act No. 98 of 1978);

“date of sequestration” means-

(a)     the date of voluntary surrender of an estate, if accepted by the Court; or

(b)     the date of provisional sequestration of an estate, if a final order of sequestration is granted by the Court;

“depreciable asset” means an asset as defined in paragraph 1 of the Eighth Schedule (other than any trading stock and any debt), in respect of which a deduction or allowance determined wholly or party with reference to the cost or value of that asset is allowable in terms of this Act for purposes other than the determination of any capital gain or capital loss;

“Designs Act” means the Designs Act, 1993 (Act No. 195 of 1993);

“director”, in relation to a close corporation, means any person who in respect of such close corporation holds any office or performs any functions similar to the office or functions of a director of a company other than a close corporation;

“dividend” means any amount, other than a dividend consisting of a distribution of an asset in specie declared and paid as contemplated in section 31(3), transferred or applied by a company that is a resident for the benefit or on behalf of any person in respect of any share in that company, whether that amount is transferred or applied-

[Words preceding paragraph (a) substituted by section 1 of Act 23 of 2018 effective on 1 January 2019, applies in respect of years of assessment commencing on or after that date]

(a)     by way of a distribution made by; or

(b)     as consideration for the acquisition of any share in,

that company, but does not include any amount so transferred or applied to the extent that the amount so transferred or applied-

(i)      results in a reduction of contributed tax capital of the company;

(ii)     constitutes shares in the company;   or  

(iii)    constitutes an acquisition by the company of its own securities by way of a general repurchase of securities as contemplated in subparagraph  (b) of paragraph  5.67(B) of section 5 of the JSE Limited Listings Requirements, where that acquisition complies with any applicable requirements prescribed by paragraph s 5.68 and 5.72 to 5.81 of section 5 of the JSE Limited Listings Requirements or a general repurchase of securities 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 acquisition complies with the applicable requirements of that exchange;

[Paragraph (iii) substituted by section 2(1)(b) of Act 17 of 2017 and by section 2(1)(a) of Act 34 of 2019]

“domestic treasury management company” means a company-

(a)       that is incorporated or deemed to be incorporated—

(i)  by or under any law in force in the Republic and is not subject to exchange control restrictions by virtue of being registered with the financial surveillance department of the South African Reserve Bank; or

(ii) by or under the law of any country other than the Republic and is not subject to exchange control restrictions by virtue of being registered before 1 January 2019 with the financial surveillance department of the South African Reserve Bank; and

(b)       that has its place of effective management in the Republic;

[Definition of “domestic treasury management company” inserted by section 4(1)(o) of Act 31 of 2013, amended by section 2(1)(c) of Act 17 of 2017 and substituted by section 2(1)(b) of Act 34 of 2019]

“equity share” means any share in a company, excluding any share that, neither as respects dividends nor as respects returns of capital, carries any right to participate beyond a specified amount in a distribution;

“Estate Duty Act” means the Estate Duty Act, 1955 (Act No. 45 of 1955);

[Definition of “Estate Duty Act” inserted by section 1 of Act 43 of 2014 effective on 20 January 2015]

“executor” means any person to whom letters of administration have been granted by a Master or an Assistant Master of the High Court appointed under the Administration of Estates Act, 1965 (Act No. 66 of 1965), in respect of the estate of a deceased person under any law relating to the administration of estates, and includes a person acting or authorized to act under letters of administration granted outside the Republic but signed and sealed by such a Master or Assistant Master for use within the Republic and, in any case where the estate is not required to be administered under the supervision of such a Master or Assistant Master, the person administering the estate;

“financial instrument” includes –

(a)     a loan, advance, debt, bond, debenture, bill, share, promissory note, banker’s acceptance, negotiable certificate of deposit, deposit with a financial institution, a participatory interest in a portfolio of a collective investment scheme, or a similar instrument;

(b)     any repurchase or resale agreement, forward purchase arrangement, forward sale arrangement, futures contract, option contract or swap contract;

(c)     any other contractual right or obligation the value of which is determined directly or indirectly with reference to –

(i)      a debt security or equity;

(ii)     any commodity as quoted on an exchange; or

(iii)    a rate index or a specified index;

(d)     any interest-bearing arrangement;

[Paragraph (d) amended by section 1 of Act 23 of 2018 effective on 17 January 2019]

(e)     any financial arrangement based on or determined with reference to the time value of money or cash flow or the exchange or transfer of an asset; and

[Paragraph (e) amended by section 1 of Act 23 of 2018 effective on 17 January 2019]

(f)      any crypto asset;

[Definition of “financial instrument” inserted by section 6(1)(h) of Act 74 of 2002 effective on the date of promulgation of that Act, 13 December, 2002. Paragraph (f) added by section 1(1)(c) of Act 23 of 2018 and substituted by section 2(1)(c) of Act 23 of 2020]

“Financial Markets Act” means the Financial Markets Act, 2012 (Act No. 19 of 2012);

“Financial Sector Regulation Act” means the Financial Sector Regulation Act, 2017 (Act No. 9 of 2017);

[Definition of “Financial Sector Regulation Act” inserted by section 1 of Act 23 of 2018 effective on 1 April 2018]

“Financial Sector Conduct Authority” means the Financial Sector Conduct Authority as defined in section 1 of the Financial Sector Regulation Act;

[Definition of “Financial Sector Conduct Authority” inserted by section 1 of Act 23 of 2018 effective on 1 April 2018]

“Financial Services Board” ……….

[Definition of “Financial Services Board” inserted by section 1 of Act 43 of 2014 and deleted by section 1 of Act 23 of 2018 effective on 1 April 2018]

“Financial Services Board Act” ……….

[Definition of “Financial Services Board Act” inserted by section 1 of Act 43 of 2014 and deleted by section 1 of Act 23 of 2018 effective on 1 April 2018]

“financial year”, in relation to any company, means –

(a)     the period, whether of 12 months or not, commencing upon the date of incorporation or creation of such company and ending upon the last day of February immediately succeeding such date or upon such other date as the Commissioner having regard to the circumstances of the case may approve; or

(b)     any period subsequent to the period referred to in paragraph (a), whether of 12 months or not, commencing immediately after the last day of the immediately preceding financial year of such company and ending upon the first anniversary of such last day or upon such other date as the Commissioner having regard to the circumstances of the case may approve;

“foreign company” means any company which is not a resident;

“foreign dividend” means any amount that is paid or payable by a foreign company in respect of a share in that foreign company where that amount is treated as a dividend or similar payment by that foreign company for the purposes of the laws relating to-

(a)     tax on income on companies of the country in which that foreign company has its place of effective management; or

(b)     companies of the country in which that foreign company is incorporated, formed or established, where the country in which that foreign company has its place of effective management does not have any applicable laws relating to tax on income,

but does not include any amount so paid or payable that-

(i)      constitutes a redemption or other disposal of a participatory interest in an arrangement or scheme contemplated in paragraph (e)(ii) of the definition of “company” to that arrangement or scheme or to the management company of that arrangement or scheme; or

[Paragraph (i) substituted by section 1(1)(a) of Act 20 of 2022]

(ii)     ……….

(iii)     constitutes a share in that foreign company;

 “foreign investment entity” means any person other than a natural person-

(a)     that is not incorporated, established or formed in the Republic;

(b)     the assets of which consist solely of a portfolio of one or more of the following:

(i)      amounts in cash or that constitute cash equivalents;

(ii)     financial instruments that-

(aa)   are issued by a listed company or by the government of the Republic in the national, provincial or local sphere; or

(bb)   if not issued by a listed company or by the government of the Republic in the national, provincial or local sphere, are traded by members of the general public and a market for that trade exists;

(iii)    financial instruments, the values of which are determined with reference to financial instruments contemplated in subparagraph (ii); or

(iv)    rights to receive any asset contemplated in subparagraph (i), (ii) or (iii),

which amounts, financial instruments and rights are held by that person for investment purposes;

(c)     where no more than 10 per cent of the shares, units or other form of participatory interest in that person are directly or indirectly held by persons that are residents; and

(d)     where that person has no employees and has no directors or trustees that are engaged in the management of that person on a full-time basis;

‘foreign partnership’, in respect of any year of assessment, means any partnership, association, body of persons or entity formed or established under the laws of any country other than the Republic if-

(a)     for the purposes of the laws relating to tax on income of the country in which that partnership, association, body of persons or entity is formed or established-

(i)      each member of the partnership, association, body of persons or entity is required to take into account the member’s interest in any amount received by or accrued to that partnership, association, body of persons or entity when that amount is received by or accrued to the partnership, association, body of persons or entity; and

(ii)     the partnership, association, body of persons or entity is not liable for or subject to any tax on income, other than a tax levied by a municipality, local authority or a comparable authority, in that country; or

[Subparagraph (ii) substituted by section 3 of Act 25 of 2015 effective on 31 Deccember 2015]

(b)     where the country in which that partnership, association, body of persons or entity is formed or established does not have any applicable laws relating to tax on income-

(i)     any amount-

(aa)    that is received by or accrues to; or

(bb)    of expenditure that is incurred by,

the partnership, association, body of persons or entity is allocated concurrently with the receipt, accrual or incurral to the members of that partnership, association, body of persons or entity in terms of an agreement between those members; and

(ii)     no amount distributed to a member of a partnership, association, body of persons or entity may exceed the allocation contemplated in subparagraph (i) after taking into account any prior distributions made by the partnership, association, body of persons or entity;

“foreign return of capital” means any amount that is paid or payable by a foreign company in respect of any share in that foreign company where that amount is treated as a distribution or similar payment (other than an amount that constitutes a foreign dividend) by that foreign company for the purposes of the laws relating to-

(a)     tax on income on companies of the country in which that foreign company has its place of effective management; or

(b)     companies of the country in which that foreign company is incorporated, formed or established, where that country in which that foreign company has its place of effective management does not have any applicable laws relating to tax on income,

but does not include any amount so paid or payable to the extent that the amount so paid or payable-

(i)      is deductible by that foreign company in the determination of any tax on income of companies of the country in which that foreign company has its place of effective management; or

(ii)     constitutes shares in that foreign company;

“foreign tax year”, in relation to a foreign company, means any year or period of reporting for foreign income tax purposes by that company or, if that company is not subject to foreign income tax, any annual period of financial reporting by that company;

“functional currency”, in relation to-

(a)     a person, means the currency of the primary economic environment in which the business operations of that person are conducted; and

(b)     a permanent establishment of any person, means the currency of the primary economic environment in which the business operations of that permanent establishment are conducted;

“gross income”, in relation to any year or period of assessment, means-

(i)      in the case of any resident, the total amount, in cash or otherwise, received by or accrued to or in favour of such resident; or

(ii)     in the case of any person other than a resident, the total amount, in cash or otherwise, received by or accrued to or in favour of such person from a source within the Republic,

during such year or period of assessment, excluding receipts or accruals of a capital nature, but including, without in any way limiting the scope of this definition, such amounts (whether of a capital nature or not) so received or accrued as are described hereunder, namely-

(a)     any amount received or accrued by way of an annuity, including any amount contemplated in the definition of “living annuity” or the definition of “annuity amount” in section 10A(1), other than an amount contemplated in paragraph (d)(ii);

[Paragraph (a) substituted by section 2(1)(e) of Act 113 of 1993, by section 2(1)(k) of Act 3 of 2008, by section 2(1)(n) of Act 22 of 2012 and by section 1(1)(b) of Act 20 of 2022]

(b)     any amount payable to the taxpayer-

(i)      by his the spouse or former spouse of that taxpayer, under any judicial order or written agreement of separation or under any order of divorce, by way of alimony or allowance or maintenance of the taxpayer or any children; or

(ii)     in terms of any maintenance order for the maintenance of a child as contemplated in section 15(1) of the Maintenance Act, 1998 (Act No. 99 of 1998);

(c)     any amount, including any voluntary award, received or accrued in respect of services rendered or to be rendered or any amount (other than an amount referred to in section 8(1), 8B or 8C) received or accrued in respect of any employment or the holding of any office: Provided that-

[Words preceding the proviso substituted by section 7 of Act 24 of 2011 and section 5 of Act 15 of 2016 effective on 1 March 2017 in respect of years of assessment ending on or after that date]

(i)      the provisions of this paragraph shall not apply in respect of any benefit or advantage in respect of which the provisions of paragraph (i) apply;

(ii)     any amount received by or accrued to or for the benefit of any person in respect of services rendered or to be rendered by any other person shall for the purposes of this definition be deemed to have been received by or to have accrued to the said other person;

(iii)      …….

(iv)     …….

(v)      …….

(vi)     …….

[Paras. (iii) to (vi) inclusive deleted by section 9(a) of Act 30 of 2002]

(vii)   the provisions of this paragraph shall not apply in respect of any amount received by or accrued to or for the benefit of any person in respect of long service as defined in paragraph 5(4) of the Seventh Schedule, to the extent that the aggregate value of an amount determined under this paragraph together with all amounts determined under paragraphs 5(2)(b), 6(4)(d) and 10(2)(e) of the Seventh Schedule do not exceed R5 000;

[Paragraph (c) amended by section 3(d) of Act 90 of 1962, by section 5(a) of Act 55 of 1966 and by section 4(1)(h) of Act 69 of 1975, substituted by section 2(1)(f) of Act 121 of 1984 and amended by section 7(1)(n) of Act 24 of 2011 and by section 5(1)(b) of Act 15 of 2016 effective on 1 March, 2017 and applicable in respect of years of assessment ending on or after that date. Paragraph (vii) added by section 4(1)(d) of Act 20 of 2021 effective on 1 March, 2022 and applicable in respect of years of assessment commencing on or after that date]

(cA)   any amount received by or accrued to any person who –

(i)      ……….

[Subparagraph (i) deleted by section 1 of Act 43 of 2014 effective on 1 March 2015]

(ii)     is or was a labour broker as defined in the Fourth Schedule (other than a labour broker in respect of which a certificate of exemption has been issued in terms of that Schedule);

(iii)    is or was a personal service provider as defined in the Fourth Schedule; or

(iv)    was a personal service company or personal service trust as defined in the Fourth Schedule prior to section 66 of the Revenue Laws Amendment Act, 2008, coming into operation,

as consideration for any restraint of trade imposed on such person;

(cB)  any amount received by or accrued to any natural person as consideration for any restraint of trade imposed on that person in respect or by virtue of-

(i)      employment or the holding of any office; or

(ii)     any past or future employment or the holding of an office;

[Paragraph (cB) to be inserted by section 1 of Act 43 of 2014 effective on 1 March 2015]

(d)     any amount (other than an amount contemplated in paragraph (a)), including any voluntary award, received or accrued-

(i)      in respect of the relinquishment, termination, loss, repudiation, cancellation or variation of any office or employment or of any appointment (or right or claim to be appointed) to any office or employment;

(ii)     by or to a person, or dependant or nominee of the person, directly or indirectly in respect of proceeds from a policy of insurance where the person is or was an employee or director of the policyholder; or

(iii)     by or to a person, or dependant or nominee of the person, in respect of any policy of insurance (other than a risk policy with no cash value or surrender value) that has been ceded to-

(aa)    the person;

(bb)   a dependant or nominee of the person; or

for the benefit of the person, or dependant or nominee of the person, by-

(A)    the employer or former employer of the person; or

(B)     the company of which the person is or was a director:

Provided that-

(aa)   the provisions of subparagraphs (i) and (ii) shall not apply to any lump sum award from any pension fund, pension preservation fund, provident fund, provident preservation fund or retirement annuity fund;

(bb)   any such amount which becomes payable in consequence of or following upon the death of any person shall be deemed to be an amount which accrued to such person immediately prior to his or her death;

(cc)    for the purposes of subparagraphs (ii) and (iii), any amount received by or accrued to a dependant or nominee of a person shall be deemed to be received by or to accrue to that person;

(e)     a retirement fund lump sum benefit or retirement fund lump sum withdrawal benefit other than any amount included under paragraph(eA);

(eA)   where, in relation to a member who effectively remains in the employment of the same employer, or the dependants or nominees of a deceased member-

(i)      any amount in a fund contemplated in paragraph (a), (b) or (d) of the definition of “pension fund” or paragraph (a), (b) or (c) of the definition of “provident fund”, the rules of which provide that on retirement of such member a portion of his benefit has to be taken in the form of an annuity, has been transferred to a fund, the rules of which entitle such member, or the dependants or nominees of a deceased member, to a benefit on retirement in the form of a lump sum exceeding one-third of the capitalised value of all benefits (including lump sum payments and annuities); or

[Subparagraph (i) substituted by section 5(1)(c) of Act 15 of 2016 and by section 1(1)(c) of Act 20 of 2022 deemed effective on 1 March, 2021 and applicable in respect of years of assessment commencing on or after that date]

(ii)      a fund contemplated in paragraph (a), (b) or (d) of the definition of “pension fund” or paragraph (a), (b) or (c) of the definition of “provident fund”, the rules of which provide that on retirement of such member a portion of his benefit has to be taken in the form of an annuity, is wholly or partially converted by way of an amendment to its rules or otherwise, to entitle such member, or the dependants or nominees of a deceased member, to a benefit on retirement in the form of a lump sum exceeding one-third of the capitalised value of all benefits (including lump sum payments and annuities); or

[Subparagraph (ii) amended by section 19(1)(h) of Act 30 of 1998 and substituted by section 5(1)(c) of Act 15 of 2016 and by section 1(1)(c) of Act 20 of 2022 deemed effective on 1 March, 2021 and applicable in respect of years of assessment commencing on or after that date]

(iii)    any amount in a fund contemplated in paragraph (a), (b) or (d) of the definition of “pension fund” or paragraph (a), (b) or (c) of the definition of “provident fund” has become payable to the member or is being utilised to redeem a debt,

[Subparagraph (iii) added by section 19(1)(i) of Act 30 of 1998 and substituted by section 5(1)(c) of Act 15 of 2016 and by section 1(1)(c) of Act 20 of 2022 deemed effective on 1 March, 2021 and applicable in respect of years of assessment commencing on or after that date]

an amount equal to two–thirds-

(aa)   of the amount so transferred; or

(bb)   in the case of a conversion, of the amount representing the amount converted for the benefit or ultimate benefit of the member or the dependants or nominees of the deceased member, and such amount shall be deemed to have been received by or accrued to or in favour of such member, dependants or nominees, as the case may be: Provided that where a court granting a decree of divorce in respect of such member has made an order that any part of such amount shall be paid to the former spouse of such member, as provided for in section 7(8) of the Divorce Act, 1979 (Act No. 70 of 1979), such part shall for the purposes of this paragraph be deemed to be an amount converted for the benefit or ultimate benefit of such member; or

(cc)    in the case of an amount becoming payable to a member or being utilised to redeem a debt, of the amount so payable or so utilised:

Provided that the Commissioner may, on application by a fund, in particular circumstances, increase the proportion of one–third contemplated in subparagraph (i) up to a maximum of one–half on the following conditions:

(a)     that on 12 March 1997 the proportion of the benefit on retirement in such fund that could be taken in the form of a lump sum was greater than one–third, but not greater than one–half, of the total capitalized value of all benefits;

(b)     that the rules of such fund are amended so that the maximum proportion of such member’s benefit on retirement that can be taken in the form of a lump sum is one–third of the total capitalized value of all benefits; and

(c)     such further conditions as the Commissioner may determine from time to time;

(f)      any amount received or accrued in commutation of amounts due under any contract of employment or service;

(g)     any amount received or accrued from another person, as a premium or consideration in the nature of a premium –

(i)      for the use or occupation or the right of use or occupation of land or buildings; or

(ii)     for the use or the right of use of plant or machinery; or

(ii)bis for the use or the right of use of any motion picture film or any film or video tape or disc for use in connection with television or any sound recording or advertising matter connected with such motion picture film, film or video tape or disc; or

(iii)    for the use or right of use of any patent as defined in the Patents Act or any design as defined in the Designs Act or any trade mark as defined in the Trade Marks Act or any copyright as defined in the Copyright Act or any model, pattern, plan, formula or process or any other property or right of a similar nature;

(gA)  any amount received or accrued from another person as consideration for the imparting of or the undertaking to impart any scientific, technical, industrial or commercial knowledge or information, or for the rendering of or the undertaking to render any assistance or service in connection with the application or utilization of such knowledge or information;

(h)     in the case of any person to whom, in terms of any agreement relating to the grant to any other person of the right of use or occupation of land or buildings, or by virtue of the cession of any rights under any such agreement, there has accrued in any such year or period the right to have improvements effected on the land or to the buildings by any other person –

(i)      the amount stipulated in the agreement as the value of the improvements or as the amount to be expended on the improvements; or

(ii)     if no amount is so stipulated, an amount representing the fair and reasonable value of the improvements;

(i)      the cash equivalent, as determined under the provisions of the Seventh Schedule, of the value during the year of assessment of any benefit or advantage granted in respect of employment or to the holder of any office, being a taxable benefit as defined in the said Schedule, and any amount required to be included in the taxpayer’s income under section 8A;

(j)      so much of the sum of any amounts received or accrued during any year of assessment in respect of disposals of assets the cost of which has in whole or in part been included in capital expenditure taken into account (whether under this Act or any previous Income Tax Act) for the purposes of any deduction in respect of any mine under section 15(a) of this Act or the corresponding provisions of any previous Income Tax Act, as exceeds the sum of so much of any capital expenditure as in the case of such mine is unredeemed at the commencement of the said year of assessment and the capital expenditure that is incurred during that year in respect of such mine, as determined before applying the definition of “capital expenditure incurred” in section 36(11);

(jA)   any amount received by or accrued to any person during the year of assessment in respect of the disposal of any asset manufactured, produced, constructed or assembled by that person, which is similar to any other asset manufactured, produced, constructed or assembled by that person for purposes of manufacture, sale or exchange by that person or on that person’s behalf;

(k)     any amount received or accrued by way of a dividend or a foreign dividend;

(l)      any amount received or accrued by way of grant or subsidy in respect of any soil erosion works referred to in section 17A(1) or any of the matters mentioned in items (a) to (i), inclusive, of paragraph 12(1) of the First Schedule;

(lA)   any amount received by or accrued to a company or association as contemplated in subparagraph (ii) of section 11E;

(lC)   any amount received by or accrued to a person by way of a government grant as defined in section 12P;

[Paragraph (lC) inserted by section 5 of Act 15 of 2016 effective on 19 January 2017]

(m)    any amount received or accrued in respect of a policy of insurance of which the taxpayer is the policyholder, where the policy relates to the death, disablement or illness of an employee or director (or former employee or director) of the taxpayer, including by way of any debt: Provided that any amount so received or accrued shall be reduced by the amount of any such debt which is or has been included in the taxpayer’s gross income;

[Paragraph (m) substituted by section 4(1)(d) of Act 88 of 1971 and by section 3(1)(b) of Act 91 of 1982, amended by section 2(1)(d) of Act 94 of 1983, substituted by section 7(1)(v) of Act 24 of 2011, amended by section 2(1)(q) of Act 22 of 2012 and by section 2(1)(d) of Act 17 of 2017 and substituted by section 2(1)(d) of Act 23 of 2020]

(n)     any amount which in terms of any other provision of this Act is specifically required to be included in the taxpayer’s income and that amount must for the purposes of this paragraph be deemed to have been received by or to have accrued to the taxpayer:

[Paragraph (n) substituted by section 3(1)(g) of Act 32 of 2005 and by section 2(1)(c) of Act 34 of 2019]

Provided that where during any year of assessment a person has become entitled to any amount which is payable on a date or dates falling after the last day of such year, that amount shall be deemed to have accrued to the person during such year;

“group of companies” means two or more companies in which one company (hereinafter referred to as the ‘controlling group company’) directly or indirectly holds shares in at least one other company (hereinafter referred to as the ‘controlled group company’), to the extent that –

(a)     at least 70 per cent of the equity shares in each controlled group company are directly held by the controlling group company, one or more other controlled group companies or any combination thereof; and

(b)     the controlling group company directly holds at least 70 per cent of the equity shares in at least one controlled group company;

“headquarter company” in respect of any year of assessment means a company contemplated in section 9I(1) in respect of which an election has been made in terms of that section;

“hotel keeper” means any person carrying on the business of hotel keeper or boarding or lodging house keeper where meals and sleeping accommodation are supplied to others for money or its equivalent;

“identical security” means in respect of a listed security, as defined in the Securities Transfer Tax Act, 2007 (Act No. 25 of 2007), that is the subject of a securities lending arrangement-

(a)     a security of the same class in the same company as that security; or

(b)     any other security that is substituted for that listed security 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;

[Definition of “identical security” inserted by section 3(1)(h) of Act 25 of 2015 effective on 1 January, 2016. Paragraph (b) substituted by section 5(1)(e) of Act 15 of 2016 and by section 1(1)(d) of Act 20 of 2022]

“identical share” means in respect of a share-

(a)     a share of the same class in the same company as that share; or

(b)     any other share that is 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;

[Paragraph (b) substituted by section 5(1)(f) of Act 15 of 2016, by section 1(1)(f) of Act 23 of 2018 and by section 2(1)(d) of Act 34 of 2019]

[Definition of “identical share” inserted by section 3 of Act 25 of 2015 effective on 1 January 2016]

“IFRS” means the International Financial Reporting Standards issued by the International Accounting Standards Board;

“income” means the amount remaining of the gross income of any person for any year or period of assessment after deducting therefrom any amounts exempt from normal tax under Part I of Chapter II;

“insolvent estate” means an insolvent estate as defined in section 2 of the Insolvency Act, 1936 (Act No. 24 of 1936);

“Insurance Act” means the Insurance Act, 2017 (Act No. 18 of 2017);

[Definition of “Insurance Act” inserted by section 1 of Act 23 of 2018 effective on 17 January 2019]

“JSE Limited Listings Requirements” means the JSE Limited Listings Requirements, 2003, made by the JSE Limited in terms of section 11 of the Financial Markets Act;

“linked unit” means a unit comprising a share and a debenture in a company, where that share and that debenture are linked and are traded together as a single unit;

“liquidation and distribution account” means the account required to be submitted by an executor to a Master in accordance with section 35 of the Administration of Estates Act, 1965 (Act 66 of 1965);

[Definition of “liquidation and distribution account” inserted by section 4(1)(e) of Act 20 of 2021 effective on 1 March, 2022 and applicable in respect of liquidation and distribution accounts finalised on or after that date]

“listed company” means a company where its shares or depository receipts in respect of its shares are listed on –

(a)     an exchange as defined in section 1 of the Financial Markets Act and licensed under section 9 of that Act; or

(b)     a stock exchange in a country other than the Republic which has been recognised by the Minister as contemplated in paragraph (c) of the definition of “recognised exchange” in paragraph 1 of the Eighth Schedule;

“listed share” means a share that is listed on an exchange as defined in section 1 of the Financial markets Act and licensed under section 9 of that Act;

“living annuity” means a right of a member or former member of a pension fund, pension preservation fund, provident fund, provident preservation fund or retirement annuity fund, or his or her dependant or nominee, or any subsequent nominee, to an annuity purchased from a person or provided by any fund on or after the retirement date of that member or former member in respect of which-

(a)     the value of the annuity is determined solely by reference to the value of assets which are specified in the annuity agreement and are held for purposes of providing the annuity;

(b)     the amount of the annuity is determined in accordance with a method or formula prescribed by the Minister by notice in the Gazette;

(c)     the full remaining value of the assets contemplated in paragraph (a) may be paid as a lump sum when the value of those assets become at any timeless than an amount prescribed by the Minister by notice in the Gazette;

(d)     the amount of the annuity is not guaranteed by that person or fund;

(e)     on the death of the member or former member, the value of the assets referred to in paragraph (a) may be paid to a nominee of the member or former member as an annuity or lump sum or as an annuity and a lump sum, or, in the absence of a nominee, to the deceased’s estate as a lump sum;

[Paragraph (e) substituted by section 4(1)(i) of Act 60 of 2008 and by section 7(1)(y) of Act 24 of 2011 and amended by section 2(1)(e) of Act 23 of 2020 effective on 1 March, 2021]

(eA)  in anticipation of the termination of a trust, the value of the assets referred to in paragraph (a) must be paid to the trust as a lump sum pursuant to that termination; and

[Paragraph (eA) inserted by section 2(1)(f) of Act 23 of 2020 effective on 1 March, 2021]

(f)      further requirements regarding the annuity may be prescribed by the Minister by notice in the Gazette;

[Definition of “living annuity” inserted by section 2(1)(o) of Act 3 of 2008 and amended by section 4(1)(g) of Act 60 of 2008 and by section 1(1)(e) of Act 20 of 2022]

“Long-term Insurance Act” means the Long-term Insurance Act, 1998 (Act No. 52 of 1998);

“low-cost residential unit” means-

(a)     an apartment qualifying as a residential unit in a building located within the Republic, where-

(i)      the cost of the apartment does not exceed R350000; and

(ii)     the owner of the apartment does not charge a monthly rental in respect of that apartment that exceeds one per cent of the cost; or

(b)     a building qualifying as a residential unit located within the Republic, where-

(i)      the cost of the building does not exceed R300000; and

(ii)     the owner of the building does not charge a monthly rental in respect of that building that exceeds one per cent of the cost contemplated in subparagraph (i) plus a proportionate share of the cost of the land and the bulk infrastructure:

Provided that for the purposes of paragraphs (a)(ii) and (b)(ii), the cost is deemed to be increased by 10 per cent in each year succeeding the year in which the apartment or building is first brought into use;

“lump sum benefit” means a retirement fund lump sum benefit or retirement fund lump sum withdrawal benefit;

“Medical Schemes Act” means the Medical Schemes Act, 1998 (Act No. 131 of 1998);

“Mineral and Petroleum Resources Development Act” means the Mineral and Petroleum Resources Development Act, 2002 (Act No. 28 of 2002);

“mining for gold” or “to mine for gold” includes mining for uranium or to mine for uranium;

mining operations” and “mining” include every method or process by which any mineral is won from the soil or from any substance or constituent thereof;

“Minister” means the Minister of Finance;

“municipality” means a municipality which is within a category listed in section 155(1) of the Constitution of the Republic of South Africa, 1996, and which is an organ of state within the local sphere of government exercising legislative and executive authority within an area determined in terms of the Local Government: Municipal Demarcation Act, 1998 (Act No. 27 of 1998);

“municipal value” means an amount determined in terms of section 46 of the Local Government: Municipal Property Rates Act, 2004 (Act No. 6 of 2004);

“natural oil” means any liquid or solid hydrocarbon or combustible gas existing in a natural condition in the earth’s crust, but does not include coal or bituminous shales or other stratified deposits from which oil can be obtained by destructive distillation, or gas arising from marsh or other surface deposits;

“neighbouring country” means Botswana, eSwatini, Lesotho and Namibia;

[Definition of “neighbouring country” inserted by section 2(1)(a) of Act 85 of 1987 and substituted by section 2(e) of Act 141 of 1992, by section 2(c) of Act 36 of 1996 and by section 3 of Act 16 of 2022]

“normal retirement age” means-

(a)     in the case of a member of a pension fund or provident fund, the date on which the member becomes entitled to retire from employment for reasons other than sickness, accident, injury or incapacity through infirmity of mind or body;

(b)     in the case of a member of a retirement annuity fund, a pension preservation fund or a provident preservation fund, the date on which the member attains 55 years of age; or

(c)     in the case of a member of any fund contemplated in this definition, the date on which that member becomes permanently incapable of carrying on his or her occupation due to sickness, accident, injury or incapacity through infirmity of mind or body;

“normal tax” means income tax referred to in section 5(1);

“officer” means, where used in the context of a person who is engaged by the Commissioner in carrying out the provisions of this Act, a SARS official as defined in section 1 of the Tax Administration Act;

“official rate of interest” means-

(a)     in the case of a debt which is denominated in the currency of the Republic, a rate of interest equal to the South African repurchase rate plus 100 basis points; or

(b)     in the case of a debt which is denominated in any other currency, a rate of interest that is the equivalent of the South African repurchase rate applicable in that currency plus 100 basis points:

Provided that where a new repurchase rate or equivalent rate is determined, the new rate of interest applies for the purposes of this definition from the first day of the month following the date on which that new repurchase rate or equivalent rate came into operation;

[Definition of “official rate of interest” inserted by section 2 of Act 17 of 2017 and substituted by section 1 of Act 23 of 2018 effective on 17 January 2019]

“Patents Act” means the Patents Act, 1978 (Act No. 57 of 1978);

“pension fund” means –

(a)

(i)      any pension or dependants’ fund or pension scheme established by law, other than the Government Employees Pension Fund, as contemplated in the Government Employees Pension Law, 1996 (Proclamation No. 21 of 1996);

[Sub-paragraph (i) substituted by section 7(1)(o) of Act 17 of 2009 and by section 3(1)(k) of Act 25 of 2015, substituted by section 74(1)(a) of Act 23 of 2020 effective on 1 March, 2021 and applicable in respect of years of assessment commencing on or after that date]

(ii)     any pension, provident or dependants’ fund or pension scheme established for the benefit of the employees of any municipality or of any local authority (as defined in the definition of “local authority” in this section prior to the coming into operation of section 3(1)(h) of the Revenue Laws Amendment Act, 2006 (Act 20 of 2006), that was established prior to the date that section so came into operation); or

[Sub-paragraph (ii) substituted by section 3(1)(k) of Act 20 of 2006 and by section 7(1)(o) of Act 17 of 2009 – pending amendment by section 3(1)(l) of Act 25 of 2015 deleted by section 74(1)(b) of Act 23 of 2020 deemed effective on 8 January, 2016]

(iii)    any fund contemplated in subparagraph (ii), which includes as members employees of any municipal entity created in accordance with the provisions of the Municipal Systems Act, 2000 (Act No. 32 of 2000), over which one or more municipalities or local authorities (as defined in section 1 prior to the coming into operation of section 3(1)(h) of the Revenue Laws Amendment Act, 2006, and that was established prior to the date that section so came into operation) exercise ownership control as contemplated by that Act, where such fund was established –

(aa)   on or before 14 November 2000, and such employees were employees of a local authority (as defined in section 1 prior to the coming into operation of section 3(1)(h) of the Revenue Laws Amendment Act, 2006, and that was established prior to the date that section so came into operation) immediately prior to becoming employees of such municipal entity; or

(bb)   after 14 November 2000, and such fund has been approved by the Commissioner subject to such limitations, conditions and requirements as contemplated in paragraph (c);

(b)     effective on a date determined by the Commissioner in relation to any fund hereinafter referred to (not being a date earlier than 4 December 1981), any pension fund established for the benefit of employees of a control board as defined in section 1 of the Marketing of Agricultural Products Act, 1996 (Act 47 of 1996), or for the benefit of employees of the Development Bank of Southern Africa, if the rules of such fund are in all material respects identical to those of the Government Employees’ Pension Fund; or

[Paragraph (b) substituted by section 2(1)(c) of Act 96 of 1985, by section 2(1)( j) of Act 28 of 1997 and by section 3(1)(m) of Act 25 of 2015 effective on 1 March, 2016 and applicable in respect of years of assessment commencing on or after that date]

(c)     the Municipal Councillors Pension Fund provisionally registered under the Pension Funds Act on 23 May 1988, or any fund (other than a retirement annuity fund, a pension preservation fund or a fund contemplated in paragraph (a) or (b)) which is approved by the Commissioner in respect of the year of assessment in question and, in the case of any such fund established on or after 1 July 1986, is registered under the provisions of that Act;

[Paragraph (c) amended by section 2(1)(c) of Act 65 of 1986, by section 1(1) of Act 99 of 1988, by section 2(1)(b) of Act 101 of 1990, by section 2(1)(i) of Act 113 of 1993, by section 2(d) and (e) of Act 21 of 1995, by section 2(g) of Act 59 of 2000, by ss. 2(2)(b) and 3(1)(f) of Act 8 of 2007, by section 2(1)(t) and (u) of Act 3 of 2008, by section 4(1)(k), (l), (m) and (n) of Act 60 of 2008, by section 6(1)(r) of Act 7 of 2010, by section 7(1)(z) of Act 24 of 2011, by section 4(1)(zC) and (zD) of Act 31 of 2013 (section 4(1)(zE) of Act 31 of 2013 substituted by section 119(1)(a) of Act 43 of 2014 and deleted by section 143(1)(a) and section 155(1) of Act 25 of 2015 respectively), by section 3(1)(n) of Act 25 of 2015, by section 2(1)(f) and (g) of Act 17 of 2017, by section 1(1)(j) and (k) of Act 23 of 2018 and by section 1(1)(f) of Act 20 of 2022]

(d)     the Government Employees Pension Fund, as contemplated in the Government Employees Pension Law, 1996 (Proclamation No. 21 of 1996):

[Paragraph (d) added by section 3(1)(o) of Act 25 of 2015 effective on 1 March, 2021 and applicable in respect of years of assessment commencing on or after that date – effective date in section 3(7) of Act 25 of 2015 substituted by section 3(1)(b) of Act 2 of 2016 as substituted by section 98(1) of Act 17 of 2017 and by section 111(1) of Act 23 of 2018]

Provided that the Commissioner may approve any fund contemplated in paragraph (c) subject to such limitations or conditions as he may determine, and shall not approve a fund in respect of any year of assessment unless the Commissioner is in respect of that year of assessment satisfied-

(i)      that the fund is a permanent fund bona fide established for the purpose of providing annuities for employees on retirement date or for the dependants or nominees of deceased employees, or mainly for the said purpose and also for the purpose of providing benefits other than annuities for the persons aforesaid or for the purpose of providing any benefit contemplated in paragraph 2C of the Second Schedule or section 15A or 15E of the Pension Funds Act; and

(ii)      that the rules of the fund provide-

(aa)   that all annual contributions of a recurrent nature to the fund shall be in accordance with specified scales;

(bb)   that membership of the fund throughout the period of employment shall be a condition of the employment by the employer of all persons of the class or classes specified therein who enter employment with that employer on or after the date upon which-

(A)    the fund comes into operation; or

(B)    the employer becomes a participant in that fund;

(cc)   those persons who immediately prior to the said date were employed by the employer and who on the said date fall within the said class or classes may, upon application made, be permitted to become members of that fund on such conditions as may be specified in the rules;

(dd)   that not more than one-third of the total value of the retirement interest may be commuted for a single payment, and that the remainder must be paid in the form of an annuity (including a living annuity), a combination of annuities (including a combination of methods of paying the annuity) or a combination of types of annuities except where two-thirds of the total value does not exceed R165 000, where the employee is deceased or where the employee elects to transfer the retirement interest to a pension fund, pension preservation fund, provident fund, provident preservation fund or a retirement annuity fund: Provided that in determining the value of the retirement interest an amount calculated as follows must not be taken into account-

(A)    in the case of a person who was a member of a provident fund or provident preservation fund and who was 55 years of age or older on 1 March 2021-

(AA)  any amount contributed to a provident fund or transferred to a provident preservation fund prior to, on and after 1 March 2021 of which that person was a member on 1 March 2021;

(BB)  with the addition of any other amount credited to the member’s individual account or minimum individual reserve of the provident fund or provident preservation fund prior to, on and after 1 March 2021; and

(CC)  any fund return, as defined in the Pension Funds Act, in relation to the contributions contemplated in subparagraph (AA) or amounts credited contemplated in subparagraph (BB); or

[Subparagraph (CC) substituted by section 1(1)(c) of Act 17 of 2023 effective on 1 March, 2022 and is applicable in respect of years of assessment commencing on or after that date]

(B)    in any other case of a person who was a member of a provident fund or provident preservation fund on 1 March 2021-

(AA)  any amount contributed to a provident fund or transferred to a provident preservation fund prior to 1 March 2021;

(BB)  with the addition of any other amount credited to the member’s individual account or minimum individual reserve of the provident fund or provident preservation fund as a result of the value of the member’s individual account or minimum individual reserve on 1 March 2021; and

(CC)  any fund return, as defined in the Pension Funds Act, in relation to the contributions contemplated in subparagraph (AA) or amounts credited contemplated in subparagraph (BB);

[Subparagraph (CC) substituted by section 1(1)(d) of Act 17 of 2023 effective on 1 March, 2022 and is applicable in respect of years of assessment commencing on or after that date]

reduced proportionally by an amount permitted in terms of the Pension Funds Act to be deducted from the member’s individual account or minimum individual reserve of the provident fund or provident preservation fund prior to, on and after 1 March 2021: Provided further that in the case where the remaining balance is utilised to provide or purchase more than one annuity, the amount utilised to provide or purchase each annuity must exceed R165 000;

[Subparagraph (dd) substituted by section 4(1)(f) of Act 20 of 2021 and amended by section 1(1)(b) of Act 17 of 2023 with effect from 1 March, 2024 and applicable in respect of years of assessment commencing on or after that date]

(ee)   that a partner of a partnership is regarded as an employee of the partnership;

[Subparagraph (ee) substituted by section 1(1)(e) of Act 17 of 2023 with effect from 1 March, 2024 and applicable in respect of years of assessment commencing on or after that date]

(ff)     that the Commissioner shall be notified of all amendments of the rules; and

(gg)   that an employee who has transferred a retirement interest in terms of paragraphs 2(1)(c) and 6A(d) of the Second Schedule to this fund shall not be entitled to payment of a withdrawal benefit as contemplated in paragraph 2(1)(b)(ii) of the Second Schedule in respect of that transferred amount; and

[Subparagraph (gg) added by section 1(1)(f) of Act 17 of 2023 with effect from 1 March, 2024 and applicable in respect of years of assessment commencing on or after that date]

(iii)     that the rules of the fund have been complied with;

: Provided further that the Commissioner may recognise a fund contemplated in paragraph (a), (b) or (d) in respect of any year of assessment if the Commissioner is satisfied that the rules of the fund provide that in determining the value of retirement interest, an amount calculated as follows must not be taken into account-

(i)      in the case of a person who was a member of a provident fund or a provident preservation fund and who was 55 years of age or older on 1 March 2021-

(aa)   any amount contributed to a provident fund or transferred to a provident preservation fund prior to, on and after 1 March 2021 of which that person was a member on 1 March 2021;

(bb)   with the addition of any other amount credited to the member’s individual account or minimum individual reserve of the provident fund or provident preservation fund prior to, on or after 1 March 2021; and

(cc)   where applicable, any fund return, as defined in the Pension Funds Act, in relation to the contributions or transfers contemplated in subparagraph (aa) or amounts credited as contemplated in subparagraph (bb); or

(ii)     in any other case of a person who was a member of a provident fund or a provident preservation fund on 1 March 2021—

(aa)   any amount contributed to a provident fund or transferred to a provident preservation fund prior to 1 March 2021;

(bb)   with the addition of any other amounts credited to the member’s individual account or minimum individual reserve of the provident fund or provident preservation fund as a result of the value of the member’s individual account or minimum individual reserve on 1 March 2021; and

(cc)   where applicable, any fund return, as defined in the Pension Funds Act, in relation to the contributions or transfers contemplated in subparagraph (aa) or amounts credited as contemplated in subparagraph (bb),

where applicable, reduced proportionally by any amount permitted to be deducted in terms of the Pension Funds Act from the member’s individual account or minimum individual reserve of the provident fund or provident preservation fund prior to, on or after 1 March 2021;

[Definition of “pension fund” amended by section 3(i) of Act 90 of 1962, by section 4(1)(c) of Act 90 of 1972, by section 3(1)(c) of Act 101 of 1978, by section 3(1)(c) of Act 104 of 1979 and by section 3(1)(c) of Act 91 of 1982, substituted by section 2(1)(e) of Act 94 of 1983(section 3(1)(p) of Act 25 of 2015 deleted by section 3(1)(a) of Act 2 of 2016) and amended by section 1(1)(a) of Act 2 of 2016(as substituted by section 97(1)(a) of Act 17 of 2017, by section 110(1)(a) of Act 23 of 2018 and by section 75(1) of Act 23 of 2020) and by section 1(1)(g) of Act 20 of 2022 with effect from 1 March, 2023 and applicable in respect of years of assessment commencing on or after that date]

“Pension Funds Act” means the Pension Funds Act, 1956 (Act No. 24 of 1956);

“pension preservation fund” means a pension fund organisation which is registered under the Pension Funds Act and which is approved by the Commissioner in respect of the year of assessment in question: Provided that the Commissioner may approve a fund subject to such limitations and conditions as the Commissioner may determine, and shall not approve a fund in respect of any year of assessment unless the Commissioner is satisfied in respect of that year of assessment that the rules of the fund provide that-

(a)        membership of the fund consists of-

(i)     former members of a pension fund or provident fund whose membership of that fund has terminated due to-

(aa)   resignation, retrenchment or dismissal from employment and who elected to have any lump sum benefit that is payable as a result of the termination transferred to that fund;

(bb)   the winding up or partial winding up of that fund, if the member elects or is required in terms of the rules to transfer to this fund; or

(cc)   a transfer of business from one employer to another in terms of section 197 of the Labour Relations Act, 1995 (Act No. 66 of 1995), and the employment of the employee with the transferor employer is transferred to the transferee employer, if the member elects or is required in terms of the rules to transfer to this fund;

(ii)     former members of any other pension preservation fund or a provident preservation fund-

(aa)   if that fund was wound up or partially wound up; or

(bb)   if the member elected to have any lump sum benefit contemplated in paragraph 2(1)(b)(ii) of the Second Schedule transferred to this pension preservation fund and who made this election while they were members of that other fund;

(iii)       . . . . . .

[Sub-paragraph (iii) substituted by section 7(1)(zD) of Act 24 of 2011 and by section 4(1)(zH) of Act 31 of 2013, amended by section 1(1)(l) of Act 23 of 2018, substituted by section 1(1)(o) of Act 23 of 2018 and deleted by section 2(1)(g) of Act 23 of 2020 effective on 1 March, 2021]

(iv)    persons who have elected to transfer to that fund amounts awarded to those persons in terms of any court order contemplated in section 7(8) of the Divorce Act, 1979 (Act No. 70 of 1979), from any pension fund, pension preservation fund, provident fund or provident preservation fund for the benefit of those persons;

[Subparagraph (iv) substituted by section 7(1)(q) of Act 17 of 2009, amended by section 1(1)(l) of Act 23 of 2018 and substituted by section 1(1)(o) of Act 23 of 2018 both effective from 1 March, 2019]

(v)     former members of a pension fund, pension preservation fund, provident fund or provident preservation fund who have elected to have a lump sum benefit contemplated in paragraph 2(1)(c) of the Second Schedule transferred to this pension preservation fund and who made the election while they were members of that other fund;

[Subparagraph (v) substituted by section 4(1)(g) of Act 20 of 2021 effective on 1 March, 2022 and applicable in respect of years of assessment commencing on or after that date]

(vi)    former members of a pension fund, pension preservation fund, provident fund or provident preservation fund or nominees or dependants of that former member in respect of whom an “unclaimed benefit” as defined in section 1 of the Pension Funds Act and as contemplated in section 37C(1)(c) of the said Act is due or payable by that fund;

[Paragraph (a) pending amendment by section 3(1)(q) of Act 25 of 2015 deleted by section 74(1)(c) of Act 23 of 2020 deemed effective on 8 January, 2016. Subparagraph (vi) added by section 2(1)(h) of Act 23 of 2020 and substituted by section 1(1)(h) of Act 20 of 2022]

(b)     payments or transfers to the fund in respect of a member are limited to any amount contemplated in paragraph 2(1)(a)(ii), (b) or (c) of the Second Schedule or any unclaimed benefit as defined in the Pension Funds Act that is paid or transferred to the fund by-

(i)      a pension fund, provident fund, provident preservation fund or any other pension preservation fund of which such member was previously a member; or

(ii)     a pension fund, pension preservation fund, provident fund, or provident preservation fund of which such member’s former spouse is or was previously a member and such payment or transfer was made pursuant to an election by such member in terms of section 37D(4)(b)(ii) of the Pension Funds Act;

[Sub-paragraph (ii) substituted section 2(1)(j) of Act 23 of 2020 effective on 1 March, 2021]

[Paragraph (b) substituted by section 4 of Act 60 of 2008 and amended by section 7 of Act 17 of 2009, section 7 of Act 24 of 2011, section 4 of Act 31 of 2013 and section 5 of Act 15 of 2016 and substituted by section 1(1)(m) of Act 23 of 2018 effective on 1 March 2019]

(c)     with the exception of amounts transferred to any other pension fund, pension preservation fund, provident preservation fund or retirement annuity fund, not more than one amount contemplated in paragraph 2(1)(b)(ii) of the Second Schedule is allowed to be paid to the member during the period of membership of the fund or any other preservation fund-

(i)      this paragraph applies separately to each payment or transfer to the fund contemplated in paragraph (b);

(ii)     a member shall, prior to his or her retirement date, be entitled to the payment of a lump sum benefit contemplated in paragraph 2(1)(b)(ii) of the Second Schedule where a member-

(aa)

(A)    is a person who is or was a resident who emigrated from the Republic and that emigration is recognised by the South African Reserve Bank for purposes of exchange control in respect of applications for that recognition received on or before 28 February 2021 and approved by the South African Reserve Bank or an authorised dealer in foreign exchange for the delivery of currency on or before 28 February 2022; or

(B)    is a person who is not a resident for an uninterrupted period of three years or longer on or after 1 March 2021; or

[Sub-paragraph (aa) substituted by section 2(1)(i) of Act 23 of 2020 effective on 1 March, 2021]

(bb)   departed from the Republic at the expiry of a visa obtained for the purposes of-

(A)    working as contemplated in paragraph (i) of the definition of ‘visa’ in section 1 of the Immigration Act, 2002 (Act No. 13 of 2002); or

(B)    a visit as contemplated in paragraph (b) of the definition of ‘visa’ in section 1 of the Immigration Act, 2002 (Act No.13 of 2002), issued in terms of paragraph (b) of the proviso to section 11 of that Act by the Director-General, as defined in that Act; and

(iii)    a member who has transferred a retirement interest in terms of paragraph 2(1)(c) of the Second Schedule to this fund shall not be entitled to payment of a withdrawal benefit as contemplated in paragraph 2(1)(b)(ii) in respect of that transferred amount, except to the extent that it is an amount contemplated in subparagraph (ii); and

[Paragraph (c) substituted by section 4(1)(o) of Act 60 of 2008 and by section 7(1)(t) of Act 17 of 2009 and amended by section 2(1)(s) of Act 22 of 2012, by section 1(1)(n) of Act 23 of 2018 and by section 1(1)(i) of Act 20 of 2022]

(d)     a member, other than a member contemplated in paragraph (a)(vi) of this proviso, will become entitled to a benefit on his or her retirement date; and

[Paragraph (d) substituted by section 1(1)(g) of Act 17 of 2023 effective on 1 March, 2021 and is applicable in respect of years of assessment commencing on or after that date]

(e)     not more than one-third of the total value of the retirement interest may be commuted for a single payment, and that the remainder must be paid in the form of an annuity (including a living annuity), a combination of annuities (including a combination of methods of paying the annuity) or a combination of types of annuities except where two-thirds of the total value does not exceed R165 000, where the member is deceased or where the member elects to transfer the retirement interest to a pension preservation fund, a provident preservation fund or a retirement annuity fund: Provided that in determining the value of the retirement interest an amount calculated as follows must not be taken into account-

(a)     in the case of a person who was a member of a provident fund or provident preservation fund and who was 55 years of age or older on 1 March 2021-

(i)      any amount contributed to a provident fund or transferred to a provident preservation fund prior to, on and after 1 March 2021 of which that person was a member on 1 March 2021;

(ii)     with the addition of any other amount credited to the member’s individual account or minimum individual reserve of the provident fund or provident preservation fund prior to, on and after 1 March 2021; and

(iii)    any fund return, as defined in the Pension Funds Act, in relation to the contributions contemplated in subparagraph (i) or amounts credited contemplated in subparagraph (ii); or

(b)     in any other case of a person who was a member of a provident fund or a provident preservation fund on 1 March 2021-

(i)      any amount contributed to a provident fund or transferred to a provident preservation fund prior to 1 March 2021;

(ii)     with the addition of any other amounts credited to the member’s individual account or minimum individual reserve of the provident fund or provident preservation fund as a result of the value of the member’s individual account or minimum individual reserve on 1 March 2021; and

(iii)    any fund return, as defined in the Pension Funds Act, in relation to the contributions or transfers contemplated in subparagraph (i) or amounts credited contemplated in subparagraph (ii),

reduced proportionally by an amount permitted to be deducted in terms of the Pension Funds Act from the member’s individual account or minimum individual reserve of the provident fund or the provident preservation fund prior to, on or after 1 March 2021: Provided further that in the case where the remaining balance is utilised to provide or purchase more than one annuity, the amount utilised to provide or purchase each annuity must exceed R165 000;

[Paragraph (e) substituted by section 4(1)(h) of Act 20 of 2021 effective on 1 March, 2022 and applicable in respect of years of assessment commencing on or after that date.)

: Provided further that-

(i)      the rules of a pension fund that is doing the business of a preservation fund as prescribed by the Commissioner from time to time must be submitted to the Commissioner for approval in terms of the provisions of this definition before 30 September 2010; and

(ii)     the rules of a pension fund contemplated in paragraph (i) that are submitted before 30 September 2010 are deemed to have been approved under this definition with effect from the date that the rules are submitted until the date that the Commissioner notifies the fund of its status under this definition;

permanent establishment” means a permanent establishment as defined from time to time in Article 5 of the Model Tax Convention on Income and on Capital of the Organisation for Economic Co-operation and Development;

: Provided that in determining whether a qualifying investor in relation to a partnership, trust or foreign partnership has a permanent establishment in the Republic, any act of that partnership, trust or foreign partnership in respect of any financial instrument must not be ascribed to that qualifying investor.

“person” includes-

(a)     an insolvent estate;

(b)     the estate of a deceased person;

(c)     any trust; and

(d)     any portfolio of a collective investment scheme,

but does not include a foreign partnership;

“portfolio of a collective investment scheme” means any-

(a)     portfolio of a collective investment scheme in participation bonds;

(b)     portfolio of a collective investment scheme in property;

(c)     portfolio of a collective investment scheme in securities; or

(d)     portfolio of a declared collective investment scheme;

“portfolio of a collective investment scheme in participation bonds” means any portfolio comprised in any collective investment scheme in participation bonds contemplated in Part VI of the Collective Investment Schemes Control Act managed or carried on by any company registered as a manager under and for the purposes of that Part;

“portfolio of a collective investment scheme in property” means any portfolio comprised in any collective investment scheme in property contemplated in Part V of the Collective Investment Schemes Control Act managed or carried on by any company registered as a manager under section 51 of that Act for the purposes of that Part;

“portfolio of a collective investment scheme in securities” means any portfolio comprised in any collective investment scheme in securities contemplated in Part IV of the Collective Investment Schemes Control Act managed or carried on by any company registered as a manager under section 42 of that Act for the purposes of that Part;

“portfolio of a declared collective investment scheme” means any portfolio comprised in any declared collective investment scheme contemplated in Part VII of the Collective Investment Schemes Control Act managed or carried on by any company registered as a manager under section 64 of that Act for the purposes of that Part;

“portfolio of a hedge fund collective investment scheme” means any portfolio held by any hedge fund business that qualifies as a declared collective investment scheme in terms of section 63 of the Collective Investment Schemes Control Act;

[Definition of “portfolio of a hedge fund collective investment scheme” inserted by section 4(1)(zL) of Act 31 of 2013 effective on the date on which the Minister, in accordance with section 63 of the Collective Investment Schemes Control Act, declares a hedge fund business, in which a portfolio is held, to be a collective investment scheme: 1 April, 2015]

“post–1973 gold mine” means an independent workable proposition in respect of which the State President or the Minister of Mines has, after 1 January, 1974, on the recommendation of the Mining Leases Board signified in writing his decision to grant a lease of the right to mine for gold, and includes any other gold mine which, in the opinion of the Government Mining Engineer, is an independent workable proposition which was established as such after the said date;

“post-1990 gold mine” means a gold mine-

(a)     which, in the opinion of the Director-General: Mineral and Energy Affairs, is an independent workable proposition and in respect of which a mining authorisation for gold mining was issued for the first time after 14 March 1990 in terms of the Minerals Act, 1991 (Act No. 50 of 1991); or

(b)     for which a mining permit or mining right for gold mining (other than a mining permit or mining right issued on conversion of an old order mining right as defined in paragraph 1 of Schedule II to the Mineral and Petroleum Resources Development Act) was issued for the first time on or after 1 May 2004 in terms of that Act;

[Definition of “post–1990 gold mine” inserted by section 2 of Act 101 of 1990, amended by section 2 of Act 141 of 92 and substituted by section 1 of Act 43 of 2014 effective on 1 May 2004]

“prescribed” means prescribed or deemed to be prescribed by or under this Act;

“prescribed rate” in relation to any interest payable in terms of this Act, means for the purposes of –

(a)     interest payable to any taxpayer under the provisions of section 89quat(4), a rate determined at four percentage points below the rate contemplated in paragraph (b); or

(b)     any other provision of this Act, such rate as the Minister may from time to time fix by notice in the Gazette in terms of section 80(1)(b) of the Public Finance Management Act, 1999 (Act No. 1 of 1999): Provided that where the Minister fixes a new rate in terms of that Act, that new rate applies for purposes of this Act from the first day of the second month following the date on which that new rate came into operation;

“provident fund” means—

(a)     any provident fund established by law;

(b)     any provident fund established for the benefit of the employees of any municipality or of any local authority (as defined in the definition of “local authority” in this section prior to the coming into operation of section 3(1)(h) of the Revenue Laws Amendment Act, 2006 (Act 20 of 2006), that was established prior to the date that section so came into operation); or

(c)     any fund contemplated in subparagraph (b), which includes as members employees of any municipal entity created in accordance with the provisions of the Municipal Systems Act, 2000 (Act 32 of 2000), over which one or more municipalities or local authorities (as defined in section 1 prior to the coming into operation of section 3(1)(h) of the Revenue Laws Amendment Act, 2006, and that was established prior to the date that section so came into operation) exercise ownership control as contemplated by that Act, where such fund was established—

(aa)   on or before 14 November 2000, and such employees were employees of a local authority (as defined in section 1 prior to the coming into operation of section 3(1)(h) of the Revenue Laws Amendment Act, 2006, and that was established prior to the date that section so came into operation) immediately prior to becoming employees of such municipal entity; or

(bb)   after 14 November 2000, and such fund has been approved by the Commissioner subject to such limitations, conditions and requirements as contemplated in paragraph (c) of the definition of “provident fund”; and

(d)     any fund (other than a pension fund, pension preservation fund, provident preservation fund, benefit fund or retirement annuity fund) which is approved by the Commissioner in respect of the year of assessment in question and, in the case of any such fund established on or after 1 July 1986, is registered under the provisions of the Pension Funds Act:

Provided that the Commissioner may approve a fund subject to such limitations or conditions as he may determine, and shall not approve a fund in respect of any year of assessment unless he is in respect of that year of assessment satisfied-

(i)      that the fund is a permanent fund bona fide established solely for the purpose of providing benefits for employees on retirement date or solely for the purpose of providing benefits for the dependants or nominees of deceased employees or deceased former employees or solely for a combination of such purposes or mainly for the said purpose and also for the purpose of providing any benefit contemplated in paragraph 2C of the Second Schedule or section 15A or 15E of the Pension Funds Act; and

[Paragraph (i) (previously paragraph (a)) substituted by section 2(f) of Act 21 of 1995, by section 4(1)(s) of Act 60 of 2008, by section 4(1)(zN) of Act 31 of 2013, by section 2(1)(h) of Act 17 of 2017  and by section 75(1) of Act 23 of 2020 effective on 1 March, 2021 and applicable in respect of years of assessment commencing on or after that date]

(ii)     that the rules of the fund provide—

(aa)   that all annual contributions of a recurrent nature to the fund shall be in accordance with specified scales;

(bb)   that membership of the fund throughout the period of employment shall be a condition of the employment by the employer of all persons of the class or classes specified therein who enter the employment of the employer on or after the date upon which-

(a)    the fund comes into operation; or

(b)    the employer becomes a participant in that fund;

(cc)   that person who immediately prior to the said date were employed by the employer and who on the said date fall within the said class or classes may, on application made, be permitted to become members of the fund on such conditions as may be specified in the rules;

(dd)   that not more than one-third of the total value of the retirement interest may be commuted for a single payment, and that the remainder must be paid in the form of an annuity (including a living annuity), a combination of annuities (including a combination of methods of paying the annuity) or a combination of types of annuities except where two-thirds of the total value does not exceed R165 000, where the employee is deceased or where the employee elects to transfer the retirement interest to a pension preservation fund, provident preservation fund or a retirement annuity fund: Provided that in determining the value of the retirement interest an amount calculated as follows must not be taken into account-

(a)     in the case of a person who is or was a member of a provident fund or provident preservation fund and who is or was 55 years of age or older on 1 March 2021-

(AA)  any amount contributed to a provident fund or transferred to provident preservation fund prior to, on and after 1 March 2021 of which that person is or was a member on 1 March 2021;

(BB)  with the addition of any other amount credited to the member’s individual account or minimum individual reserve of the provident fund or provident preservation fund prior to, on and after 1 March 2021; and

(CC)  any fund return, as defined in the Pension Funds Act, in relation to the contributions or transfers contemplated in subparagraph (AA) or amounts credited contemplated in subparagraph (BB);

[Subparagraph (CC) substituted by section 1(1)(h) of Act 17 of 2023 effective on 1 March, 2022 and is applicable in respect of years of assessment commencing on or after that date]

(b)     in any other case of a person who is or was a member of a provident fund or provident preservation fund on 1 March 2021-

(AA)  any amount contributed to a provident fund or transferred to a provident preservation fund prior to 1 March 2021;

(BB)  with the addition of any other amounts credited to the member’s individual account or minimum individual reserve of the provident fund or provident preservation fund as a result of the value of the member’s individual account or minimum individual reserve on 1 March 2021; and

(CC)  any fund return, as defined in the Pension Funds Act, in relation to the contributions or transfers contemplated in subparagraph (AA) or amounts credited contemplated in subparagraph (BB);

[Subparagraph (CC) substituted by section 1(1)(i) of Act 17 of 2023 effective on 1 March, 2022 and is applicable in respect of years of assessment commencing on or after that date]

reduced proportionally by an amount permitted in terms of the Pension Funds Act to be deducted from the member’s individual account or minimum individual reserve of the provident fund or provident preservation fund prior to, on and after 1 March 2021: Provided further that in the case where the remaining balance is utilised to provide or purchase more than one annuity, the amount utilised to provide or purchase each annuity must exceed R165 000;

[Subparagraph (dd) substituted by section 4(1)(i) of Act 20 of 2021 effective on 1 March, 2022 and applicable in respect of annuities purchased on or after that date]

(ee)   that the employee may elect to transfer the withdrawal interest to a pension fund established by the same employer or a pension fund in which that employer participates;

(ff)     that a partner of a partnership is regarded as an employee of the partnership; and

(gg)   that an employee who has transferred a retirement interest in terms of paragraphs 2(1)(c) and 6A(d) of the Second Schedule to this fund shall not be entitled to payment of a withdrawal benefit as contemplated in paragraph 2(1)(b)(ii) of the Second Schedule in respect of that transferred amount; and

[Subparagraph (gg) added by section 1(1)(j) of Act 17 of 2023 with effect from 1 March, 2024 and applicable in respect of years of assessment commencing on or after that date]

[Paragraph (ii) (previously paragraph (b)) substituted by section 2(1)(f) of Act 94 of 1983 and by section 1(1)(p) of Act 23 of 2018, amended by section 1(1)(q) of Act 23 of 2018 and substituted by section 2(1)(e) of Act 34 of 2019 and by section 1(1)(c) of Act 2 of 2016, as substituted by section 97(1)(a) of Act 17 of 2017, by section 110(1)(a) of Act 23 of 2018 and by section 75(1) of Act 23 of 2020 effective on 1 March, 2021 and applicable in respect of years of assessment commencing on or after that date]

(iii)     that the rules of the fund have been complied with:

[Paragraph (iii) (previously paragraph (c)) substituted by section 1(1)(c) of Act 2 of 2016 and substituted by section 97(1)(a) of Act 17 of 2017, by section 110(1)(a) of Act 23 of 2018 and by section 75(1) of Act 23 of 2020 effective on 1 March, 2021 and applicable in respect of years of assessment commencing on or after that date]

Provided further that a fund contemplated in paragraph (i) of the further proviso to the definition of “provident preservation fund” which is deemed to be approved or which is approved in terms of that definition or which fails to submit its rules as required by that paragraph is deemed effective on the earlier of the date of the deemed approval or 30 September 2010 to be a fund which is not approved in terms of this definition: Provided further that the Commissioner may recognise a fund contemplated in paragraph (a), (b) or (c) in respect of any year of assessment if the Commissioner is satisfied that the rules of the fund provide that in determining the value of retirement interest an amount calculated as follows must not be taken into account-

(i)      in the case of a person who was a member of a provident fund or a provident preservation fund and who was 55 years of age or older on 1 March 2021-

(aa)   any amount contributed to a provident fund or transferred to a provident preservation fund prior to, on or after 1 March 2021 of which that person was a member on 1 March 2021;

(bb)   with the addition of any other amounts credited to the member’s individual account or minimum individual reserve of the provident fund or provident preservation fund prior to, on or after 1 March 2021; and

(cc)   where applicable, any fund return, as defined in the Pension Funds Act, in relation to the contributions or transfers contemplated in subparagraph (aa) or amounts credited contemplated in subparagraph (bb); or

(ii)     in any other case of a person who was a member of a provident fund or a provident preservation fund on 1 March 2021-

(aa)  any amount contributed to a provident fund or transferred to a provident preservation fund prior to 1 March 2021;

(bb)   with the addition of any other amounts credited to the member’s individual account or minimum individual reserve of the provident fund or provident preservation fund as a result of the value of the member’s individual account or minimum individual reserve on 1 March 2021; and

(cc)   where applicable, any fund return, as defined in the Pension Funds Act, in relation to the contributions or transfers contemplated in subparagraph (aa) or amounts credited contemplated in subparagraph (bb),

where applicable, reduced proportionally by any amount permitted to be deducted in terms of the Pension Funds Act from the member’s individual account or minimum individual reserve of the provident fund or provident preservation fund prior to, on or after 1 March 2021;

[Definition of “provident fund” amended by section 2(1)(d) of Act 65 of 1986, by section 4(1)(r) and (t) of Act 60 of 2008, by section 6(1)(z) of Act 7 of 2010, by section 4(1)(zM) of Act 31 of 2013, by section 3(1)(u) of Act 25 of 2015(as substituted by section 74(1)(d) of Act 23 of 2020) and by section 1(1)(j) of Act 20 of 2022 with effect from 1 March, 2023 and applicable in respect of years of assessment commencing on or after that date]

“provident preservation fund” means a pension fund organisation which is registered under the Pension Funds Act and which is approved by the Commissioner in respect of the year of assessment in question : Provided that the Commissioner may approve a fund subject to such limitations and conditions as the Commissioner may determine, and shall not approve a fund in respect of any year of assessment unless the Commissioner is satisfied in respect of that year of assessment that the rules of the fund provide that-

(a)     membership of the fund consists of-

(i)      former members of any other pension fund, pension preservation fund, provident fund or provident preservation fund whose membership of that fund has terminated due to-

(aa)   resignation, retrenchment or dismissal from employment and who elected to have any lump sum benefit that is payable as a result of the termination transferred to that fund;

(bb)   the winding up or partial winding up of that fund, if the members elected or are required in terms of the rules to transfer to this fund; or

(cc)   a transfer of business from one employer to another in terms of section 197 of the Labour Relations Act, 1995 (Act No. 66 of 1995), and the employment of the employee with the transferor employer is transferred to the transferee employer, if the members elected or are required in terms of the rules to transfer to this fund;

[Sub-paragraph (i) amended by section 3(1)(w) of Act 25 of 2015 effective on 1 March, 2021 and applicable in respect of years of assessment commencing on or after that date – effective date in section 3(7) of Act 25 of 2015 substituted by section 3(1)(b) of Act 2 of 2016 as substituted by section 98(1) of Act 17 of 2017 and by section 111(1) of Act 23 of 2018]

(ii)     former members of any other pension fund, pension preservation fund, provident fund or provident preservation fund-

(aa)    if that fund was wound up or partially wound up; or

(bb)   if the member elected to have any benefit contemplated in paragraph 2(1)(b)(ii) of the Second Schedule transferred to that fund and who made this election while they were members of that other fund;

[Sub-paragraph (ii) amended by section 3(1)(x) of Act 25 of 2015 effective on 1 March, 2021 and applicable in respect of years of assessment commencing on or after that date – effective date in section 3(7) of Act 25 of 2015 substituted by section 3(1)(b) of Act 2 of 2016 as substituted by section 98(1) of Act 17 of 2017 and by section 111(1) of Act 23 of 2018). Item (bb) substituted by section 7(1)(w) of Act 17 of 2009]

(iii)     . . . . . .

[Sub-paragraph (iii) substituted by section 7(1)(zF) of Act 24 of 2011, by section 4(1)(zQ) of Act 31 of 2013 and by section 1(1)(r) of Act 23 of 2018 and deleted by section 2(1)(k) of Act 23 of 2020 effective on 1 March, 2021]

(iv)    a person who has elected to transfer an amount awarded to that person in terms of a court order contemplated in section 7(8) of the Divorce Act, 1979 (Act 70 of 1979), from a pension fund, pension preservation fund, provident fund or provident preservation fund for the benefit of that person;

[Sub-paragraph (iv) amended by section 1(1)(r) of Act 23 of 2018 and substituted by section 2(1)(l) of Act 23 of 2020 effective on 1 March, 2021]

(v)     former members of a pension fund, pension preservation fund, provident fund or provident preservation fund who have elected to have a lump sum benefit contemplated in paragraph 2(1)(c) of the Second Schedule transferred to this provident preservation fund and who made the election while they were members of that other fund; or

[Subparagraph (v) added by section 1(1)(r) of Act 23 of 2018 and substituted by section 2(1)(l) of Act 23 of 2020 and by section 4(1)(j) of Act 20 of 2021 effective on 1 March, 2022 and applicable in respect of years of assessment commencing on or after that date]

(vi)    former members of a pension fund, pension preservation fund, provident fund or provident preservation fund or nominees or dependants of that former member in respect of whom an “unclaimed benefit” as defined in section 1 of the Pension Funds Act and as contemplated in section 37C(1)(c) of the said Act is due or payable by that fund;

[Subparagraph (vi) added by section 2(1)(m) of Act 23 of 2020 and substituted by section 1(1)(k) of Act 20 of 2022]

(b)     payments or transfers to the fund in respect of a member are limited to any amount contemplated in paragraph 2(1)(a)(ii), (b) or (c) of the Second Schedule or any unclaimed benefit as defined in the Pension Funds Act that is paid or transferred to the fund by-

[Words preceding subparagraph (i) substituted by section 7 of Act 24 of 2011, section 4(1)(zR) of Act 31 of 2013 and section 1(1)(s) of Act 23 of 2018 effective on 1 March 2019]

(i)      a pension fund, pension preservation fund, provident fund or provident preservation fund of which that member was previously a member; or

[Sub-paragraph (i) substituted by section 3(1)(y) of Act 25 of 2015 effective on 1 March, 2021 and applicable in respect of years of assessment commencing on or after that date – effective date in section 3(7) of Act 25 of 2015 substituted by section 3(1)(b) of Act 2 of 2016 as substituted by section 98(1) of Act 17 of 2017 and by section 111(1) of Act 23 of 2018]

(ii)     a pension fund, pension preservation fund, provident fund or provident preservation fund of which such member’s former spouse is or was previously a member and such payment or transfer was made pursuant to an election by such member in terms of section 37D(4)(b)(ii) of the Pension Funds Act;

[Sub-paragraph (ii) substituted by section 7(1)(y) of Act 17 of 2009, by section 4(1)(zS) of Act 31 of 2013 and by section 2(1)(j) of Act 23 of 2020 effective on 1 March, 2021]

[Paragraph (b) substituted by section 4(1)(u) of Act 60 of 2008 and amended by section 7(1)(x) of Act 17 of 2009, by section 7(1)(zG) of Act 24 of 2011, by section 4(1)(zR) of Act 31 of 2013 and by section 1(1)(s) of Act 23 of 2018 effective on 1 March, 2019]

(c)     with the exception of amounts transferred to any pension fund, pension preservation fund, other provident fund, provident preservation fund or retirement annuity fund, not more than one amount contemplated in paragraph 2(1)(b)(ii) of the Second Schedule is allowed to be paid to the member during the period of membership of the fund or any other pension preservation fund: Provided that this paragraph applies separately to each payment or transfer to the fund contemplated in paragraph (b): : Provided that-

(i)      this paragraph applies separately to each payment or transfer to the fund contemplated in paragraph (b);

(ii)     a member shall, prior to his or her retirement date, be entitled to the payment of a lump sum benefit contemplated in paragraph 2(1)(b)(ii) of the Second Schedule where a member-

(aa)

(a)    is a person who is or was a resident who emigrated from the Republic and that emigration is recognised by the South African Reserve Bank for purposes of exchange control in respect of applications for that recognition received on or before 28 February 2021 and approved by the South African Reserve Bank or an authorised dealer in foreign exchange for the delivery of currency on or before 28 February 2022; or

(b)    is a person who is not a resident for an uninterrupted period of three years or longer on or after 1 March 2021; or

[Sub-paragraph (aa) substituted by section 2(1)(n) of Act 23 of 2020 effective on 1 March, 2021]

(bb)   departed from the Republic at the expiry of a visa obtained for the purposes of-

(A)    working as contemplated in paragraph (i) of the definition of ‘visa’ in section 1 of the Immigration Act, 2002 (Act No. 13 of 2002); or

(B)    a visit as contemplated in paragraph (b) of the definition of ‘visa’ in section 1 of the Immigration Act, 2002 (Act No. 13 of 2002), issued in terms of paragraph (b) of the proviso to section 11 of that Act by the Director-General, as defined in that Act; and

(iii)    a member who has transferred a retirement interest in terms of paragraph 2(1)(c) of the Second Schedule to this fund shall not be entitled to payment of a withdrawal benefit as contemplated in paragraph 2(1)(b)(ii) in respect of that transferred amount, except to the extent that it is an amount contemplated in subparagraph (ii); and

[Proviso to paragraph (c) substituted by section 1(1)(t) of Act 23 of 2018 effective on 1 March 2019]

[Paragraph (c) substituted by section 4 of Act 60 of 2008 and section 7 of Act 17 of 2009, amended by section 4(1)(zT) of Act 31 of 2013 effective on 1 March 2015, amendment by section 4(1)(zT) of Act 31 of 2013 deleted by section 143 of Act 25 of 2015 effective on 12 December 2013]

(d)     a member, other than a member contemplated in paragraph (a)(vi) of this proviso, will become entitled to a benefit on his or her retirement date:

[Paragraph (d) substituted by section 1(1)(k) of Act 17 of 2023 effective on 1 March, 2021 and applicable in respect of years of assessment commencing on or after that date]

(e)     that not more than one-third of the total value of the retirement interest may be commuted for a single payment, and that the remainder must be paid in the form of an annuity (including a living annuity), a combination of annuities (including a combination of methods of paying the annuity) or a combination of types of annuities except where two-thirds of the total value does not exceed R165 000, where the member is deceased or where the member elects to transfer the retirement interest to a pension preservation fund, a provident preservation fund or a retirement annuity fund: Provided that in determining the value of the retirement interest an amount calculated as follows must not be taken into account:

(a)     in the case of a person who is or was a member of a provident fund or provident preservation fund and who is or was 55 years of age or older on 1 March 2021—

(i)      any amount contributed to a provident fund or transferred to a provident preservation fund prior to, on and after 1 March 2021 of which that person is or was a member on 1 March 2021;

(ii)     with the addition of any other amount credited to the member’s individual account or minimum individual reserve of the provident fund or provident preservation fund prior to, on and after 1 March 2021; and

(iii)     any fund return, as defined in the Pension Funds Act, in relation to the contributions or transfers contemplated in subparagraph (i) or amounts credited contemplated in subparagraph (ii);

(b)     in any other case of a person who is or was a member of a provident fund or provident preservation fund on 1 March 2021-

(i)      any amount contributed to a provident fund or transferred to a provident preservation fund prior to 1 March 2021;

(ii)     with the addition of any other amounts credited to the member’s individual account or minimum individual reserve of the provident fund or provident preservation fund as a result of the value of the member’s individual account or minimum individual reserve on 1 March 2021; and

(iii)     any fund return, as defined in the Pension Funds Act, in relation to the contributions or transfers contemplated in subparagraph (i) or amounts credited contemplated in subparagraph (ii),

reduced proportionally by an amount permitted in terms of the Pension Funds Act to be deducted from the member’s individual account or minimum individual reserve of the provident fund or provident preservation fund prior to, on and after 1 March 2021: Provided further that in the case where the remaining balance is utilized to provide or purchase more than one annuity, the amount utilised to provide or purchase each annuity must exceed R165 000:

[Paragraph (e) (addition by section 4(1)(zV) of Act 31 of 2013 substituted by section 119(1)(c) of Act 43 of 2014 and deleted by section 143(1)(a) and by section 155(1) of Act 25 of 2015 respectively and amendment by section 3(1)(z) of Act 25 of 2015, deleted by section 3(1)(a) of Act 2 of 2016) substituted by section 1(1)(d) of Act 2 of 2016(as substituted by section 97(1)(a) of Act 17 of 2017, by section 110(1)(a) of Act 23 of 2018 and by section 75(1) of Act 23 of 2020) and by section 4(1)(k) of Act 20 of 2021 and amended by section 1(1)(l) of Act 17 of 2023 effective on 1 March, 2021 and applicable in respect of years of assessment commencing on or after that date]

: Provided further that-

(i)      the rules of a provident fund that is doing the business of a preservation fund as prescribed by the Commissioner from time to time must be submitted to the Commissioner for approval in terms of the provisions of this definition before 30 September 2010; and

(ii)     the rules of the provident fund contemplated in paragraph (i) that are submitted before 30 September 2010 are deemed to have been approved under this definition with effect from the date that the rules are submitted until the date that the Commissioner notifies the fund of its status under this definition

“Public Finance Management Act” means the Public Finance Management Act, 1999 (Act No. 1 of 1999);

“Public Private Partnership” means a Public Private Partnership as defined in-

(a)     Regulation 16 of the Treasury Regulations issued in terms of section 76 of the Public Finance Management Act; or

(b)     the Municipal Public-Private Partnership Regulations made in terms of section 168 of the Local Government: Municipal Finance Management Act, 2003 (Act No. 56 of 2003);

[Definition of “Public Private Partnership” inserted by section 3 of Act 32 of 2004 and substituted by section 4 of Act 31 of 2013 and section 1 of Act 43 of 2014 effective on 20 January 2015]

“qualifying investor” means a member of a partnership or foreign partnership or a beneficiary of a trust if the liability of the member or beneficiary to any creditor of the partnership, trust or foreign partnership is limited to the amount that the member or beneficiary has contributed or undertaken to contribute to the partnership, trust or foreign partnership, unless that member or beneficiary-

(a)     participates in the effective management of the trade or business of the partnership, trust or foreign partnership;

(b)        has the authority to act on behalf of-

(i)         the partnership or foreign partnership;

(ii)        the members of the partnership or foreign partnership; or

(iii)       the trust; or

(c)     renders any services to or on behalf of the partnership, trust or foreign partnership;

“regional electricity distributor” ……….

[Definition of “regional electricity distributor” inserted by section 3 of Act 20 of 2006, amended by section 4 of Act 31 of 2013 and deleted by section 1 of Act 43 of 2014 effective on 20 January 2015]

“regulation” means a regulation in force under this Act;

“REIT” means a company-

(a)     that is a resident; and

(b)     the equity shares of which are listed—

(i)      on an exchange (as defined in section 1 of the Financial Markets Act and licensed under section 9 of that Act); and

(ii)     as shares in a REIT as defined in the listing requirements of that exchange approved in consultation with the Director-General of the National Treasury and published, after approval of those listing requirements by the Director-General of the National Treasury, by the appropriate authority, as contemplated in section 1 of the Financial Markets Act, in terms of section 11 of that Act or by the Financial Sector Conduct Authority;

[Definition of “REIT” inserted by section 2(1)(v) of Act 22 of 2012 effective on 1 April, 2013 and applicable in respect of years of assessment commencing on or after that date. Paragraph (b) amended by section 4(1)(zZ) of Act 31 of 2013, by section 1(1)(u) of Act 23 of 2018 and by section 2(1)(f) of Act 34 of 2019 and substituted by section 2(1)(o) of Act 23 of 2020]

“relative” in relation to any person, means the spouse of that person or anybody related to that person or that person’s spouse within the third degree of consanguinity, or any spouse of anybody so related, and for the purpose of determining the relationship between any child referred to in the definition of ‘child’ in this section and any other person, that child shall be deemed to be related to the adoptive parent of that child within the first degree of consanguinity;

[Definition of “relative” inserted by section 4 of Act 90 of 64 and substituted by section 1 of Act 23 of 2018 effective on 17 January 2019]

“remuneration proxy”, in relation to a year of assessment, means the remuneration, as defined in paragraph 1 of the Fourth Schedule, derived by an employee from an employer during the year of assessment immediately preceding that year of assessment, other than the cash equivalent of the value of a taxable benefit derived from the occupation of residential accommodation as contemplated in subparagraph (3) of paragraph 9 of the Seventh Schedule in the application of that subparagraph: Provided that-

[Words preceding the proviso substituted by section 3 of Act 25 of 2015 and section 5 of Act 15 of 2016 effective 1 March 2017 in respect of years of assessment ending on or after that date]

(a)     where during a portion of such preceding year the employee was not in the employment of the employer or of any associated institution in relation to the employer, the remuneration proxy as respects that employee must be deemed to be an amount which bears to the amount of the employee’s remuneration for the portion of such preceding year during which the employee was in such employment the same ratio as the period of 365 days bears to the number of days in such last-mentioned portion;

(b)     where during the whole of such preceding year, the employee was not in the employment of the employer or of any associated  institution in relation to the employer, the remuneration proxy as respects that employee must be deemed to be an amount which  bears to the employee’s remuneration during the first month during which the employee was in the employment of the employer  the same ratio as 365 days bears to the number of days during which the employee was in such employment;

“representative taxpayer” means a natural person who resides in the Republic and-

(a)     in respect of the income of a company, the public officer thereof, or in the event of such company being placed under business rescue in terms of Chapter 6 of the Companies Act, the business rescue practitioner;

[Paragraph (a) substituted by section 1 of Act 44 of 2014 effective on 20 January 2015]

(b)     in respect of the income under his or her management, disposition or control, the agent of any person;

(c)     in respect of income which is the subject of any trust or in respect of the income of any minor or any other person under legal disability, the trustee, guardian, curator or other person entitled to the receipt, management, disposal or control of such income or remitting or paying to or receiving moneys on behalf of such person under disability;

[Paragraph (c) substituted by section 4 of Act 21 of 2012 and by section 2 of Act 24 of 2020]

(d)     in respect of income paid under the decree or order of any court or judge to any receiver or other person, such receiver or person, whoever may be entitled to the benefit of such income, and whether or not it accrues to any person on a contingency or an uncertain event;

(e)     in respect of the income received by or accrued to any deceased person during his lifetime and the income received by or accrued to the estate of any deceased person, the executor or administrator of the estate of such deceased person;

(f)      in respect of the income received by or accrued to an insolvent estate, the trustee or administrator of such insolvent estate;

Provided that for the purposes of this definition income includes any amount received or accrued or deemed to have been received or accrued in consequence of the disposal of any asset envisaged in the Eighth Schedule;

“Republic” means the Republic of South Africa and, when used in a geographical sense, includes the territorial sea thereof as well as any area outside the territorial sea which has been or may be designated, under international law and the laws of South Africa, as areas within which South Africa may exercise sovereign rights or jurisdiction with regard to the exploration or exploitation of natural resources;

“resident” means any-

(a)        natural person who is-

(i)      ordinarily resident in the Republic; or

(ii)     not at any time during the relevant year of assessment ordinarily resident in the Republic, if that person was physically present in the Republic-

(aa)   for a period or periods exceeding 91 days in aggregate during the relevant year of assessment, as well as for a period or periods exceeding 91 days in aggregate during each of the five years of assessment preceding such year of assessment; and

(bb)   for a period or periods exceeding 915 days in aggregate during those five preceding years of assessment:

in which case that person will be a resident with effect from the first day of that relevant year of assessment:

Provided that-

(A)     a day shall include a part of a day, but shall not include any day that a person is in transit through the Republic between two places outside the Republic and that person does not formally enter the Republic through a ‘port of entry’ as contemplated in section 9(1) of the Immigration Act, 2002 (Act No. 13 of 2002), or at any other place as may be permitted by the Director General of the Department of Home Affairs or the Minister of Home Affairs in terms of that Act; and

(B)     where a person who is a resident in terms of this subparagraph is physically outside the Republic for a continuous period of at least 330 full days immediately after the day on which such person ceases to be physically present in the Republic, such person shall be deemed not to have been a resident from the day on which such person so ceased to be physically present in the Republic; or

(b)     person (other than a natural person) which is incorporated, established or formed in the Republic or which has its place of effective management in the Republic,

but does not include any person who is deemed to be exclusively a resident of another country for purposes of the application of any agreement entered into between the governments of the Republic and that other country for the avoidance of double taxation;

: Provided that where any person that is a resident ceases to be a resident during a year of assessment, that person must be regarded as not being a resident from the day on which that person ceases to be a resident;

: Provided further that in determining whether a person that is a foreign investment entity has its place of effective management in the Republic, no regard must be had to any activity that-

(a)     constitutes-

(i)      a financial service as defined in section 1 of the Financial Advisory and Intermediary Services Act, 2002 (Act No. 37 of 2002); or

(ii)     any service that is incidental to a financial service contemplated in subparagraph (i) where the incidental service is in respect of a financial product that is exempted from the provisions of that Act, as contemplated in section 1(2) of that Act; and

(b)     is carried on by a financial service provider as defined in section 1 of the Financial Advisory and Intermediary Services Act, 2002 (Act No. 37 of 2002), in terms of a licence issued to that financial service provider under section 8 of that Act;

“residential unit” means a building or self-contained apartment mainly used for residential accommodation, unless the building or apartment is used by a person in carrying on a trade as an hotel keeper;

“retirement annuity fund” means any fund (other than a pension fund, provident fund or benefit fund) which is approved by the Commissioner in respect of the year of assessment in question and, in the case of any such fund established on or after 1 July 1986, is registered under the provisions of the Pension Funds Act: Provided that the Commissioner may approve a fund subject to such limitations or conditions as he may determine, and shall not approve any fund in respect of any year of assessment unless he is in respect of that year of assessment satisfied –

(a)     that the fund is a permanent fund bona fide established for the sole purpose of providing life annuities for the members of the fund or annuities for the dependants or nominees of deceased members; and

(b)     that the rules of the fund provide –

(i)      for contributions by the members, including contributions made by way of transfer of members’ interests in approved pension funds, pension preservation funds, provident funds, provident preservation funds or other retirement annuity funds;

(ii)     that not more than one-third of the total value of the retirement interest may be commuted for a single payment, and that the remainder must be paid in the form of an annuity (including a living annuity), a combination of annuities (including a combination of methods of paying the annuity) or a combination of types of annuities except where two-thirds of the total value does not exceed R165 000 or where the member is deceased: Provided that in determining the value of the retirement interest an amount calculated as follows must not be taken into account:

(a)     in the case of a person who was a member of a provident fund or a provident preservation fund and who was 55 years of age or older on 1 March 2021-

(i)      any amount contributed to a provident fund or transferred to a provident preservation fund prior to, on and after 1 March 2021 of which that person was a member on 1 March 2021;

(ii)     with the addition of any other amounts credited to the member’s individual account or minimum individual reserve of the provident fund or provident preservation fund prior to, on and after 1 March 2021; and

(iii)    any fund return, as defined in the Pension Funds Act, in relation to the contributions or transfers contemplated in subparagraph (i) or amounts credited contemplated in subparagraph (ii);

(b)     in any other case of a person who was a member of a provident fund or provident preservation fund on 1 March 2021-

(i)      any amount contributed to a provident fund or transferred to a provident preservation fund prior to 1 March 2021;

(ii)     with the addition of any other amounts credited to the member’s individual account or minimum individual reserve of the provident fund or provident preservation fund as a result of the value of the member’s individual account or minimum individual reserve on 1 March 2021; and

(iii)    any fund return, as defined in the Pension Funds Act, in relation to the contributions or transfers contemplated in subparagraph (i) or amounts credited contemplated in subparagraph (ii),

reduced proportionally by an amount permitted to be deducted in terms of the Pension Funds Act from the member’s individual account or minimum individual reserve of the provident fund or provident preservation fund prior to, on and after 1 March 2021: Provided further that in the case where the remaining balance is utilised to provide or purchase more than one annuity, the amount utilised to provide or purchase each annuity must exceed R165 000;

[Subparagraph (ii) substituted by section 4(1)(e) of Act 90 of 1972, amended by section 3(1)(d) of Act 91 of 1982, substituted by section 2(1)(d) of Act 101 of 1990, amended by section 2(1)(k) of Act 113 of 1993 and by section 2(2)(b) of Act 8 of 2007, substituted by section 3(1)(g) of Act 8 of 2007, by section 2(1)(x) of Act 3 of 2008, by section 4(1)(x) of Act 60 of 2008 (section 4(1)(zZc) of Act 31 of 2013 deleted by section 143(1)(a) of Act 25 of 2015), by section 3(1)(zB) of Act 25 of 2015 (section 3(1)(zC) of Act 25 of 2015 deleted by section 3(1)(a) of Act 2 of 2016) and by section 1(1)(e) of Act 2 of 2016 (as substituted by section 97(1)(a) of Act 17 of 2017, by section 110(1)(a) of Act 23 of 2018 and by section 75(1) of Act 23 of 2020 which erroneously omits the words preceding item (a) of subparagraph (ii)) and amended by section 4(1)(l) and (m) of Act 20 of 2021 effective on 1 March, 2022 and applicable in respect of annuities purchased on or after that date]

(iii)       ……….

(iv)       ……….

(v)     that no member shall become entitled to the payment of any annuity or lump sum benefit contemplated in paragraph 2(1)(a) of the Second Schedule prior to reaching normal retirement age; 

(vi)       ……….

(vii)      ……….

(viii)     ……….

(ix)       ……….

(x)     that a member who discontinues his or her contributions prior to his or her retirement date shall be entitled to –

(aa)   an annuity or a lump sum benefit contemplated in paragraph 2(1)(a) of the Second Schedule payable on that date;

(bb)   be reinstated as a full member under conditions prescribed in the rules of the fund;

(cc)   the payment of a lump sum benefit contemplated in paragraph 2(1)(b)(ii) of the Second Schedule where that member’s interest in the fund is less than an amount determined by the Minister by notice in the Gazette; or

(dd)   the payment of a lump sum benefit contemplated in paragraph 2(1)(b)(ii) of the Second Schedule where that member-

(A)

(AA)  is a person who is or was a resident who emigrated from the Republic and that emigration is recognised by the South African Reserve Bank for purposes of exchange control in respect of applications for that recognition received on or before 28 February 2021 and approved by the South African Reserve Bank or an authorised dealer in foreign exchange for the delivery of currency on or before 28 February 2022; or

(BB)  is a person who is not a resident for an uninterrupted period of three years or longer on or after 1 March 2021;

[Sub-item (A) substituted by section 2(1)(p) of Act 23 of 2020 effective on 1 March, 2021]

(B)    departed from the Republic at the expiry of a visa obtained for the purposes of—

(AA)  working as contemplated in paragraph (i) of the definition of “visa” in section 1 of the Immigration Act, 2002 (Act 13 of 2002); or

(BB)  a visit as contemplated in paragraph (b) of the definition of “visa” in section 1 of the Immigration Act, 2002 (Act 13 of 2002), issued in terms of paragraph (b) of the proviso to section 11 of that Act by the Director-General, as defined in section 1 of that Act;

[Sub-item (B) amended by section 2(1)(q) of Act 23 of 2020 effective on 1 March, 2021]

[Sub-paragraph (x) substituted by section 3(1)(p) of Act 20 of 2006, by section 2(1)(zB) of Act 3 of 2008 and by section 7(1)(zB) of Act 17 of 2009. Item (dd) substituted by section 3(1)(zD) of Act 25 of 2015 and by section 5(1)(i) of Act 15 of 2016 deemed effective on 1 March, 2016 and applicable in respect of years of assessment commencing on or after that date]

(xi)    that upon the winding up of the fund a member’s withdrawal interest therein must-

(aa)   where the member received an annuity from the fund on the date upon which the fund is wound up, be used to purchase an annuity (including a living annuity) from any other fund; or

(bb)   in any other case, be paid for the member’s benefit into any other retirement annuity fund;

(xii)    that save-

(aa)   as is contemplated in subparagraph (ii);

(bb)   for the transfer of any member’s interest in any approved retirement annuity fund into another approved retirement annuity fund: Provided that the value of each individual contract being transferred must exceed R371 250: Provided further that—

(a)    in the case where the total member’s interest in any approved retirement annuity fund is not transferred into another approved retirement annuity fund, the value of the member’s remaining interest after the transfer must exceed R371 250; and

(b)    the provisions of the first proviso and paragraph (a) of the further proviso shall not apply in the case where the member’s total interest in any approved retirement annuity fund is transferred into another approved retirement annuity fund;

[Item (bb) substituted by section 5(1)(r) of Act 35 of 2007, by section 1(1)(l) of Act 20 of 2022 and by section 1(1)(m) of Act 17 of 2023 effective on 1 March, 2023 and applicable in respect of years of assessment commencing on or after that date]

(cc)   for the benefit contemplated in subparagraph (x)(cc);

(dd)   as is contemplated in Part V of the Policyholder Protection Rules promulgated in terms of section 62 of the Long-term Insurance Act; or

(ee)   for any deduction contemplated in paragraph 2(1)(b) of the Second Schedule,

no member’s rights to benefits shall be capable of surrender, commutation or assignment or of being pledged as security for any loan;

(xiii)   that the Commissioner shall be notified of all amendments of the rules; and

(c)     that the rules of the fund have been complied with; 

“retirement date” means the date on which –

(a)     a member of a pension fund, pension preservation fund, provident fund, provident preservation fund or retirement annuity fund, elects to retire and in terms of the rules of that fund, becomes entitled to an annuity or a lump sum benefit contemplated in paragraph 2(1)(a)(i) of the Second Schedule on or subsequent to attaining normal retirement age; or

[Paragraph (a) substituted by section 1 of Act 43 of 2014, section 2 of Act 17 of 2017 and section 1 of Act 23 of 2018 effective on 1 March 2018, applies in respect of years of assessment commencing on or after that date]

(b)     a nominee or dependant of a deceased member of a pension fund, pension preservation fund, provident fund, provident preservation fund or retirement annuity fund, in terms of the rules of that fund, becomes entitled to an annuity or a lump sum benefit contemplated in paragraph 2(1)(a)(i) of the Second Schedule on the death of the member;

“retirement–funding employment” ……….

[Definition of “retirement-funding employment” inserted by section 3 of Act 104 of 1979, amended by section 2 of Act 94 of 1983, section 2 of Act 121 of 1984, section 2 of Act 113 of 1993, section 2 of Act 21 of 1994, section 6 of Act 74 of 2002, section 3 of Act 8 of 2007, section 2 of Act 3 of 2008 and section 4 of Act 60 of 2008]

[The proposed date of the deletion in section 4 of Act 31 of 2013 effective on 1 March 2015, was substituted by section 119 of Act 43 of 2014 effective on 1 March 2016 and the proposed amendment by section 119 of Act 43 of 2014 was repealed by section 155 of Act 25 of 2015 effective on 20 January 2015)]

[Definition of “retirement-funding employment is deleted by section 4 of Act 31 of 2013 effective on 1 March 2015]

“retirement fund lump sum benefit” means an amount determined in terms of paragraph 2(1)(a) or (c) of the Second Schedule;

[Definition of “retirement fund lump sum benefit” inserted by section 3 of Act 8 of 2007 and substituted by section 2 of Act 3 of 2008, section 7 of Act 17 of 2009 and section 2 of Act 17 of 2017 effective on 1 March 2018 and applies in respect of years of assessment commencing on or after that date]

“retirement fund lump sum withdrawal benefit” means an amount determined in terms of paragraph 2(1)(b) of the Second Schedule;

“retirement interest” means a member’s share of the value of a pension fund, pension preservation fund, provident fund, provident preservation fund or retirement annuity fund as determined in terms of the rules of the fund on the date on which he or she elects to retire or transfer to a pension fund, pension preservation fund, provident fund, provident preservation fund or retirement annuity fund;

[Definition of “retirement interest” inserted by section 2(1)(zF) of Act 3 of 2008 and substituted by section 1(1)(q) of Act 43 of 2014, by section 2(1)(k) of Act 17 of 2017, by section 1(1)(x) of Act 23 of 2018 and by section 1(1)(n) of Act 17 of 2023 with effect from 1 March, 2024 and applicable in respect of years of assessment commencing on or after that date]

“return” means a return as defined in section 1 of the Tax Administration Act;

“return of capital” means any amount transferred by a company that is a resident for the benefit or on behalf of any person in respect of any share in that company to the extent that that transfer results in a reduction of contributed tax capital of the company, whether that amount is transferred-

(a)       by way of a distribution made by; or

(b)       as consideration for the acquisition of any share in,

that company, but does not include any amount so transferred to the extent that the amount so transferred constitutes-

(i)      shares in the company; or

(ii)   an acquisition by the company of its own securities by way of a general repurchase of securities as contemplated in subparagraph (b) of paragraph 5.67(B) of section 5 of the JSE Limited Listings Requirements, where that acquisition complies with any applicable requirements prescribed by paragraph s 5.68 and 5.72 to 5.81 of section 5 of the JSE Limited Listings Requirements or by way of a general repurchase of securities 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 acquisition complies with the applicable requirements of that exchange;

[Paragraph (ii) substituted by section 2(1)(l) of Act 17 of 2017 and by section 2(1)(g) of Act 34 of 2019 deemed effective on 1 March, 2019]

[Definition of “return of capital” inserted by section 7 of Act 24 of 2011 and substituted by section 2 of Act 17 of 2017 effective on 18 December 2017]

“securities lending arrangement” means a ‘lending arrangement’ as defined in the Securities Transfer Tax Act, 2007 (Act No. 25 of 2007);

“severance benefit” means any amount (other than a lump sum benefit or an amount contemplated in paragraph (d)(ii) or (iii) of the definition of ‘gross income’) received by or accrued to a person by way of a lump sum from or by arrangement with the person’s employer or an associated institution in relation to that employer in respect of the relinquishment, termination, loss, repudiation, cancellation or variation of the person’s office or employment or of the person’s appointment (or right or claim to be appointed) to any office or employment, if-

(a)     such person has attained the age of 55 years;

(b)     such relinquishment, termination, loss, repudiation, cancellation or variation is due to the person becoming permanently incapable of holding the person’s office or employment due to sickness, accident, injury or incapacity through infirmity of mind or body; or

(c)     such termination or loss is due to-

(i)      the person’s employer having ceased to carry on or intending to cease carrying on the trade in respect of which the person was employed or appointed; or

(ii)      the person having become redundant in consequence of a general reduction in personnel or a reduction in personnel of a particular class by the person’s employer,

unless, where the person’s employer is a company, the person at any time held more than five per cent of the issued shares or members’ interest in the company:

Provided that any such amount which becomes payable in consequence of or following upon the death of a person must be deemed to be an amount which accrued to such person immediately prior to his or her death;

“share” means, in relation to any company, any unit into which the proprietary interest in that company is divided;

“Share Blocks Control Act” means the Share Blocks Control Act, 1980 (Act No. 59 of 1980);

[Definition of “Share Blocks Control Act” inserted by section 1 of Act 43 of 2014 effective on 20 January 2015]

“Short-term Insurance Act” means the Short-term Insurance Act, 1998 (Act No. 53 of 1998);

“small business funding entity” means any entity, approved by the Commissioner in terms of section 30C;

[Definition of “small business funding entity” inserted by section 1 of Act 43 of 2014 effective on 1 March 2015]

“small, medium or micro-sized enterprise” means any-

(a)     person that qualifies as a micro business as defined in paragraph 1 of the Sixth Schedule; or

(b)     any person that is a small business corporation as defined in section 12E(4);

[Definition of “small, medium or micro-sized enterprise” inserted by section 1 of Act 43 of 2014 effecive on 1 March 2015]

“South African Reserve Bank” means the central bank of the Republic regulated in terms of the South African Reserve Bank Act, 1989 (Act No. 90 of 1989);

“South African Revenue Service” means the South African Revenue Service established by section 2 of the South African Revenue Service Act, 1997;

“special trust” means a trust created –

(a)     solely for the benefit of one or more persons who is or are persons with a disability as defined in section 6B(1) where such disability incapacitates such person or persons from earning sufficient income for their maintenance, or from managing their own financial affairs: Provided that-

(aa)   such trust shall be deemed not to be a special trust in respect of years of assessment ending on or after the date on which all such persons are deceased; and

(bb)   where such trust is created for the benefit of more than one person, all persons for whose benefit the trust is created must be relatives in relation to each other; or

(b)     by or in terms of the will of a deceased person, solely for the benefit of beneficiaries who are relatives in relation to that deceased person and who are alive on the date of death of that deceased person (including any beneficiary who has been conceived but not yet born on that date), where the youngest of those beneficiaries is on the last day of the year of assessment of that trust under the age of 18 years;

“specified date”, in relation to any company, means –

(a)     in respect of the year of assessment ending the thirtieth day of June, 1962, that date or, if such company’s return is under the proviso to subsection (13) of section 66 accepted in respect of a period ending upon some other date, such other date; or

(b)     in respect of any other year of assessment, the last day of such other year of assessment;

“specified period”, in relation to a year of assessment of any company commencing on or after 1 April 1977, means –

(a)     where such year of assessment is the first financial year of such company, the period commencing on the first day of such year and ending six months after the specified date in respect of such year; and

(b)     where such year of assessment is a subsequent financial year of such company, the period commencing the day after the end of the specified period in respect of the immediately preceding year of assessment and ending six months after the specified date in respect of the year of assessment in question:

Provided that where by reason of the amalgamation under section 94 of the Co–operative Societies Act, 1939 (Act No. 29 of 1939), of two or more agricultural co–operatives (as defined in section 27(9) of this Act), the assets and liabilities of such co–operatives have vested in a new agricultural co–operative (as so defined), the Commissioner may, having regard to the circumstances of the case, direct that the specified period of each of the co–operatives which have so amalgamated, as applicable in relation to the final year of assessment of the co–operative in question be extended so as to end on such day as the Commissioner may determine;

“spot rate” means the appropriate quoted exchange rate at a specific time by any authorised dealer in foreign exchange for the delivery of currency;

“spouse”, in relation to any person, means a person who is the partner of such person-

(a)     in a marriage or customary union recognised in terms of the laws of the Republic;

(b)     in a union recognised as a marriage in accordance with the tenets of any religion; or

(c)     in a same-sex or heterosexual union which is intended to be permanent,

[Paragraph (c) substituted by section 3 of Act 25 of 2015 effective on 8 January 2016]

and “married”, “husband” or “wife” shall be construed accordingly: Provided that a marriage or union contemplated in paragraph (b) or (c) shall, in the absence of proof to the contrary, be deemed to be a marriage or union out of community of property;

“tax” means tax or a penalty imposed in terms of this Act;

“Tax Administration Act” means the Tax Administration Act, 2011 (Act No. 28 of 2011);

 “taxable capital gain” means an amount determined in terms of paragraph 10 of the Eighth Schedule;

“taxable income” means the aggregate of –

(a)     the amount remaining after deducting from the income of any person all the amounts allowed under Part I of Chapter II to be deducted from or set off against such income; and

(b)     all amounts to be included or deemed to be included in the taxable income of any person in terms of this Act;

“tax benefit” includes any avoidance, postponement or reduction of any liability for tax;

“taxpayer” means any person chargeable with any tax leviable under this Act;

“this Act” includes the regulations;

“trade” includes every profession, trade, business, employment, calling, occupation or venture, including the letting of any property and the use of or the grant of permission to use any patent as defined in the Patents Act or any design as defined in the Designs Act or any trade mark as defined in the Trade Marks Act or any copyright as defined in the Copyright Act or any other property which is of a similar nature;

“Trade Marks Act” means the Trade Marks Act, 1993 (Act No. 194 of 1993);

“trading stock” includes –

(a)        includes-

(i)      anything produced, manufactured, constructed, assembled, purchased or in any other manner acquired by a taxpayer for the purposes of manufacture, sale or exchange by the taxpayer or on behalf of the taxpayer;

(ii)     anything the proceeds from the disposal of which forms or will form part of the taxpayer’s gross income, otherwise than-

(aa)   in terms of paragraph (j) or (m) of the definition of ‘gross income’;

(bb)   in terms of paragraph 14(1) of the First Schedule; or

(cc)   as a recovery or recoupment contemplated in section 8(4) which is included in gross income in terms of paragraph (n) of the definition of ‘gross income’; or

(iii)    any consumable stores and spare parts acquired by the taxpayer to be used or consumed in the course of the taxpayer’s trade; but

(b)        does not include-

(i)         a foreign currency option contract ;or

(ii)        a forward exchange contract,

as defined in section 24I(1);

“trust” means any trust fund consisting of cash or other assets which are administered and controlled by a person acting in a fiduciary capacity, where such person is appointed under a deed of trust or by agreement or under the will of a deceased person;

“trustee”, in addition to every person appointed or constituted as such by act of parties, by will, by order or declaration of court or by operation of law, includes an executor or administrator, tutor or curator, and any person having the administration or control of any property subject to a trust, usufruct, fideicommissum or other limited interest or acting in any fiduciary capacity or having, either in a private or in an official capacity, the possession, direction, control or management of any property of any person under legal disability;

“Value-Added Tax Act” means the Value-Added Tax Act, 1991 (Act No. 89 of 1991);

“water services provider” means a person who provides water supply services and sanitation services and who is –

(a)     a public entity regulated under the Public Finance Management Act;

(b)     a wholly owned subsidiary or entity of a public entity contemplated in paragraph (a) if the operations of the subsidiary or entity are ancillary or complementary to the operations of that public entity;

(c)     a company as contemplated in paragraph (a) of the definition of ‘company’, which is wholly owned by one or more municipalities; or

(d)     a board or institution which has powers similar to a water board established in terms of the Water Services Act, 1997 (Act No. 108 of 1997), and would have fallen within the ambit of the definition of ‘local authority’ prior to the coming into operation of section 3(1)(h) of the Revenue Laws Amendment Act, 2006;

“withdrawal interest” means the value of the member’s share of the pension fund, pension preservation fund, provident fund, provident preservation fund or retirement annuity fund value, as determined in terms of the rules of the fund on the date on which the member elects to withdraw due to an event other than the member attaining normal retirement age;

[Definition of “withdrawal interest” inserted by section 2(1)(zH) of Act 3 of 2008 and substituted by section 2(1)(h) of Act 34 of 2019 deemed effective on 1 March, 2019]

“year of assessment” means any year or other period in respect of which any tax or duty leviable under this Act is chargeable, and any reference in this Act to any year of assessment ending the last or the twenty-eighth or the twenty-ninth day of February shall, unless the context otherwise indicates, in the case of a company or a portfolio of a collective investment scheme in securities be construed as a reference to any financial year of that company or portfolio ending during the calendar year in question.

(2)     Unless the context indicates otherwise, a word or expression to which a meaning has been assigned in the Tax Administration Act bears that meaning for purposes of this Act.

CHAPTER I

 ADMINISTRATION

2.     Administration of Act

(1)     The Commissioner is responsible for carrying out the provisions of this Act.

(2)     Administrative requirements and procedures for purposes of the performance of any duty, power or obligation or the exercise of any right in terms of this Act are, to the extent not regulated in this Act, regulated by the Tax Administration Act.

3.     Exercise of powers and performance of duties

(1)     The powers conferred and the duties imposed upon the Commissioner by or under the provisions of this Act may be exercised or performed by the Commissioner, or by any officer under the control, direction or supervision of the Commissioner.

(2)     ……….

(3)     ……….

(4)      Any decision of the Commissioner under the following provisions of this Act is subject to objection and appeal in accordance with Chapter 9 of the Tax Administration Act, namely-

(a)     the definitions of “benefit fund”, “pension fund”, “pension preservation fund”, “provident fund”, “provident preservation fund”, “retirement annuity fund” and “spouse” in section 1;

(b)     section 6quat(5), section 8(5)(b) and (bA), section 10(1)(cA), (e)(i)(cc), (j) and (nB), section 10A(8), section 11(e), (f), (g), (gA), (j) and (l), section 11D(20)(b), section 12B(6), section 12C, section 12E, section 12J(6), (6A) and (7), section 13, section 15, section 18A(1)(a)(cc), (b), (bA)(dd) and (c), section 22(1) and (3), section 23H(2), section 23K, section 24(2), section 24A(6), section 24C, section 24D, section 24I(1) and (7), section 24J(9), section 24P, section 25A, section 27, section 28(9), section 30, section 30A, section 30B, section 30C, section 31, section 37A, section 38(2)(a) and (b) and (4), section 44(13)(a), section 47(6)(c)(i), section 62(1)(c)(iii) and (d) and (2)(a) and (4), section 80B and section 103(2);

[Paragraph (b) substituted by section 2(a) of Act 44 of 2014, by section 1 of Act 33 of 2019, by section 3 of Act 24 of 2020 and by section 1 of Act 18 of 2023]

(c)     paragraphs 6, 7, 9, 13, 13A, 14, 19 and 20 of the First Schedule;

(d)     paragraph 4 of the Second Schedule;

(e)     paragraphs 5(2), 14(6), 21(2) and 24 of the Fourth Schedule;

[Paragraph (e) substituted by section 2 of Act 44 of 2014 effective on 20 January 2015]

(f)     paragraphs 10(3), 11(2)  and 13 of the Sixth Schedule;

[Paragraph (f) substituted by section 2 of Act 44 of 2014 effective on 20 January 2015]

(g)     paragraphs 2(h), 3, 6(4)(b), 7(6), (7) and (8), 11 and 12A(3) of the Seventh Schedule; and

(h)     paragraphs (bb)(A) of the proviso to paragraph 12A(6)(e), 29(2A), 29(7), 31(2), 65(1)(d) and 66(1)(e) of the Eighth Schedule.

(5)     The Commissioner may, in writing, and on such conditions as may be agreed upon between the Commissioner and the Financial Sector Conduct Authority delegate to the Financial Sector Conduct Authority his or her power-

[Words preceding paragraph (a) substituted by section 2 of Act 43 of 2014 and section 2 of Act 23 of 2018 effective on 1 April 2018]

(a)     to approve a fund contemplated in the definition of a ‘pension fund’, ‘pension preservation fund’, ‘provident fund’, ‘provident preservation fund’ or ‘retirement annuity fund’, subject to-

(i)      any limitation or condition as may be determined by the Commissioner in terms of those definitions; and

(ii)     the compliance by any such fund with the requirements under those definitions;

[Paragraph (a) amended by section 1(b) of Act 4 of 2008, by section 5 of Act 60 of 2008 and by section 1 of Act 16 of 2016]

(b)     to withdraw any such approval if any of the limitations, conditions or requirements listed in paragraph (a) are not met.

(c)     to make a disclosure under section 69(8)(b)(i) of the Tax Administration Act.

[Subsection (5) added by section 4(b) of Act 16 of 2004 and amended by section 2(a) of Act 43 of 2014 and by section 2(1)(a) of Act 23 of 2018 deemed effective on 1 April, 2018. Paragraph (c) added by section 1 of Act 16 of 2016]

(6)     Any person aggrieved by a decision of the Financial Sector Conduct Authority to approve or to withdraw an approval of a fund in terms of subsection (5) must, notwithstanding section 219 of the Financial Sector Regulation Act, lodge his or her objection with the Commissioner in accordance with the provisions of Chapter 9 of the Tax Administration Act.

[Subsection (6) added by section 4 of Act 16 of 2004 and substituted by section 271 of Act 28 of 2011, section 2 of Act 43 of 2014 and section 2 of Act 23 of 2018 effective on 1 April 2018]

(7)     A decision by the Financial Sector Conduct Authority against which an objection has been lodged is, for the purpose of subsection (6), deemed to be a decision of the Commissioner.

[Subsection (7) added by section 4 of Act 16 of 2004 and substituted by section 2 of Act 23 of 2018 effective on 1 April 2018]

4A.     Exercise of powers and performance of duties by Minister

The powers conferred and the duties imposed upon the Minister by or under the provisions of this Act may be exercised or performed by the Minister personally or, except for the power to issue notices or regulations, delegated by the Minister to the Director-General of the National Treasury and the Director-General may in turn delegate the powers and duties so delegated to him or her to any officer or person under his or her control, direction or supervision.

CHAPTER II

 THE TAXES

PART I

Normal Tax

5.     Levy of normal tax and rates thereof

(1)     Subject to the provisions of the Fourth Schedule there shall be paid annually for the benefit of the National Revenue Fund, an income tax (in this Act referred to as the normal tax) in respect of the taxable income received by or accrued to or in favour of –

(a)     ……….

(b)     ……….

(c)     any person (other than a company) during the year of assessment ending during the period of 12 months ending the last day of February each year; and

[Paragraph (c) substituted by section 10(1)(b) of Act 30 of 2002, by section 15(b) of Act 45 of 2003 and by section 4(1) of Act 13 of 2016 deemed effective on 1 March, 2016 and applicable in respect of years of assessment commencing on or after that date]

(d)     any company during every financial year of such company.

(2)

(a)     The Minister may announce in the national annual budget contemplated in section 27(1) of the Public Finance Management Act, 1999, (Act No. 1 of 1999), that, with effect from a date or dates mentioned in that announcement, the rates of tax chargeable in respect of taxable income will be altered to the extent mentioned in the announcement.

(b)     If the Minister makes an announcement of an alteration contemplated in paragraph (a), that alteration comes into effect on the date or dates determined by the Minister in that announcement and continues to apply for a period of 12 months from that date or those dates subject to Parliament passing legislation giving effect to that announcement within that period of 12 months.

[Subsection (2) substituted by section 6 of Act 95 of 1967, section 5 of Act 103 of 1976, section 5 of Act 113 of 1977, section 4 of Act 20 of 2006, section 4 of Act 8 of 2007, section 6 of Act 15 of 2016 and section 3 of Act 23 of 2018 effective on 17 January 2019]

(3)     ……….

(4)     ……….

(5)     ……….

(6)     ……….

(7)     ……….

[Subsection (7) added by section 6 of Act 88 of 1965, substituted by section 7 of Act 55 of 1966, deleted by section 5 of Act 65 of 1973, inserted by section 5 of Act 103 of 1976 and substituted by section 271 of Act 28 of 2011 and deleted by section 6 of Act 15 of 2016 efffective on 19 January 2017]

(8)     ……….

(9)     For the purposes of subsection (10) “special remuneration” means any amount received by or accrued to any mineworker over and above his normal remuneration and any regular allowance, in respect of special services rendered by him (otherwise than in the course of his normal duties) in combating any fire, flood, subsidence or other disaster in a mine or in rescuing persons trapped in a mine or in performing any hazardous task during any emergency in a mine, if such services are rendered by him as a member of a team recognized by the management of the mine and the members of such team have been appointed for the purpose of rendering such services.

(10)   Where any taxpayer’s income includes any special remuneration, or where the provisions of paragraph 15(3), 17 or 19(1) of the First Schedule are applicable in the case of the taxpayer in respect of any year of assessment, the normal tax (excluding tax on any lump sum benefit or severance benefit) payable by the taxpayer in respect of such year (as determined before the deduction of any rebate) shall be determined in accordance with the formula-

Y = (             A             ) x B

             B + D – C

in which formula-

(a)     ‘Y’ represents the amount of normal tax to be determined;

(b)     ‘A’ represents the amount of normal tax (as determined before the deduction of any rebate) calculated at the full rate of tax chargeable for the said year in respect of taxable income equal to the amount represented by the expression ‘B + D – C’ in the formula;

(c)    ‘B’ represents the taxpayer’s taxable income (excluding any lump sum benefit or severance benefit) for the said year;

[Paragraph (c) substituted by section 3 of Act 23 of 2018 effective on 17 January 2019]

(d)     ‘C’ represents an amount equal to the sum of-

(i)      the amount of any special remuneration (as defined in subsection (9)) which is included in the taxpayer’s income for the said year;

(ii)     where the provisions of paragraph 15(3) of the First Schedule are in the case of the taxpayer applicable in respect of the said year, an amount determined in accordance with those provisions as being the amount, if any, by which the taxable income derived by the taxpayer during the said year from the disposal of plantations and forest produce exceeds the annual average taxable income derived by the taxpayer from that source over the three years of assessment immediately preceding the said year;

(iii)    where the provisions of paragraph 17 of the First Schedule are in the case of the taxpayer applicable in respect of the said year, an amount equal to so much of the taxable income of the taxpayer for such year as has been derived from the disposal of sugar cane as a result of fire in the taxpayer’s cane fields and but for such fire would not have been derived by the taxpayer in that year; and

(iv)    where the provisions of subparagraph (1) of paragraph 19 of the First Schedule are in the case of the taxpayer applicable in respect of the said year, the amount by which the taxpayer’s taxable income derived from farming for that year exceeds the taxpayer’s average taxable income from farming as determined in relation to that year in accordance with subparagraph (2) of the said paragraph; and

(e)     ‘D’ represents an amount equal to so much of any current contribution to a pension fund, provident fund or retirement annuity fund as is allowable as a deduction in terms of section 11F solely by reason of the inclusion in the taxpayer’s income of any amount contemplated in paragraph (d)(i), (ii), (iii) or (iv):

[Paragraph (e) substituted by section 5 of Act 31 of 2013 effective on 1 March 2015 – comes into operation in terms of section 5 of Act 31 of 2013 effective on 1 March 2015, substituted by section 120 of Act 43 of 2014, effective on 1 March 2016, and operation date in terms of section 120 of Act 43 of 2014 effective on 1 March 2016, repealed by section 156 of Act 25 of 2015 effective on 20 January 2015, and section 3 of Act 17 of 2017 effective on 1 March 2016]

Provided that in no case shall the amount of normal tax so payable be less than the amount of normal tax which would be chargeable at the relevant rate fixed in terms of subsection (2) in respect of the first rand of taxable income, and nothing in this section contained shall be construed as relieving any person from liability for taxation under this Act upon any portion of that person’s taxable income.

6.     Normal tax rebates

(1)     In determining the normal tax payable by any natural person, other than normal tax in respect of any retirement fund lump sum benefit, retirement fund lump sum withdrawal benefit or severance benefit, there must be deducted an amount equal to the sum of the amounts allowed to the natural person by way of rebates under subsection (2).

[Subsection (1) substituted by section 4 of Act 90 of 1988, section 4 of Act 70 of 1989, section 4 of Act 129 of 1991, section 5 of Act 21 of 1995, section 5 of Act 8 of 2007, section 7 of Act 60 of 2008, section 9 of Act 24 of 2011 and section 4 of Act 25 of 2015 and section 7 of Act 15 of 2016 effective on 19 January 2017]

(2)     In the case of a natural person there shall, subject to the provisions of subsection (4), be allowed by way of –

(a)     a primary rebate, an amount of R17 235;

[Paragraph (a) amended by section 4 of Act 36 of 1996, by section 3 of Act 28 of 1997, by section 22(a) of Act 30 of 1998, by section 5(a) of Act 32 of 1999, by section 15(a) of Act 30 of 2000, by section 6(a) of Act 19 of 2001, by section 11 of Act 30 of 2002, substituted by section 35 of Act 12 of 2003, by section 6 of Act 16 of 2004, by section 3 of Act 9 of 2005, amended by section 20 of Act 9 of 2006, by section 2(2)(a) of Act 8 of 2007, by section 1(2)(a) of Act 3 of 2008, by section 6(3) of Act 17 of 2009, by section 5(3) of Act 7 of 2010, by section 6(3) of Act 24 of 2011, by section 9(1)(b) of Act 24 of 2011 and substituted by section 2(1) of Act 13 of 2012, by section 4(1) of Act 23 of 2013, by section 3(1) of Act 42 of 2014, by section 4(1) of Act 13 of 2015, by section 5(1) of Act 13 of 2016, by section 4(1) of Act 14 of 2017, by section 3(1) of Act 21 of 2018, by section 2(1) of Act 32 of 2019, by section 3(1) of Act 22 of 2020, by section 2(1) of Act 19 of 2021, by section 2(1) of Act 19 of 2022 and by section 3(1) of Act 19 of 2023 effective on 1 March, 2023 and applicable in respect of years of assessment commencing on or after that date]

(b)     a secondary rebate, if the taxpayer was or, had he or she lived, would have been 65 years of age or older on the last day of the year of assessment, an amount of R9 444; and

[Paragraph (b) amended by section 22(b) of Act 30 of 1998, by section 5(b) of Act 32 of 1999, by section 15(b) of Act 30 of 2000, by section 6(b) of Act 19 of 2001, substituted by section 35 of Act 12 of 2003, by section 6 of Act 16 of 2004, by section 3 of Act 9 of 2005, amended by section 2(2)(a) of Act 8 of 2007, by section 1(2)(a) of Act 3 of 2008, by section 6(3) of Act 17 of 2009, by section 5(3) of Act 7 of 2010, by section 6(3) of Act 24 of 2011, by section 9(1)(c) of Act 24 of 2011 and substituted by section 2(1) of Act 13 of 2012, by section 4(1) of Act 23 of 2013, by section 3(1) of Act 42 of 2014, by section 4(1) of Act 13 of 2015, by section 4(1) of Act 14 of 2017, by section 3(1) of Act 21 of 2018, by section 2(1) of Act 32 of 2019, by section 3(1) of Act 22 of 2020, by section 2(1) of Act 19 of 2021, by section 2(1) of Act 19 of 2022 and by section 3(1) of Act 19 of 2023 effective on 1 March, 2023 and applicable in respect of years of assessment commencing on or after that date]

(c)     a tertiary rebate if the taxpayer was or, had he or she lived, would have been 75 years of age or older on the last day of the year of assessment, an amount of R3 145.

[Subsection (2) amended by section 5(a) and (b) of Act 91 of 1982, by section 4 of Act 121 of 1984, by section 3(a) and (b) of Act 96 of 1985, by section 4 of Act 85 of 1987, by section 4(b) and (c) of Act 90 of 1988, substituted by section 4(1)(a) of Act 70 of 1989, amended by section 3(a), (b) and (c) of Act 101 of 1990, by section 4(b), (c), (d) and (e) of Act 129 of 1991, by section 4(a), (b) and (c) of Act 141 of 1992 and substituted by section 5(a) of Act 21 of 1995. Paragraph (c) added by section 9(1)(d) of Act 24 of 2011 and substituted by section 2(1) of Act 13 of 2012, by section 4(1) of Act 23 of 2013, by section 3(1) of Act 42 of 2014, by section 4(1) of Act 13 of 2015, by section 4(1) of Act 14 of 2017, by section 3(1) of Act 21 of 2018, by section 2(1) of Act 32 of 2019, by section 3(1) of Act 22 of 2020, by section 2(1) of Act 19 of 2021, by section 2(1) of Act 19 of 2022 and by section 3(1) of Act 19 of 2023 effective on 1 March, 2023 and applicable in respect of years of assessment commencing on or after that date]

(3)     ……….

(4)     Where the period assessed is less than 12 months, the amount to be allowed by way of a rebate under subsection (2) shall be such amount as bears to the full amount of such rebate, the same ratio as the period assessed bears to 12 months.

(5)     ……….

[Subsection (5) added by section 8 of Act 7 of 2010, substituted by section 9 of Act 24 of 2011 and deleted by section 4 of Act 25 of 2015 effective on 8 January 2016]

(6)

(a)     The Minister may announce in the national annual budget contemplated in section 27(1) of the Public Finance Management Act, that, with effect from a date or dates mentioned in that announcement, the amounts allowed to a natural person by way of rebates under subsection (2) will be altered to the extent mentioned in the announcement.

(b)     If the Minister makes an announcement of an alteration contemplated in paragraph (a), that alteration comes into effect on the date or dates determined by the Minister in that announcement and continues to apply for a period of 12 months from that date or those dates, subject to Parliament passing legislation giving effect to that announcement within that period of 12 months.

[Subsection (6) added by section 4 of Act 23 of 2018 effective on 17 January 2019]

6A.      Medical scheme fees tax credit

(1)     In determining the normal tax payable by any natural person there must be deducted an amount, to be known as the medical scheme fees tax credit, equal to the sum of the amounts allowed to that natural person by way of rebates under subsection (2) , subject to subsection (3A).

[Subsection (1) substituted by section 8 of Act 15 of 2016 and section 5 of Act 23 of 2018 effective on 1 March 2018, applies in respect of years of assessment commencing on or after that date]

(2)

(a)     The medical scheme fees tax credit applies in respect of fees paid by the  person to-

(i)      a medical scheme registered under the Medical Schemes Act; or

(ii)     a fund which is registered under any similar provision contained in the laws of any other country where the medical scheme is registered, that relate to benefits from that fund in respect of that person or of any person that is a dependant of that person.

[Subparagraph (ii) amended by section 5 of Act 23 of 2018 effective on 1 March 2018, applies in respect of years of assessment commencing on or after that date]

(b)     The amount of the medical scheme fees tax credit must be-

(i)

(aa)   R364, in respect of benefits to the person, or if the person is not a member of a medical scheme or fund in respect of benefits to a dependant who is a member of a medical scheme or fund or a dependant of a member of a medical scheme or fund;

(bb)   R728, in respect of benefits to the person, and one dependant; or

(cc)   R728, in respect of benefits to two dependants; and

[Subparagraph (i), (previously subparagraphs. (i), (ii) and part of (iii)) substituted by section 4(1) of Act 42 of 2014, by section 5(1) of Act 13 of 2015, by section 6(1) of Act 13 of 2016, by section 5(1) of Act 14 of 2017, by section 4(1) of Act 21 of 2018, by section 5(1)(c) of Act 23 of 2018, by section 4(1) of Act 22 of 2020, by section 3(1) of Act 19 of 2021, by section 3(1) of Act 19 of 2022 and by section 4(1) of Act 19 of 2023 effective on 1 March, 2023 and applicable in respect of years of assessment commencing on or after that date]

(ii)      R246, in respect of benefits to each additional dependant,

[Subparagraph (ii) (previously part of subparagraph (iii)) substituted section 4(1) of Act 21 of 2018, by section 5(1)(c) of Act 23 of 2018, by section 4(1) of Act 22 of 2020, by section 3(1) of Act 19 of 2021, by section 3(1) of Act 19 of 2022 and by section 4(1) of Act 19 of 2023 effective on 1 March, 2023 and applicable in respect of years of assessment commencing on or after that date]

for each month in that year of assessment in respect of which those fees are paid.

(3)     For the purposes of this section, any amount contemplated in subsection (2) that has been paid by-

(a)     the estate of a deceased person is deemed to have been paid by the  person on the day before his or her death; or

(b)     an employer of the person is, to the extent that the amount has been included in the income of that  person as a taxable benefit in terms of the Seventh Schedule, deemed to have been paid by that  person.

(3A)   Where more than one person pay any fees in respect of benefits to a person or dependant, the amount allowed to be deducted in respect of the medical scheme fees tax credit under subsection (1) must be an amount that bears to the total amount in respect of that person or dependant contemplated in subsection (2)(b) the same ratio as the amount of the fees paid by that person bears to the total amount of the fees payable.

[Subsection (3A) inserted by section 5 of Act 23 of 2018 effective on 1 March 2018 and applies in respect of years of assessment commencing on or after that date]

(4)     For the purposes of this section a ‘dependant’ in relation to a person means a ‘dependant’ as defined in section 6B(1).

[Subsection (4) substituted by section 5 of Act 23 of 2018 effective on 1 March 2018 and applies in respect of years of assessment commencing on or after that date]

(5)

(a)     The Minister may announce in the national annual budget contemplated in section 27(1) of the Public Finance Management Act, that, with effect from a date or dates mentioned in that announcement, the amounts allowed to a natural person by way of rebates under subsection (2) will be altered to the extent mentioned in the announcement.

(b)     If the Minister makes an announcement of an alteration contemplated in paragraph (a), that alteration comes into effect on the date or dates determined by the Minister in that announcement and continues to apply for a period of 12 months from that date or those dates subject to Parliament passing legislation giving effect to that announcement within that period of 12 months.

[Subsection (5) added by section 5 of Act 23 of 2018 and applies in respect of years of assessment commencing on or after that date]

6B.       Additional medical expenses tax credit

(1)       For the purposes of this section-

‘child’ means a person’s child or child of his or her spouse who was alive during any portion of the year of assessment, and who on the last day of the year of assessment-

(a)     was unmarried and was not or would not, had he or she lived, have been-

(i)      over the age of 18 years;

(ii)     over the age of 21 years and was wholly or partially dependent for maintenance upon the person and has not become liable fo the payment of normal tax in respect of such year; or

(iii)    over the age of 26 years and was wholly or partially dependent for maintenance upon the person and has not become liable for the payment of normal tax in respect of such year and was a full-time student at an educational institution of a public character; or

(b)     in the case of any other child, was incapacitated by a disability from maintaining himself or herself and was wholly or partially dependent for maintenance upon the person and has not become liable for the payment of normal tax in respect of that year;

‘dependant’ means-

(a)     a person’s spouse;

(b)     a person’s child and the child of his or her spouse;

(c)     any other member of a person’s family in respect of whom he or she is liable for family care and support; or

[Paragraph (c) amended by section 6 of Act 23 of 2018 effective on 17 January 2019]

(d)     any other person who is recognised as a dependant of that person in terms of the rules of a medical scheme or fund contemplated in section 6A(2)(a) (i) or (ii),

at the time the fees contemplated in section 6A(2)(a) were paid, the amounts contemplated in paragraph (a) and (b) of the definition of ‘qualifying medical expenses’ were paid or the expenditure contemplated in paragraph (c) of that definition was incurred and paid;

‘disability’ means a moderate to severe limitation of any person’s ability to function or perform daily activities as a result of a physical, sensory, communication, intellectual or mental impairment, if the limitation-

(a)     has lasted or has a prognosis of lasting more than a year; and

(b)     is diagnosed by a duly registered medical practitioner in accordance with criteria prescribed by the Commissioner;

‘qualifying medical expenses’ means-

(a)     any amounts (other than amounts recoverable by a person or his or her spouse) which were paid by the person during the year of assessment to any duly registered-

(i)      medical practitioner, dentist, optometrist, homeopath, naturopath, osteopath, herbalist, physiotherapist, chiropractor or orthopedist for professional services rendered or medicines supplied to the person or any dependant of the person;

(ii)     nursing home or hospital or any duly registered or enrolled nurse, midwife or nursing assistant (or to any nursing agency in respect of the services of such a nurse, midwife or nursing assistant) in respect of the illness or confinement of the person or any dependant of the person; or

(iii)    pharmacist for medicines supplied on the prescription of any person mentioned in subparagraph (i) for the person or any dependant of the person;

(b)     any amounts (other than amounts recoverable by a person or his or her spouse) which were paid by the person during the year of assessment in respect of expenditure incurred outside the Republic on services rendered or medicines supplied to the person or any dependant of the person, and which are substantially similar to the services and medicines contemplated in   paragraph (a); and

(c)     any expenditure that is prescribed by the Commissioner (other than expenditure recoverable by a person or his or her spouse) necessarily incurred and paid by the person during the year of assessment in consequence of any physical impairment or disability suffered by the person or any dependant of the person.

(2)     In determining the normal tax payable by any natural person there must be deducted an amount, to be known as the additional medical scheme fees tax credit, equal to the sum of the amounts allowed to that natural person by way of rebates under subsection (3).

[Subsection (2) substituted by section 9 of Act 15 of 2016 effective on 19 January 2017]

(3)     The amount of the additional medical expenses tax credit must be-

(a)     where the person is entitled to a rebate under section 6(2)(b),the aggregate of-

(i)      33,3 per cent of so much of the amount of the fees paid by the person to a medical scheme or fund contemplated in section 6A(2)(a) as exceeds three times the amount of the medical scheme fees tax credit to which that person is entitled under section 6A(2)(b); and

(ii)     33,3 per cent of the amount of qualifying medical expenses paid by the person;

(b)     where the person, his or her spouse or his or her child is a person with a disability, the aggregate of-

(i)      33,3 per cent of so much of the amount of the fees paid by the person to a medical scheme or fund contemplated in section 6A(2)(a) as exceeds three times the amount of the medical scheme fees tax credit to which that person is entitled under section 6A(2)(b); and

(ii)     33,3 per cent of the amount of qualifying medical expenses paid by the person; or

(c)     in any other case, if the aggregate of-

(i)      the amount of the fees paid by the person to a medical scheme or fund contemplated in section 6A(2)(a) as exceeds four times the amount of the medical scheme fees tax credit to which that person is entitled under section 6A(2)(b); and

(ii)     the amount of qualifying medical expenses paid by the person,

exceeds 7,5 per cent of the person’s taxable income (excluding any retirement fund lump sum benefit, retirement fund lump sum withdrawal benefit and severance benefit), 25 per cent of the excess.

[Paragraph (c) substituted by section 3 of Act 43 of 2014 effective on 1 March 2014]

(4)     For the purposes of this section, any amount contemplated in subsection (3) or the definition of ‘qualifying medical expenses’ that has been paid by-

(a)     the estate of a deceased person is deemed to have been paid by the person on the day before his or her death; or

(b)     an employer of the person is, to the extent that the amount has been included in the income of that person as a taxable benefit in terms of the Seventh Schedule, deemed to have been paid by that person.

(5)

(a)     The Minister may announce in the national annual budget contemplated in section 27(1) of the Public Finance Management Act, that, with effect from a date or dates mentioned in that announcement, the amounts allowed to a natural person by way of rebates under subsection (3) will be altered to the extent mentioned in the announcement.

(b)     If the Minister makes an announcement of an alteration contemplated in paragraph (a), that alteration comes into effect on the date or dates determined by the Minister in that announcement and continues to apply for a period of 12 months from that date or those dates subject to Parliament passing legislation giving effect to that announcement within that period of 12 months.

[Subsection (5) added by section 6 of Act 23 of 2018 effective on 17 January 2019]

6C     Solar energy tax credit

(1)     In determining the normal tax payable by any natural person, there must, subject to subsection (4), be deducted an amount to be known as the solar energy tax credit, equal to the amount of the rebate determined under subsection (2).

(2)

(a)     The solar energy tax credit applies in respect of the cost actually incurred by the natural person-

(i)      for the acquisition of any new and unused solar photovoltaic panels, the generation capacity of each being not less than 275W; and

(ii)      if the solar photovoltaic panels referred to in subparagraph (i) are brought into use for the first time, by that person on or after 1 March 2023 and before 1 March 2024.

(b)     The amount of the solar energy tax credit allowed to the natural person referred to in paragraph (a) must-

(i)      be 25 per cent of the actual cost of the solar photovoltaic panels described in paragraph (a); and

(ii)     in aggregate be limited to an amount not exceeding R15 000.

(3)     A solar energy tax credit will be allowed under subsection (1) only if-

(a)     the solar panels are installed and mounted on or affixed to a residence mainly used for domestic purposes by the natural person referred to in subsection (2)(a);

(b)     the installation is connected to the distribution board of such residence; and

(c)     an electrical certificate of compliance contemplated in the Electrical Installation Regulations, 2009, is issued in respect of the installation referred to in paragraph (a).

(4)     No deduction shall be allowed under this section on any asset in respect of which a deduction has been allowed to the taxpayer under section 12B or 12BA.

[Section 6C inserted by section 2(1) of Act 17 of 2023 effective on 1 March, 2023 and applicable in respect of years of assessment commencing on or after that date]

6quat.    Rebate or deduction in respect of foreign taxes on income

(1)     Subject to subsection (2), where the taxable income of any resident during a year of assessment includes-

(a)     any income received by or accrued to such resident from any source outside the Republic; or

(b)     any proportional amount contemplated in section 9D; or

(c)     ……….

(d)     ……….

(e)     any taxable capital gain contemplated in section 26A, from a source outside the Republic; or

(f)      any amount-

(i)      contemplated in paragraph (a) or (b) which is received by or accrued to any other person and which is deemed to have been received by or accrued to such resident in terms of section 7;

(ii)     of capital gain of any other person from a source outside the Republic and which is attributed to that resident in terms of paragraph 68, 69, 70, 71, 72 or 80 of the Eighth Schedule; or

(iii)    contemplated in paragraphs (a), (b) or (e) which represents capital of a trust, and which is included in the income of that resident in terms of section 25B(2A) or taken into account in determining the aggregate capital gain or aggregate capital loss of that resident in terms of paragraph 80(3) of the Eighth Schedule,

in determining the normal tax payable in respect of that taxable income there must be deducted a rebate determined in accordance with this section.

[Words following paragraph (f) substituted by section 10 of Act 15 of 2016 effective on 19 January 2017]

(1A)  For the purposes of subsection (1), the rebate shall be an amount equal to the sum of any taxes on income proved to be payable to any sphere of government of any country other than the Republic, without any right of recovery by any person (other than a right of recovery in terms of any entitlement to carry back losses arising during any year of assessment to any year of assessment prior to such year of assessment), by-

(a)     such resident in respect of-

(i)      any income contemplated in subsection (1)(a); or

(ii)     ……….

(iii)    any amount of taxable capital gain as contemplated in subsection (1)(e); or

(b)     any controlled foreign company, in respect of such proportional amount contemplated in subsection (1)(b), subject to section 72A(3); or

(c)     ……….

(d)     ……….

(e)     ……….

(f)      any other person contemplated in subsection (1)(f)(i) or (ii) or any trust contemplated in subsection (1)(f)(iii), in respect of the amount included in the taxable income of that resident as contemplated in subsection (1)(f),

which is so included in that resident’s taxable income: Provided that-

(i)      where such resident is a member of any partnership or a beneficiary of any trust and such partnership or trust is liable for tax as a separate entity in such other country, a proportional amount of any tax payable by such entity, which is attributable to the interest of such resident in such partnership or trust, shall be deemed to have been payable by such resident; and

(ii)     for the purposes of this subsection, the amount so included in such resident’s taxable income must be determined without regard to section 10B(3).

(1B)   Notwithstanding the provisions of subsection (1A)-

(a)     the rebate or rebates of any tax proved to be payable as contemplated in subsection (1A), shall not in aggregate exceed an amount which bears to the total normal tax payable the same ratio as the total taxable income attributable to the income, proportional amount, taxable capital gain or amount, as the case may be, which is included as contemplated in subsection (1), bears to the total taxable income:

Provided that –

(i)      in determining the amount of the taxable income that is attributable to that income, proportional amount, taxable capital gain or amount-

(aa)   any allowable deductions contemplated in sections 11F and 18A must be deemed to have been incurred proportionately in respect of taxable income derived from sources within and outside the Republic;

(bb)   the deduction under section 11F must be allocated in relation to the taxable income from sources within and outside the Republic before taking into account any deduction in terms of that section, subsection (1C) and section 18A; and

(cc)   the deduction under section 18A must be allocated in relation to taxable income from sources within and outside the Republic before taking into account any deduction in terms of that section and subsection (1C);

[Paragraph (i) of the proviso substituted by section 11 of Act 24 of 2011, section 4 of Act 17 of 2017 and section 7 of Act 23 of 2018 effective on 1 March 2018, applies in respect of years of assessment commencing on or after that date]

(iA)   the taxes contemplated in subsection (1A)(b) that are attributable to any proportional amount which-

(aa)    ……….

(bb)   relates to any amount contemplated in section 9D(9A)(a) which is not excluded from the application of section 9D(2) in terms of that section or section 9D(9)(b),

shall in aggregate be limited to the amount of the normal tax which is attributable to those proportional amounts;

(iB)    the taxes contemplated in subsection (1A)(a)(iii) which are attributable to any taxable capital gain in respect of an asset which is not attributable to a permanent establishment of the resident outside the Republic, must in aggregate be limited to the amount of normal tax which is attributable to that taxable capital gain;

(ii)     where the sum of any such taxes proved to be payable (excluding any taxes contemplated in paragraphs (iA) and (iB) of this proviso) exceeds the rebate as so determined (hereinafter referred to as the excess amount), that excess amount may-

(aa)   be carried forward to the immediately succeeding year of assessment and shall be deemed to be a tax on income paid to the government of any other country in that year; and

(bb)   be set off against the amount of any normal tax payable by that resident during that year of assessment in respect of any amount derived from any other country which is included in the taxable income of that resident during that year, as contemplated in subsection (1), after any tax payable to the government of any other country in respect of any amount so included during such year of assessment which may be deducted in terms of subsection (1) and (1A), has been deducted from the amount of such normal tax payable in respect of such amount so included; and

(iii)    the excess amount shall not be allowed to be carried forward for more than seven years reckoned from the year of assessment when such excess amount was for the first time carried forward;

(b)     ……….

(c)     ……….

(d)     ……….

(e)     ……….

(1C)

(a)     For the purpose of determining the taxable income derived by any resident from carrying on any trade, there may at the election of the resident be allowed as a deduction from the income of such resident so derived the sum of any taxes on income (other than taxes contemplated in subsection (1A)) paid or proved to be payable by that resident to any sphere of government of any country other than the Republic, without any right of recovery by any person other than in terms of a mutual agreement procedure in terms of an international tax agreement or a right of recovery in terms of any entitlement to carry back losses arising during any year of assessment to any year of assessment prior to such year of assessment.

(b)     Where, during any year of assessment, any amount was deducted in terms of this  subsection from the income of a resident and, in any year of assessment subsequent to that year of assessment, that resident receives any amount by way of refund in respect of the amount so deducted or is discharged from any liability in respect of that amount, so much of the amount so received or so much of the amount of that discharge as does not exceed that amount must be included in the income of that resident in respect of that subsequent year of assessment.

[Subsection (1C) inserted by section 7 of Act 35 of 2007 and substituted by section 3 of Act 22 of 2012, section 6 of Act 25 of 2015 and section 10 of Act 15 of 2016 effective on 1 January 2016, applies in respect of years of assessment commencing on or after that date]

(1D)   Notwithstanding subsection (1C), the deduction of any tax paid or proved to be payable as contemplated in that subsection shall not in aggregate exceed the total taxable income (before taking into account any such deduction) attributable to income which is subject to taxes as contemplated in that subsection: Provided that in determining the amount of the taxable income that is attributable to that income-

(a)     any allowable deductions contemplated in sections 11F and 18A must be deemed to have been incurred proportionately in respect of attributable and non-attributable taxable income;

(b)     the deduction under section 11F must be allocated in relation to the taxable income from attributable and non-attributable taxable income before taking into account any deduction in terms of that section, subsection (1C) and section 18A; and

(c)     the deduction under section 18A must be allocated in relation to attributable and non-attributable taxable income before taking into account any deduction in terms of that section and subsection (1C).

[Subsection (1D) inserted by section 7 of Act 35 of 2007, substituted by section 6 of Act 25 of 2015, section 4 of Act 17 of 2017 and section 7 of Act 23 of 2018 effective on 1 March 2018, applies in respect of years of assessment commencing on or after that date]

(2)     The rebate under subsection (1) and the deduction under subsection (1C) shall not be granted in addition to any relief to which the resident is entitled under any agreement between the governments of the Republic and the said other country for the prevention of or relief from double taxation, but may be granted in substitution for the relief to which the resident would be so entitled.

(3)     For the purposes of this section-

“taxes on income” does not include any compulsory payment to the government of any other country which constitutes a consideration for the right to extract any mineral or natural oil;

(4)     For the purpose of this section the amount of any foreign tax proved to be payable as contemplated in subsection (1A) or any amount paid or proved to be payable as contemplated in subsection (1C) in respect of any amount which is included in the taxable income of any resident during any year of assessment, shall be translated to the currency of the Republic on the last day of that year of assessment by applying the average exchange rate for that year of assessment.

[Subsection (4) substituted by section 9 of Act 74 of 2002, section 7 of Act 35 of 2007, section 7 of Act 18 of 2009 and section 6 of Act 25 of 2015 effective on 1 January 2016]

(4A)  If the amount translated in accordance with subsection (4) includes a number of cents that is less than one rand, that amount must be rounded off to the nearest rand.

(5)     Notwithstanding the provisions of sections 93, 99(1) and 100 of the Tax Administration Act, an additional or reduced assessment in respect of a year of assessment to give effect to subsections (1) and (1A) may be made within a period that does not exceed six years from the date of the original assessment in respect of that year.

[Section 6quat inserted by section 9 of Act 89 of 1969, repealed by section 5 of Act 94 of 1983, inserted by section 5 of Act 85 of 1987, amended by section 5 of Act 28 of 1997, by section 12 of Act 53 of 1999 and by section 16(1) of Act 30 of 2000, substituted by section 4 of Act 59 of 2000(as amended by section 125(1) of Act 74 of 2002) and amended by section 7(a) of Act 35 of 2007. Subsection (5) amended by section 9(1)(m) of Act 74 of 2002 and substituted by section 7(e) of Act 35 of 2007, by section 11(1)(g) of Act 24 of 2011, by section 271 read with paragraph 29 of Schedule 1 of Act 28 of 2011, by section 3 of Act 39 of 2013 and by section 2 of Act 18 of 2023]

6quin.     Rebate in respect of foreign taxes on income from source within Republic

(1)       ……….

[Subsection (1) amended by section 4 of Act 22 of 2012 and section 13 of Act 24 of 2011 and deleted by section 7 of Act 25 of 2015 effective on 1 January 2016]

(2)     ……….

[Subsection (2) deleted by section 7 of Act 25 of 2015 effective on 1 January 2016]

(3)     ……….

[Subsection (3) amended by section 4 of Act 22 of 2012 and deleted by section 7 of Act 25 of 2015 efffective on 1 January 2016]

(3A)    ……….

[Subsection (3A) inserted by section 13 of Act 24 of 2011, substituted by section 4 of Act 39 of 2013 and deleted by section 7 of Act 25 of 2015 effective on 1 January 2016]

(4)     ………….

[Subsection (4) deleted by section 7 of Act 25 of 2015 effective on 1 January 2016]

(5)     Where, during any year of assessment, a rebate was deducted in terms of this section from the normal tax payable by a resident and, in any year of assessment subsequent to that year of assessment, that resident receives any amount by way of refund in respect of the amount so deducted or is discharged from any liability in respect of that amount, so much of the amount so received or so much of the amount of that discharge as does not exceed that rebate must be deemed to be an amount of normal tax payable by that resident in respect of that subsequent year of assessment.

[Subsection (5) inserted by section 4 of Act 22 of 2012 and substituted by section 7 of Act 25 of 2015 effective on 1 January 2016]

7.     When income is deemed to have accrued or to have been received

(1)     Income shall be deemed to have accrued to a person notwithstanding that such income has been invested, accumulated or otherwise capitalized by him or that such income has not been actually paid over to him but remains due and payable to him or has been credited in account or reinvested or accumulated or capitalized or otherwise dealt with in his name or on his behalf, and a complete statement of all such income shall be included by any person in the returns rendered by him under this Act.

(2)     Any income received by or accrued to any person married in or out of community of property (hereinafter referred to as the recipient) shall be deemed for the purposes of this Act to be income accrued to such person’s spouse (hereinafter referred to as the donor) if –

(a)     such income was derived by the recipient in consequence of a donation, settlement or other disposition made by the donor on or after 20 March 1991 or of a transaction, operation or scheme entered into or carried out by the donor on or after that date, and the sole or main purpose of such donation, settlement or other disposition or of such transaction, operation or scheme was the reduction, postponement or avoidance of the donor’s liability for any tax, levy or duty which, but for such donation, settlement, other disposition, transaction, operation or scheme, would have become payable by the donor under this Act or any other Act administered by the Commissioner; or

(b)     income was received by or accrued to the recipient –

(i)      from any trade carried on by the recipient in partnership or association with the donor or which is in any way connected with any trade carried on by the donor; or

(ii)     from the donor or any partnership of which the donor was at the time of such receipt or accrual a member or any private company of which the donor was at such time the sole or main holder of shares or one of the principal holders of of share,

and such income represents the whole or any portion of the total income so received by or accrued to the recipient which exceeds the amount of income to which the recipient would reasonably be entitled having regard to the nature of the relevant trade, the extent of the recipient’s participation therein, the services rendered by the recipient or any other relevant factor; or

(c)     ……….

(2A)  In the case of spouses who are married in community of property –

(a)     any income (other than income derived from the letting of fixed property) which has been derived from the carrying on of any trade shall, if such trade is carried on –

(i)      by only one of the spouses, be deemed to have accrued to that spouse; or

(ii)     jointly by both spouses, be deemed, subject to the provisions of subsection (2) (b), to have accrued to both spouses in the proportions determined by them in terms of the agreement that regulates their joint trade or, if there is no such agreement, in the proportion to which each spouse would reasonably be entitled having regard to the nature of the relevant trade, the extent of each spouse’s participation therein, the services rendered by each spouse or any other relevant factor; and

(b)     any income derived from the letting of fixed property and any income derived otherwise than from the carrying on of any trade shall be deemed to have accrued in equal shares to both spouses: Provided that any such income which does not fall into the joint estate of the spouses shall be deemed to be income accrued to the spouse who is entitled thereto.

(2B)   So much of any deduction or allowance which may be made under the provisions of this Act in the determination of the taxable income derived from any income referred to in subsections (2) and (2A) as relates to any portion of such income which is under the provisions of that subsection deemed to be income accrued to a spouse shall be deemed to be a deduction or allowance which may be made in the determination of the taxable income of such spouse.

(2C)   For the purposes of subsection (2A) –

(a)     any benefit paid or payable to a spouse in his or her capacity as a member or past member of a pension fund, pension preservation fund, provident fund, provident preservation fund, benefit fund, retirement annuity fund or any other fund of a similar nature shall be deemed to be income derived by such spouse from a trade carried on by him or her;

(b)     any annuity amount (as defined in section 10A) paid or payable to a spouse shall be deemed to be income derived by such spouse from a trade carried on by him; and

(c)     where any spouse is the –

(i)      registered holder of a patent as defined in the Patents Act or any design as defined in the Designs Act or any trade mark as defined in the Trade Marks Act; or

(ii)     author of a work on which copyright has been conferred in terms of the Copyright Act or the owner of such a copyright by reason of assignment, testamentary disposition or operation of law; or

(iii)    holder of any other property or right of a similar nature,

any income derived from the grant of the right of use of such patent, design, trade mark, copyright or other property or right shall be deemed to be income derived by such spouse from a trade carried on by him.

(3)     Income shall be deemed to have been received by the parent of any minor child or stepchild, if by reason of any donation, settlement or other disposition made by that parent of that child –

(a)     it has been received by or has accrued to or in favour of that child or has been expended for the maintenance, education or benefit of that child; or

(b)     it has been accumulated for the benefit of that child.

(4)     Any income received by or accrued to or in favour of any minor child or stepchild of any person, by reason of any donation, settlement or other disposition made by any other person, shall be deemed to be the income of the parent of that child, if such parent or his or her spouse has made a donation, settlement or other disposition or given some other consideration in favour directly or indirectly of the said other person or his or her family.

(5)     If any person has made any donation, settlement or other disposition which is subject to a stipulation or condition, whether made or imposed by such person or anybody else, to the effect that the beneficiaries thereof or some of them shall not receive the income or some portion of the income thereunder until the happening of some event, whether fixed or contingent, so much of any income as would, but for such stipulation or condition, in consequence of the donation, settlement or other disposition be received by or accrue to or in favour of the beneficiaries, shall, until the happening of that event or the death of that person, whichever first takes place, be deemed to be the income of that person.

(6)     If any deed of donation, settlement or other disposition contains any stipulation that the right to receive any income thereby conferred may, under powers retained by the person by whom that right is conferred, be revoked or conferred upon another, so much of any income as in consequence of the donation, settlement or other disposition is received by or accrues to or in favour of the person on whom that right is conferred, shall be deemed to be the income of the person by whom it is conferred, so long as he retains those powers.

(7)     If by reason of any donation, settlement or other disposition made, whether before or after the commencement of this Act, by any person (hereinafter referred to as the donor) –

(a)     the donor’s right to receive or have paid to him or for his benefit any amount by way of rent, dividend, foreign dividend, interest, royalty or similar income in respect of any movable or immovable property (including without limiting the foregoing any lease, company share, marketable security, deposit, loan, copyright, design or trade mark) or in respect of the use of, or the granting of permission to use, such property, is ceded or otherwise made over to any other person or to a third party for that other person’s benefit in such manner that the donor remains the owner of or retains an interest in the said property or if the said property or interest is transferred, delivered or made over to the said other person or to a third party for the said other person’s benefit, in such manner that the donor is or will at a fixed or determinable time be entitled to regain ownership of or the interest in the said property; or

(b)     the donor’s right to receive or have paid to him or for his benefit any income that is or may become due to him by any other person acting in a fiduciary capacity is ceded or otherwise made over to any other person or to a third party for that other person’s benefit in such manner that the donor is or will at a determinable time be entitled to regain the said right,

any such rent, dividend, foreign dividend, interest, royalty or income (including any amount which, but for this subsection, would have been exempt from tax in the hands of the said other person) as is received by or accrues to or for the benefit of the said other person on or after 1 July 1983 and which would otherwise, but for the said donation, settlement or other disposition, have been received by or have accrued to or for the benefit of the donor, shall be deemed to have been received by or to have accrued to the donor.

(8)

(a)     Whereby reason of or in consequence of any donation, settlement or other disposition (other than a donation, settlement or other disposition to an entity which is not a resident and which is similar to a public benefit organisation contemplated in section 30) made by any resident, any amount is received by or accrued to any person who is not a resident (other than a controlled foreign company in relation to such resident), which would have constituted income had that person been a resident, there shall be included in the income of that resident so much of that amount as is attributable to that donation, settlement or other disposition.

(aA)  In determining, for purposes of paragraph (a), whether an amount received by or that accrued to a person who is not a resident would have constituted income had that person been a resident, the provisions of section 10B(2)(a) must be disregarded in respect of a receipt or accrual consisting of or derived, directly or indirectly, from a foreign dividend-

(i)      paid or payable by a company if-

(aa)    more than 50 per cent of the total participation rights, as defined in section 9D(1), or of the voting rights in that company are directly or indirectly held or are exercisable, as the case may be, by that person whether alone or together with any one or more persons that are connected persons in relation to that person; and

(bb)   the resident who made the donation, settlement or other disposition or any person that is a connected person in relation to that resident is a connected person in relation to the person who is not a resident; and

(ii)     to the extent to which that foreign dividend is not derived from an amount that must be included in the income of or that must be attributed as a capital gain to-

(aa)   the resident who made that donation, settlement or other disposition; or

(bb)   a resident who is a connected person in relation to the resident referred to in item (aa).

[Paragraph (aA) inserted by section 8 of Act 23 of 2018 effective on 1 March 2019 and applies in respect of amounts received or accrued on or after that date]

(b)     So much of any expenditure, allowance or loss incurred by the person contemplated in paragraph (a) as does not exceed the amount included in the income of the resident in terms of that paragraph and which would be allowable as a deduction under this Act in the determination of the taxable income derived from that amount had that person been a resident, is deemed to be an expenditure, allowance or loss incurred by that resident for purposes of the determination of the taxable income of that resident from that amount.

(9)     Where any asset has been disposed of for a consideration which is less than the market value of such asset, the amount by which such market value exceeds such consideration shall for the purposes of this section be deemed to be a donation.

(10)   Any resident who, at any time during any year of assessment makes any donation, settlement or other disposition as contemplated in this section, shall disclose such fact to the Commissioner in writing when submitting his return of income for such year and at the same time furnish such information as may be required by the Commissioner for the purposes of this section.

(11)   Any amount received by or accrued to any person by way of deduction from the minimum individual reserve of any other person in terms of –

(a)     section 37D(1)(d)(iA) of the Pension Funds Act; or

(b)     section 37D(1)(e) of the Pension Funds Act to the extent that the deduction is a result of a deduction contemplated in paragraph (a),

[Paragraph (b) substituted by section 8 of Act 31 of 2013 and section 4 of Act 43 of 2014 effective on 28 February 2014]

shall be deemed for the purposes of this Act to be income accrued to that other person on the date of the deduction.

7A.    Date of receipt or accrual of antedated salaries or pensions and of certain retirement gratuities

(1)     For the purposes of this section –

“antedated salary or pension” means an amount of salary or pension which has become payable to any person under a permanent grant, made with retrospective effect, of a salary or pension or of an increase in a salary or pension, and which in terms of such grant is payable in respect of a period ending on or before the date on which the grant has become effective;

“pension” means an annuity payable under any law or under the rules of a pension fund or provident fund or by an employer to a former employee of that employer or to the dependant or nominee of a deceased person who was employed by such employer;

“salary” means salary, wages or similar remuneration payable by an employer to an employee, but does not include any bonus.

[Definition of “salary” substituted by section 11 of Act 15 of 2016 effective on 19 January 2017]

(2)     Where any antedated salary or pension has been received by or has accrued to any person during any year or period of assessment and the period in respect of which such antedated salary or pension has become payable (hereinafter referred to as the accrual period) commenced before the commencement of the said year or period of assessment, such antedated salary or pension shall at the option of the taxpayer be deemed-

(a)     if the accrual period commenced not more than two years before the commencement of the said year or period of assessment, to have been received by or to have accrued to the said person in part during each of the years or periods of assessment in which any portion of the accrual period falls (the part of the said amount relating to any such year or period of assessment being determined on the basis of a reasonable apportionment of the whole of the said amount between all the said years or periods of assessment); or

(b)     if the accrual period commenced more than two years before the commencement of the first–mentioned year or period of assessment, to have been received by or to have accrued to the said person in three equal annual instalments (the first and second instalments two years and one year respectively before the date on which the said amount accrued to the said person and the third instalment on the said date).

(3)     Where any member of the citizen force or of the commandos has bound himself to serve in such force or the commandos for a continuous period of service of at least eighteen months as contemplated in section 22 (6A) or 44 (5A) of the Defence Act, 1957 (Act No. 44 of 1957), the provisions of subsection (2) shall mutatis mutandis apply in respect of any gratuity which has become payable to him by the State upon and by reason of the completion of such period of service, as though such gratuity were antedated salary or pension granted permanently and with retrospective effect, in respect of the said period of service.

7B.     Timing of accrual and incurral of variable remuneration

(1)     For the purposes of this section-

“employee” means an employee as defined in paragraph 1 of the Fourth Schedule;

“employer” means an employer as defined in paragraph 1 of the Fourth Schedule;

“variable remuneration” means-

(a)     overtime pay, bonus or commission contemplated in the definition of “remuneration” in paragraph 1 of the Fourth Schedule;

(b)     an allowance or advance paid in respect of transport expenses as contemplated in section 8(1)(b)(ii) or (iii);

[Paragraph (b) substituted by section 3(1)(a) of Act 34 of 2019 effective on 1 March, 2020 and applicable in respect of amounts accrued or expenditure incurred on or after that date]

(c)     any amount which an employer has during any year of assessment become liable to pay to an employee in consequence of the employee having during such year become entitled to any period of leave which had not been taken by the employee during that year.

(d)     any night shift allowance;

[Paragraph (d) added by section 3(1)(b) of Act 34 of 2019 effective on 1 March, 2020 and applicable in respect of amounts accrued or expenditure incurred on or after that date]

(e)     any standby allowance;

[Paragraph (e) added by section 3(1)(b) of Act 34 of 2019 and substituted by section 2(1)(a) of Act 20 of 2022 with effect from 1 March, 2023 and applicable in respect of amounts accrued or expenditure incurred on or after that date]

(f)      any amount paid or granted in reimbursement of any expenditure as contemplated in section 8(1)(a)(ii); or

[Paragraph (f) added by section 3(1)(b) of Act 34 of 2019 and substituted by section 2(1)(a) of Act 20 of 2022 with effect from 1 March, 2023 and applicable in respect of amounts accrued or expenditure incurred on or after that date]

(g)     any amount of “remuneration” as defined in paragraph 1 of the Fourth Schedule (other than a bonus) that is determined based on the employee’s work performance.

[Paragraph (g) added by section 2(1)(b) of Act 20 of 2022 with effect from 1 March, 2023 and applicable in respect of amounts accrued or expenditure incurred on or after that date]

(2)     In determining the taxable income derived by any person during a year of assessment, any amount to which an employee becomes entitled from an employer in respect of variable remuneration is deemed to-

(a)     accrue to the employee; and

(b)     constitute expenditure incurred by the employer,

on the date during the year of assessment on which the amount is paid to the employee by the employer: Provided that where the employee is deceased before the date of payment, the amount is deemed to accrue to the employee and constitutes expenditure incurred by the employer, on the day during the year of assessment prior to the date of the employee’s death.

[Section 7B inserted by section 8(1) of Act 22 of 2012 with effect from 1 March, 2013 and applicable in respect of amounts accrued or expenditure incurred on or after that date. Subsection (2) amended by section 2(1)(c) of Act 20 of 2022 with effect from 1 March, 2023 and applicable in respect of amounts accrued or expenditure incurred on or after that date]

7C.    Loan, advance or credit granted to trust by connected person

[Heading to section 7C amended by section 4 of Act 34 of 2019]

(1)     This section applies in respect of any loan, advance or credit that-

(a)     a natural person; or

(b)     at the instance of a natural person, a company in relation to which that person is a connected person in terms of paragraph (d)(iv) of the definition of connected person,

[Paragraph (b) substituted by section 5(a) of Act 20 of 2021]

directly or indirectly provides to-

(i)      a trust in relation to which-

(aa)   that person or company; or

(bb)   any person that is a connected person in relation to the person or company referred to in item (aa),

is a connected person; or

(ii)     a company if at least 20 per cent of-

(aa)    the equity shares in that company are held, directly or indirectly; or

(bb)   the voting rights in that company can be exercised,

by a trust referred to in paragraph (i) whether alone or together with any person who is a beneficiary of that trust or the spouse of a beneficiary of that trust or any person related to that beneficiary or that spouse within the second degree of consanguinity.

[Words following paragraph (b) substituted by section 5 of Act 17 of 2017 and section 9 of Act 23 of 2018 effective on 19 July 2017 and applies in respect of any amount owed by a trust or a company in respect of a loan, advance or credit provided to that trust or that company before, on or after that date]

(1A)   If a person acquires a claim to an amount owing by a trust or a company in respect of a loan, advance or credit referred to in subsection (1), that person must for purposes of this section be treated as having provided a loan, advance or credit to that trust or company-

(a)     on the date on which that person acquired that claim; or

(b)     if that person was not a connected person on that date in relation to-

(i)      that trust; or

(ii)     the person who provided that loan, advance or credit to that trust or company,

on the date on which that person became a connected person in relation to that trust or person,

that is equal to the amount of the claim so acquired.

[Subsection (1A) inserted by section 5 of Act 17 of 2017 effective on 19 July 2017, applies in respect of any amount owed by a trust or a company in respect of a loan, advance or credit provided to that trust or that company before, on or after that date]

(1B)    Where-

(a)     a natural person; or

(b)     at the instance of a natural person, a company that is a connected person in relation to that natural person in terms of paragraph (d)(iv) of the definition of “connected person”,

subscribes for a preference share in a company in which 20 per cent or more of the equity shares are held (whether directly or indirectly) or the voting rights can be exercised by a trust that is a connected person in relation to that natural person or to that company, whether alone or together with any person who is a beneficiary of that trust-

(i)      consideration received by or accrued to that company for the issue of that preference share shall be deemed to be a loan for the purposes of subsection (3); and

(ii)     any dividend or foreign dividend accrued in respect of that preference share shall be deemed to be interest in respect of the loan contemplated in paragraph (i).

[Subsection (1B) inserted by section 3(1)(a) of Act 23 of 2020 effective on 1 January, 2021 and applicable in respect of any dividend or foreign dividend accruing during any year of assessment commencing on or after that date]

(2)     No deduction, loss, allowance or capital loss may be claimed in respect of-

(a)     a disposal, including by way of a reduction or waiver; or

(b)     the failure, wholly or partly, of a claim for the payment,

of any amount owing in respect of a loan, advance or credit referred to in subsection (1).

(3)       If a trust or company incurs-

(a)     no interest in respect of a loan, advance or credit referred to in subsection (1), (1A) or (1B); or

[Paragraph (a) substituted by section 3(1)(b) of Act 23 of 2020 effective on 1 January, 2021 and applicable in respect of any dividend or foreign dividend accruing during any year of assessment commencing on or after that date]

(b)     interest at a rate lower than the official rate of interest,

an amount equal to the difference between the amount incurred by that trust or company during a year of assessment as interest in respect of that loan, advance or credit and the amount that would have been incurred by that trust or company at the official rate of interest must, for purposes of Part V of Chapter II, be treated as a donation made to that trust by the person referred to in subsection (1)(a), (1A) or (1B) on the last day of that year of assessment of that trust or company.

[Subsection (3) substituted by section 5(1)(c) of Act 17 of 2017 and amended by section 3(1)(c) of Act 23 of 2020 and by section 3 of Act 20 of 2022]

(3A)  Where the amount to be treated as a donation in terms of subsection (3) is denominated in any currency other than that of the Republic, the person referred to in subsection (1), (1A) or (1B) must, for purposes of that subsection, translate that amount to the currency of the Republic by applying the average exchange rate for the year of assessment in respect of which that amount is treated as a donation.

[Subsection (3A) inserted by section 3(1)(a) of Act 17 of 2023 with effect from 1 January, 2024 and applicable in respect of years of assessment commencing on or after that date]

(4)     If a loan, advance or credit was provided by a company to a trust or another company at the instance of more than one person that is a connected person in relation to that company as referred to in paragraph (b) of subsection (1), each of those persons must be treated as having donated, to that trust or company, the part of that amount that bears to that amount the same ratio as the equity shares or voting rights in that company that were held by that person during that year of assessment bears to the equity shares or voting rights in that company held in aggregate by those persons during that year of assessment.

[Subsection (4) substituted by section 5 of Act 17 of 2017 effective on 19 July 2017, applies in respect of any amount owed by a trust or a company in respect of a loan, advance or credit provided to that trust or that company before, on or after that date]

(5)     Subsections (2) and (3) do not apply in respect of any amount owing by a trust or company during a year of assessment in respect of a loan, advance or credit referred to in subsection (1) if-

[Words preceding paragraph (a) substituted by section 5 of Act 17 of 2017 effective on 19 July 2017, applies in respect of any amount owed by a trust or a company in respect of a loan, advance or credit provided to that trust or that company before, on or after that date]

(a)     that trust or company is a public benefit organisation approved by the Commissioner in terms of section 30(3) or a small business funding entity approved by the Commissioner in terms of section 30C;

[Paragraph (a) substituted by section 5 of Act 17 of 2017 effective on 19 July 2017, applies in respect of any amount owed by a trust or a company in respect of a loan, advance or credit provided to that trust or that company before, on or after that date]

(b)     that loan, advance or credit was provided to that trust by a person by reason of or in return for a vested interest held by that person in the receipts and accruals and assets of that trust and-

(i)      the beneficiaries of that trust hold, in aggregate, a vested interest in all the receipts and accruals and assets of that trust;

(ii)     no beneficiary of that trust can, in terms of the trust deed governing that trust, hold or acquire an interest in that trust other than a vested interest in the receipts and accruals and assets of that trust;

(iii)    the vested interest of each beneficiary of that trust is determined solely with reference and in proportion to the assets, services or funding contributed by that beneficiary to that trust; and

(iv)    none of the vested interests held by the beneficiaries of that trust is subject to a discretionary power conferred on any person in terms of which that interest can be varied or revoked;

(c)     that trust is a special trust as defined in paragraph (a) of the definition of a special trust;

(d)     that trust or company used that loan, advance or credit wholly or partly for the purposes of funding the acquisition or improvement of an asset and—

(i)      the natural person referred to in subsection (1)(a) or (b) or the spouse of that person used that asset as a primary residence as contemplated in paragraph (b) of the definition of “primary residence” in paragraph 44 of the Eighth Schedule, where that primary residence and the land on which it is situated (including unconsolidated adjacent land) do not exceed two hectares are together used mainly for domestic or private purposes, throughout the period during that year of assessment during which that trust or company held that asset; and

(ii)     the amount owed relates to the part of that loan, advance or credit that funded the acquisition or improvement of that asset;

[Paragraph (d) amended by section 5(1)(f) and (g) of Act 17 of 2017 and by section 5(b) of Act 20 of 2021 and substituted by section 3(1)(b) of Act 17 of 2023 with effect from 1 January, 2024 and applicable in respect of years of assessment commencing on or after that date]

(e)     that loan, advance or credit constitutes an affected transaction as defined in section 31(1) that is subject to the provisions of that section;

(f)     that loan, advance or credit was provided to that trust or company in terms of an arrangement that would have qualified as a sharia compliant financing arrangement as contemplated in section 24JA, had that trust or company been a bank as defined in that section;

[Paragraph (f) substituted by section 5 of Act 17 of 2017 effective on 19 July 2017, applies in respect of any amount owed by a trust or a company in respect of a loan, advance or credit provided to that trust or that company before, on or after that date]

(g)     that loan, advance or credit is subject to the provisions of section 64E(4); or

[Paragraph (g) amended by section 5 of Act 17 of 2017 effective on 1 March 2017, applies in respect any amount owed by a trust in respect of a loan, advance or credit provided to that trust before, on or after that date]

(h)     that trust was created solely for purposes of giving effect to an employee share incentive scheme in terms of which-

(i)      that loan, advance or credit was provided-

(aa)   by a company to that trust; or

(bb)   for purposes of funding the acquisition, by that trust, of shares in that company or in any other company forming part of the same group of companies as that company (hereinafter referred to as a scheme company’);

(ii)     equity instruments, as defined in section 8C, that relate to or derive their value from shares in a scheme company may be offered by that trust to a person solely by virtue of that person-

(aa)    being in employment on a full-time basis with; or

(bb)   holding the office of director of, a scheme company; and

(iii)    a person that is a connected person in terms of paragraph (d)(iv) of the definition of connected person in relation to any scheme company is not entitled to participate in that scheme.

[Paragraph (h) inserted by section 5 of Act 17 of 2017 effective on 1 March 2017, applies in respect any amount owed by a trust in respect of a loan, advance or credit provided to that trust before, on or after that date]

(6)     For the purposes of this section “preference share” means a preference share as defined in section 8EA (1).

[Section 7C inserted by section 12(1) of Act 15 of 2016 and amended by section 4 of Act 34 of 2019. Subsection (6) added by section 3(1)(d) of Act 23 of 2020 effective on 1 January, 2021 and applicable in respect of any dividend or foreign dividend accruing during any year of assessment commencing on or after that date]

[Section 7C inserted by section 12 of Act 15 of 2016 effective on 1 March 2017, applies in respect of any amount owed by a trust in respect of a loan, advance or credit provided to that trust before, on or after that date]

7D.    Calculation of amount of interest

Where it must be determined, for the purposes of this Act, what amount would have accrued or been incurred as interest in respect of any loan, debt, advance or amount of credit provided to a person or an amount owed by a person had that interest accrued or been incurred at a specific rate of interest, that amount must be determined-

(a)     without regard to any rule of the common law or provision of any Act in terms of which-

(i)      the amount of any interest, fee or similar finance charge that accrues or is incurred in respect of a debt may not in aggregate exceed the amount of that debt; or

(ii)     no interest may accrue or be incurred in respect of a debt once the amount that has accrued or been incurred as interest is equal to the amount of that debt; and

(b)     as simple interest calculated daily.

[Section 7D inserted by section 6 of Act 17 of 2017 and substituted by section 10 of Act 23 of 2018 effective on 17 January 2019]

7E.    Time of accrual of interest payable by SARS

In determining the taxable income derived by any person during a year of assessment, any amount of interest to which a person becomes entitled that is payable by SARS in terms of a tax Act is deemed to accrue to that person on the date on which that amount is paid to that person.

[Section 7E inserted by section 7 of Act 17 of 2017 effective on 1 March 2018, applies to amounts of interest paid by SARS on or after that date]

7F. Deduction of interest repaid to SARS

In determining the taxable income derived by any person during a year of assessment, any amount of interest paid by SARS to that person under a tax Act and deemed to have accrued to that person in terms of section 7E that has to be repaid by that person to SARS, to the extent that the amount of interest is or was included in the taxable income of that person, must be deducted from that person’s income in the year of assessment during which that amount is repaid to SARS.

[Section 7F inserted by section 11(1) of Act 23 of 2018 and substituted by section 5 of Act 34 of 2019]

8.     Certain amounts to be included in income or taxable income

(1)

(a)

(i)   There shall be included in the taxable income of any person (hereinafter referred to as the “recipient”) for any year of assessment any amount which has been paid or granted during that year by his or her principal as an allowance or advance, excluding any portion of any allowance or advance to the extent that the allowance or advance or a portion of the allowance or advance is exempt from normal tax under section 10(1) or has actually been expended by that recipient—

(aa)   on travelling on business, as contemplated in paragraph (b), unless an allowance or advance has been granted by an employer in respect of the use of a motor vehicle as contemplated in paragraph 7 of the Seventh Schedule;

(bb)   on any accommodation, meals and other incidental costs, as contemplated in paragraph (c), while such recipient is by reason of the duties of his or her office or employment obliged to spend at least one night away from his or her usual place of residence in the Republic; or

(cc)   by reason of the duties attendant upon his or her office, as contemplated in paragraph (d).

[Sub­paragraph (i) amended by section 6(a) of Act 34 of 2019]

(ii)     There shall not be included in the taxable income of a person in terms of the provisions of paragraph (a)(i), any amount paid or granted by a principal in reimbursement of, or as an advance for, any expenditure incurred or to be incurred by the recipient –

(aa)

(A)    on the instruction of his or her principal; or

(B)    where the recipient is allowed by his or her principal to incur expenditure on meals and other incidental costs while such recipient is by reason of the duties of his or her office or employment obliged to spend a part of a day away from his or her usual place of work or employment, not exceeding an amount determined by way of notice in the Gazette,

in the furtherance of the trade of that principal; and

[Item (aa) substituted by section 4(1)(a) of Act 23 of 2020 effective on 1 March, 2021 and applicable in respect of years of assessment commencing on or after that date]

(bb)   where that recipient must produce proof to that principal that such expenditure was wholly incurred as aforesaid and must account to that principal for that expenditure:

Provided that where that expenditure was incurred to acquire any asset, the ownership in that asset must vest in that principal.

(iii)    For the purposes of this paragraph, ‘principal’ in relation to a recipient includes his or her employer or the authority, company, body or other organisation in relation to which any office is held, or any associated institution, as defined in the Seventh Schedule, in relation to such employer, authority, company, body or organisation.

(iv)    The provisions of this paragraph shall not apply in respect of any amount paid or granted as an allowance or advance that is received by or accrued to a person in respect of-

(aa)   the holding of a public office by that person as contemplated in section 9(2)(g);or

(bb)   services rendered or work or labour performed by that person as contemplated in section 9(2)(h),

if that person is stationed outside the Republic and that amount is attributable to services rendered by that person outside the Republic.

(b)     For the purposes of paragraph (a)(i)(aa) –

(i)      any allowance or advance in respect of transport expenses shall, to the extent to which such allowance or advance has been expended by the recipient on private travelling (including travelling between his or her place of residence and his or her place of employment or business or any other travelling done for his or her private or domestic purposes), be deemed not to have been actually expended on travelling on business;

[Subparagraph (i) amended by section 4 of Act 96 of 1985, section 9 of Act 129 1991 and section 5 of Act 43 of 2014 effective on 20 January 2015]

(ii)   subject to the provisions of subparagraph (iii), where such allowance or advance has been paid to the recipient in order that it may be utilized for defraying expenditure in respect of any motor vehicle used by the recipient, the portion of the allowance expended by the recipient during the year of assessment for business purposes shall, unless an acceptable calculation based on accurate data is furnished by the recipient, be deemed to be an amount calculated by applying the rate per kilometre determined in the manner prescribed by the Minister of Finance by notice in the Gazette for the category of vehicle used, on a distance travelled during the said year for business purposes (other than private travelling as contemplated in subparagraph (i)): Provided that where an allowance or advance is deemed to have accrued under section 7B to the recipient in the year of assessment during which that allowance or advance is paid, the distance travelled for business purposes in respect of which that allowance or advance is received shall be deemed to have been travelled during the year in which that allowance or advance is paid;

[Sub­paragraph (ii) substituted by section 6(a) of Act 85 of 1987 and amended by section 9(b) of Act 129 of 1991, by section 8(1)(a) of Act 21 of 1995, by section 6(1)(a) of Act 28 of 1997, by section 24(1) of Act 30 of 1998, bysection 4(a) of Act 9 of 2005, by section 21 of Act 9 of 2006, by section 11(1)(a) of Act 17 of 2009, by section 10(1)(b) of Act 7 of 2010 and by section 6(b) of Act 34 of 2019]

(iii)  where such allowance or advance is based on the actual distance travelled by the recipient in using a motor vehicle on business (excluding the said private travelling), or such actual distance is proved to the satisfaction of the Commissioner to have been travelled by the recipient, the amount expended by the recipient on such business travelling shall, unless the contrary appears, be deemed to be an amount determined on such actual distance at the rate per kilometre fixed by the Minister of Finance by notice in the Gazette for the category of vehicle used: Provided that where an allowance or advance is deemed to have accrued under section 7B to the recipient in the year of assessment during which that allowance or advance is paid, the distance travelled for business purposes in respect of which that allowance or advance is received shall be deemed to have been travelled during the year in which that allowance or advance is paid;

[Sub­paragraph (iii) amended by section 6(c) of Act 34 of 2019]

(iiiA)  where the portion of the allowance or advance which is claimed by the recipient to be actually expended is calculated based on accurate data furnished by the recipient in respect of any vehicle –

(aa)   in the case of a vehicle that is being leased, the total amount of payments in respect of that lease may not in any year of assessment exceed an amount of the fixed cost determined by the Minister in the notice contemplated in subparagraph (ii), for the category of vehicle used;

(bb)   in any other case –

(A)    the wear and tear of that vehicle must be determined over a period of seven years from the date of original acquisition by that recipient and the cost of the vehicle must for this purpose be limited to R800 000, or such other amount determined by the Minister by notice in the Gazette; and

[Sub-item (A) substituted by section 5(1) of Act 42 of 2014, by section 6(1) of Act 14 of 2017, by section 5(1) of Act 22 of 2020 and by section 5(1) of Act 19 of 2023 effective on 1 March, 2023 and applicable in respect of years of assessment commencing on or after that date]

(B)    the finance charges in respect of any debt incurred in respect of the purchase of that vehicle must be limited to an amount which would have been incurred had the original debt been R800 000, or such other amount determined by the Minister in terms of subitem (A);

[Sub-item (B) substituted by section 5(1) of Act 42 of 2014, by section 6(1) of Act 14 of 2017, by section 5(1) of Act 22 of 2020 and by section 5(1) of Act 19 of 2023 effective on 1 March, 2023 and applicable in respect of years of assessment commencing on or after that date]

(iv)    where any motor vehicle which is owned or leased by an employee, his spouse or his child, whether directly or indirectly by virtue of an interest in a company or trust or otherwise, has been let to the employer or any associated institution in relation to the employer, the sum of the rental paid by the employer or associated institution and any expenditure defrayed by the employer or associated institution in respect of the vehicle, shall be deemed to be an allowance paid to the employee in respect of transport expenses, and in such case the said rental shall for the purposes of this Act (excluding this paragraph) be deemed not to have been received by or to have accrued to the lessor of such motor vehicle, and for the purposes of paragraph 2 (b) of the Seventh Schedule such employee shall be deemed not to have been granted the right to use such motor vehicle.

(c)     A recipient shall, for the purposes of paragraph (a)(i) (bb), be deemed to have actually expended, –

(i)      where that recipient proves to the Commissioner the amount of the expenses incurred by him or her in respect of accommodation, meals or other incidental costs (other than any amount of expenditure borne by the employer otherwise than by way of payment or granting of the allowance), the amount so actually incurred but limited to the amount of the allowance or advance paid or granted to meet those expenses; or

(ii)     for each day or part of a day in the period during which that recipient is absent from his or her usual place of residence, such amount in respect of meals and other incidental costs, or incidental costs only, as the Commissioner may determine for a country or region for the relevant year of assessment by way of notice in the Gazette, but limited to the amount of the allowance paid or granted to meet those expenses: Provided that this subparagraph does not apply to the extent that –

(aa)   the employer has borne the expenses (otherwise than by way of granting the allowance or advance) in respect of which the allowance was paid or granted for that day or part of that day; or

(bb)   the recipient has proved to the Commissioner any amount of actual expenditure in respect of meals or incidental costs for that day or part of that day, as contemplated in subparagraph (i).

(d)     Any allowance granted to the holder of any public office contemplated in paragraph (e) to enable him to defray expenditure incurred by him in connection with such office shall for the purposes of paragraph (a) be deemed to have been so expended by him to the extent that expenditure relevant to such allowance and not otherwise recoverable by him has actually been incurred by him for the purposes of his office in respect of –

(i)      secretarial services, duplicating services, stationery, postage, telephone calls, the hire of office accommodation and the maintenance of such accommodation;

(ii)     travelling;

(iii)    hospitality extended at any official or civic function which the holder of such office is by reason of the nature of such office normally expected to arrange;

(iv)    ……….

(v)     subsistence and incidental costs incurred in the circumstances contemplated in paragraph (c).

(e)     For the purposes of paragraph (d) the holder of a public office includes –

(i)      the President, Deputy President, a Minister, Deputy Minister, a member of the National Assembly, a permanent delegate to the National Council of Provinces, a Premier, a member of an Executive Council or a member of a provincial legislature;

(ii)     any member of a municipal council, a traditional leader, a member of a provincial House of Traditional Leaders and a member of the Council of Traditional Leaders; and

(iii)    a person occupying the office of president, chairman or chief executive officer of any non-profitmaking organization which is organized on a national or regional basis to represent persons with common interests and the funds of which are derived wholly or mainly from subscriptions of members or donations from the general public.

(f)      Where it is expected of any person contemplated in paragraph (e) (i) to defray any expenditure referred to in paragraph (d) out of his salary received as the holder of any public office, an amount equal to a portion (which shall be determined by the National Assembly or the President, as the case may be, as provided for in the Remuneration of Public Office Bearers Act, 1998 (Act No. 20 of 1998)) of such salary shall for the purposes of paragraph (d) be deemed to be an allowance granted to such person.

(g)     Where, during any year of assessment, any person contemplated in paragraph (e) has held a public office for less than 12 months, the amount determined in terms of paragraph (f), shall be reduced to an amount which bears to the relevant amount, the same ratio as the number of months (in the determination of which a part of a month shall be reckoned as a full month), for which the office was held bears to 12 months.

(2)     ……….

(3)     ……….

(4)

(a)     There shall be included in the taxpayer’s income all amounts allowed to be deducted or set off under the provisions of sections 11 to 20, inclusive, section 24D, section 24F, section 24G, section 24I, section 24J, section 27(2)(b) and section 37B(2) of this Act, except section 11(k), 11(n), 11(p) and (q), section 11F, section 12(2) or section 12(2) as applied by section 12(3), section 12A(3), section 13(5), or section 13(5) as applied by section 13(8), or section 13bis(7), section 15(a) or section 15A, or under the corresponding provisions of any previous Income Tax Act, whether in the current or any previous year of assessment which have been recovered or recouped during the current year of assessment:

[Words preceding the proviso substituted by section 9 of Act 31 of 2013 and section 8 of Act 17 of 2017 effective on 1 March 2016]

Provided that the provisions of this paragraph shall not apply in respect of any such amount so recovered or recouped which has been-

(i)      included in the gross income of such taxpayer in terms of paragraph (jA) of the definition of ‘gross income’;

(ii)     applied to reduce any cost or expenditure incurred by such taxpayer in terms of section 19; or

(iii)    previously taken into account as an amount that is deemed to have been recovered or recouped in terms of section 19(4), (5), (6) or (6A).

[Paragraph (a) amended by section 6(1)(a) of Act 90 of 1964, substituted by section 9(1)(a) of Act 88 of 1965, by section 10(1)(a) of Act 55 of 1966, by section 10(a) of Act 89 of 1969, by section 8(d) of Act 85 of 1974, by section 7(1)(b) of Act 69 of 1975, by section 7(1)(a) of Act 113 of 1977, by section 8(a) of Act 94 of 1983, by section 5(1)(b) of Act 121 of 1984, by section 6(f) of Act 85 of 1987 and by section 6(a) of Act 90 of 1988 and amended by section 17(1)(b) of Act 30 of 2000, by section 21(1)(a) of Act 60 of 2001, by section 6 of Act 32 of 2004, by section 6(1) of Act 8 of 2007, by section 5(1)(a) of Act 3 of 2008, by section 11(1)(b) of Act 17 of 2009, by section 16(1)(b) of Act 24 of 2011, by section 9(1)(b) of Act 22 of 2012, by section 9(1)(a) of Act 31 of 2013 and by section 8(1) of Act 17 of 2017 deemed effective on 1 March, 2016. Paragraph (iii) added by section 9(1)(d) of Act 31 of 2013 and substituted by section 6 of Act 20 of 2021]

(b)     For the purposes of paragraph (a), where during any year of assessment any actuarial surplus is paid to a taxpayer pursuant to the provisions of section 15E(1)(f) or (g) of the Pension Funds Act the taxpayer must be deemed to have recovered or recouped an amount equal to the amount of that actuarial surplus less any expenditure incurred by that taxpayer in respect of that actuarial surplus that was not allowed as a deduction during any year of assessment.

(c)     ……….

(d)     ……….

(dA)  ……….

(dB)   ……….

(e)     Notwithstanding paragraph (a), but subject to paragraph (eB), (eC), (eD) and (eE), there shall not be included in the income of a person any amount recovered or recouped as a result of the disposal of any asset, where that person has elected that paragraph 65 or 66 of the Eighth Schedule applies in respect of the disposal of that asset.

(eA)  Where a person acquires more than one asset (hereinafter referred to as “the replacement asset or assets”) contemplated in paragraph (e), that person must, in applying paragraphs (eB), (eC) and (eD), apportion the amount recovered or recouped to each replacement asset in the same ratio as the receipts and accruals from that disposal respectively expended in acquiring each replacement asset bear to the total amount of those receipts and accruals expended in acquiring all those replacement assets.

(eB)   Where a replacement asset in relation to an asset of a person as contemplated in paragraph (e) constitutes a depreciable asset, that person shall be deemed to have recovered or recouped in a year of assessment so much of the amount contemplated in paragraph (e) apportioned to that asset as contemplated in paragraph (eA) as bears to the total amount of the recovery or recoupment contemplated in paragraph (e) the same ratio as the amount of any deduction or allowance allowed in that year of assessment in respect of that 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) allowable for all years of assessment in respect of that replacement asset.

(eC)   Where a person during any year of assessment disposes of a replacement asset in relation to an asset contemplated in paragraph (e) and any portion of the recovery or recoupment which is apportioned to that replacement asset has not been included in the income of that person in terms of paragraph (eE) or (eD), that portion must be deemed to be an amount recovered or recouped by that person in respect of that replacement asset in that year of assessment.

(eD)   Where during any year of assessment a person ceases to use a replacement asset in relation to an asset contemplated in paragraph (e), in respect of which paragraph 66 of the Eighth Schedule applies, for the purposes of that person’s trade and any portion of the amount which is apportioned to that replacement asset has not been included in the income of that person in terms of paragraph (eE) or (eC), that portion must be deemed to be an amount recovered or recouped in that year of assessment.

(eE)   Where a person contemplated in paragraph (e) fails to conclude a contract or fails to bring any replacement asset into use within the period prescribed in paragraphs 65 or 66 of the Eighth Schedule, as the case may be, paragraph (e) shall not apply and that person must-

(i)     deem the amount contemplated in paragraph (e) to be an amount recovered or recouped for purposes of paragraph (a) on the date on which the relevant period ends;

(ii)     determine interest at the prescribed rate on the amount recovered or recouped from the date of the disposal contemplated in paragraph (e) to the date contemplated in subparagraph (i); and

(iii)    deem that interest to be an amount recovered or recouped for purposes of paragraph (a) on the date contemplated in subparagraph (i).

(f)      If as a result of the loss, sale or disposal in any other manner by the taxpayer of the further asset referred to in paragraph (e) there has accrued to or has been received by the taxpayer an amount in excess of the cost thereof less the amount referred to in the said paragraph, so much of the excess as does not exceed such last–mentioned amount shall (unless such last–mentioned amount has been included in income in terms of the proviso to the said paragraph) be deemed to have been recovered or recouped and shall be included in the taxpayer’s income for the year of assessment during which such further asset was so lost, sold or disposed of in addition to any recovery or recoupment referred to in paragraph (a).

(g)     ……….

[Paragraph (g) added by section 9 of Act 88 of 1965, amended by section 6 of Act 141 of 1992 and deleted by section 5 of Act 43 of 2014 effective on 12 December 2013]

(h)     ……….

[Paragraph (h) added by section 9 of Act 88 of 65 and deleted by section 5 of Act 43 of 2014 effetive on 12 December 2013]

(i)      ……….

[Paragraph (i) added by section 9 of Act 88 of 1965 and deleted by section 5 of Act 43 of 2014 effecive on 12 December 2013]

(j)      ……….

[Paragraph (j) added by section 9 of Act 88 of 1965 and deleted by section 5 of Act 43 of 2014 effective on 12 December 2013]

(k)     For the purposes of paragraph (a), where during any year of assessment any person has –

(i)      donated any asset;

(ii)  in the case of a company, transferred in whatever manner or form any asset to any holder of a share in that company;

[Sub­paragraph (ii) substituted by section 9(1)(g) of Act 31 of 2013 and amended by section 6(d) of Act 34 of 2019]

(iii)  disposed of any asset to a person who is a connected person in relation to that person; or

[Sub­paragraph (iii) amended by section 6(d) of Act 34 of 2019]

(iv)  commenced to hold any asset as trading stock which was previously not held as trading stock,

[Sub­paragraph (iv) added by section 6(d) of Act 34 of 2019]

in respect of which a deduction or an allowance has been granted to such person in terms of any of the provisions referred to in that paragraph, that person shall be deemed to have disposed of that asset for an amount equal to the market value of that asset as at the date of that donation, transfer, disposal or commencement.

[Paragraph (k) added by section 4(1) of Act 113 of 1993, substituted by section 7(g) of Act 19 of 2001 and by section 21(1)(b) of Act 60 of 2001, amended by section 11(1)(c) and (d) of Act 74 of 2002, substituted by section 5(b) of Act 20 of 2006 and amended by section 4(1)(b) of Act 23 of 2020 deemed effective on 15 January, 2020]

(l)      For the purposes of paragraph (a), where –

(i)      any person was entitled to a deduction in respect of any interest or related finance charges (including a discount or premium), which was incurred or deemed to have been incurred by such person in relation to any financial arrangement during any year of assessment and such interest or related finance charges were allowed as a deduction in terms of the provisions of this Act during such year of assessment in the hands of such person;

(ii)     such person has transferred such financial arrangement during any year of assessment to any other person; and

(iii)    any obligation or part thereof in respect of such interest or related finance charges which such person is legally liable to pay has, as a result of such transfer, been transferred to such other person,

such person shall be deemed to have recovered or recouped an amount equal to the amount of such obligation or part thereof so transferred during the year of assessment in which such obligation or part thereof has been so transferred
.

(m)    ……….

(n)     Where a taxpayer disposes of an industrial asset contemplated in section 12G or a manufacturing asset contemplated in section 12I before completion of the write off period of that asset for purposes of section 11(e), 12C or 13, as applicable, there shall be included in the taxpayer’s income, all amounts allowed to be deducted in respect of that industrial asset under section 12G or manufacturing asset under section 12I, whether in the current year or any previous year of assessment, which have been recovered or recouped during the current year of assessment, in addition to the inclusion of those amounts in terms of paragraph (a).

(nA)  Where, before 1 March 2026, a taxpayer disposes of an asset contemplated in section 12BA, there shall be included in the taxpayer’s income 25 per cent of the cost of that asset, which has been recouped during the current year of assessment, in addition to the inclusion of amounts in terms of paragraph (a), but limited to the total amount allowed to be deducted in respect of that asset.

[Paragraph (nA) inserted by section 4(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]

(4A)   The provisions of subsection (4)(a), (e), (f) or (k) shall not apply in respect of any amount which is deemed to have been allowed as a deduction in terms of subparagraph (ix) of the proviso to section 11(e), section 12B(4B), section 12C(4A), section 12D(3A), section 12DA(4), section 12F(3A), section 13(1A), section 13bis(3A), section 13ter(6A), section 13quin(3) or section 37B(4).

(5)

(a)     Any amount which has been paid, whether in the form of rent or otherwise, by any person for the right of use or occupation of any movable or immovable property and has been allowed as a deduction in the determination of such person’s taxable income, and which or the equivalent of which is upon the subsequent acquisition of such property by that or any other person applied in reduction or towards settlement of the purchase price of such property, shall be included in the income of the person by whom the property is acquired as aforesaid for the year of assessment in which such person exercises the option or concludes the agreement, as the case may be, in consequence of which the property is acquired by him: Provided that the provisions of this subsection shall not apply in any case where, in consequence of the acquisition of such property, the person who has acquired the property or any other person has derived a taxable benefit the cash equivalent of which has been included in his gross income in terms of the provisions of paragraph (i) of the definition of “gross income” in section 1.

(b)     Where any amount has been paid by any person for the right of use or occupation of any property which is thereafter acquired by that or any other person for a consideration which  is less than the fair market value of such property, it shall for the purposes of paragraph (a) be deemed that the said amount, or so much thereof as does not exceed the fair market value of such property less the amount of the consideration, if any, for which it has been acquired as aforesaid, has been applied in reduction or towards settlement of the purchase price of such property.

[Paragraph (b) substituted by section 8 of Act 94 of 1983, section 5 of Act 43 of 2014 and section 8 of Act 25 of 2015 effective 8 January 2016]

(bA)  If after the termination by the effluxion of time or otherwise of a lease of property consisting of corporeal movable goods or of any machinery or plant in respect of which the lessor under such lease was entitled to any allowance under the provisions of this Act, the person who was the lessee under such lease (hereinafter referred to as the former lessee) is, with the express or implied consent or acquiescence of the person who was the lessor under such lease (hereinafter referred to as the former lessor) or of the owner of the property, allowed to use, enjoy or deal with the property as the former lessee may deem fit-

(i)      without the payment of any consideration; or

(ii)     in the case of a lease without the payment of any rental or other consideration or subject to the payment of any consideration which is nominal in relation to the fair market value of the property,

the former lessee shall be deemed for the purposes of paragraph (b) to have acquired the property  for no consideration and, if the property was owned by the former lessor, the fair market value thereof shall be deemed for the said purposes to be the cost to the former lessor of the property  (or, where the said lease was a financial lease contemplated in paragraph (b) of the definition of ‘instalment credit agreement’ in section 1 of the Value-Added Tax Act, the cash value as defined in that Act of the property, less a depreciation allowance calculated in accordance with paragraph (bB)(i) for the period from the commencement to the termination of the lease.

[Words following subparagraph (ii) substituted by section 8 of Act 25 of 2015 effective on 8 January 2016]

(bB)   For the purposes of paragraph (bA)–

(i)      the depreciation allowance shall be calculated as an aggregate of annual allowances for the years in the period for which the depreciation allowance may be made, the allowance for the first year in the said period being calculated at the rate of 20 per cent of the said cost or cash value, as the case may be, of the property in question and the allowance for each succeeding year in that period being calculated at the said rate on the balance of the said cost or cash value, as the case may be, remaining after the deduction therefrom of the allowance or allowances calculated for the year or years preceding such succeeding year;

(ii)     the former lessor of the property in question, or the owner thereof, as the case may be, shall, unless and until the contrary is proved, be deemed to have consented to the former lessee using, enjoying or dealing with the property as contemplated in the said paragraph if, at the end of a period of three months reckoned after the date on which the lease in question terminated, the former lessor has not instituted proceedings to compel the former lessee to return the property to the former lessor or to relinquish possession thereof or to dispose thereof in accordance with the terms of the lease;

(iii)    where any consideration is payable in respect of the property in question for the period after the termination of the lease in question, such consideration shall be deemed to be nominal in relation to the fair market value of the property if that consideration, in relation to the period for which it is payable, amounts to less than 10 per cent per annum of the said fair market value;

(iv)    if after the termination of a lease referred to in the said paragraph (bA) the former lessee is required to pay a consideration in respect of his right to use, enjoy or deal with the property in question but ceases to pay such consideration or, in the case of a lease referred to in subparagraph (ii) of the said paragraph (bA), pays a consideration in respect of such right which is nominal in relation to the fair market value of the property, the said lease shall be deemed to have been terminated on the date from which the former lessee is no longer required to pay such consideration or in the case of a lease referred to in the said subparagraph (ii), whereafter the consideration payable by him becomes nominal as aforesaid.

(v)     ……….

(bC)   Any person who, as a former lessor of property referred to in paragraph (bA) or as the owner thereof, has after the termination of the lease of such property consented to the former lessee thereof using, enjoying or dealing with such property as contemplated in the said paragraph, or is deemed to have so consented under the provisions of paragraph (bB) (ii), shall not later than 14 days after the end of three months after the termination of the relevant lease advise the former lessee of the fair market value of such property as determined in accordance with paragraph (bA).

8A.   Gains made by directors of companies or by employees in respect of rights to acquire marketable securities

(1)

(a)     There shall be included in the taxpayer’s income for the year of assessment the amount of any gain made by the taxpayer after the first day of June, 1969, by the exercise, cession or release during such year of any right to acquire any marketable security (whether such right be exercised, ceded or released in whole or part), if such right was obtained by the taxpayer before 26 October 2004 as a director or former director of any company or in respect of services rendered or to be rendered by him as an employee to an employer.

(b)     Where the taxpayer has exercised such right but, by reason of a condition imposed by the said company or employer or the grantor of the right, the taxpayer is not entitled to dispose of the marketable security until after the end of the said year of assessment, the gain made by the exercise of the right shall, if the taxpayer makes an election as provided in paragraph (c), not be included in his income for such year of assessment but shall be included in his income for the year of assessment during which he becomes entitled to dispose of the marketable security: Provided that in the event of the taxpayer’s death or insolvency before he becomes entitled to dispose of the marketable security the said gain shall be deemed to have been made by him on the day before the date of his death or insolvency, as the case may be, and shall be assessed accordingly.

(c)     The taxpayer may, in the circumstances contemplated in paragraph (b), elect that the provisions of that paragraph shall apply in respect of the gain referred to in that paragraph, and such election shall be in writing and shall be furnished to the Commissioner not later than the date on which the taxpayer’s return of income is furnished for the year of assessment referred to in paragraph (a), or within such further time as the Commissioner may allow.

(2)     For the purposes of this section –

(a)     a gain shall be deemed to have been made by the taxpayer by the exercise of a right to acquire any marketable security if the amount by which the market value of such marketable security at the time such right was exercised exceeds the consideration given by the taxpayer for such marketable security and any consideration given by him for such right or the grant of such right: Provided that such market value shall for the purpose of this paragraph be deemed to be the sum which a person having the right freely to dispose of such marketable security might reasonably expect to obtain from a sale of such marketable security in the open market;

(b)     where the taxpayer for a consideration accepts a restriction upon his right to acquire any marketable security such right shall be deemed to be released in part;

(c)     where any gain is made by the exercise, cession or release of a right to acquire any marketable security, such gain shall be deemed to be made at the time when such right is exercised, ceded or released, as the case may be.

(3)     The amount to be included in the taxpayer’s income in respect of any gain referred to in subsection (1) shall be –

(a)     where such gain is made by the exercise of a right to obtain any marketable security, the amount referred to in subsection (2) (a); or

(b)     where such gain is made by the cession or release of a right to obtain any marketable security, the amount by which the amount or value of the consideration received by or accrued to the taxpayer for the cession or release, exceeds the amount or value of any consideration given by the taxpayer for such right or the grant of such right.

(4)     In determining under subsections (2) (a) and (3) whether any gain has been made by the exercise, cession or release of a right to obtain any marketable security, and in determining the amount of such gain –

(a)     where any consideration was given by the taxpayer for such right or the grant of such right and the right is exercised, ceded or released in part only or the consideration was given for something in addition to the right, only the portion of such consideration which relates to so much of the right as is exercised, ceded or released, as the case may be, shall be deductible and for that purpose a fair apportionment of such consideration shall be made; and

(b)     no deduction shall be made in respect of any consideration in the form of services rendered or to be rendered or anything done or to be done or not to be done.

(5)     Where any right (hereinafter referred to as the first right) to acquire any marketable security is ceded or released by the taxpayer in whole or in part for a consideration which consists of or includes another right (hereinafter referred to as the second right) to acquire such marketable security or any other marketable security –

(a)     the second right shall for the purposes of this section not be deemed to be consideration for the cession or release of the first right; and

(b)     any gain made by the taxpayer (other than a gain in respect of which section 8C applies or will apply) by the exercise, cession or release of the second right, shall be determined and included in the taxpayer’s income as though such gain had been made by the exercise, cession or release of the first right, and for the purpose of determining such gain, the amount to be deducted under subsection (2)(a) or (3) in respect of the amount or value of the consideration given by the taxpayer for the second right shall be deemed to be the consideration given by the taxpayer for the first right or the grant of such right, less so much of the amount or value of that consideration as has been offset by any consideration other than the consideration consisting of the second right.

(6)     For the purposes of this section, a gain made by any person other than the taxpayer by the exercise, cession or release of a right to acquire any marketable security shall be deemed to be made by the taxpayer and shall be included in the taxpayer’s income as though it were a gain referred to in subsection (1) –

(a)     if that right was originally obtained by any person other than the taxpayer by reason of the taxpayer’s office or former office as a director of any company or any services rendered or to be rendered by the taxpayer as an employee of any employer; or

(b)     if that right was originally obtained by the taxpayer as a director or former director of any company or in respect of services rendered or to be rendered by him as an employee to an employer, and –

(i)      the right was ceded by the taxpayer to any person otherwise than by or under a cession made by way of a bargain at arm’s length; or

(ii)     the gain was made by a relative of the taxpayer.

(7)     The provisions of subsections (2), (3), (4) and (5) shall mutatis mutandis apply in relation to the determination of any gain referred to in subsection (6).

(8)     Where any gain is made after the first day of June, 1969, by the exercise, cession or release of a right to acquire any marketable security granted to any person on or before that date, the amount required to be included in income under this section in respect of such gain shall be reduced by an amount which bears to the amount of the gain, as determined under the preceding provisions of this section, the same ratio as the exemption period, as determined under subsection (9) in relation to the said gain, bears to the accrual period, as so determined.

(9)     For the purposes of determining any reduction to be made under subsection (8) in respect of any gain made by the exercise, cession or release or any right to acquire any marketable security –

(a)     the exemption period shall be deemed to be the period commencing on the date on which the person referred to in subsection (8) was granted such right and ending on the first day of June, 1969; and

(b)     the accrual period shall be deemed to be the period commencing on the first day of the exemption period and ending on the date on which such right is exercised, ceded or released, as the case may be.

(10)   For the purposes of this section “marketable security” means any security, debenture, share, option or other interest capable of being sold in a share–market or exchange or otherwise.

8B. Taxation of amounts derived from broad-based employee share plan

(1)     Notwithstanding section 9C, there must be included in the income of a person for a year of assessment any gain made by that person during that year from the disposal of any qualifying equity share or any right or interest in a qualifying equity share, which is disposed of by that person within five years from the date of grant of that qualifying equity share, otherwise than –

(a)     in exchange for another qualifying equity share as contemplated in subsection (2);

(b)     on the death of that person; or

(c)     on the insolvency of that person.

(2)    If a person disposes of a qualifying equity share in exchange solely for any other equity share in that employer or any company that is an associated institution as defined in the Seventh Schedule in relation to that employer, that other equity share acquired in exchange is deemed to be-

(a)     a qualifying equity share which was acquired by that person on the date of grant of the qualifying equity share disposed of in exchange; and

(b)     acquired for a consideration equal to any consideration given for the qualifying equity share disposed of in exchange.

(2A)  If a person acquires any equity share by virtue of any qualifying equity share held by that person, that other equity share so acquired is deemed to be a qualifying equity share which was acquired by that person on the date of grant of the qualifying equity share so held by that person.

(2B)   If a person disposes of any right or interest in a qualifying equity share, the amount of consideration incurred in respect of the acquisition of that qualifying equity share that is attributable to that right or interest must be determined in accordance with the ratio that the amount received for the disposal of that right or interest bears to the market value of that qualifying equity share immediately before that disposal.

(3)     For the purposes of this section –

‘broad-based employee share plan’ of an employer means a plan in terms of which –

(a)     equity shares in that employer, or in a company that is an associated institution as defined in the Seventh Schedule in relation to the employer are acquired by employees of that employer;

[Paragraph (a) substituted by section 10(1)(b) of Act 60 of 2008, by section 9 of Act 17 of 2017 and by section 7 of Act 34 of 2019]

(b)     employees who participate in any other equity scheme of that employer or of a company that is an associated institution as defined in the Seventh Schedule in relation to that employer are not entitled to participate and where at least 80 per cent of all other employees who are employed by that employer on a permanent basis on the date of grant (and who have continuously been so employed on a full-time basis for at least one year) are entitled to participate;

(c)     the employees who acquire the equity shares as contemplated in paragraph (a) are entitled to all dividends and foreign dividends and full voting rights in relation to those equity shares; and

(d)     no restrictions have been imposed in respect of the disposal of those equity shares, other than –

(i)      a restriction imposed by legislation;

(ii)     a right of any person to acquire those equity shares from the employee or former employee who acquired the equity shares as contemplated in paragraph (a) –

(aa)   in the case where the employee or former employee is or was guilty of misconduct or poor performance, at the lower of market value on the date of grant or the market value on the date of acquisition by that employer; or

(bb)   in any other case, at market value on the date of acquisition by that person; or

(iii)    a restriction in terms of which the employee or former employee who acquired the equity shares as contemplated in paragraph (a) may not dispose of those equity shares for a period, which may not extend beyond five years from the date of grant;

“date of grant” in relation to an equity share means the date on which the granting of that equity share is approved by the directors of the employer company or some other person or body of persons with comparable authority;

‘gain’ in relation to the disposal by a person of a qualifying equity share or a right or interest in a qualifying equity share, means the amount by which any amount received by or accrued to that person from that disposal exceeds the consideration given by him or her for that qualifying equity share, right or interest (otherwise than in the form of services rendered or to be rendered or anything done or to be done or not to be done);

‘market value’ in relation to an equity share means the price which could be obtained upon the sale of that equity share between a willing buyer and a willing seller dealing freely at arm’s length in an open market and without having regard to any restrictions imposed in respect of that equity share;

‘qualifying equity share’ in relation to a person means an equity share acquired in a year of assessment in terms of a broad-based employee share plan, where the market value of all equity shares (as determined on the relevant date of grant of each equity share and excluding the market value of any qualifying equity share acquired in the circumstances contemplated in subsection (2A)), which were acquired by that person in terms of that plan in that year and the four immediately preceding years of assessment, does not in aggregate exceed R50 000.

(4)     The provisions of section 25 do not apply in respect of any amount received or accrued from the disposal of any qualifying equity share after the date of death of the person contemplated in subsection (1).

8C.     Taxation of directors and employees on vesting of equity instruments

(1)

(a)     Notwithstanding section sections 9C and 23(m), a taxpayer must include in or deduct from his or her income for a year of assessment any gain or loss determined in terms of subsection (2) in respect of the vesting during that year of any equity instrument, if that equity instrument was acquired by that taxpayer –

[Words preceding subparagraph (i) substituted by section 6 of Act 43 of 2014 effective on 20 January 2015]

(i)      by virtue of his or her employment or office of director of any company or from any person by arrangement with the taxpayer’s employer;

(ii)     by virtue of any restricted equity instrument held by that taxpayer in respect of which this section will apply upon vesting thereof; or

(iii)    as a restricted equity instrument during the period of his or her employment by or office of director of any company from-

(aa)   that company or any associated institution in relation to that company; or

(bb)   any person employed by or that is a director of-

(A)    that company; or

(B)    any associated institution in relation to that company.

(b)     This section does not apply in respect of any equity instrument which –

(i)      was acquired by the exercise or conversion of, or in exchange for the disposal of, any other equity instrument where this section applied in respect of the vesting of that other equity instrument before that exercise, conversion or exchange; or

(ii)     constitutes a qualifying equity share contemplated in section 8B.

(1A)    A taxpayer must include any amount received by or accrued to him or her during a year of assessment in respect of a restricted equity instrument in his or her income for that year of assessment if that amount does not constitute-

(a)     a return of capital or foreign return of capital by way of a distribution of a restricted equity instrument;

(b)     a dividend or foreign dividend in respect of that restricted equity instrument; or

(c)     an amount that must be taken into account in determining the gain or loss, in terms of this section, in respect of that restricted equity instrument.

[Subsection (1A) inserted by section 11 of Act 60 of 2008, substituted by section 12 of Act 7 of 2010, section 19 of Act 24 of 2011 and section 13 of Act 15 of 2016 effective on 1 March 2017, applies in respect of amounts received or accrued on or after that date]

(2)

(a)     The gain to be included in the income of a taxpayer –

(i)      in the case of –

(aa)   a disposal contemplated in subsection (5)(c); or

(bb)   a disposal by way of release, abandonment or lapse of an option or financial instrument contemplated in paragraph (a) or (b) of the definition of ‘equity instrument’,

is the amount received or accrued in respect of that disposal which exceeds the sum of any consideration in respect of that equity instrument; or

(ii)     in any other case, is the amount by which the market value of the equity instrument determined at the time that it vests in that taxpayer exceeds the sum of any consideration in respect of that equity instrument.

(b)     The loss to be deducted from the income of a taxpayer –

(i)      in the case of –

(aa)   a disposal contemplated in subsection (5)(c); or

(bb)   a disposal by way of release, abandonment or lapse of an option or financial instrument contemplated in paragraph (a) or (b) of the definition of ‘equity instrument’,

is the amount by which the sum of any consideration in respect of that equity instrument exceeds the amount received or accrued in respect of that disposal; or

(ii)     in any other case, is the amount by which the consideration in respect of the equity instrument exceeds the market value of that equity instrument determined at the time that it vests in that taxpayer.

(3)     An equity instrument acquired by a taxpayer is deemed for the purposes of this section to vest in that taxpayer –

(a)     in the case of the acquisition of an unrestricted equity instrument, at the time of that acquisition; or

(b)     in the case of the acquisition of a restricted equity instrument, at the earliest of –

(i)      when all the restrictions, which result in that equity instrument being a restricted equity instrument, cease to have effect;

(ii)     immediately before that taxpayer disposes of that restricted equity instrument, other than a disposal contemplated in subsection (4) or (5)(a), (b) or (c);

(iii)    immediately after that equity instrument, which is an option contemplated in paragraph (a) of the definition of ‘equity instrument’ or a financial instrument contemplated in paragraph (b) of that definition, terminates (otherwise than by the exercise or conversion of that equity instrument);

(iv)    immediately before that taxpayer dies, if all the restrictions relating to that equity instrument are or may be lifted on or after death; and

(v)     the time a disposal contemplated in subsection (2)(a)(1) or (b)(i) occurs.

(4)

(a)     If a taxpayer disposes of a restricted equity instrument which was acquired in the manner contemplated in subsection (1) for an amount which consists of or includes any other restricted equity instrument in the employer of the taxpayer or an associated institution in relation to the employer, that other restricted equity instrument acquired in exchange is deemed to be acquired by that taxpayer by virtue of his or her employment or office of director of any company.

(b)     If the amount received or accrued in respect of the restricted equity instrument which is disposed of as contemplated in paragraph (a) includes any payment in a form other than restricted equity instruments, that payment less any consideration attributable to that payment must be deemed to be a gain or loss which must be included in or deducted from the income of the taxpayer in the year of assessment during which that restricted equity instrument is so disposed of.

(5)

(a)     If a restricted equity instrument which was acquired by a taxpayer in the manner contemplated in subsection (1) is disposed of by that taxpayer to any person –

(i)      otherwise than by or under a disposal made in terms of a transaction at arm’s length; or

(ii)     who is a connected person in relation to that taxpayer, the provisions of subsections (2), (3) and (4) apply mutatis mutandis in the determination of any gain or loss made by that person as if that person had been the taxpayer, and that gain or loss is for purposes of subsection (1) deemed to be made by that taxpayer in respect of the vesting of that equity instrument.

(b)     If an equity instrument was acquired by any person other than the taxpayer by virtue of the taxpayer’s employment or office of director, that equity instrument must, for purposes of this section, be deemed to have been so acquired by that taxpayer and disposed of to that person in the manner contemplated in paragraph (a).

(c)     Paragraph (a) does not apply where a taxpayer disposes of any restricted equity instrument (including by way of forfeiture, lapse or cancellation) to his or her employer, an associated institution or other person by arrangement with the employer in terms of a restriction imposed in relation to that equity instrument for an amount which is less than the market value of that restricted equity instrument.

  (6)     If a person who acquires a restricted equity instrument from the taxpayer as contemplated in subsection (5), disposes of that restricted equity instrument to any other person in the manner contemplated in subsection (5)(a)(i) or to a connected person in relation to the taxpayer, subsection (5) applies in respect of that other person as if he or she had acquired that restricted equity instrument directly from that taxpayer.

(7)     For purposes of this section, unless the context otherwise indicates –

‘associated institution’ means an associated institution as contemplated in paragraph 1 of the Seventh Schedule;

‘consideration’ in respect of an equity instrument means any amount given or to be given (otherwise man in the form of services rendered or to be rendered or anything done, to be done or not to be done) –

(a)     by the taxpayer in respect of that equity instrument;

(b)     by the taxpayer in respect of any other restricted equity instrument which had been disposed of by that taxpayer in exchange for that equity instrument, reduced by any amount attributable to the gain or loss determined in terms of subsection (4)(b); or

(c)     by any person contemplated in subsection (5) (a) or (b) in respect of that restricted equity instrument to the extent that the amount does not exceed the amount the taxpayer would have had to give to acquire that equity instrument had it not been disposed of or deemed to have been disposed of by him or her, but does not include any amount given or to be given by that person to the taxpayer to acquire that restricted equity instrument:

Provided that where a taxpayer acquires –

(a)     an equity instrument in exchange for any other equity instrument, as contemplated in subsection (4)(a), the market value of the equity instrument given in exchange must not be taken into account in determining the consideration in respect of the equity instrument so acquired; or

(b)     a right to acquire any marketable security in exchange for any other such right, as contemplated in section 8A(5), and the right so acquired constitutes an equity instrument acquired in the manner contemplated in subsection (1), the consideration for that equity instrument must be determined as if it was acquired in the manner contemplated in subsection (4)(a);

‘employer’ means an employer as contemplated in paragraph 1 of the Seventh Schedule;

‘equity instrument’ means a share or a member’s interest in a company, and includes –

(a)     an option to acquire such a share, part of a share or member’s interest;

(b)     any financial instrument that is convertible to a share or member’s interest; and

(c)     any contractual right or obligation the value of which is determined directly or indirectly with reference to a share or member’s interest;

“market value” in relation to an equity instrument-

(a)     of a private company as defined in the Companies Act or a company that would be regarded as a private company if it were incorporated under that Act, means an amount determined as its value in terms of a method of valuation –

(i)      prescribed in the rules relating to the acquisition and disposal of that equity instrument;

(ii)     which is regarded as a proxy for the market value of that equity instrument for the purposes of those rules; and

(iii)    used consistently to determine both the consideration for the acquisition of that equity instrument and the price of the equity instrument repurchased from the taxpayer after it has vested in that taxpayer; or

(b)     of any other company, means the price which could be obtained upon the sale of that equity instrument between a willing buyer and a willing seller dealing freely at arm’s length in an open market and, in the case of a restricted equity instrument, had the restriction to which that equity instrument is subject not existed;

‘restricted equity instrument’ in relation to a taxpayer means an equity instrument –

(a)     which is subject to any restriction (other than a restriction imposed by legislation) that prevents the taxpayer from freely disposing of that equity instrument at market value;

(b)     which is subject to any restriction that could result in the taxpayer-

 (i)      forfeiting ownership or the right to acquire ownership of that equity instrument otherwise than at market value; or

(ii)     being penalised financially in any other manner for not complying with the terms of the agreement for the acquisition of that equity instrument;

(c)     if any person has retained the right to impose a restriction contemplated in paragraph (a) or (b) on the disposal of that equity instrument;

(d)     which is an option contemplated in paragraph (a) of the definition of ‘equity instrument’ and where the equity instrument which can be acquired in terms of that option will be a restricted equity instrument;

(e)     which is a financial instrument contemplated in paragraph (b) of the definition of ‘equity instrument’ and where the equity instrument to which that financial instrument can be converted will be a restricted equity instrument;

(f)      if the employer, associated institution in relation to the employer or other person by arrangement with the employer has at the time of acquisition by the taxpayer of the equity instrument undertaken to –

(i)      cancel the transaction under which that taxpayer acquired the equity instrument; or

(ii)     repurchase that equity instrument from that taxpayer at a price exceeding its market value on the date of repurchase,

if there is a decline in the value of the equity instrument after that acquisition; or

(g)     which is not deliverable to the taxpayer until the happening of an event, whether fixed or contingent; and

‘unrestricted equity instrument’ means an equity instrument which is not a restricted equity instrument.

8E.    Dividends derived from certain shares and equity instruments deemed to be income in relation to recipients thereof

[Heading of section 8E substituted by section 14 of Act 15 of 2016 effective on 1 January 2017, applies in respect of years of assessment ending on or after that date]

(1)       For the purposes of this section-

‘date of issue’, in relation to a share in a company, means the date on which-

(a)     the share is issued by the company;

(b)     the company at any time after the share has been issued undertakes the obligation to redeem that share in whole or in part; or

(c)     the holder of the share at any time after the share has been issued obtains the right to require that share to be redeemed in whole or in part, otherwise than as a result of the acquisition of that share by that holder;

“equity instrument” means any right or interest the value of which is determined directly or indirectly with reference to-

(a)     a share; or

(b)     an amount derived from a share;

[Definition of “equity instrument” inserted by section 14 of Act 15 of 2016 effective on 1 January 2017, applies in respect of years of assessment ending on or after that date]

‘financial instrument’ means any-

(a)     interest-bearing arrangement; or

(b)     financial arrangement based on or determined with reference to a specified rate of interest or the time value of money;

‘hybrid equity instrument’ means-

(a)     any share, other than an equity share, if-

(i)      the issuer of that share is obliged to redeem that share or to distribute an amount constituting a return of the issue price of that share (in whole or in part); or

[Sub­paragraph (i) substituted by section 8(1)(a) of Act 34 of 2019 deemed effective on 21 July, 2019 and applicable in respect of years of assessment ending on or after that date]

(ii)     the holder of that share may exercise an option in terms of which the issuer must redeem that share or distribute an amount constituting a return of the issue price of that share (in whole or in part),

[Sub­paragraph (ii) substituted by section 8(1)(a) of Act 34 of 2019 deemed effective on 21 July, 2019 and applicable in respect of years of assessment ending on or after that date]

within a period of three years from the date of issue of that share;

(b)     any share, other than a share contemplated in paragraph (a), if-

(i)

(aa)   the issuer of that share is obliged to redeem that share or to distribute an amount constituting a return of the issue price of that share (in whole or in part) within a period of three years from the date of issue of that share;

[Item (aa) substituted by section 8(1)(b) of Act 34 of 2019 deemed effective on 21 July, 2019 and applicable in respect of years of assessment ending on or after that date]

(bb)   the holder of that share may exercise an option in terms of which the issuer must redeem that share or distribute an amount constituting a return of the issue price of that share (in whole or in part) within a period of three years from the date of issue of that share; or

[Item (bb) substituted by section 8(1)(b) of Act 34 of 2019 deemed effective on 21 July, 2019 and applicable in respect of years of assessment ending on or after that date]

(cc)    at any time on the date of issue of that share, the existence of the company issuing that share-

(A)    is to be terminated within a period of three years; or

(B)    is likely to be terminated within a period of three years upon a reasonable consideration of all the facts at that time; and

(ii)

(aa)   that share does not rank pari passu as regards its participation in dividends or foreign dividends with all other equity shares in the capital of the relevant company or, where the equity shares in such company are divided into two or more classes, with the shares of at least one of such classes; or

[Item (aa) substituted by section 12 of Act 23 of 2018 effective on 17 January 2019]

(bb)   any dividend or foreign dividend payable on such share is to be calculated directly or indirectly with reference to any specified rate of interest or the time value of money;

[Item (bb) amended by section 14 of Act 15 of 2016 effective on 1 January 2017, applies in respect of years of assessment ending on or after that date]

(c)     any preference share if that share is-

(i)      secured by a financial instrument; or

(ii)     subject to an arrangement in terms of which a financial instrument may not be disposed of,

unless that share was issued for a qualifying purpose;

(d)     any equity instrument the value of which is determined directly or indirectly with reference to-

(i)      a share contemplated in paragraph (a) or (b) or a preference share contemplated in paragraph (c); or

(ii)     an amount derived from a share or preference share contemplated in subparagraph (i); or

[Paragraph (d) added by section 14 of Act 15 of 2016 effective on 1 January 2017, applies in respect of years of assessment ending on or after that date]

(e)     any equity instrument, other than an equity instrument contemplated in paragraph (d), if that equity instrument is subject to a right or arrangement that would have constituted a right or arrangement contemplated in paragraph (a), (b) or (c) had that right or arrangement applied in respect of the share with reference to which the value of that equity instrument is directly or indirectly determined;

[Paragraph (e) added by section 14(1)(d) of Act 15 of 2016 and substituted by section 8(1)(c) of Act 34 of 2019 and by section 7 of Act 20 of 2021]

“issue price” in relation to a share in a company means the amount that was received by or that accrued to that company in respect of the issue of that share;

[Definition of “issue price” inserted by section 8(1)(d) of Act 34 of 2019 deemed effective on 21 July, 2019 and applicable in respect of years of assessment ending on or after that date]

‘preference share’ means a preference share as defined in section 8EA(1);

‘qualifying purpose’ means a qualifying purpose as defined in section 8EA(1).

(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 accrued to that person if that share or equity instrument constitutes a hybrid equity instrument at any time during that year of assessment.

[Subsection (2) substituted by section 14 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 any share or 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 hybrid equity instrument solely by reason of a right of redemption or a security arrangement acquired in accordance with the terms of that agreement and that right or arrangement is cancelled on or after 26 October 2016 and on or before 31 December 2017-

(a)     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 right or arrangement; and

(b)     the cancellation of that right or arrangement must not be treated as a disposal of that share if no consideration is payable in respect of that cancellation.

[Subsection (2A) inserted by section 14 of Act 15 of 2016 effective on 19 January 2017]

8EA. Dividends on third-party backed shares deemed to be income in relation to recipients thereof

(1)       For the purposes of this section-

‘enforcement obligation’...

[Definition of “enforcement obligation” substituted by section 15(1)(a) of Act 15 of 2016 and deleted by section 9(a) of Act 34 of 2019]

‘enforcement right’ in relation to a share or equity instrument means any right, whether fixed or contingent, of the holder of that share or equity instrument or of any person that is a connected person in relation to that holder to require any person other than the issuer of that share or equity instrument to-

(a)     acquire that share or equity instrument from the holder;

(b)     make any payment in respect of that share or equity instrument in terms of a guarantee, indemnity or similar arrangement; or

(c)     procure, facilitate or assist with any acquisition contemplated in paragraph (a) or the   making of any payment contemplated in paragraph (b);

[Definition of ‘enforcement right’ 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]

‘equity instrument’ means a right or interest the value of which is determined directly or indirectly with reference to-

(a)     a preference share; or

(b)     an amount derived from a preference share;

[Definition of ‘equity instrument’ inserted 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]

‘operating company’ means-

(a)     any company that carries on business continuously, and in the course or furtherance of that business-

(i)      provides goods or services for consideration; or

(ii)     carries on exploration for natural resources;

[Paragraph (a) substituted by section 7 of Act 43 of 2014 effective on 1 January 2013]

(b)     any company that is a controlling group company in relation to a company contemplated in paragraph (a);or

(c)     any company that is a listed company;

‘preference share’ means any share-

(a)    other than an equity share; or

(b)     that is an equity share, if an amount of any dividend or foreign dividend in respect of that share is based on or determined with reference to a specified rate of interest or the time value of money;

‘qualifying purpose’, in relation to the application of the funds derived from the issue of a preference share, means one or more of the following purposes:

[Words preceding paragraph (a) substituted by section 7 of Act 43 of 2014 effective on 1 January 2013]

(a)     The direct or indirect acquisition of an equity share by any person in a company that is an operating company at the time of the receipt or accrual of any dividend or foreign dividend in respect of that preference share, other than a direct or indirect acquisition of an equity share from a company that, immediately before that acquisition, formed part of the same group of companies as the person acquiring that equity share;

[Paragraph (a) 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]

(b)     the partial or full settlement by any person of any-

(i)      debt incurred for one or more of the following purposes:

(aa)    The direct or indirect acquisition of an equity share by any person in a company that is an operating company at the time of the receipt or accrual of any dividend or foreign dividend in respect of that preference share, other than a direct or indirect acquisition of an equity share from a company that, immediately before that acquisition, formed part of the same group of companies as the person acquiring that equity share;

[Item (aa) 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]

 (bb)   a direct or indirect acquisition or a redemption contemplated in paragraph (c);

 (cc)   the payment of any dividend or foreign dividend as contemplated in paragraph (d); or

(dd)   the partial or full settlement, directly or indirectly, of any debt incurred as contemplated in item (aa), (bb) or (cc); or

(ii)     interest accrued on any debt contemplated in subparagraph (i);

(c)     the direct or indirect acquisition by any person or a redemption by any person of any other preference share if-

(i)   that other preference share was issued for any purpose contemplated in this definition; and

(ii)     the amount received by or accrued to the issuer of that preference share as consideration for the issue of that preference share does not exceed the amount outstanding in respect of that other preference share being acquired or redeemed, being the sum of-

(aa)   that amount; and

(bb)   any amount of dividends, foreign dividends or interest accrued in respect of that other preference share; or

(d)     the payment by any person of any dividend or foreign dividend in respect of the other preference share contemplated in paragraph (c);

“third­-party backed share” means any preference share or equity instrument in respect of which an enforcement right is exercisable by the holder of that preference share or equity instrument as a result of any amount of any specified dividend, foreign dividend, return of capital or foreign return of capital attributable to that share or equity instrument not being received by or accruing to any person entitled thereto;

[Definition of “third-­party backed share” amended by section 11(1)(c) of Act 31 of 2013 and substituted by section 15(1)(f) of Act 15 of 2016 and by section 9(b) of Act 34 of 2019]

(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]

8F.     Interest on hybrid debt instruments deemed to be dividends in specie

(1)     For the purposes of this section—

‘enforcement right’ in relation to an instrument means any right, whether fixed or contingent, to require any person other than the issuer of that instrument to-

(a)     acquire that instrument from the holder thereof;

(b)     make any payment in respect of that instrument in terms of a guarantee, indemnity or similar arrangement; or

(c)     procure, facilitate or assist with any acquisition contemplated in paragraph (a) or the making of any payment contemplated in paragraph (b);

[Definition of ‘enforcement right’ inserted by section 16 of Act 15 of 2016 effective on 1 January 2017, applies in respect of years of assessment commencing on or after that date]

‘hybrid debt instrument’ means any instrument in respect of which a company owes an amount during a year of assessment if in terms of any arrangement as defined in section 80L-

(a)     that company is in that year of assessment entitled or obliged to-

(i)      convert that instrument (or any part thereof) in any year of assessment to; or

(ii)     exchange that instrument (or any part thereof) in any year of assessment for,

shares unless the market value of those shares is equal to the amount owed in terms of the instrument at the time of conversion or exchange;

(b)     the obligation to pay an amount so owed on a date or dates falling within that year of assessment has been deferred by reason of that obligation being conditional upon the market value of the assets of that company not being less than the amount of the liabilities of that company; or

[Paragraph (b) substituted by section 16 of Act 15 of 2016 effective on 1 January 2016, applies in respect of years of assessment commencing on or after that date]

(c)     that company owes the amount to a connected person in relation to that company and is not obliged to redeem the instrument, excluding any instrument payable on demand, within 30 years from the date of issue of that instrument;

[Words and subparagraphs preceding the proviso substituted by section 9 of Act 25 of 2015 effective on 1 January 2016]

Provided that, for the purposes of this paragraph, where the company has the right to-

(aa)    convert that instrument to; or

(bb)   exchange that instrument for,

a financial instrument other than a share-

(A)    that conversion or exchange must be deemed to be an arrangement in respect of that instrument; and

(B)    that instrument and that financial instrument must be deemed to be one and the same instrument for the purposes of determining the period within which the company is obliged to redeem that instrument;

‘instrument’ means any form of interest-bearing arrangement or debt that is issued by-

(a)     a company that is a resident;

(b)     a company that is not a resident if the interest in respect of that instrument is attributable to a permanent establishment of that company in the Republic; or

(c)     a company that is a controlled foreign company as contemplated in section 9D if the interest incurred in respect of that instrument must be taken into account in determining the net income of that controlled foreign company as contemplated in that section;

[Definition of ‘instrument’ substituted by section 16 of Act 15 of 2016 effective on 24 February 2016, applies in respect of amounts incurred in respect of an instrument on or after that date]

‘issue’, in relation to an instrument, means the creation of a liability to pay an amount in terms of that instrument;

‘interest’ means interest as defined in section 24J(1);

[Definition of “interest” substituted by section 9 of Act 25 of 2015 effective on 8 January 2016]

‘redeem’, in relation to an instrument, means the discharge of all liability to pay all amounts in terms of that instrument.

‘third-party backed instrument’ means any instrument in respect of which an enforcement right is exercisable as a result of any amount relating to that instrument not being received by or accruing to any person entitled thereto.

[Definition of ‘third-party backed instrument’ added by section 16 of Act 15 of 2016 effective on 1 January 2017, applies in respect of years of assessment commencing on or after that date]

(2)     Any amount that is incurred by a company or accrues to a person in respect of interest on or after the date that an instrument becomes a hybrid debt instrument is—

(a)     deemed to be a dividend in specie in respect of a share that is declared and paid by that company to the person to whom that amount accrued on the last day of the year of assessment of that company during which it was incurred;

(b)     not deductible; and

(c)     deemed to be a dividend in specie in respect of a share that accrues to that person on the date contemplated in paragraph (a).

[Subsection (2) amended by section 8 of Act 43 of 2014, substituted by section 16(1)(e) of Act 15 of 2016 and by section 11 of Act 17 of 2017, amended by section 14(1) of Act 23 of 2018 and substituted by section 8(1) of Act 20 of 2021 effective on the date of promulgation of that Act, 19 January, 2022 and applicable in respect of amounts incurred or accrued on or after that date]

(3)     This section does not apply to any instrument-

(a)     in respect of which all amounts are owed by a small business corporation as defined in section 12E(4);

(b)     that constitutes a tier 1 or tier 2 capital instrument referred to in the regulations issued in terms of section 90 of the Banks Act (contained in Government Notice No. R.1029 published in Government Gazette No. 35950 of 12 December 2012) issued-

(i)      by a bank as defined in section 1 of that Act; or

(ii)     by a controlling company in relation to that bank;

(c)     of any class that is subject to approval as contemplated in the-

(i)      Short-term Insurance Act in accordance with the conditions determined in terms of section 23(a)(i) of that Act by the Registrar defined in that Act, where an amount is owed in respect of that instrument by a short-term insurer as defined in that Act; or

(ii)     Long-term Insurance Act in accordance with the conditions determined in terms of section 24(a)(i) of that Act by the Registrar defined in that Act, where an amount is owed in respect of that instrument by a long-term insurer as defined in that Act;

[Paragraph (c) amended by section 16(1)(f) of Act 15 of 2016 effective on 1 January, 2017 and applicable in respect of years of assessment commencing on or after that date]

(d)     that constitutes a linked unit in a company where the linked unit is held by a long-term insurer as defined in the Long-term Insurance Act, a pension fund, a provident fund, a REIT or a short-term insurer as defined in the Short-term Insurance Act, if—

(i)      the long-term insurer, pension fund, provident fund, REIT or short-term insurer holds at least 20 per cent of the linked units in that company;

(ii)     the long-term insurer, pension fund, provident fund, REIT or short-term insurer acquired those linked units before 1 January 2013; and

(iii)    at the end of the previous year of assessment 80 per cent or more of the value of the assets of that company, reflected in the annual financial statements prepared in accordance with the Companies Act for the previous year of assessment, is directly or indirectly attributable to immovable property;

(e)     that constitutes a third-party backed instrument; or

[Paragraph (e) added by section 16 of Act 15 of 2016 effective on 1 January 2017, applies in respect of years of assessment commencing on or after that date]

(f)      that constitutes a hybrid debt instrument solely in terms of paragraph (b) of the definition of hybrid debt instrument if a registered auditor, as contemplated in the Auditing Profession Act, 2005 (Act No. 26 of 2005), has certified that the payment, by a company, of an amount owed in respect of that instrument has been or is to be deferred by reason of the market value of the assets of that company being less than the amount of the liabilities of that company.

[Paragraph (f) added by section 16 of Act 15 of 2016 effective on 1 January 2016, applies in respect of years of assessment commencing on or after that date]

8FA.     Hybrid interest deemed to be dividends in specie

(1)       For the purposes of this section-

‘hybrid interest’, in relation to any debt owed by a company in terms of an instrument, means-

  (a)     any interest where the amount of that interest is-

(i)      not determined with reference to a specified rate of interest; or

(ii)     not determined with reference to the time value of money; or

(b)     if the rate of interest has in terms of that instrument been raised by reason of an increase in the profits of the company, so much of the amount of interest as has been determined with reference to the raised rate of interest as exceeds the amount of interest that would have been determined with reference to the lowest rate of interest in terms of that instrument during the current year of assessment and the previous five years of assessment;

‘instrument’ means an instrument as defined in section 8F(1);

[Definition of ‘instrument’ substituted by section 17 of Act 15 of 2016 effective on 24 February 2016, applies in respect of amounts incurred in respect of an instrument on or after that date]

‘issue’, in relation to an instrument, means the creation of a liability to pay or a right to receive an amount in terms of that instrument;