“Cost” definition of section 13quat of ITA

Posted on by admin_kmos

(1)     For the purposes of this section-

 

‘cost’ means the costs (other than borrowing or finance costs) actually incurred in erecting or extending, adding to or improving a building or part thereof and includes any costs incurred-

 

(a)     in demolishing any existing building or part thereof;

 

(b)     in excavating the land for purposes of that erection, extension, addition or improvement; and

 

(c)     in respect of structures or works directly adjoining the building or part so erected, extended, added to or improved, for purposes of providing-

 

(i)      water, power or parking with respect to that building or part;

 

(ii)     drainage or security for that building or part;

 

(iii)    means of waste disposal for that building or part; or

 

(iv)    access to that building or part, including the frontage thereof;

Subsections 2, 2A, 3, 4, 5, 6, 6A, 7, 8, 9, 10 and 11 of section 13ter of ITA

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(2)     Notwithstanding anything to the contrary contained in paragraph (ii) of the proviso to section 11(e), there shall, subject to the provisions of this section, be allowed to be deducted from the income of the taxpayer for the year of assessment referred to in subsection (6) of this section and each succeeding year of assessment, an allowance, to be known as the residential building annual allowance, equal to two per cent of the cost to the taxpayer of any residential unit erected by the taxpayer under a housing project of the taxpayer.

 

(2A)  For the purposes of this section where a taxpayer completes an improvement as contemplated in section 12N, the expenditure incurred by the taxpayer to complete the improvement shall be deemed to be the cost to the taxpayer of a residential unit contemplated in subsection (2).

 

(3)     In addition to the deduction provided for in subsection (2), there shall, subject to the provisions of this section, be allowed to be deducted from the income of the taxpayer for the year of assessment referred to in subsection (5), an allowance, to be known as the residential building initial allowance, equal to ten per cent of the cost to the taxpayer of the residential unit referred to in subsection (2).

 

(4)     The allowances under this section shall not be made in respect of any portion of the cost of any residential unit on any premises not owned by the taxpayer, unless the taxpayer, at the date on which the erection of such residential unit is commenced, is entitled to the occupation of such premises for a period ending not less than ten years after such date.

 

(5)     The residential building initial allowance in relation to any residential unit shall be made for the year of assessment during which such residential unit is for the first time let or occupied as contemplated in the definition of “residential unit” in subsection (1): Provided that if at the end of such year of assessment less than five of the residential units of the relevant housing project have for the first time been let or occupied as contemplated in the definition of “residential unit” in subsection (1), the residential building initial allowance relating to such residential unit shall not be made for that year of assessment but shall be made for the first succeeding year of assessment in which at least five of the residential units in that housing project have been so let or occupied for the first time.

 

(6)     The residential building annual allowance relating to any residential unit shall be made for the first time for the year of assessment in which the residential building initial allowance is made in respect of that residential unit.

 

(6A)  Where any building in respect of which any deduction of an allowance is claimed in terms of this section was during any previous financial year or years used by the taxpayer for the purposes of any trade carried on by him the receipts and accruals of which were not included in the income of such taxpayer during such year or years, any deduction which could have been allowed during such previous year or years in terms of this section shall for the purposes of this section (excluding the provisions of subsection (7)(a)) be deemed to have been allowed during such previous year or years as if the receipts and accruals of such trade had been included in the income of such taxpayer.

 

(7)     If in any year of assessment any residential unit in respect of the cost of which any allowance has been made to the taxpayer under the provisions of this section, whether in the current or any previous year of assessment, is so used or dealt with by the taxpayer that it ceases to be available either for letting to a tenant or for occupation by an employee as contemplated in the definition of “residential unit” in subsection (1) –

 

(a)     there shall be included in the income of the taxpayer for the year of assessment in which such residential unit is so used or dealt with, the amount of the residential building initial allowance made to him in respect of the cost of such residential unit, less one–tenth of such amount for each completed period of one year, but not exceeding ten years, from the date on which such residential unit was first let or occupied as contemplated in the definition of “residential unit” in subsection (1) until the date on which such residential unit was used or dealt with as aforesaid; and

 

(b)     the residential building annual allowance shall not be made in respect of the cost of the said residential unit for the year of assessment during which such residential unit was used or dealt with as aforesaid nor in respect of any succeeding year of assessment during which it continued to be unavailable for the letting or occupation contemplated in the definition of “residential unit” in subsection (1).

 

(8)     The provisions of sections 8(4)(a) and 11(o) shall not apply to so much of the amount of any residential building initial allowance as has been included in the taxpayer’s income under the provisions of subsection (7) (a) of this section, whether in the current or any previous year of assessment.

 

(9)     No allowance shall be made under this section in respect of so much of the cost of any residential unit as has qualified or will qualify for deduction from the taxpayer’s income by way of a deduction of expenditure or an allowance in respect of expenditure under any other provision of this Act, whether for the current or any preceding or subsequent year of assessment.

 

(10)   The aggregate of the allowances allowed or deemed to have been allowed under the preceding provisions of this section in respect of the cost of any residential unit shall not exceed such cost or, if such allowances have been calculated on a portion of such cost, such portion.

 

(11)   Where any company is mainly engaged in the provision of housing facilities for the employees of the sole or principal holder of shares in that company or for the employees of any other company the shares in which are held wholly by the sole or principal holder of shares in such firstmentioned company, the employees of such holder of shares or such other company, as the case may be, shall for the purposes of this section be deemed to be the employees also of such firstmentioned company.

“Residential unit” definition of section 13ter of ITA

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“residential unit” means any self–contained residential accommodation consisting of more than one room (but excluding any hostel, hotel or similar accommodation), the erection of which was commenced by the taxpayer on or after 1 April 1982 and before 21 October 2008 and which was erected under a housing project of the taxpayer –

 

(a)     in order to be let to a tenant for the purpose of deriving a profit for the taxpayer; or

 

(b)     in order to be occupied by a bona fide full–time employee of the taxpayer.

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

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13bis.     Deductions in respect of buildings used by hotel keepers

(1)     Notwithstanding anything to the contrary contained in paragraph (ii) of the proviso to paragraph (e) of section 11, there shall be allowed to be deducted from the income of any taxpayer for any year of assessment ending on or after the first day of January, 1964, an allowance equal to two per cent of the cost (after the set–off of any amount as provided in subsection (6)) to the taxpayer –

(a)     ……….


(b)     ……….


(c)     of any building the erection of which was commenced by the taxpayer on or after the first day of January, 1964, and of any improvements (other than repairs) thereto commenced not later than the thirtieth day of June, 1965, if such building –


(i)      was brought into use not later than the thirtieth day of June, 1965; and


(ii)     was during the year of assessment wholly or mainly used by the taxpayer for the purpose of carrying on therein his trade of hotel keeper or was during such year let by the taxpayer and wholly or mainly used by the lessee for the purpose of carrying on therein the lessee’s trade of hotel keeper;


(d)     of such portion –


(i)      of any building (other than a building in respect of the cost of which an allowance under the preceding provisions of this subsection is or was deductible from the income of the taxpayer for the current or any previous year of assessment) the erection of which was commenced by the taxpayer on or after the first day of January, 1964; or


(ii)     of any improvements (other than repairs) to any building referred to in this paragraph, if such improvements were commenced on or after the first day of January, 1964; or

[Subparagraph (ii) substituted by section 31 of Act 25 of 2015 effective on 1 January 2016]


(iii)    of any improvements (other than repairs) to any building referred to in paragraph (c), if such improvements were commenced on or after the first day of July, 1965,


as –


(aa)   was during the year of assessment used by the taxpayer for the purpose of carrying on therein his trade of hotel keeper; or


(bb)   was during such year let by the taxpayer and used by the lessee for the purpose of carrying on therein the lessee’s trade of hotel keeper; or


(e)     of such portion of any building improvements (other than repairs and other than improvements in respect of the cost of which, or of any portion thereof, an allowance under the preceding provisions of this subsection is or was deductible from the income of the taxpayer for the current or any previous year of assessment) commenced on or after 1 January 1964, as was during the year of assessment in question used by the taxpayer for the purposes of the taxpayer’s trade of hotel keeper or was during the year of assessment in question let by the taxpayer and used by the lessee for the purposes of the lessee’s trade of hotel keeper:

[Paragraph (e) substituted by section 13 of Act 113 of 1993, section 12 of Act 21 of 1994 and section 33 of Act 23 of 2018 effective on 17 January 2019]


Provided that no allowance shall be made under this subsection in respect of such portion of the cost of any building the erection of which was commenced on or after the first day of July, 1961, or any improvements effected thereto, as has been taken into account in the calculation of any allowance to the taxpayer under paragraph (g) of section eleven, whether in the current or any previous year of assessment: Provided further that in the case of any such building the erection of which has or is commenced on or after 4 June 1988 and any such improvements which have or are commenced on or after that date the allowance under this subsection shall be increased to 5 per cent of the cost (after the set­off of any amount as provided in subsection (6)) to the taxpayer of such building or improvements: Provided further that to the extent to which any portion of any such improvements which have or are commenced on or after 17 March 1993 does not extend the existing exterior framework of the building, the allowance under this subsection shall be increased to 20 percent of the cost of such portion.

[Sub­section (1) amended by section 13(a) of Act 90 of 1988, by section 13(1)(c) of Act 13 of 1993 and by section 21 of Act 34 of 2019]

(1A)  ……….

[Subsection (1A) inserted by section 31 of Act 7 of 2010 and deleted by section 33 of Act 23 of 2018 effective on 17 January 2019]

(2)     . . . . . .

[Subsection (2) deleted by section 14 of Act 42 of 2024]

(3)     . . . . . .

[Subsection (3) amended by section 18(1)(a) of Act 55 of 1966, substituted by section 14(1) of Act 95 of 1967, amended by section 46 of Act 97 of 1986 and by section 33(c) of Act 23 of 2018(English only) and deleted by section 14 of Act 42 of 2024]

(3A)  Where any building in respect of which any deduction of an allowance is claimed in terms of this section was during any previous financial year or years used by the taxpayer for the purposes of any trade carried on by such taxpayer, the receipts and accruals of which were not included in the income of such taxpayer during such year or years, any deduction which could have been allowed during such previous year or years in terms of this section shall for the purposes of this section be deemed to have been allowed during such previous year or years as if the receipts and accruals of such trade had been included in the income of such taxpayer.

(4)     . . . . . .

[Subsection (4) amended by section 46 of Act 97 of 1986 and deleted by section 14 of Act 42 of 2024]

(5)     The deductions which may be allowed or deemed to have been allowed in terms of this section and any other provision of this Act in respect of the cost of any building or improvement shall not in the aggregate exceed the amount of such cost.

[Subsection (5) substituted by section 21 of Act 59 of 2000 and section 31 of Act 25 of 2015 effective on 1 January 2016]

(6)

(a)     If in any year of assessment there falls to be included in a taxpayer’s income in terms of paragraph (a) of subsection (4) of section 8 an amount which has been recovered or recouped in respect of any allowance made under the preceding provisions of this section or the provisions of subsection (1) of section 13, as applied by subsection (4) of that section, or the corresponding provisions of any previous Income Tax Act, in respect of any building or portion thereof or any improvements or portion thereof, so much of the amount so recovered or recouped as is set off against the cost of a further building as hereinafter provided shall, notwithstanding the provisions of the said paragraph, at the option of the taxpayer and provided the taxpayer erects within twelve months or such further period as the Commissioner may allow from the date on which the event giving rise to the recovery or recoupment occurred, any other building in respect of the cost of which an allowance is made under the preceding provisions of this section, not be included in the taxpayer’s income for that year of assessment, but shall be set off against so much of the cost to the taxpayer of such further building erected by the taxpayer as remains after the deduction of any portion of that cost in respect of which an allowance has been granted to the taxpayer under paragraph (g) of section eleven, whether in the current or any previous year of assessment.


(b)     Where any allowance has been made under the provisions of subsection (1) of section 13, as applied by subsection (4) of that section, in respect of the cost of any building, any amount which has in terms of subsection (3) of that section been set off against such cost, shall be set off against such cost in the calculation of any allowance made in respect thereof under the preceding provisions of this section.

(7)     ……….

(8)     ……….

(9)     . . . . . .

[Subsection (9) added by section 14(1) of Act 88 of 1971, amended by section 14(a) of Act 69 of 1975, deleted by section 13 of Act 94 of 1983, added by section 13(b) of Act 90 of 1988, amended by section 12(c) of Act 21 of 1994 and deleted by section 14 of Act 42 of 2024]

“Shipbuilding structure” definition of section 13 of ITA

Posted on by admin_kmos

“shipbuilding structure” means any launching way, fitting–out quay or craneway which is not part of a building.

[Section 13 amended by section 30 of Act 60 of 2001 and by section 13(1)(a) of Act 42 of 2024. Subsection (9) added by section 17(1)(f) of Act 55 of 1966 and substituted by section 13(1)(c) of Act 88 of 1971]

Section 13 (ITA) – Deductions in respect of buildings used in the process of manufacture

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13     Deductions in respect of buildings used in process of manufacture or research and development

 

(1)     Notwithstanding anything to the contrary contained in paragraph (ii) of the proviso to section 11(e), there shall be allowed to be deducted from the income of the taxpayer an allowance equal to two per cent of the cost (after the deduction of any amount referred to in subsection (3) or the corresponding provisions of any previous Income Tax Act) to the taxpayer of-

 

(a)     ……….

 

(b)     any building the erection of which was commenced by the taxpayer on or after the fifteenth day of March, 1961, if such building was wholly or mainly used by the taxpayer during the year of assessment for the purpose of carrying on therein in the course of his trade (other than mining or farming) any process of manufacture, research and development or any other process which is of a similar nature, or such building was let by the taxpayer and was wholly or mainly used by a tenant or subtenant for the purpose of carrying on therein any process as aforesaid in the course of any trade (other than mining or farming);

[Paragraph (b) substituted by section 40(1)(a) of Act 24 of 2011, by section 30 of Act 25 of 2015 and by section 13(1)(c) of Act 42 of 2024]

 

(c)     ………..

 

(d)     any building the erection of which was commenced on or after the fifteenth day of March, 1961, if such building has been acquired by the taxpayer by purchase from any other person who was entitled to an allowance in respect thereof under paragraph (b) or this paragraph or the corresponding provisions of any previous Income Tax Act, and such building was wholly or mainly used during the year of assessment by the taxpayer for the purpose of carrying on therein in the course of his trade (other than mining or farming) a process of manufacture, research and development or any other process which is of a similar nature, or such building was let by the taxpayer and was wholly or mainly used by a tenant or subtenant for the purpose of carrying on therein in the course of any trade (other than mining or farming) any process as aforesaid;

[Paragraph (d) substituted by section 40(1)(b) of Act 24 of 2011, by section 30 of Act 25 of 2015 and by section 13(1)(c) of Act 42 of 2024]

 

(dA)  any building that has never been used, if such building has been acquired by the taxpayer by purchase from any other person and such building was wholly or mainly used during the year of assessment by the taxpayer for the purpose of carrying on therein in the course of his trade (other than mining or farming) a process of manufacture, research and development or any other process which is of a similar nature, or such building was let by the taxpayer and was wholly or mainly used by a tenant or subtenant for the purpose of carrying on therein in the course of any trade (other than mining or farming) any process as aforesaid; or

[Paragraph (dA) inserted by section 13 of Act 19 of 2001 and substituted by section 40 of Act 24 of 2011 and section 30 of Act 25 of 2015 effective on 8 January 2016]

 

(e)       . . . . . . 

[Paragraph (e) deleted by section 13(1)(d) of Act 42 of 2024]

 

(f)      any improvements (other than repairs) to any building, if such improvements were commenced on or after the first day of April, 1971, and such building was wholly or mainly used by the taxpayer during the year of assessment for the purpose of carrying on therein in the course of his trade (other than mining or farming) any process of manufacture, research and development or any other process which is of a similar nature, or such building was let by the taxpayer and was wholly or mainly used by a tenant or subtenant for the purpose of carrying on therein any process as aforesaid in the course of any trade (other than mining or farming):

[Paragraph (f) substituted by section 37 of Act 15 of 2016 and by section 13(1)(e) of Act 42 of 2024]

 

Provided that –

 

(a)     no allowance shall be made under this subsection in respect of such portion of the cost of any building the erection of which was commenced on or after 1 July 1961, or any improvements effected thereto as has been taken into account in the calculation of any allowance to the taxpayer under section 11(g) whether in the current or any previous year of assessment;

 

(b)     in the case of any such building the erection of which has or is commenced on or after 1 January 1989 and any such improvements which have or are commenced on or after that date the allowance under this subsection shall be increased to 5 per cent of the cost (after the deduction of any amount as provided in subsection (3)) to the taxpayer of such building or improvements; and

[Paragraph (b) substituted by section 22(a) of Act 53 of 1999 and by section 13(1)(f) of Act 42 of 2024]

 

(c)     ……….

 

(d)     in the case of an improvement completed by a taxpayer as contemplated in section 12N, the expenditure incurred by the taxpayer to complete the improvement shall for the purposes of this section be deemed to be the cost to the taxpayer of any building or improvement contemplated in this subsection.

[Subsection (1) amended by section 12(a) of Act 90 of 1962 and by section 17(1)(a) of Act 55 of 1966, substituted by section 13(1)(a) of Act 88 of 1971 and amended by section 10(1)(a) of Act 96 of 1985, by section 12 of Act 90 of 1988, by section 11(1) of Act 46 of 1996 and by section 13(1)(b) of Act 42 of 2024. Paragraph (d) added by section 30(1) of Act 7 of 2010 effective on the date of promulgation of that Act, 2 November, 2010]

 

(1A)  Where any building in respect of which any deduction of an allowance is claimed in terms of this section was during any previous financial year or years used by the taxpayer for the purposes of any trade carried on by such taxpayer, the receipts and accruals of which were not included in the income of such taxpayer during such year or years, any deduction which could have been allowed during such previous year or years in terms of this section shall for the purposes of this section be deemed to have been allowed during such previous year or years as if the receipts and accruals of such trade had been included in the income of such taxpayer.

 

(2)     The aggregate of the allowances allowed under subsection (1) or the corresponding provisions of any previous Income Tax Act, or deemed to have been allowed in terms of subsection (1A), in respect of any building or improvements shall not exceed the cost (after the deduction of any amount referred to in subsection (3) or the corresponding provisions of any previous Income Tax Act) of such building or improvements, as the case may be, less the aggregate of any allowances made to the taxpayer in respect of such building or improvements, as the case may be, under section 11(g) or the corresponding provisions of any previous Income Tax Act.

[Subsection (2) amended by section 12(b) of Act 90 of 1962 and substituted by section 13(1)(a) of Act 88 of 1971, by section 10(1)(b) of Act 96 of 1985, by section 20(b) of Act 59 of 2000 and by section 13(1)(g) of Act 42 of 2024]

 

(2A)   No deduction shall be allowed under this section in respect of any asset in respect of which a deduction has been granted to the taxpayer under section 12V.

[Subsection (2A) inserted by section 13(1)(h) of Act 42 of 2024 effective on 1 March, 2026 and applicable in respect of buildings or improvements brought into use on or after that date]

 

(3)     If in any year of assessment there falls to be included in a taxpayer’s income in terms of paragraph (a) of section 8(4) an amount which has been recovered or recouped in respect of any allowance made under subsection (1) or the corresponding provisions of any previous Income Tax Act in respect of any building or improvements, such portion of the amount so recovered or recouped as is set off against the cost of a further building as hereinafter provided shall, notwithstanding the provisions of the said paragraph, at the option of the taxpayer and provided the taxpayer purchases or erects within twelve months or such further period as the Commissioner may allow from the date on which the event giving rise to the recovery or recoupment occurred, any other building to which the provisions of subsection (1) apply, not be included in the taxpayer’s income for that year of assessment, but shall be set off against so much of the cost to the taxpayer of that further building purchased or erected by the taxpayer as remains after the deduction of any portion of such cost in respect of which an allowance has been granted to the taxpayer under section 11(g), whether in the current or any previous year of assessment.

 

(4)     ……….

 

(5)    ……….

 

(6)     ……….

 

(7)     ……….

 

(8)     The provisions of this section shall mutatis mutandis apply with reference to any permanent shipbuilding structure the erection of which was commenced by the taxpayer on or after the first day of January, 1966, and the cost of improvements (other than repairs) effected thereto if such structure was wholly or mainly used during the year of assessment for the purposes of the shipbuilding trade, and for the purposes of this subsection any reference in the said provisions to a building shall be construed as a reference to a shipbuilding structure and any reference therein to improvements to a building shall be construed as a reference to improvements to a shipbuilding structure.