“Exchange difference” definition of section 24I of ITA

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“exchange difference” means the foreign exchange gain or foreign exchange loss in respect of an exchange item during any year of assessment determined by multiplying such exchange item by the difference between –

(a)     the ruling exchange rate on transaction date in respect of such exchange item during that year of assessment, and –

(i)      the ruling exchange rate at which such exchange item is realised during that year of assessment; or

(ii)     the ruling exchange rate at which such exchange item is translated at the end of that year of assessment; or

(b)     the ruling exchange rate at which such exchange item was translated at the end of the immediately preceding year of assessment or at which it would have been translated had this section been applicable at the end of that immediately preceding year of assessment, and –

(i)      the ruling exchange rate at which such exchange item is realised during that year of assessment; or

(ii)     the ruling exchange rate at which such exchange item is translated at the end of that year of assessment;

“Affected contract” definition of section 24I of ITA

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“affected contract” means any foreign currency option contract or forward exchange contract to the extent that the foreign currency option contract or forward exchange contract has been entered into by any person during any year of assessment to serve as a hedge in respect of a debt, where-

(a)     that debt-

(i)      is to be utilised by that person for the purposes of acquiring any asset or for financing any expenditure; or

(ii)     will arise from the sale of any asset or supply of any services,

in terms of an agreement entered into by that person in the ordinary course of the person’s trade prior to the end of the current year of assessment; and

(b)     that debt has not yet been incurred by such person or the amount payable in respect of such debt has not yet accrued during that current year of assessment;

[Definition of “affected forward exchange contract” inserted by section 18 of Act 21 of 1994, substituted by section 13 of Act 36 of 1996, amended by section 35 of Act 30 of 1998 and substituted by section 53 of Act 22 of 2012 and section 42 of Act 17 of 2017 effective on 18 December 2017]

“Acquisition rate” definition of section 24I of ITA

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(1)     For the purposes of this section –

“acquisition rate” means the exchange rate in respect of an exchange item obtained by dividing the amount of the expenditure incurred for the acquisition of such exchange item by the foreign currency amount in respect of such exchange item;

Subsections 2, 3, 4 and 5 of section 24H of ITA

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(2)     Where any trade or business is carried on in partnership, each member of such partnership shall, notwithstanding the fact that he may be a limited partner, be deemed for the purposes of this Act to be carrying on such trade or business.

 

(3)     Notwithstanding anything to the contrary in this Act contained, the amount of any allowance or deduction which may be granted to any taxpayer under any provision of this Act in respect of or in connection with any trade or business carried on by him in a partnership in relation to which he is a limited partner shall not in the aggregate exceed the sum of –

 

(a)     the amount, whether it consists of the taxpayer’s contribution to the partnership or of any other amount, for which the taxpayer is or may be held liable to any creditor of the partnership; and

 

(b)     any income received by or accrued to the taxpayer from such trade or business.

 

(4)     Any allowance or deduction which has been disallowed under the provisions of subsection (3) shall be carried forward and be deemed to be an allowance or deduction to which the taxpayer is entitled in the succeeding year of assessment.

 

(5)

 

(a)     Where any income has in common been received by or accrued to the members of any partnership or foreign partnership, a portion (determined in accordance with any agreement between such members as to the ratio in which the profits or losses of the partnership are to be shared) of such income shall, notwithstanding anything to the contrary contained in any law or the relevant agreement of partnership, be deemed to have been received by or to have accrued to each such member individually on the date upon which such income was received by or accrued to them in common.

 

(b)     Where a portion of any income is under the provisions of paragraph (a) deemed to have been received by or to have accrued to a taxpayer, a portion (determined as aforesaid) of any deduction or allowance which may be granted under the provisions of this Act in the determination of the taxable income derived from such income shall be granted in the determination of the taxpayer’s taxable income so derived.

“Limited partner” definition of section 24H of ITA

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(1)     For the purposes of this section, ‘limited partner’ means any member of a partnership en commandite, an anonymous partnership, any similar partnership or a foreign partnership, if such member’s liability towards a creditor of the partnership is limited to the amount which the member has contributed or undertaken to contribute to the partnership or is in any other way limited.

Section 25D (ITA) – Determination of taxable income in foreign currency

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25D.    Determination of taxable income in foreign currency

(1)     Subject to subsections (2), (3) and (4), any amount received by or accrued to, or expenditure or loss incurred by, a person during any year of assessment in any currency other than the currency of the Republic must be translated to the currency of the Republic by applying the spot rate on the date on which that amount was so received or accrued or expenditure or loss was so incurred.

(2)     Any amounts received by or accrued to, or expenditure incurred by, a person in any currency other than the currency of the Republic which are attributable to a permanent establishment of that person outside the Republic must be determined in the functional currency of that permanent establishment (other than the currency of any country in the common monetary area) and be translated to the currency of the Republic by applying the average exchange rate for the relevant year of assessment.

(2A)  Subsection (2) shall not apply to the extent that-

(a)     the other currency contemplated in that subsection is not the functional currency of that permanent establishment; and

 

(b)     the functional currency is the currency of a country which has an official rate of inflation of 100 per cent or more throughout the relevant year of assessment.

(3)     Notwithstanding subsection (1), a natural person or a trust (other than a trust which carries on any trade) may elect that all amounts received by or accrued to, or expenditure or losses incurred by that person or trust in any currency other than the currency of the Republic, be translated to the currency of the Republic by applying the average exchange rate for the relevant year of assessment.

(4)     Where, during any year of assessment-

(a)     any amount-

 

(i)      is received by or accrued to; or

 

(ii)     of expenditure is incurred by,

a headquarter company in any currency other than the functional currency of the headquarter company; and

(b)     the functional currency of that headquarter company is a currency other than the currency of the Republic,that amount must be determined in the functional currency of the headquarter company and must be translated to the currency of the Republic by applying the average exchange rate for that year of assessment.

(5)       Where, during any year of assessment-

(a)     any amount-

 

(i)      is received by or accrues to; or

 

(ii)     of expenditure is incurred by,

 

a domestic treasury management company in any currency other than the functional currency of the domestic treasury management company; and

(b)     the functional currency of that domestic treasury management company is a currency other than the currency of the Republic,

 

that amount must be determined in the functional currency of the domestic treasury management company and must be translated to the currency of the Republic by applying the average exchange rate for that year of assessment.

(6)       Where, during any year of assessment-

(a)     any amount-

(i)      is received by or accrues to; or

(ii)     of expenditure is incurred by,

an international shipping company in any currency other than the functional currency of the international shipping company; and

(b)     the functional currency of that international shipping company is a currency other than the currency of the Republic,

that amount must be determined in the functional currency of the international shipping company and must be translated to the currency of the Republic by applying the average exchange rate for that year of assessment.

 [Subsection (6) added by section 75 of Act 31 of 2013 and substituted by section 46 of Act 43 of 2014 effective on 1 April 2014]

(7)       Any amounts received by or accrued to, or expenditure incurred by-

(a)     a headquarter company contemplated in subsection (4); or

(b)     a domestic treasury management company contemplated in subsection (5); or

(c)     an international shipping company contemplated in subsection (6),

during any year of assessment in a functional currency that is a currency other than the currency of the Republic must be translated to the currency of the Republic by applying the average exchange rate for the relevant year of assessment.

[Subsection (7) added by section 46 of Act 43 of 2014 effective on 20 January 2015]

Section 25C (ITA) – Income of insolvent estates

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25C.    Income of insolvent estates

 

For the purposes of this Act, and subject to any such adjustments as may be necessary the estate of a person prior to sequestration and that person’s insolvent estate shall be deemed to be one and the same person for purposes of determining-

 

(a)     the amount of any allowance, deduction or set off to which that insolvent estate may be entitled;

 

(b)     any amount which is recovered or recouped by or otherwise required to be included in the income of that insolvent estate; and

 

(c)     any taxable capital gain or assessed capital loss of that insolvent estate.

Subsection 2, 3, 4, 5, 6, 7 and 8 of section 25BB of ITA

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(2)

(a)     There must be deducted from the income for a year of assessment of-

(i)      a REIT; or

(ii)     a controlled company that is a resident,

the amount of any qualifying distribution made by that REIT or that controlled company in respect of that year of assessment if that company is a REIT or a controlled company on the last day of that year of assessment.

(b)     The aggregate amount of the deductions contemplated in paragraph (a) may not exceed the taxable income for that year of assessment of that REIT or that controlled company, before taking into account-

(i)      any deduction in terms of this subsection;

(ii)     any assessed loss brought forward in terms of section 20; and

(iii)    the amount of taxable capital gain included in taxable income in terms of section 26A.

(2A)    For the purposes of calculating the taxable income in respect of a year of assessment of a REIT or a controlled company as contemplated in subsection (2)(b)-

(a)     where-

(i)      a REIT or a controlled company is a beneficiary of a vesting trust that is not a resident; and

(ii)     the trust contemplated in subparagraph (i) is liable for or subject to tax on income in the country in which that trust is established or formed,

so much of any amount of tax on income proved to be payable by that trust to the government of a country other than the Republic as is attributable to the interest of that REIT or controlled company in that trust, without any right of recovery of that tax by any person, other than a right of recovery in terms of any entitlement to carry back losses arising during any year of assessment, limited to the amount of taxable income that is attributable to those amounts, must be allowed to be deducted by that REIT or controlled company before taking into account any deduction in terms of subsection (2)(a).

[Words following subparagraph (ii) substituted by section 48 of Act 15 of 2016 and section 49 of Act 23 of 2018 effective on 17 January 2019]

(b)     there must be allowed as a deduction from the income of that REIT or that controlled company the sum of any taxes on income proved to be payable, by that REIT or that controlled company in respect of any amount 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, limited to the amount of taxable income that is attributable to those amounts, before taking into account any deduction in terms of paragraph (c) and subsection (2)(a);

[Paragraph (b) substituted by section 48(1)(c) of Act 15 of 2016 and amended by section 29(1)(b) of Act 23 of 2020 effective on 1 January, 2021 and applicable in respect of years of assessment commencing on or after that date]

(c)     where during any year of assessment a REIT or controlled company has made a bona fide donation to any organisation as contemplated in section 18A(1)(a) or (b) there must be allowed to be deducted an amount equal to the amount of that donation: Provided that the deduction so allowed may not exceed 10 per cent of the taxable income of that REIT or controlled company after taking into account any deduction in terms of paragraph (a) and (b) but before taking into account any deduction in terms of subsection (2)(a); and

[Paragraph (c) amended by section 29(1)(b) of Act 23 of 2020 effective on 1 January, 2021 and applicable in respect of years of assessment commencing on or after that date]

(d)     where a foreign dividend is received by or accrued to a REIT or controlled company, section 10B(2)(a) must not apply.

[Subsection (2A) inserted by section 50(1)(b) of Act 25 of 2015 effective on 1 January, 2016 and applicable in respect of years of assessment commencing on or after that date. Paragraph (d) added by section 29(1)(b) of Act 23 of 2020 effective on 1 January, 2021 and applicable in respect of years of assessment commencing on or after that date]

(3)       ……….

[Subsection (3) deleted by section 50 of Act 25 of 2015 effective on 1 April 2013]

(4)     A company that is a REIT or a controlled company on the last day of a year of assessment may not deduct by way of an allowance any amount in respect of immovable property in terms of section 11(g), 12B, 12BA, 13, 13bis, 13ter, 13quat, 13quin or 13sex.

[Subsection (4) substituted by section 22(b) of Act 42 of 2024]

(5)     In determining the aggregate capital gain or aggregate capital loss of a company that is a REIT or a controlled company on the last day of a year of assessment for purposes of the Eighth Schedule, any capital gain or capital loss determined in respect of the disposal of-

[Words preceding paragraph (a) substituted by section 45 of Act 43 of 2014 effective on 1 April 2013]

(a)     immovable property of a company that is a REIT or controlled company at the time of the disposal;

[Paragraph (a) substituted by section 45 of Act 43 of 2014 effective on 20 January 2015]

(b)     a share or a linked unit in a company that is a REIT at the time of that disposal; or

(c)     a share or a linked unit in a company that is a property company at the time of that disposal,

must be disregarded.

(6)

(a)     Any amount of interest received by or accrued to a person during a year of assessment in respect of a debenture forming part of a linked unit held by that person in a company that is-

(i)      a REIT or a controlled company that is a resident must be deemed to be a dividend received by or accrued to that person; or

(ii)     a controlled company that is a foreign company must be deemed to be a foreign dividend received by or accrued to that person,

during that year of assessment.

[Paragraph (a) substituted by section 45 of Act 43 of 2014, section 50 of Act 25 of 2015 and section 48 of Act 15 of 2016 effective on 19 January 2017]

(b)     Any amount of interest received by or accrued to a company that is a REIT or a controlled company that is a resident during a year of assessment in respect of a debenture forming part of a linked unit held by that company in a property company must if the property company is a resident be deemed to be a dividend, or if the property company is a foreign company be deemed to be a foreign dividend, received by or accrued to that company during that year of assessment if that company is a REIT or a controlled company that is a resident at the time of that receipt or accrual.

[Paragraph (b) substituted by section 45 of Act 43 of 2014 and section 50 of Act 25 of 2015 effective on 1 April 2013]

(c)     Any amount of interest paid in respect of a linked unit in a REIT or a controlled company must be deemed-

(i)      to be a dividend paid by that REIT or that controlled company that is a resident for the purposes of the dividends tax contemplated in Part VIII of this Chapter; and

[Subparagraph (i) substituted by section 48 of Act 15 of 2016 effective on 1 January 2017, applies in respect of amounts paid on or after that date]

(ii)     not to be an amount of interest paid by that REIT or that controlled company for the purposes of the withholding tax on interest contemplated in Part IVB of this Chapter.

(7)     If during any year of assessment a company that is a REIT ceases to be a REIT and that company does not qualify as a controlled company or a company that is a controlled company ceases to be a controlled company and that company does not qualify as a REIT-

(a)     that year of assessment of that REIT or controlled company is deemed to end on the day preceding the date on which that company ceases to be either a REIT or a controlled company; and

[Paragraph (a) substituted by section 45 of Act 17 of 2017 effective on 18 December 2017]

(b)     the following year of assessment of that company is deemed to commence on the day on which that company ceased to be either a REIT or a controlled company.

[Paragraph (b) substituted by section 45 of Act 17 of 2017 effective on 18 December 2017]

(8)     If a REIT or a controlled company cancels the debenture part of a linked unit and capitalises the issue price of the debenture to stated capital for the purposes of financial reporting in accordance with IFRS-

(a)     the cancellation of the debenture must be disregarded in determining the taxable income of the holder of the debenture and of the REIT or controlled company;

(b)     expenditure incurred by the holder of a share in the REIT or controlled company in respect of the shares is deemed to be equal to the amount of the expenditure incurred in respect of the acquisition of that linked unit; and

[Paragraph (b) substituted by section 45 of Act 43 of 2014 effective on 1 April 2013]

(c)     the issue price of the cancelled debenture must be added to the contributed tax capital of the class of shares that forms part of the linked unit.