“Rental income” definition of section 25BB of ITA

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“rental income” means an amount calculated in accordance with the formula-

RI = PI + EG

in which formula-

(a)       “RI” represents the amount to be determined;

(b)       “PI” represents the aggregate of all amounts received or accrued-

(i)  in respect of the use of immovable property, including a penalty or interest in respect of late payment of any such amount;

(ii) as a dividend (other than a dividend contemplated in paragraph (b) of the definition of “dividend”) from a company that is a REIT at the time of the distribution of that dividend;

(iii)    as a qualifying distribution from a company that is a controlled company at the time of that distribution;

(iv)    as a dividend or foreign dividend from a company that is a property company at the time of that distribution; and

(v)     any amount recovered or recouped in terms of section 8(4) in respect of an amount of an allowance previously deducted in terms of section 11(g), 12B, 12BA, 13, 13bis, 13ter, 13quat, 13quin or 13sex; and

[Subparagraph (v) substituted by section 22(a) of Act 42 of 2024]

(c)      “EG” represents the total of foreign exchange gains contemplated in the definition of “exchange difference” in section 24I(1), determined in terms of that section in respect of the amounts referred to in paragraph (b) that constitute exchange items or any exchange item serving as a hedge in respect of amounts referred to in that paragraph.

[Definition of “rental income” amended by section 48(1)(a) of Act 15 of 2016 and substituted by section 32 of Act 34 of 2019]

“Qualifying distribution” definition of section 25BB of ITA

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“qualifying distribution”, in respect of a year of assessment of a company that is a REIT or a controlled company as at the end of a year of assessment, means any dividend (other than a dividend contemplated in paragraph (b) of the definition of “dividend”) paid or payable in respect of an equity share, or interest incurred in respect of a debenture forming part of a linked unit in that company, if the amount thereof is determined with reference to the financial results of that company as reflected in the financial statements prepared for that year of assessment if-

[Definition of “qualifying distribution” amended by section 45(a) of Act 17 of 2017 and by section 29(1)(a) of Act 23 of 2020 effective on 1 January, 2021 and applicable in respect of years of assessment commencing on or after that date]

(a)     that year of assessment is the first year of assessment and at least 75 per cent of the gross income received by or accrued to a company during that first year of assessment that the company qualifies as a REIT or controlled company, consists of rental income; and

[Paragraph (a) substituted by section 50 of Act 25 of 2015 and section 49 of Act 23 of 2018 effective on 17 January 2019]

(b)     in any other case, at least 75 per cent of the gross income received by or accrued to a REIT or a controlled company in the preceding year of assessment consists of rental income:

Provided that any amount that must be included in the income of the REIT or controlled company in terms of section 9D(2) must not be included in the gross income of the REIT or controlled company in respect of that year of assessment for the purposes of this definition;

“Property company” definition of section 25BB of ITA

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‘property company’ means a company-

(a)     in which 20 per cent or more of the equity shares or linked units are held by a REIT or a controlled company (whether alone or together with any other company forming part of the same group of companies as that REIT or that controlled company); and

(b)     of which at the end of the previous year of assessment 80 per cent or more of the value of the assets, reflected in the annual financial statements prepared in accordance with the Companies Act or IFRS for the previous year of assessment, is directly or indirectly attributable to immovable property;

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

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

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

 

(1)     Any amount, other than an amount of a capital nature, received by or accrued to any portfolio of a collective investment scheme, other than a portfolio of a collective investment scheme in property, must-

 

(a)     to the extent that the amount is distributed by that portfolio-

 

(i)      to any person who is entitled to the distribution by virtue of the person being a holder of a participatory interest in that portfolio; and

 

(ii)     not later than 12 months after its accrual to or, in the case of interest, its receipt by that portfolio;

 

be deemed to have directly accrued to the person on the date of the distribution; and

 

(b)     to the extent that the amount is not distributed as contemplated in paragraph (a) within 12 months after its accrual to, or in the case of interest, its receipt by that portfolio-

 

(i)      be deemed to have accrued to that portfolio on the last day of the period of 12 months commencing on the date of its accrual to or receipt by that portfolio; and

 

(ii)     to the extent that the amount is attributable to a dividend received by or accrued to that portfolio, be deemed to be income of that portfolio.

 

(2)     Where a portfolio of a hedge fund collective investment scheme is constituted as a partnership any amount allocated by that portfolio to the partners in that partnership must for the purposes of subsection (1)(a) be treated as having been distributed by that portfolio to the partners in that partnership by virtue of those partners being holders of participatory interests in that portfolio.

Section 25B (ITA) – Income of trusts and beneficiaries of trusts

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25B.     Taxation of trusts and beneficiaries of trusts

[Heading amended by section 28(a) of Act 23 of 2020]

 

(1)     Any amount (other than an amount of a capital nature which is not included in gross income or an amount contemplated in paragraph 3B of the Second Schedule) received by or accrued to or in favour of any person during any year of assessment in his or her capacity as the trustee of a trust, shall, subject to the provisions of section 7(2) to (8),-

 

(a)     where that trust is a resident, to the extent to which that amount has been derived for the immediate or future benefit of any ascertained beneficiary, who is a resident and has a vested right to that amount during that year, be deemed to be an amount which has accrued to that beneficiary, and to the extent to which that amount is not so derived, be deemed to be an amount which has accrued to that trust; or

 

(b)     where that trust is not a resident, to the extent to which that amount has been derived for the immediate or future benefit of any ascertained beneficiary, who has a vested right to that amount during that year, be deemed to be an amount which has accrued to that beneficiary, and to the extent to which that amount is not so derived, be deemed to be an amount which has accrued to that trust.

[Subsection (1) substituted by section 28(b) of Act 23 of 2020, by section 29(1)(a) of Act 17 of 2023 and by section 24(1) of Act 5 of 2026 effective on 1 March, 2026 and applicable in respect of years of assessment commencing on or after that date]

 

(2)     Where a beneficiary who is a resident has acquired a vested right to any amount referred to in subsection (1) in consequence of the exercise by the trustee of a discretion vested in him or her in terms of the relevant deed of trust, agreement or will of a deceased person, that amount shall for the purposes of that subsection be deemed to have been derived for the benefit of that beneficiary.

[Subsection (2) substituted by section 29(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]

 

(2A)  Where during any year of assessment any resident acquires any vested right to any amount representing capital of any trust which is not a resident, that amount must be included in the income of that resident in that year, if –

 

(a)     that capital consists of or is derived, directly or indirectly, from any receipts and accruals of such trust which would have constituted income if such trust had been a resident, in any previous year of assessment during which that resident had a contingent right to that amount; and

[Paragraph (a) substituted by section 48 of Act 23 of 2018 effective on 1 March 2019, applies in respect of any year of assessment commencing on or after that date]

 

(b)     that amount has not been subject to tax in the Republic in terms of this Act.

 

(2B)  In determining, for purposes of subsection (2A), whether an amount received by or that accrued to a trust which is not a resident would have constituted income had that trust been a resident, the provisions of section 10B(2)(a) must be disregarded in respect of an amount received or accrued 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 trust whether alone or together with any one or more persons that are connected persons in relation to that trust; and

 

(bb)   that resident or any person that is a connected person in relation to that resident is a connected person in relation to that trust; 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 acquired the vested right to the amount referred to in subsection (2A); or

 

(bb)   a resident who is a connected person in relation to the resident referred to in item (aa).

[Subsection (2B) inserted by section 48 of Act 23 of 2018 effective on 1 March 2019, applies in respect of any year of assessment commencing on or after that date]

 

(3)     Any deduction or allowance which may be made under the provisions of this Act in the determination of the taxable income derived by way of any amount referred to in subsection (1), must, to the extent to which that amount is under that subsection deemed to be an amount which has accrued to –

 

(a)     a beneficiary, be deemed to be a deduction or allowance which may be made in the determination of the taxable income derived by that beneficiary; and

 

(b)     the trust, be deemed to be a deduction or allowance which may be made in the determination of the taxable income derived by that trust.

 

(4)     The deduction or allowance contemplated in subsection (3) which is deemed to be made in the determination of the taxable income of a beneficiary of a trust during any year of assessment, shall be limited to so much of the amount deemed to have been received by or accrued to that beneficiary in terms of subsection (1), as is included in the income of that beneficiary during that year of assessment.

 

(5)     The amount by which the sum of the deductions and allowances contemplated in subsection (4) exceeds the amount included in the income of the beneficiary during a year of assessment as contemplated in that subsection –

 

(a)     is deemed to be a deduction or allowance which may be made in the determination of the taxable income of the trust during that year: Provided that the sum of those deductions and allowances shall be limited to the taxable income of that trust during that year of assessment as calculated before allowing any deduction or allowance under this subsection; or

 

(b)     where the trust is not subject to tax in the Republic, must be carried forward and be deemed to be a deduction or allowance which may be made in the determination of the taxable income derived by that beneficiary by way of amounts referred to in subsection (1) during the immediately succeeding year of assessment.

 

(6)     The amount by which the sum of the deductions and allowances contemplated in subsection (4) exceeds the sum of the amount included in the income of the beneficiary as contemplated in subsection (4) and the taxable income of the trust as contemplated in subsection (5)(a), must be deemed to be a deduction or allowance for purposes of subsection (3), which may be made in the determination of the taxable income derived by that beneficiary by way of any amount referred to in subsection (1) during the immediately succeeding year of assessment.

 

(7)     Subsections (4), (5) and (6) do not apply in respect of any amount which is deemed to have accrued to any beneficiary in terms of subsection (1), where that beneficiary is not subject to tax in the Republic on that amount.

Section 25A (ITA) – Determination of taxable income of permanently separated spouses

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25A.    Determination of taxable incomes of permanently separated spouses

Where during any period of assessment any taxpayer who is married in community of property has lived apart from his or her spouse in circumstances which indicate that the separation is likely to be permanent, his or her taxable income for such period shall be determined at the amount at which such taxpayer’s taxable income would have been determined under the provisions of this Act if such taxpayer had not been married in community of property.

 [Section 25A inserted by section 21 of Act 55 of 1966, amended by section 271 of Act 28 of 2011 and substituted by section 49 of Act 25 of 2015 effective on 8 January 2016]

Section 25 (ITA) – Taxation of deceased estates

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25.    Taxation of deceased estates

(1)     Any-

(a)     income received by or accrued to or in favour of any person in his or her capacity as the executor of the estate of a deceased person; and

(b)     amount received or accrued as contemplated in paragraph (a) which would have been income in the hands of that deceased person had that amount been received by or accrued to or in favour of that deceased person during his or her lifetime,

must be treated as income of the deceased estate of that deceased person.

(2)     Where the deceased estate of a person acquires an asset from that person, that deceased estate must, if that asset is an asset-

(a)     other than an asset contemplated in section 9HA(2), be treated as having acquired that asset for an amount of expenditure incurred equal to the amount contemplated in section 9HA(1); and

[Paragraph (a) substituted by section 47 of Act 15 of 2016 effective on 1 March 2016, applies in respect of a person who dies on or after that date]

(b)     contemplated in section 9HA(2), be treated as having acquired that asset for an amount of expenditure incurred equal to the amount contemplated in section 9HA(2)(b).

(3)     Where the deceased estate of a person disposes of an asset to an heir or legatee of that person-

(a)     that deceased estate must be treated as having disposed of that asset for an amount received or accrued equal to the amount of expenditure incurred by the deceased estate in respect of that asset;

[Paragraph (a) amended by section 20(1) 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]

(b)     the heir or legatee must be treated as having acquired that asset for an amount of expenditure incurred equal to the expenditure incurred by the deceased estate in respect of that asset; and

[Paragraph (b) amended by section 20(1) 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]

(c)     that deceased estate must be treated as having disposed of that asset on the earlier of the date on which that asset is disposed of or on which the liquidation and distribution account becomes final.

[Paragraph (c) added by section 20(1) 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]

(4)

(a)     This subsection must be applied in respect of an asset acquired by a surviving spouse of a deceased person as contemplated in section 9HA(2) for purposes of determining the amount of any-

(i)      allowance or deduction to which that spouse may be entitled or that is to be recovered or recouped by or included in the income of that spouse in respect of that asset; or

(ii)     the amount of any capital gain or capital loss in respect of a disposal of that asset by that spouse.

(b)     The surviving spouse contemplated in paragraph (a) must be treated as one and the same person as the deceased person and deceased estate with respect to-

(i)      the date of acquisition of that asset by that deceased person;

(ii)     any valuation of that asset effected by that deceased person as contemplated in paragraph 29(4) of the Eighth Schedule;

(iii)    the amount of any expenditure and the date on which and the currency in which that expenditure was incurred in respect of that asset-

(aa)   by that deceased person as contemplated in section 9HA(2)(b); and

(bb)   by that deceased estate, other than the expenditure contemplated in section 9HA(2)(b);

(iv)    the manner in which that asset had been used by the deceased person and the deceased estate; and

(v)     any allowance or deduction allowable in respect of that asset to the deceased person and the deceased estate.

[Subsection (4) substituted by section 47 of Act 15 of 2016 effective on 1 March 2016, applies in respect of a person who dies on or after that date]

(5)     A deceased estate must-

(a)     other than for the purposes of section 6, section 6A, section 6B and section 6C, be treated as if that estate were a natural person; and

[Paragraph (a) substituted by section 28(1)(a) of Act 17 of 2023 effective on 1 March, 2023 and applicable in respect of years of assessment commencing on or after that date]

(b)     if the deceased person at the time of his or her death was—

(i)      a resident, be treated as if that estate were a resident; and

(ii)     a non-resident, be treated as if that estate were a non-resident.

[Subsection (5) substituted by section 47 of Act 23 of 2018. Paragraph (b) substituted by section 28(1)(b) of Act 17 of 2023]

(6)    Where-

(a)     the tax determined in terms of this Act, which relates to the taxable capital gain derived by a deceased person from assets disposed of by that person as contemplated in section 9HA, exceeds 50 per cent of the net value of the estate of that person, as determined in terms of section 4 of the Estate Duty Act for purposes of that Act, before taking into account the amount of that tax so determined; and

(b)     the executor of the estate is required to dispose of any asset of the estate for purposes of paying the amount of the tax contemplated in paragraph (a),

any heir or legatee of the estate who would have been entitled to that asset contemplated in paragraph (b) had there been no liability for tax, may elect that that asset be distributed to that heir or legatee if the amount of tax which exceeds 50 per cent of that net value be paid by that heir or legatee within a period of three years after the date that the estate has become distributable in terms of section 35(12) of the Administration of Estates Act, 1965 (Act No. 66 of 1965).

(7)     Any amount of tax payable by an heir or legatee as contemplated in subsection (6), becomes a debt due to the state and must be treated as an amount of tax chargeable in terms of this Act which is due by that person.

[Section 25 substituted by section 22 of Act 113 of 1993 and section 48 of Act 25 of 2015 effective on 1 March 2016]

Subsection 2 and 3 of section 24O of ITA

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(2)     Subject to subsection (3), where during any year of assessment any interest is incurred by a company in respect of a debt issued, assumed or used by that company-

(a)     for the purpose of financing the acquisition by that company, in terms of an acquisition transaction, of an equity share; or

(b)     in substitution for a debt issued, assumed or used as contemplated in paragraph (a),

the interest incurred by that company in respect of that debt must, to the extent to which the amount thereof relates to a period during which-

(i)      that company held that equity share; and

(ii)     that equity share constituted a qualifying interest in an operating company, as determined-

(aa)   in the case of an equity share held by that company at the end of that year, at the date on which that year ends; or

(bb)   if that equity share was disposed of by that company during that year, at the date of that disposal,

be deemed to have been so incurred in the production of the income of that company and laid out or expended by that company for the purposes of trade.

[Subsection (2) substituted by section 46 of Act 23 of 2018 effective on 1 January 2019, applies in respect of years of assessment ending on or after that date]

(3)     An equity share in a company constitutes a qualifying interest in an operating company if that equity share is an equity share on the date referred to in subsection (2) in-

(a)     a company that qualified as an operating company in its latest year of assessment that ended prior to or on the date referred to in subsection (2); or

(b)     any other company, to the extent that the value of that equity share is derived from an equity share or equity shares held by that company in a company or companies described in paragraph (a)-

(i)      in relation to which that company is a controlling group company; and


(ii)     that form part, with that company, of a group of companies, as defined in section 41(1):

Provided that if at least 90 per cent of the value of that equity share is so derived, that equity share must be treated as an equity share in an operating company.

[Sub­section (3) amended by section 46(1) of Act 23 of 2018 and substituted by section 31(1)(b) of Act 34 of 2019 deemed effective on 1 January, 2019 and applicable in respect of years of assessment ending on or after that date]

(4)       ……….

[Subsection (4) deleted by section 46 of Act 23 of 2018 effective on 1 January 2019, applies in respect of years of assessment ending on or after that date]

(5)     Where a company that acquired equity shares in a controlling group company in relation to an operating company as contemplated in paragraph (b) of the definition of “acquisition transaction” acquires the equity shares held by that controlling group company in that operating company in terms of-

(a)     an unbundling transaction as defined in section 46(1)(a) in respect of which section 46 was applied; or

(b)     a liquidation distribution as defined in section 47(1)(a) in respect of which section 47 was applied, those equity shares must for purposes of subsection (2) be treated-

(i)      as having been acquired by that company in terms of paragraph (a) of the definition of “acquisition transaction”; and


(ii)     as constituting a qualifying interest in an operating company to the extent to which the value of the equity shares in the controlling group company from which the equity shares in the operating company were acquired was derived from the value of the equity shares in the operating company so acquired.

[Sub­section (5) added by section 31(1)(c) of Act 34 of 2019 deemed to have come into operation on 1 January, 2019 and applicable in respect of years of assessment ending on or after that date]

[Section 24O inserted by section 57 of Act 22 of 2012, amended by section 72 of Act 31 of 2013 and substituted by section 46 of Act 25 of 2015 effective on 1 January 2016]