20.

(1)     If a taxpayer (other than a company) who derives income from farming operations makes an election as provided in subparagraph (6) and if –

(a)     the taxpayer’s income was in whole or in part derived from farming operations carried on on any land acquired-

(i)      by the State (including the Railways Administration and any provincial administration) or any local authority as defined in section 1 of the Expropriation Act, 1975 (Act No. 63 of 1975); or

(ii)     by any juristic person or body mentioned in section 3(2) of the said Act, if such juristic person or body acquired the land by expropriation or, where the owner of the land agreed to dispose of it, the Minister referred to in subparagraph (6)(b)(ii) has given a certificate as contemplated therein;

(b)     in consequence of the acquisition of such land as aforesaid the farming undertaking on such land (hereinafter referred to as the undertaking) has been or is being wound up; and

(c)     the taxpayer’s income for any year of assessment (being the year of assessment during which the said land was acquired as aforesaid or the first or the second year of assessment succeeding the first-mentioned year of assessment) includes any abnormal farming receipts or accruals referred to in subparagraph (2) which relate to the aforesaid farming operations,

the normal tax chargeable (as determined before the deduction of any rebate) in respect of the taxpayer’s taxable income for such year of assessment shall, notwithstanding any other provisions of this Act to the contrary, be determined at an amount equal to the sum of-

(i)      an amount equal to the taxpayer’s excess farming profits for the year of assessment (as determined in accordance with subparagraph (3)(a)) multiplied by the relevant rate of tax fixed for the year of assessment in terms of section 5(2) in respect of the first rand of taxable income; and

(ii)     an amount equal to the amount of normal tax (as determined before the deduction of any rebate) which would have been payable by the taxpayer in respect of the year of assessment if his or her taxable income for that year had been an amount equal to the balance of his or her taxable income for that year (as determined in accordance with, subparagraph (4)).

[Subparagraph (1) amended by section 31 of Act 103 of 1976, section 26 of Act 104 of 1980, section 30 of Act 91 of 1982, section 43 of Act 129 of 1991, section 45 of Act 8 of 2007 and section 271 of Act 28 of 2011, substituted by section 82 of Act 25 of 2015 effective on 8 January 2016]

(1A)  Where the land referred to in subparagraph (1) was acquired as contemplated in item (a) of that subparagraph within the period of twelve months after the owner accepted an offer to purchase the land, it shall be deemed for purposes of that subparagraph that such land was acquired on the date on which the offer was accepted.

[Subparagraph (1A) inserted by section 25 of Act 113 of 1977, substituted by section 82 of Act 25 of 2015 effective on 8 January 2016]

(2)     For the purposes of subparagraph (1)(c), the taxpayer’s abnormal farming receipts or accruals for any year of assessment referred to in subparagraph (1)(c) shall be deemed to be such amounts as consist of-

 

(a)     any amounts derived from disposals, in the course of the winding-up of the undertaking, of livestock normally held for the purposes of the undertaking; or

(b)     any amounts derived from the disposal of any plantation together with the land referred to in subparagraph (1)(a) or from the disposal in the course of the winding-up of the undertaking of any plantation on such land or any forest produce from such plantation.

[Subparagraph (2) substituted by section 82 of Act 25 of 2015 effective on 8 January 2016]

(3)

(a)     For the purposes of this paragraph the taxpayer’s excess farming profits for any year of assessment referred to in subparagraph (1) (c) shall be deemed to be the sum of the taxpayer’s excess livestock profits (if any) for such year, as determined under item (b), and the taxpayer’s excess plantation farming profits (if any) for such year, as determined under item (g): Provided that the amount of such excess farming profits shall not be determined at an amount exceeding the amount of the taxpayer’s taxable income for such year.

(b)     The taxpayer’s excess livestock profits for such year shall be so much of the sum of the amounts referred to in subparagraph (2) (a) which have been derived by the taxpayer during such year as does not exceed the taxpayer’s abnormal livestock profits for such year, as determined under item (c).

(c)     The taxpayer’s abnormal livestock profits for such year shall be the amount by which his livestock profits for such year, as determined under item (d) or (f), exceed his average livestock profits (as determined under item (e) or (f)) for the years of assessment (but not exceeding five years of assessment) which immediately precede the said year and during which the undertaking was carried on.

(d)     For the purposes of this subparagraph, the taxpayer’s livestock profits for any year of assessment shall be the amount by which the sum of the amounts included in his income from farming for such year in respect of disposals of livestock during such year and the value (as determined under this Schedule) of the livestock held and not disposed of by him at the end of such year exceeds the sum of the amounts allowed to be deducted from such income in respect of livestock acquired by him during such year and the value (as determined under this Schedule) of the livestock held and not disposed of by him at the beginning of such year, and the taxpayer’s livestock loss for such year shall be determined accordingly.

(e)     The taxpayer’s average livestock profits for the years of assessment referred to in item (c) shall be the sum of his livestock profits for the said years, as determined under item (d) (reduced by any livestock loss as determined under that item in respect of any such years), divided by the number of such years of assessment.

(f)     If by reason of disposals of livestock otherwise than in the ordinary course of farming or because of any unusual circumstances the taxpayer’s livestock profits or loss for any year of assessment cannot be determined in a satisfactory manner under item (d) or the taxpayer’s average livestock profits for the years of assessment referred to in item (c) cannot be determined in a satisfactory manner under item (e), such livestock profits or loss or such average livestock profits shall be determined by the Commissioner on application by the taxpayer.

[Item (f) substituted by section 82 of Act 25 of 2015 effective on 8 January 2016]

(g)     The taxpayer’s excess plantation farming profits for any year of assessment referred to in item (a) shall be so much of the sum of the amounts referred to in subparagraph (2) (b) which have been derived by the taxpayer during such year, as does not exceed the amount by which the taxpayer’s taxable income (as determined under subparagraph (3) of paragraph 15 before applying paragraph (ii) of the proviso to the said subparagraph) derived during such year from the disposal of plantations and forest produce exceeds the annual average taxable income (as determined under paragraph 15(3)) derived by him from that source over the three years of assessment immediately preceding the said year of assessment.

(4)     For the purposes of this paragraph, the balance of the taxpayer’s taxable income for a year of assessment referred to in subparagraph (1) (c) shall be deemed to be the amount remaining after deducting the taxpayer’s excess farming profits for that year (as determined under subparagraph (3) (a)) from the full amount of the taxpayer’s taxable income for such year, as determined under this Act.

(5)          ……….

(6)

(a)     Any taxpayer (other than a company) may elect for the normal tax payable by the taxpayer to be determined under this paragraph.

(b)     For purposes of such election the following records must be obtained and retained:

(i)      a certificate by the head of the department of State or the administration concerned in the acquisition by the State or such administration of the land referred to in item (a) of subparagraph (1), or where such land was acquired by a local authority, juristic person or body referred to in the said item, by the chief executive officer of such local authority, juristic person or body, to the effect that the State or such administration, local authority, juristic person or body, as the case may be, has acquired such land; and

(ii)     where such land was acquired by such juristic person or body, a certificate by a Minister referred to in section 3 (1) of the Expropriation Act, 1975, to the effect that the land was acquired by such juristic person or body by expropriation or, where the owner of the land agreed to dispose of it, to the effect that, if the owner had not so agreed, steps would have been taken for the expropriation of the land.

19.

(1)     If any taxpayer has made an election as provided in subparagraph (5) which is binding upon him in respect of any period of assessment (hereinafter referred to as the relevant period) during which he or his spouse has carried on farming operations or has derived income from farming operations, and his taxable income derived during the relevant period from farming exceeds his average taxable income from farming as determined in relation to the relevant period in accordance with subparagraph (2), the normal tax chargeable in respect of his taxable income for the relevant period shall, subject to the provisions of section 5 of this Act, be determined in accordance with section 5(10).

(2)    

(a)     where the taxpayer or his spouse carried on farming operations before the commencement of the relevant period, such amount as represents the taxpayer’s annual average taxable income (if any) from farming in respect of the periods of assessment-

(aa)   for which the taxpayer was assessable under this Act and which fall within the period of five years ending on the last day of the relevant period; and

(bb)   during which such farming operations were carried on or farming income was derived by the taxpayer:

Provided that any excess farming profits derived by the taxpayer in any of the said periods of assessment shall not be taken into account in the determination of such annual average taxable income: Provided further that in the case of the estate of an insolvent person any farming operations carried on by such person prior to insolvency, any income derived by him from such operations and any deductions allowable against such income under this Act shall, so far as such estate is concerned, be deemed for the purposes of this item to be respectively operations, income or deductions of such estate, and the annual average taxable income derived by such estate from farming shall be determined accordingly; or

[Item (a) substituted by section 32 of Act 69 of 1975, amended by section 34 of Act 21 of 1995, substituted by section 81 of Act 25 of 2015 effective on 8 January 2016]

(b)     where the taxpayer is a person referred to in subparagraph (5)(a) and did not carry on farming operations before the commencement of the relevant period, an amount equal to two-thirds of such taxable income.

(3)     Where the taxpayer’s assessment for a relevant period has in terms of section 100 of the Tax Administration Act, become final and conclusive, the Commissioner shall not, merely by reason of the fact that the amount determined under subparagraph (2)(a), as the taxpayer’s annual average taxable income from farming in relation to such period is incorrect, be required to make a further assessment upon the taxpayer for such period in terms of section 99 of that Act or to authorize a refund under section 190 of that Act of any tax overpaid in respect of such period, unless it appears that such annual average taxable income from farming should be increased or reduced by at least six hundred rand.

(4)     In determining under this paragraph any amount of normal tax which is or would be chargeable no regard shall be had to the deductions provided for in section 6 of this Act, and nothing in this paragraph contained shall be construed as relieving any person from liability for taxation under this Act upon any portion of that person’s taxable income.

(5)     Any person –

(a)     who is a natural person and whose taxable income for any period of assessment consists of or includes taxable income derived from farming operations carried on by him for his own benefit or by his spouse for such spouse’s own benefit; or

(b)     who is the executor of the estate of any deceased person or the trustee of the insolvent estate of a natural person and who in his capacity as such has during the period of assessment commencing immediately after the death or insolvency of the said person continued farming operations commenced by such deceased or insolvent person prior to his death or insolvency,

may, within three months after the end of such period of assessment or within such further time as the Commissioner may approve and in such form as the Commissioner may prescribe, elect that the normal tax chargeable in respect of his taxable income if item (a) is applicable or the taxable income of such estate if item (b) is applicable, be determined as provided in subparagraph (1), and such election shall be binding upon such natural person or estate, as the case may be, in respect of the said period of assessment and every succeeding period of assessment: Provided that –

(i)      no election may be made under this subparagraph by any person in respect of any period of assessment referred to in item (a) if during such period such person was married and such person’s income for such period is in terms of section 7(2) of this Act deemed to be income accrued to such person’s spouse;

  

(ii)     where an election has been made by such person in respect of any period of assessment referred to in item (a) and such person’s income for any succeeding period of assessment is in terms of section 7(2) of this Act deemed to be income accrued to such person’s spouse, such election shall, with effect from such succeeding period, cease to have any force or effect.