Paragraph 67D (Eighth Schedule) – Communications licence conversions

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67D.    Communications licence conversions

 

(1)     Where existing licences referred to in Chapter 15 of the Electronic Communications Act, 2005 (Act No. 36 of 2005), are converted to new licences in terms of section 93 of that Act, a licensee of an existing licence or licences is deemed to have disposed of the existing-

 

(a)     licence for an amount equal to the base cost of the licence; or

 

(b)     licences for an amount equal to the aggregate of the base cost of the licences,

 

on the date of the conversion.

 

(2)     The licensee of a new licence contemplated in subparagraph (1) –

 

(a)     is deemed to have acquired the new licence –

 

(i)      in the case where an existing licence is converted to a new licence, at a cost, recognised as such for the purposes of paragraph 20, equal to the expenditure incurred in respect of the existing licence;

 

(ii)     in the case where two or more existing licences are converted to a new licence, at a cost, recognised as such for the purposes of paragraph 20, equal to the aggregate of the expenditure incurred in respect of the existing licences; and

 

(iii)    in the case where an existing licence is converted to two or more new licences, at a cost, recognised as such for the purposes of paragraph 20, that bears to the expenditure incurred in respect of the existing licence the same ratio as the value of that new licence bears to the aggregate value of the new licences,

 

which cost must be treated as expenditure actually incurred by the licensee in respect of the new licence or licences for the purposes of paragraph 20; and

 

(b)     is deemed to have incurred the cost contemplated in item (a) on the day immediately after the conversion.

Paragraph 67C (Eighth Schedule) – Mineral rights conversions and renewals

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67C.    Mineral rights conversions and renewals

 

Notwithstanding paragraph 11, there is no disposal where-

 

(a)     any old order right or OP26 right as defined in Schedule II of the Mineral and Petroleum Resources Development Act wholly or partially continues in force or is wholly or partially converted into a new right pursuant to the same Schedule; or

 

(b)     any prospecting right, mining right, exploration right, production right, mining permit, retention permit or reconnaissance permit, as defined in section 1 of the Mineral and Petroleum Resources Development Act is wholly or partially renewed in terms of that Act,

 

and the continued, converted or renewed right or permit will be treated as one and the same asset as the right or permit before continuation, conversion or renewal for purposes of this Act.

Paragraph 66 (Eighth Schedule) – Reinvestment in replacement assets

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66.  Reinvestment in replacement assets

(1)     A person may elect that this paragraph applies in respect of the disposal of an asset, where-

(a)     that asset qualified for a deduction or allowance in terms of section 11(e), 11D(2), 12B, 12BA, 12C, 12DA, 12E, 14, 14bis or 37B;

[Item (a) substituted by section 67(1)(a) of Act 8 of 2007, by section 79(a) of Act 35 of 2007 and by section 43(1)(a) of Act 17 of 2023 effective on 1 March, 2023 and applicable in respect of assets brought into use on or after that date]

(b)     the proceeds received or accrued from that disposal are equal to or exceed the base cost of that asset;

(c)     an amount at least equal to the receipts and accruals from that disposal has been or will be expended to acquire one or more assets (hereinafter referred to as the “replacement asset or assets”), all of which will qualify for a capital deduction or allowance in terms of section 11(e), 11D(2), 12B, 12BA, 12C, 12DA, 12E or 37B;

[Item (c) substituted by section 67(1)(b) of Act 8 of 2007, by section 79(b) of Act 35 of 2007 and by section 43(1)(b) of Act 17 of 2023 effective on 1 March, 2023 and applicable in respect of assets brought into use on or after that date]

(d)     all the replacement assets constitute assets contemplated in section 9(2)(j) or (k);

[Item (d) substituted by section 125 of Act 22 of 2012 and section 78 of Act 15 of 2016 effective on 1 January 2012, applies in respect of disposals made during years of assessment commencing on or after that date]

(e)     the contracts for the acquisition of a replacement asset or assets are or will be concluded within 12 months after the asset contemplated in item (a) is disposed of and are all brought into use within three years after that disposal: Provided that the Commissioner may, on application by the taxpayer, decide to extend the period by which the contracts must be concluded or assets brought into use by no more than six months if all reasonable steps were taken to conclude those contracts or bring those assets into use; and

[Proviso substituted by section 120 of Act 25 of 2015 effective on 8 January 2016]

(f)      that asset is not deemed to have been disposed of and to have been reacquired by that person.

(2)     Where a person has elected in terms of subparagraph (1) that this paragraph must apply in respect of the disposal of an asset, any capital gain determined in respect of that disposal must, subject to subparagraphs (4), (5), (6) and (7), be disregarded when determining that person’s aggregate capital gain or aggregate capital loss.

(3)     Where a person acquires more than one replacement asset as contemplated in subparagraph (1), that person must, in applying subparagraphs (4), (5) and (6), apportion the capital gain derived from the disposal of that asset to each replacement asset in the same ratio as the receipts and accruals from that disposal respectively expended in acquiring each of those replacement assets bear to the total amount of those receipts and accruals expended in acquiring all those replacement assets.

(4)     A person must treat as a capital gain for a year of assessment so much of the disregarded capital gain contemplated in subparagraph (2), as bears to the total amount of that disregarded capital gain apportioned to that replacement asset as contemplated in subparagraph (3) the same ratio as the amount of any deduction or allowance allowed in that year in terms of section 11(e), 11D(2), 12B, 12BA, 12C, 12DA, 12E or 37B in respect of the replacement asset bears to the total amount of the deduction or allowance in terms of that section (determined with reference to the cost of value of that asset at the time of acquisition thereof) which is allowable for all years of assessment in respect of that replacement asset.

[Subparagraph (4) substituted by section 67(1)(c) of Act 8 of 2007, by section 79(c) of Act 35 of 2007 and by section 43(1)(c) of Act 17 of 2023 effective on 1 March, 2023 and applicable in respect of assets brought into use on or after that date]

(5)     Where a person during any year of assessment disposes of a replacement asset and any portion of the disregarded capital gain which is apportioned to that asset as contemplated in subparagraph (3), has not been treated as a capital gain in terms of subparagraph (4) or (6), that person must treat that portion of disregarded capital gain as a capital gain from the disposal of that replacement asset in that year of assessment.

(6)     Where during any year of assessment a person ceases to use a replacement asset for the purposes of that person’s trade and any portion of the disregarded capital gain which is apportioned to that asset as contemplated in subparagraph (3), has not been treated as a capital gain in terms of subparagraph (4) or (5), that person must treat that portion of disregarded capital gain as a capital gain for that year of assessment.

(7)     Where a person fails to conclude a contract or to bring any replacement asset into use within the period prescribed in subparagraph (1)(e), subparagraph (2) shall not apply and that person must-

(a)     treat the capital gain contemplated in subparagraph (2) as a capital gain on the date that the relevant period ends;

(b)     determine interest at the prescribed rate on that capital gain from the date of that disposal to the date contemplated in item (a); and

(c)     treat that interest as a capital gain on the date contemplated in item (a) when determining that person’s aggregate capital gain or aggregate capital loss.

Paragraph 65B (Eighth Schedule) – Disposal by recreational club

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65B.    Disposal by recreational club

 

(1)     A recreational club approved in terms of section 30A may elect that this paragraph applies in respect of the disposal of an asset the whole of which was used mainly for purposes of providing social and recreational facilities and amenities for members of that club, where –

 

(a)     proceeds accrue to that club in respect of that disposal;


(b)     those proceeds are equal to or exceed the base cost of that asset;


(c)


(i)      an amount at least equal to the receipts and accruals from that disposal has been or will be expended to acquire one or more replacement assets all of which will be used mainly for such purposes;

 

(ii)     the contracts for the acquisition of the replacement asset or assets have all been or will be concluded within 12 months after the date of the disposal of that asset; and

 

(iii)    the replacement asset or assets will all be brought into use within three years of the disposal of that asset:
Provided that the Commissioner may extend the period within which the contract must be concluded or asset brought into use by no more than six months if all reasonable steps were taken to conclude those contracts or bring those assets into use; and

 

(d)     that asset is not deemed to have been disposed of and to have been reacquired by that club.

 

(2)     Where a club has elected in terms of subparagraph (1) that this paragraph must apply in respect of the disposal of an asset, any capital gain determined in respect of that disposal must, subject to subparagraphs (3), (4) and (5) be disregarded when determining that club’s aggregate capital gain or aggregate capital loss.

 

(3)     Where a club acquires more than one replacement asset as contemplated in subparagraph (1), that club must, in applying subparagraphs (4) and (5), apportion the capital gain derived from the disposal of that asset to each replacement asset in the same ratio as the receipts and accruals from that disposal respectively expended in acquiring each of those replacement assets bear to the total amount of those receipts and accruals expended in acquiring all those replacement assets.

 

(4)     Where a club during any year of assessment disposes of a replacement asset and any portion of the disregarded capital gain which is apportioned to that asset, has not otherwise been treated as a capital gain in terms of this paragraph, that club must treat that portion of disregarded capital gain as a capital gain from the disposal of that replacement asset in that year of assessment.

 

(5)     Where a club fails to conclude a contract or fails to bring any replacement asset into use within the period prescribed in subparagraph (1)(c)(ii) and (iii), that club must –

 

(a)     treat the capital gain contemplated in subparagraph (2) as a capital gain on the date on which the relevant period ends;


(b)     determine interest at the prescribed rate on that capital gain from the date of that disposal to the date contemplated in item (a); and


(c)     treat that interest as a capital gain on the date contemplated in item (a) when determining that club’s aggregate capital gain or aggregate capital loss.

Paragraph 65 (Eighth Schedule) – Involuntary disposal

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65.     Involuntary disposal

(1)     A person may elect that this paragraph applies in respect of the disposal of an asset (other than a financial instrument), where-

(a)     that asset is disposed of by way of operation of law, theft or destruction;

(b)     proceeds accrue to that person by way of compensation in respect of that disposal;

(c)     those proceeds are equal to or exceed the base cost of that asset;

(d)

 

(i)      an amount at least equal to the receipts and accruals from that disposal has been or will be expended to acquire one or more asset (hereinafter referred to as the ‘replacement asset or assets’);

(ii)     all the replacement assets constitute assets contemplated in section 9(2)(j) or (k);

[Subitem (ii) substituted by section 124(1)(a) of Act 22 of 2012, section 124(1)(b) of Act 22 of 2012 and section 119 of Act 25 of 2015 effective on 1 January 2012]

(iii)    the contracts for the acquisition of the replacement asset or assets have all been or will be concluded within 12 months after the date of the disposal of that asset; and

(iv)    the replacement asset or assets will all be brought into use within three years of the disposal of that asset: Provided that the Commissioner may, on application by the taxpayer, decice to extend the period within which the contract must be concluded or asset brought into use by no more than six months if all reasonable steps were taken to conclude those contracts or bring those assets into use; and

[Proviso substituted by section 119 of Act 25 of 2015 effective on 8 January 2016]

(e)     that asset is not deemed to have been disposed of and to have been reacquired by that person.

(2)     Where a person has elected in terms of subparagraph (1) that this paragraph must apply in respect of the disposal of an asset, any capital gain determined in respect of that disposal must, subject to subparagraphs (4), (5) and (6) be disregarded when determining that person’s aggregate capital gain or aggregate capital loss.

(3)     Where a person acquires more than one replacement asset as contemplated in subparagraph (1), that person must, in applying subparagraphs (4) and (5), apportion the capital gain derived from the disposal of that asset to each replacement asset in the same ratio as the receipts and accruals from that disposal respectively expended in acquiring each of those replacement assets bear to the total amount of those receipts and accruals expended in acquiring all those replacement assets.

(4)     Where a replacement asset contemplated in subparagraph (1) constitutes a depreciable asset, the person must treat as a capital gain for a year of assessment, so much of the disregarded capital gain contemplated in subparagraph (3), as bears to the total amount of that disregarded gain apportioned to that replacement asset as contemplated in subparagraph (3) the same ratio as the amount of any deduction or allowance allowed in that year in respect of the 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) which is allowable for all years of assessment in respect of that replacement asset.

 

(5)     Where a person during any year of assessment disposes of a replacement asset and any portion of the disregarded capital gain which is apportioned to that asset, has not otherwise been treated as a capital gain in terms of this paragraph, that person must treat that portion of disregarded capital gain as a capital gain from the disposal of that replacement asset in that year of assessment.

(6)     Where a person fails to conclude a contract or fails to bring any replacement asset into use within the period prescribed in subparagraph (1)(d)(iii) or (iv), subparagraph (2) shall not apply and that person must-

(a)     treat the capital gain contemplated in subparagraph (2) as a capital gain on the date on which the relevant period ends;

(b)     determine interest at the prescribed rate on that capital gain from the date of that disposal to the date contemplated in item (a); and

(c)     treat that interest as a capital gain on the date contemplated in item (a) when determining that person’s aggregate capital gain or aggregate capital loss.

(7)     Where a replacement asset or assets constitute personal use assets, the provisions of this paragraph shall not apply.

Paragraph 64B (Eighth Schedule) – Disposal of equity shares in foreign companies

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64B.  Disposal of equity shares in foreign companies

(1)     Subject to subparagraph (4), a person other than a headquarter company must disregard any capital gain or capital loss determined in respect of the disposal of any equity share in any foreign company (other than an interest contemplated in paragraph 2(2)), if-

(a)     that person (whether alone or together with any other person forming part of the same group of companies as that person) immediately before that disposal-

 

(i)      held an interest of at least 10 per cent of the equity shares and voting rights in that foreign company; and

 

(ii)     held the interest contemplated in subitem (i) for a period of at least 18 months prior to that disposal, unless-

 

(aa)    that person is a company;

 

(bb)   that interest was acquired by that person from any other company that forms part of the same group of companies as that person; and

 

(cc)    that person and that other company in aggregate held that interest for more than 18 months; and

 

(b)     that interest is disposed of to any person that is not a resident, other than-

(i)      a controlled foreign company or any person that is a connected person in relation to the person disposing of that interest;

(ii)     a non-resident company that formed part of the same group of companies as the company disposing of the shares at any time during a period of 18 months before that disposal; or

(iii)    a non-resident company, of which the shareholders and their shareholding, immediately after the disposal, are substantially the same as the shareholders of and their shareholding in any company that is in the same group of companies as the company in the group of companies disposing of the shares,

[Item (iii) substituted by section 35(1)(a) of Act 42 of 2024 deemed to have come into operation on 1 November, 2023 and applicable in respect of disposals on or after that date]

for an amount that is equal to or exceeds the market value of the interest.

[Item (b) substituted by section 117(1) of Act 25 of 2015 and by section 42(1)(a) of Act 17 of 2023 effective on 1 November, 2023 and applicable in respect of any disposals on or after that date]

(2)     Subject to subparagraph (4), a headquarter company must disregard any capital gain or capital loss determined in respect of the disposal of any equity share in any foreign company (other than an interest contemplated in paragraph 2(2)) if that headquarter company (whether alone or together with any other person forming part of the same group of companies as that headquarter company) immediately before that disposal held at least 10 per cent of the equity shares and voting rights in that foreign company.

(3)     Paragraph 8(b) applies in respect of any capital gain determined in respect of any disposal of any equity share in any foreign company on or before 31 December 2012 by a person which is or was disregarded in terms of subparagraphs (1) and (4) in any year of assessment, if-

(a)     the foreign company prior to that disposal was a controlled foreign company in relation to that person or in relation to any other company in the same group of companies as that person;

 

(b)     the equity share in that foreign company was disposed of to a connected person in relation to that person either before or after that disposal;

 

(c)     that person-

 

(i)      disposed of that equity share for no consideration or for consideration which does not reflect an arm’s length price, other than a distribution contemplated in subitem (ii);

 

(ii)     disposed of that equity share by means of a distribution made unless-

 

(aa)   that distribution was made to a company that forms part of the same group of companies as that person; or

 

(bb)   the full amount of that distribution was included in the income of a holder of shares in that foreign company or would, but for the provisions of section 10B(2)(a) or (b), have been so included; or

 

(iii)    disposed of any consideration where that consideration was received or accrued from the disposal of that equity share (or any amount received in exchange therefor) in terms of any transaction, operation or scheme of which the disposal of the equity share forms part-

 

(aa)   for no consideration or for consideration which does not reflect an arm’s length price (other than a distribution contemplated in subsubitem (bb)); or

 

(bb)   by means of a distribution by a company, unless the full amount of that distribution was included in the income of a holder of shares in that company or would, but for the provisions of section 10B(2)(a) or (b), have been so included; and

[Subsubitem (bb) amended by section 144 of Act 31 of 2013 and substituted by section 84 of Act 23 of 2018 effective on 17 January 2019]

 

(d)     that foreign company ceased, in terms of any transaction, operation or scheme of which the disposal of the equity share forms part, to be a controlled foreign company in relation to that person or other company in the same group of companies as that person (having regard solely to any rights contemplated in paragraph (a) of the definition of ‘participation rights’ in section 9D).

(4)     A person must disregard any capital gain determined in respect of any foreign return of capital received by or accrued to that person from a “foreign company” as defined in section 9D (other than an interest contemplated in paragraph 2(2) where that person (whether alone or together with any other person forming part of the same group of companies as that person)-

(a)     holds an interest of at least 10 per cent of the total equity shares and voting rights in that company; and

(b)     has held the interest referred to in item (a) for at least 18 months prior to the receipt or accrual of that foreign return of capital, unless-

(i)      that person is a company;

(ii)     that interest was acquired by that person from any other company that forms part of the same group of companies as that person; and

(iii)     that person and that other company in aggregate held that interest for longer than 18 months.

[Subparagraph (4) substituted by section 42(1)(b) of Act 17 of 2023 and by section 35(1)(b) of Act 42 of 2024 deemed to have come into operation on 1 January, 2024 and applicable in respect of foreign returns of capital received or accrued on or after that date]

(5)     The provisions of this paragraph do not apply in respect of any capital gain or capital loss determined in respect of-

(a)     the disposal of any equity share in any portfolio contemplated in paragraph (e) of the definition of ‘company’ in section 1; and

 

(b)     any distribution contemplated in subparagraph (4) by any portfolio contemplated in item (a).

(6)     This paragraph must not apply in respect of any capital gain or capital loss determined in respect of the disposal of any share in a controlled foreign company to the extent that the value of the assets of that controlled foreign company is attributable to assets directly or indirectly located, issued or registered in the Republic.

[Subparagraph (6) added by section 51(1) of Act 23 of 2020 effective on 1 January, 2021 and applicable in respect of any disposal on or after that date]