“An interest” definition of paragraph 44 of Eighth Schedule

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“an interest” means-

(a)     any real or statutory right; or

(b)     a share owned directly in a share block company as defined in the Share Blocks Control Act or a share or interest in a similar entity which is not a resident; or

[Paragraph (b) substituted by section 89 of Act 43 of 2014 effective on 20 January 2015]

(c)     a right of use or occupation,

but excluding –

(i)      a right under a mortgage bond; or

(ii)     a right or interest of whatever nature in a trust or an asset of a trust, other than a right of a lessee who is not a connected person in relation to that trust;

Paragraph 43B (Eighth Schedule) – Base cost of assets of controlled foreign companies

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43B.   Base cost of assets of controlled foreign companies

 

Where the functional currency of a controlled foreign company –

 

(a)     was the currency of a country which-

 

(i)      abandoned its currency; and

 

(ii)     had an official rate of inflation of 100 per cent or more for the foreign tax year preceding the abandonment of the currency; and

 

(b)     the controlled foreign company adopted a new functional currency as a consequence of the abandonment contemplated in subparagraph (a)(i),

 

the controlled foreign company must, for the purposes of determining the base cost of an asset of the controlled foreign company, be deemed to have acquired the asset in that new currency-

 

(A)    on the first day of the foreign tax year of the controlled foreign company in which; and

 

(B)     for an amount equal to the market value of the asset on the date on which,

 

the new currency was adopted by the controlled foreign company.

Paragraph 43A (Eighth Schedule) – Dividends treated as proceeds on disposal of certain shares

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43A.    Dividends treated as proceeds on disposal of certain shares

(1)       For the purposes of this paragraph-

[Words preceding the definition of “exempt dividend” substituted by section 80 of Act 23 of 2018 effective on 17 January 2019]

Paragraph 43 (Eighth Schedule) – Assets disposed of or acquired in foreign currency

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43.     Assets disposed of or acquired in foreign currency

(1)     Where, during any year of assessment, a person that is a natural person or a trust that is not carrying on a trade disposes of an asset for proceeds in a foreign currency after having incurred expenditure in respect of that asset in the same currency, that person must determine the capital gain or capital loss on the disposal in that currency and that capital gain or capital loss must be translated to the local currency by applying the average exchange rate for the year of assessment in which that asset was disposed of or by applying the spot rate on the date of disposal of that asset.

(1A)   Where, during any year of assessment, a person disposes of an asset (other than a disposal contemplated in subparagraph (1)) for proceeds in a foreign currency or after having incurred expenditure in respect of that asset in a foreign currency, that person must, for the purposes of determining the capital gain or capital loss on the disposal of that asset, translate-

(a)     the proceeds into the local currency at the average exchange rate for the year of assessment in which that asset was disposed of or at the spot rate on the date of disposal of that asset; and

(b)     the expenditure incurred in respect of that asset into the local currency at the average exchange rate for the year of assessment during which that expenditure was incurred or at the spot rate on the date on which that expenditure was incurred.

Provided that the amount of any capital gain or capital loss determined under this subparagraph in respect of an exchange item contemplated in section 24I must be taken into account in terms of this paragraph only to the extent to which it exceeds the amounts determined in respect of that exchange item under section 24I.

[Sub­paragraph (1A) inserted by section 117(1)(b) of Act 22 of 2012, substituted by section 136(1)(b) of Act 31 of 2013 and amended by section 61(a) of Act 34 of 2019]

(2)       ………..

(3)     ……….

(4)     ……….

(5)     Where a person is treated as having derived an amount of proceeds from the disposal of any asset and the expenditure incurred to acquire that asset is determined in any foreign currency-

(a)     the amount of those proceeds must be treated as being denominated in the currency of the expenditure incurred to acquire that asset; and

(b)     the expenditure incurred by a person acquiring that asset must for purposes of sections 9HA and 25 and paragraph s 12, 38 and 40 be treated as being denominated in that currency.

[Item (b) substituted by section 114(a) of Act 25 of 2015, by section 72(1) of Act 15 of 2016 and by section 61(b) of Act 34 of 2019]

[Paragraph (5) amended by section 101 of Act 45 of 2003 and substituted by section 88 of Act 43 of 2014 effective on 1 January 2015]

(6)     Where a person has adopted the market value as the valuation date value of any asset contemplated in this paragraph, that market value must be determined in the currency of the expenditure incurred to acquire that asset and for purposes of the application of subparagraph (1A) be translated to the local currency by applying the spot rate on valuation date.

[Subparagraph (6) amended by section 75 of Act 31 of 2005, substituted by section 136 of Act 31 of 2013, section 88 of Act 43 of 2014 and section 114 of Act 25 of 2015 effective on 8 January 2016]

(6A)…

[Sub­paragraph (6A) inserted by section 117(1)(d) of Act 22 of 2012, amended by section 136(1)(f)­(i) of Act 31 of 2013 and deleted by section 61(c) of Act 34 of 2019]

Paragraph 42 (Eighth Schedule) – Short-term disposals and acquisitions of identical financial instruments

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42.    Short-term disposals and acquisitions of identical financial instruments

(1)     Where a capital loss is determined in respect of the disposal by a person of a financial instrument, other than a disposal contemplated in section 29B, and within a period beginning 45 days before the date of disposal and ending 45 days after that date, that person or a connected person in relation to that person, subject to subparagraph (3), acquires or has entered into a contract to acquire a financial instrument of the same kind and of the same or equivalent quality-

(a)     the person who disposed of the financial instrument must be treated as having disposed thereof for proceeds equal to the base cost thereof; and

(b)     the person who acquired the financial instrument of the same kind and of the same or equivalent quality must be treated as having acquired that financial instrument at a cost equal to the total of –

(i)      any amount allowable in terms of paragraph 20; and

(ii)     the amount of any capital loss which would have arisen in the hands of the person who disposed of the asset, were it not for the operation of item (a).

which cost must be treated as an amount of expenditure actually incurred for the purposes of paragraph 20(1)(a).

[Item (b) substituted by section 90(1)(a) of Act 60 of 2001 and amended by section 74 of Act 35 of 2007, by section 55 of Act 3 of 2008 and by section 50 of Act 23 of 2020]

(2)     For the purposes of subparagraph (1), there must not be taken into account in determining the period of 91 days any days in which the person disposing of the financial instrument-

(a)     has an option to sell, is under a contractual obligation to sell or has made (and not closed) a short sale of a financial instrument of the same kind and of the same or equivalent quality;

(b)     is the grantor of an option to buy a financial instrument of the same kind and of the same or equivalent quality; or

(c)     has otherwise diminished risk of loss in respect of that financial instrument by holding one or more contrary positions with respect to a financial instrument of the same kind and of the same or equivalent quality.

(3)     For the purposes of this paragraph, a connected person in relation to-

(a)     a natural person does not include a relative of that person other than a parent, child, stepchild, brother, sister, grandchild or grandparent of that person; or

(b)     a fund of an insurer contemplated in section 29A does not include another such fund of that insurer in respect of the disposal of an asset by such fund to another such fund.

(4)     This paragraph must not apply to any asset-

(a)     in respect of which the weighted average method of determining base cost of assets, as contemplated in paragraph 32(4), is used; and

(b)     if that asset is, in terms of section 29B, allocated to any policyholder fund of an insurer as defined in that section.

Paragraph 41 (Eighth Schedule) – Tax payable by heir of a deceased estate

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41.    Tax payable by heir of a deceased estate

(1)       Where a person dies before 1 March 2016-

[Words preceding item (a) substituted by section 113 of Act 25 of 2015 effective on 1 March 2016]

(a)     the tax determined in terms of this Act, which relates to the taxable capital gain of a deceased person, exceeds 50 per cent of the net value of the estate determined for purposes of the Estate Duty Act, before taking into account the amount of that tax so determined; and

[Item (a) substituted by section 83 of Act 74 of 2002 and section 87 of Act 43 of 2014 effective on 20 January 2015]

(b)     the executor of the estate is required to dispose of any asset of the estate for purposes of paying the amount of that tax, any heir or legatee of the estate, who would have been entitled to that asset contemplated in item (b), had there been no liability for tax, may elect that that asset be distributed to that heir or legatee upon the condition that the amount of tax which exceeds 50 per cent of that net value be paid by him or her within a period of three years after the date that the executor obtained permission to distribute the assets of the estate, as contemplated in section 35(12) of the Administration of Estates Act, 1965 (Act No. 66 of 1965).

(2)     Any amount of tax payable by an heir as contemplated in subparagraph (1), 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.

Paragraph 40 (Eighth Schedule) – Disposal to and from deceased estate

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40.    Disposal to and from deceased estate

 

(1)     A person who dies before 1 March 2016 must be treated as having disposed of his or her assets, other than-

[Words preceding item (a) substituted by section 112 of Act 25 of 2015 effective on 1 March 2016]

(a)     assets transferred to the surviving spouse of that deceased person as contemplated in section 9HB(2)(a);

[Item (a) substituted by section 60(a) of Act 34 of 2019]

(b)     ………..

(c)     a long-term insurance policy of the deceased which if the proceeds of the policy had been received by or accrued to the deceased, the capital gain or capital loss determined in respect of that disposal would be disregarded in terms of paragraph 55; or

(d)     an interest in a pension, pension preservation, provident, provident preservation or retirement annuity fund in the Republic or a fund, arrangement or instrument situated outside the Republic which provides benefits similar to a pension, pension preservation, provident, provident preservation or retirement annuity fund which if the proceeds thereof had been received by or accrued to the deceased, the capital gain or capital loss determined in respect of the disposal of the interest would have been disregarded in terms of paragraph 54

for an amount received or accrued equal to the market value of those assets at the date of that person’s death.

(1A)  If any asset of a deceased person is treated as having been disposed of as contemplated in subparagraph (1) and is transferred directly to –

(a)     the estate of the deceased person, the estate must be treated as having acquired that asset at a cost equal to the market value of that asset as at the date of death of that deceased person; or

(b)     an heir or legatee of the person, the heir or legatee must be treated as having acquired that asset at a cost equal to the market value of that asset as at the date of death of that deceased person,

which cost must be treated as an amount of expenditure actually incurred for the purposes of paragraph 20(1)(a).

(2)     Where an asset is disposed of by a deceased estate to an heir or legatee (other than the surviving spouse of the deceased person as contemplated in section 9HB(2)(a))-

(a)     the deceased estate must be treated as having disposed of that asset for proceeds equal to the base cost of the deceased estate in respect of that asset; and

(b)     the heir or legatee must be treated as having acquired that asset at a cost equal to the base cost of the deceased estate in respect of that asset, which cost must be treated as an amount of expenditure actually incurred for the purposes of paragraph 20(1)(a).

[Sub­paragraph (2) amended by section 82(c) of Act 74 of 2002, by section 50 of Act 20 of 2006, by section 79(1)(c) of Act 60 of 2008, by section 115(1) of Act 22 of 2012 and by section 60(b) of Act 34 of 2019]

(3)     For the purposes of this Schedule, the disposal of an asset by the deceased estate of a natural person shall be treated in the same manner as if that asset had been disposed of by that natural person.

Paragraph 39A (Eighth Schedule) – Disposal of asset for unaccrued amounts of proceeds

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39A.    Disposal of asset for unaccrued amounts of proceeds

 

(1)     Where a person during any year of assessment disposes of an asset and all the proceeds from the disposal of that asset will not accrue to that person during that year, that person must, when determining the aggregate capital gain or aggregate capital loss for that year or any subsequent year of assessment, disregard any capital loss determined in respect of that disposal.

 

(2)     A person’s capital loss which is disregarded during any year of assessment in terms of subparagraph (1) which has not otherwise been allowed as a deduction may be deducted from that person’s capital gains determined in any subsequent year in respect of the disposal of the asset contemplated in subparagraph (1).

 

(3)     If during any year of assessment a person shows that no further proceeds will accrue to that person from the disposal contemplated in subparagraph (1), so much of the capital loss contemplated in that subparagraph as has not been deducted from any subsequent capital gains as contemplated in subparagraph (2), may be taken into account in determining that person’s aggregate capital gain or aggregate capital loss for that year of assessment.