Income Tax Act, 1962 (Act No. 58 of 1962)Chapter II : The TaxesPart I : Normal Tax12P. Exemption of amounts received or accrued in respect of government grants |
(1) For the purposes of this section—
"allowance asset"
means an asset as defined in paragraph 1 of the Eighth Schedule, other than trading stock, in respect of which a deduction or allowance is allowable in terms of this Act for purposes other than the determination of any capital gain or capital loss;
"base cost"
means base cost as defined in paragraph 1 of the Eighth Schedule;
"government grant"
means a grant-in-aid, subsidy or contribution by the government of the Republic in the national, provincial or local sphere.
[Definition substituted by section 33(1)(a) of the Taxation Laws Amendment Act, 2016 (Act No. 15 of 2016) - effective 1 March 2016]
| (2) | There must be exempt from normal tax any amount received by or accrued to a person as a beneficiary of a government grant if that government grant— |
| (a) | is listed in the Eleventh Schedule; or |
| (b) | is identified by the Minister by notice in the Gazette for the purpose of exempting that government grant with effect from a date specified by the Minister in that notice (including any date that precedes the date of that notice), after having regard to— |
| (i) | the implications of the exemption for the National Revenue Fund; and |
| (ii) | whether the tax implications were taken into account in allocating that grant. |
| (2A) | Notwithstanding subsection (2), there must be exempt from normal tax any amount received by or accrued to or in favour of any person from the Government in the national, provincial or local sphere, where— |
| (a) | that amount is granted for the performance by that person of its obligations pursuant to a Public Private Partnership; and |
| (b) | that person is required in terms of that Public Private Partnership to expend an amount at least equal to that amount in respect of any improvements on land or to buildings owned by any sphere of government or over which any sphere of government holds a servitude. |
[Section 12P(2A)(b) substituted by section 33(1)(b) of the Taxation Laws Amendment Act, 2016 (Act No. 15 of 2016) - effective 1 March 2016]
[Section 12P(2A) inserted by section 26(1)(a) of the Taxation Laws Amendment Act, 2015 (Act No. 25 of 2015) - effective 1 January 2016]
| (3) | Where during any year of assessment any amount is received by or accrues to a person by way of a government grant as contemplated in subsection (2) or (2A), other than a government grant in kind, for the acquisition, creation or improvement, or as a reimbursement for expenditure incurred in respect of the acquisition, creation or improvement of— |
| (a) | trading stock— |
| (i) | any expenditure incurred in respect of that trading stock allowed as a deduction in terms of section ll(a); or |
| (ii) | any amount taken into account in respect of the value of trading stock as contemplated in section 22(1) or (2); or |
| (b) | an allowance asset, the base cost of that allowance asset, |
must be reduced to the extent that the amount of that government grant is applied for that purpose.
[Section 12P(3) substituted by section 26(1)(b) of the Taxation Laws Amendment Act, 2015 (Act No. 25 of 2015) - effective 1 January 2016]
| (4) | Where any amount is received by or accrues to a person by way of a government grant as contemplated in subsection (2) or (2A) for the acquisition, creation or improvement of an allowance asset or as a reimbursement for expenditure incurred in respect of that acquisition, creation or improvement, the aggregate amount of the deductions or allowances allowable to that person in respect of that allowance asset may not exceed an amount equal to the aggregate of the expenditure incurred in the acquisition, creation or improvement of that allowance asset, reduced by an amount equal to the sum of— |
| (a) | the amount of the government grant; and |
| (b) | the aggregate amount of all deductions and allowances previously allowed to that person in respect of that allowance asset. |
Provided that where a person referred to in this subsection qualifies for a deduction under section 12BA in respect of an allowance asset, the aggregate amount of the deductions or allowances allowable to that person in respect of that allowance asset may not exceed an amount equal to 125 per cent of the aggregate amount otherwise determined in terms of this subsection.
[Section 12P(4) proviso inserted by section 19(1) of the Taxation Laws Amendment Act, 2023 (Act No. 17 of 2023), Notice No. 4226, GG49894, dated 22 December 2023 - deemed to have come into operation on 1 March 2023 and applies in respect of assets brought into use on or after that date (section 19(2))]
| (5) | Where during any year of assessment any amount is received by or accrues to a person by way of a government grant as contemplated in subsection (2) or (2A), other than a government grant in kind— |
| (a) | for the purpose of the acquisition, creation or improvement of an asset other than an asset contemplated in subsection (3) or (4); or |
| (b) | as a reimbursement for expenditure incurred for the acquisition, creation or improvement of an asset other than an asset contemplated in subsection (3) or (4), |
the base cost of that asset must be reduced to the extent that the amount of the government grant is applied for that acquisition, creation or improvement.
[Section 12P(5) substituted by section 26(1)(d) of the Taxation Laws Amendment Act, 2015 (Act No. 25 of 2015)]
(6)
| (a) | Where during any year of assessment— |
| (i) | any amount is received by or accrues to a person by way of a government grant as contemplated in subsection (2) or (2A), other than a government grant in kind; and |
[Section 12P(6)(i) substituted by section 26(1)(e) of the Taxation Laws Amendment Act, 2015 (Act No. 25 of 2015) - effective 1 January 2016]
| (ii) | subsection (3), (4) or (5) does not apply to that amount, |
any amount allowed to be deducted from that person's income in terms of section 11 for that year of assessment must be reduced to the extent of the amount of that government grant.
| (b) | To the extent that the amount received or accrued by way of a government grant exceeds the amount allowed to be deducted as contemplated in paragraph (a), that excess is deemed to be an amount received or accrued in respect of that government grant during the following year of assessment for the purposes of paragraph (a). |
[Section 12P inserted by section 33(1) of the Taxation Laws Amendment Act, 2012 (Act No. 22 of 2012) - effective 1 January 2013]