Income Tax Act, 1962 (Act No. 58 of 1962)Chapter II : The TaxesPart I : Normal Tax24JB. Taxation in respect of financial assets and liabilities of certain persons |
[Section 24JB heading substituted by section 43(1)(a) of the Taxation Laws Amendment Act, 2014 (Act No. 43 of 2014) - effective 1 January 2014]
| (1) | For the purposes of this section— |
means—
| (a) | any authorised user as defined in section 1 of the Financial Markets Act that is a company, other than any company of which the principal trading activities constitute the activities of a treasury operation; |
[Paragraph (a) substituted by section 46(1) of the Taxation Laws Amendment Act, 2016 (Act No. 15 of 2016 - effective 1 January 2017]
| (b) | the South African Reserve Bank; |
| (c) | any— |
| (i) | bank; |
| (ii) | branch; |
| (iii) | branch of a bank; or |
| (iv) | controlling company, |
as defined in section 1 of the Banks Act;
| (d) | any company or trust that forms part of a banking group as defined in section 1 of the Banks Act, excluding— |
| (i) | a company that is a long-term insurer as defined in section 1 of the Long-term Insurance Act; |
| (ii) | a company that is a short-term insurer as defined in section 1 of the Short-term Insurance Act; |
| (iii) | a company of which more than 50 per cent of the shares are directly or indirectly held by a company contemplated in subparagraph (i) or (ii) if that company does not form part of the same group of companies as a bank; |
| (iv) | any subsidiary, as defined in section 1 of the Companies Act, of a company contemplated in subparagraph (i) or (ii); |
[Paragraph(d)(iv) inserted by section 44(1)(a) of the Taxation Laws Amendment Act, 2017 (Act No. 17 of 2017)]
means a derivative as defined in and within the scope of IFRS 9;
[Definition substituted by section 44(1)(b) of the Taxation Laws Amendment Act, 2017 (Act No. 17 of 2017) - effective 1 January 2018]
means—
| (a) | a financial asset defined in and within the scope of International Accounting Standard 32 of IFRS or any other International Accounting Standard that replaces International Accounting Standard 32; and |
| (b) | a commodity taken into account in terms of IFRS at fair value less cost to sell in profit or loss in the statement of comprehensive income; |
[Definition deleted by section 43(1)(b) of the Taxation Laws Amendment Act, 2014 (Act No. 43 of 2014) - deemed to have come into operation on 1 January 2014]
means a financial liability defined in and within the scope of International Accounting Standard 32 of IFRS or any International Accounting Standard that replaces International Accounting Standard 32;
in relation to a financial asset or a financial liability, means the value, as determined for the purposes of financial reporting pursuant to IFRS, of that financial asset or financial liability;
in relation to a covered person, means—
| (a) | the year of assessment immediately succeeding the realisation year; |
| (b) | the year of assessment immediately succeeding the year of assessment contemplated in paragraph (a); and |
| (c) | the year of assessment immediately succeeding the year of assessment contemplated in paragraph (b); |
in relation to a person, means—
| (a) | where that person is a covered person, the year of assessment of that person immediately preceding the year of assessment ending on or after 1 January 2014; or |
| (b) | where that person becomes a covered person during any year of assessment ending after 1 January 2014, the year of assessment of that person that precedes the first year of assessment of that person in which that person becomes a covered person; |
means tax base as defined in International Accounting Standard 12 of IFRS or any International Accounting Standard replacing International Accounting Standard 12.
| (2) | Subject to sections 8F, 8FA and subsection (4), there must be included in or deducted from the income, as the case may be, of any covered person for any year of assessment all amounts in respect of financial assets and financial liabilities of that covered person that are recognised in profit or loss in the statement of comprehensive income in respect of financial assets and financial liabilities of that covered person that are measured at fair value in profit or loss in terms of IFRS 9 or, in the case of commodities, at fair value less cost to sell in profit or loss in terms of IFRS for that year of assessment, excluding any amount in respect of— |
| (a) | a financial asset that is— |
| (i) | a share; |
| (ii) | an endowment policy; |
| (iii) | an interest held in a portfolio of a collective investment scheme; |
[Section 24JB(2)(a)(iii) substituted by section 43(1)(c) of the Taxation Laws Amendment Act, 2014 (Act No. 43 of 2014)]
| (iv) | an interest in a trust; or |
[Section 24JB(2)(a)(iv) substituted by section 43(1)(d) of the Taxation Laws Amendment Act, 2014 (Act No. 43 of 2014)]
(v) an interest in a partnership,
[Section 24JB(2)(a)(v) inserted by section 43(1)(e) of the Taxation Laws Amendment Act, 2014 (Act No. 43 of 2014)]
if that financial asset does not constitute trading stock; or
[Words substituted by section 44(1)(d) of the Taxation Laws Amendment Act, 2017 (Act No. 17 of 2017)]
| (b) | a dividend or foreign dividend received by or accrued to a covered person; or |
| (c) | a dividend distributed. |
[Section 24JB(2)(c) inserted by section 27(1) of the Taxation Laws Amendment Act, 2020 (Act No. 23 of 2020), GG44083, dated 20 January 2021 - comes into operation on 1 January 2021 and applies to dividends declared on or after that date (section 27(2)]
| (2A) | A covered person must include in or deduct from income for a year of assessment a realised gain or realised loss that is recognised in a statement of other comprehensive income as contemplated in IFRS 9 if that realised gain or realised loss is attributable to a change in the credit risk of the financial liability as contemplated in IFRS 9 and that instrument was issued in any year of assessment commencing on or after 1 January 2018. |
[Section 24JB(2A) substituted by section 44(1) of the Taxation Laws Amendment Act, 2018 (Act No. 23 of 2018), GG 42172, dated 17 January 2019 - deemed to have come into operation on 1 January 2018 (section 44(2)]
| (2B) | Where a covered person has, during any year of assessment preceding the year of assessment commencing on or after 1 January 2018, included in or deducted from income any amount attributable to a change in the credit risk of a financial liability issued by that covered person measured at fair value through profit or loss in terms of subsection (2), such covered person must include in or deduct from income, as the case may be, any amount in respect of a change in credit risk of that financial liability recognised in other comprehensive income during any year of assessment commencing on or after 1 January 2018. |
[Section 24JB(2B) inserted by section 44(1)(e) of the Taxation Laws Amendment Act, 2017 (Act No. 17 of 2017) - effective 1 January 2018]
| (3) | Any amount required to be taken into account in determining the taxable income in terms of any provision of Part I of Chapter II, or in determining any assessed capital loss of a covered person in respect of a financial asset or a financial liability contemplated in subsection (2) must only be taken into account in terms of this section. |
[Section 24JB(3) substituted by section 43(1)(f) of the Taxation Laws Amendment Act, 2014 (Act No. 43 of 2014) - deemed to have come into operation on 1 January 2014]
| (4) | Subsection (2) does not apply to any amount in respect of a financial asset or a financial liability of a covered person where— |
| (a) | a covered person and another person that is not a covered person, are parties to an agreement in respect of a financial asset or financial liability; and |
[Section 24JB(4)(a) substituted by section 43(1)(g) of the Taxation Laws Amendment Act, 2014 (Act No. 43 of 2014) - deemed to have come into operation on 1 January 2014]
| (b) | the agreement contemplated in paragraph (a) was entered into solely or mainly for the purpose of a reduction, postponement or avoidance of liability for tax, which, but for that agreement, would have been or would become payable by the covered person. |
| (5) | In addition to any amount included in or deducted from the income of any person in terms of subsection (2), there must be included in or deducted from the income, as the case may be, of any person for the post-realisation years of that person an amount determined in terms of subsection (6). |
| (6) | For the purposes of subsection (5)— |
| (a) | if— |
| (i) | the financial reporting values of all financial assets of a nature as described in subsection (2) held by that person as at the end of the realisation year of that person exceed the tax base amount attributed to those financial assets as at the end of the realisation year of that person; or |
[Section 24JB(6)(a)(i) substituted by section 43(1)(h) of the Taxation Laws Amendment Act, 2014 (Act No. 43 of 2014) - deemed to have come into operation on 1 January 2014]
| (ii) | the tax base amount attributed to all financial liabilities of a nature as described in subsection (2) held by that person as at the end of the realisation year of that person exceeds the financial reporting values of those financial liabilities as at the end of the realisation year of that person, |
[Section 24JB(6)(a)(ii) substituted by section 43(1)(h) of the Taxation Laws Amendment Act, 2014 (Act No. 43 of 2014) - deemed to have come into operation on 1 January 2014]
one-third of the excess must be included in the income of that person;
| (b) | if— |
| (i) | the tax base amount attributed to all financial assets of a nature as described in subsection (2) held by that person as at the end of the realisation year of that person exceeds the financial reporting values of those financial assets as at the end of the realisation year of that person; or |
[Section 24JB(6)(b)(i) substituted by section 43(1)(i) of the Taxation Laws Amendment Act, 2014 (Act No. 43 of 2014) - deemed to have come into operation on 1 January 2014]
| (ii) | the financial reporting values of all financial liabilities of a nature as described in subsection (2) held by that person as at the end of the realisation year of that person exceed the tax base amount attributed to those financial liabilities as at the end of the realisation year of that person, |
[Section 24JB(6)(a)(ii) substituted by section 43(1)(i) of the Taxation Laws Amendment Act, 2014 (Act No. 43 of 2014) - deemed to have come into operation on 1 January 2014]]
one-third of the excess must be deducted from the income of that person.
| (7) | If a person ceases to be a covered person before the expiry of the post-realisation years of that person, the amounts determined in terms of subsection (6) which have not been included in or deducted from, as the case may be, the income of that person, must be included in or deducted from the income of that person in the year of assessment that it ceases to be a covered person. |
| (8) | Where a person ceases to be a covered person, that person is deemed to have— |
| (a) | disposed of its financial assets and redeemed its financial liabilities that were subject to tax in terms of subsection (2); and |
| (b) | immediately reacquired those financial assets and incurred those financial liabilities, |
at an amount equal to the market value of those financial assets on the last day of the year of assessment of that person before that person ceased to be a covered person.
| (9) | Where a financial asset held by or financial liability owed by a covered person at the end of the year of assessment immediately preceding the year of assessment commencing on or after 1 January 2018 would have ceased to be subject to tax or would have become subject to tax in terms of subsection (2), had IFRS 9 applied on the last day of that immediately preceding year of assessment, that covered person is deemed to have— |
| (a) | disposed of that financial asset or redeemed that financial liability; and |
| (b) | immediately reacquired that financial asset or incurred that financial liability, |
for an amount equal tot he market value of that financial asset or financial liability on that day.
[Section 24JB(9) substituted by section 44(1)(f) of the Taxation Laws Amendment Act, 2017 (Act No. 17 of 2017)]