Income Tax Act, 1962 (Act No. 58 of 1962)SchedulesTenth Schedule : Oil and Gas Activities7. Disposal of oil and gas right |
| (1) | If an oil and gas company disposes of any oil and gas right to another company, that oil and gas company and that other company may (instead of any other provision of this Act) agree in writing that rollover treatment as contemplated in subparagraph (2) or participation treatment as contemplated in subparagraph (3) applies in respect of that right. |
[Paragraph 7(1) of the Tenth Schedule substituted by section 159(1)(a) of the Taxation Laws Amendment Act, 2013 (Act No. 31 of 2013), GG 37158, dated 12 December 2013]
| (2) | If an oil and gas company disposes of any oil and gas right to another company pursuant to an agreement that rollover treatment as contemplated in subparagraph (1) applies, and the market value of that oil and gas right is equal to or exceeds— |
[Words preceding paragraph 7(2)(a) of the Tenth Schedule substituted by section 159(1)(b) of the Taxation Laws Amendment Act, 2013 (Act No. 31 of 2013), GG 37158, dated 12 December 2013]
| (a) | in the case that right is held as a capital asset, the base cost of that right on the date of that disposal; or |
| (b) | in the case that right is held as trading stock, the amount taken into account in respect of that right in terms of section 11(a) or 22(1) or (2), |
that company is deemed to have disposed of that right for an amount equal to the amount contemplated in items (a) or (b), as the case may be, and that other company is deemed to have acquired that right—
| (i) | where that right is so disposed of as a capital asset, for a cost equal to any expenditure in respect of that right incurred by that company that is allowable in terms of paragraph 20 of the Eighth Schedule and to have incurred such cost at the date of incurral by that company of such expenditure, which cost must, where that right is acquired as— |
| (A) | a capital asset, be treated as an expenditure actually incurred by that company in respect of that right for the purposes of paragraph 20 of the Eighth Schedule; or |
[Paragraph 7(2)(i)(A) of the Tenth Schedule substituted by section 55 of the Taxation Laws Amendment Act, 2020 (Act No. 23 of 2020), GG44083, dated 20 January 2021]
| (B) | trading stock, be treated as the amount to be taken into account by that company in respect of that right for the purposes of section 11(a) or 22(1) or (2); or |
| (ii) | where that right is so disposed of as trading stock and that right is acquired as trading stock, for a cost equal to the amount referred to in item (b), which cost must be treated as the amount to be taken into account by that company in respect of that right for purposes of section 11(a) or 22(1) or (2). |
(3)
| (a) | If an oil and gas company disposes of any oil and gas right to another company pursuant to an agreement that participation treatment as contemplated in subparagraph (1) applies and— |
[Words preceding paragraph 7(3)(a)(i) of the Tenth Schedule substituted by section 159(1)(c) of the Taxation Laws Amendment Act, 2013 (Act No. 31 of 2013), GG 37158, dated 12 December 2013]
| (i) | that right is held as a capital asset; and |
| (ii) | the market value of that right exceeds the base cost of that right on the date of that disposal, |
any gain derived by that company in respect of the amount contemplated in subitem (ii) is deemed to be an amount of gross income, and that other company that acquired that right may deduct from its oil and gas income as contemplated in paragraph 5(1) (but not including 5(2)) an amount equal to the amount deemed to be gross income of the company that disposed of that right.
[Words following paragraph 7(3)(a)(ii) of the Tenth Schedule substituted by section 75(1)(a) of the Taxation Laws Amendment Act, 2007 (Act No. 8 of 2007)]
| (b) | If an oil and gas company disposes of any oil and gas right to another company pursuant to an agreement that participation treatment as contemplated in subparagraph (1) applies and— |
[Words preceding paragraph 7(3)(b)(i) of the Tenth Schedule substituted by section 159(1)(d) of the Taxation Laws Amendment Act, 2013 (Act No. 31 of 2013), GG 37158, dated 12 December 2013]
| (i) | that right is held as trading stock; and |
| (ii) | the market value of that right exceeds the amount taken into account in respect of that right in terms of section 11(a) or 22, |
that other company that acquired that right may deduct from its oil and gas income as contemplated in paragraph 5(1) (but not including 5(2)) an amount equal to the amount deemed to be gross income of the company that disposed of that right less the applicable deduction allowable as contemplated in section 11(a) or 22, as the case may be, in respect of that right.
[Words following paragraph 7(3)(b)(ii) of the Tenth Schedule substituted by section 75(1)(b) of the Taxation Laws Amendment Act, 2007 (Act No. 8 of 2007)]