Income Tax Act, 1962 (Act No. 58 of 1962)SchedulesEighth Schedule : Determination of Taxable Capital Gains and Assessed Capital Losses (Section 26A)Part VI : Proceeds |
35. Proceeds from disposal
| (1) | Subject to subparagraphs (2), (3) and (4), the proceeds from the disposal of an asset by a person are equal to the amount received by or accrued to, or which is treated as having been received by, or accrued to or in favour of, that person in respect of that disposal, and includes— |
| (a) | the amount by which any debt owed by that person has been reduced or discharged; and |
| (b) | any amount received by or accrued to a lessee from the lessor of property for improvements effected to that property. |
| (1A) | [Paragraph 35(1A) of the Eighth Schedule deleted by section 78 of the Taxation Laws Amendment Act, 2018 (Act No. 23 of 2018), GG 42172, dated 17 January 2019] |
| (2) | The amount of the proceeds from a disposal by way of a value shifting arrangement is determined as the market value of the person’s interests to which subparagraph 11(1)(g) applies immediately prior to the disposal less the market value of the person’s interests immediately after the disposal, which amount shall be treated as having been received or accrued to that person. |
| (3) | The proceeds from the disposal, during a year of assessment, of an asset by a person, as contemplated in subparagraph (1) must be reduced by— |
[Words preceding paragraph 35(3)(a) of the Eighth Schedule substituted by section 111(1)(a) of Act No. 25 of 2015 - effective 1 January 2016]
| (a) | any amount of the proceeds that must be or was included in the gross income of that person or that must be or was taken into account when determining the taxable income of that person before the inclusion of any taxable capital gain; |
| (b) | any amount of the proceeds that has during that year of assessment been repaid or has become repayable to the person to whom that asset was disposed of; or |
[Paragraph 35(3)(b) of the Eighth Schedule substituted by section 111(1)(b) of the Taxation Laws Amendment Act, 2015 (Act No. 25 of 2015) - effective 1 January 2016]
| (c) | any reduction, as the result of the cancellation, termination or variation of an agreement, other than any cancellation or termination of an agreement that results in the asset being reacquired by the person that disposed of it, or any reduction due to the prescription or waiver of a claim or release from an obligation or any other event during that year, of an accrued amount forming part of the proceeds of that disposal. |
[Paragraph 35(3)(c) of the Eighth Schedule substituted by section 58 of the Taxation Laws Amendment Act, 2019 (Act No. 34 of 2019), GG 42951, dated 15 January 2020]
| (4) | Where during any year of assessment a person has become entitled to any amount which is payable on a date or dates falling after the last day of that year, that amount must be treated as having accrued to that person during that year. |
35A. Disposal of certain debt claims
(1) This paragraph applies where—
| (a) | a person has disposed of an asset during any year of assessment, all the proceeds of which will not accrue to that person in that year; |
| (b) | that person subsequently disposes of any right to claim payment in respect of that disposal; and |
| (c) | that claim includes any amount which has not yet accrued to that person at the time of the disposal of that claim. |
| (2) | So much of any consideration received by or accrued to a person from the disposal of a claim contemplated in subparagraph (1)(b) as is attributable to any amount which has not yet accrued to that person as contemplated in subparagraph (1)(c), must be treated as an amount of consideration which accrues to that person in respect of the disposal of the asset contemplated in subparagraph (1)(a). |
[Paragraph 35A(2) of the Eighth Schedule substituted by section 71 of the Taxation Laws Amendment Act, 2017 (Act No. 17 of 2017)]
| (3) | So much of any capital gain or capital loss determined in respect of the disposal by the person of the right to claim payment as contemplated in subparagraph (1)(b), as is attributable to any amount which has not yet accrued to that person, must be disregarded. |
[Paragraph 35A of the Eighth Schedule inserted by section 62(1) of the Revenue Laws Amendment Act, 2004 (Act No. 32 of 2004)]
36. Disposal of partnership asset
The proceeds from the disposal of a partner’s interest in an asset of the partnership must be treated as having accrued to that partner at the time of that disposal.
37. Assets of trust and company
(1) Where—
| (a) | an asset contemplated in paragraph 15 which is not used for purposes of carrying on a trade or an asset which, if owned by a natural person, would be a personal-use asset as contemplated in paragraph 53, is owned by a trust or a company any interest in which or any shares of which are held directly or indirectly by a natural person; |
| (b) | there is a decrease in the market value of that asset while held by that trust or company after that person acquired an interest in that trust or company; and |
| (c) | any interest in that trust or that company is thereafter disposed of by a person, |
that person must be treated as having disposed of that interest for proceeds equal to the market value of that interest, determined on the date of disposal, as if the market value of that asset had not decreased.
| (2) | Subparagraph (1) does not apply where more than 50 per cent of the assets of the trust or company consist of assets used wholly and exclusively for trading purposes. |
| 38. | Disposal by way of donation, consideration not measurable in money and transactions between connected persons not at an arm’s length price |
| (1) | Subject to subparagraph (2) and section 9HB, where a person disposed of an asset by means of a donation or for a consideration not measurable in money or to a person who is a connected person immediately prior to or immediately after that disposal in relation to that person for a consideration which does not reflect an arm’s length price— |
[Words preceding paragraph 38(1)(a) of the Eighth Schedule substituted by section 59(a) of the Taxation Laws Amendment Act, 2019 (Act No. 34 of 2019), GG 42951, dated 15 January 2020]
| (a) | the person who disposed of that asset must be treated as having disposed of that asset for an amount received or accrued equal to the market value of that asset as at the date of that disposal; and |
[Paragraph 38(1)(a) of the Eighth Schedule inserted by section 63(1)(a) of the Revenue Laws Amendment Act (Act No. 32 of 2004)]
| (b) | the person who acquired that asset must be treated as having acquired that asset at a cost equal to that market value, which cost must be treated as an amount of expenditure actually incurred for the purposes of paragraph 20(1)(a). |
[Paragraph 38(1)(b) of the Eighth Schedule substituted by section 59(b) of the Taxation Laws Amendment Act, 2019 (Act No. 34 of 2019), GG 42951, dated 15 January 2020]
| (2) | Subparagraph (1) does not apply in respect of the disposal of— |
| (a) | a right contemplated in section 8A; |
[Paragraph 38(2)(a) of the Eighth Schedule substituted by section 134(1)(a) of the Taxation Laws Amendment Act, 2013 (Act No. 31 of 2013) - effective 1 April 2013]
| (b) | an asset in the circumstances contemplated in section 10(1)(nE); |
| (c) | a qualifying equity share contemplated in section 8B by an employer, associated institution or any other person by arrangement with the employer, as contemplated in paragraph 1 of the Seventh Schedule, to an employee; |
[Paragraph 38(2)(c) of the Eighth Schedule substituted by section 134(1)(b) of the Taxation Laws Amendment Act, 2013 (Act No. 31 of 2013) - effective 1 April 2013]
| (d) | [Paragraph 38(2)(d) of the Eighth Schedule deleted by section 98 of the Taxation Laws Amendment Act, 2010 (Act No. 7 of 2010)] |
| (e) | any asset in respect of which section 40CA applies; |
[Paragraph 38(2)(e) of the Eighth Schedule substituted by section 71(1) of the Taxation Laws Amendment Act, 2016 (Act No. 15 of 2016) - effective 1 March 2015]
| (f) | any land from the date on which that land becomes declared land as defined in section 37D(1). |
[Paragraph 38(2)(f) of the Eighth Schedule inserted by section 71(1) of the Taxation Laws Amendment Act, 2016 (Act No. 15 of 2016) - effective 1 March 2015]
[Paragraph 38(2) of the Eighth Schedule substituted by section 63(1)(b) of the Revenue Laws Amendment Act, 2004 (Act No. 32 of 2004)]
| 39. | Capital losses determined in respect of disposals to certain connected persons |
| (1) | A person must, when determining the aggregate capital gain or aggregate capital loss of that person, disregard any capital loss determined in respect of the disposal of an asset to any person— |
| (a) | Who was a connected person in relation to that person immediately before that disposal; or |
| (b) | Which is immediately after the disposal— |
| (i) | a member of the same group of companies as that person; or |
| (ii) | a trust with a beneficiary which is a member of the same group of companies as that person. |
[Paragraph 39(1)(b) of the Eighth Schedule substituted by section 26(b) of Act No. 16 of 2004]
[Paragraph 39(1) of the Eighth Schedule substituted by section 100 of the Revenue Laws Amendment Act, 2003 ( the Revenue Laws Amendment Act, 2003 (Act No. 45 of 2003)]
| (2) | A person’s capital loss which is disregarded in terms of subparagraph (1) may be deducted from that person’s capital gains determined in respect of disposals of assets during that year or subsequent years to the same person to whom the disposal giving rise to that capital loss was made, if at the time of those subsequent disposals, that person is still a connected person in relation to that person. |
| (3) | For the purposes of subparagraph (1), a connected person in relation to— |
[Words preceding paragraph 39(3)(a) of the Eighth Schedule substituted by section 63(1) of the Taxation Laws Amendment Act, 2007 (Act No. 8 of 2007)]
| (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; |
[Paragraph 39(3)(b) of the Eighth Schedule substituted by section 73(1)(a) of Act No. 31 of 2005]
[Paragraph 39(3) of the Eighth Schedule substituted by section 88(1) of the Second Revenue Laws Amendment Act, 2001 (Act No. 60 of 2001)]
| (4) | Subparagraph (1) does not apply in respect of the disposal by a trust of any right, marketable security or equity instrument contemplated in section 8A or 8C to a beneficiary of that trust, if— |
| (a) | that right, marketable security or equity instrument is disposed of to that beneficiary— |
| (i) | by virtue of that beneficiary’s employment with an employer, directorship of a company or services rendered or to be rendered by that beneficiary as an employee to an employer; or |
| (ii) | as a result of the exercise, cession, release, conversion or exchange by that beneficiary of the right, marketable security or equity instrument contemplated in subitem (i); and |
| (b) | that trust is an associated institution as contemplated in paragraph 1 of the Seventh Schedule in relation to that employer or company. |
[Paragraph 39(4) of the Eighth Schedule inserted by section 73(1)(b) of Act No. 31 of 2005]
| (5) | For the purposes of subparagraph (1), where a company redeems its shares, the holder of those shares must be treated as having disposed of them to that company. |
[Paragraph 39(5) of the Eighth Schedule inserted by section 79 of the Taxation Laws Amendment Act, 2018 (Act No. 23 of 2018), GG 42172, dated 17 January 2019]
| 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. |
[Paragraph 39A of the Eighth Schedule inserted by section 64(1) of the Revenue Laws Amendment Act (Act No. 32 of 2004)]
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 paragraph 40(1)(a) of the Eighth Schedule substituted by section 112(1) of Act No. 25 of 2015 - effective 1 March 2016]
| (a) | assets transferred to the surviving spouse of that deceased person as contemplated in section 9HB(2)(a); |
[Paragraph 40(1)(a) of the Eighth Schedule substituted by section 60(a) of the Taxation Laws Amendment Act, 2019 (Act No. 34 of 2019), GG 42951, dated 15 January 2020]
| (b) | [Paragraph 40(1)(b) of the Eighth Schedule deleted by the Revenue Laws Amendment Act, 2008 (Act No. 60 of 2008)]; |
| (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 |
[Paragraph 40(1)(c) of the Eighth Schedule substituted by section 82(b) of the Revenue Laws Amendment Act, 2002 (Act No. 74 of 2002)]
| (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, |
[Paragraph 40(1)(d) of the Eighth Schedule substituted by section 54 of the Taxation Laws Amendment Act, 2008 (Act No. 3 of 2008)]
for an amount received or accrued equal to the market value of those assets at the date of that person's death.
[Words following paragraph 40(1)(d) of the Eighth Schedule substituted by section 71(1)(a) of the Taxation Laws Amendment Act, 2009 (Act No. 17 of 2009)]
| (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).
[Paragraph 40(1A) of the Eighth Schedule inserted by section 71(1)(b) of the Taxation Laws Amendment Act, 2009 (Act No. 17 of 2009)]
| (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))— |
[Words preceding paragraph 40(2)(a) of the Eighth Schedule substituted by section 60(b) of the Taxation Laws Amendment Act, 2019 (Act No. 34 of 2019), GG 42951, dated 15 January 2020]
| (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 or trustee 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). |
[Paragraph 40(2)(b) of the Eighth Schedule substituted by section 71(1)(c) of the Taxation Laws Amendment Act, 2009 (Act No. 17 of 2009)]
| (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. |
| 41. | Tax payable by heir of a deceased estate |
| (1) | Where a person dies before 1 March 2016 and— |
[Words preceding paragraph 41(1)(a) of the Eighth Schedule substituted by section 113(1) of Act No. 25 of 2015 - effective 1 January 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 |
[Paragraph 41(1)(a) of the Eighth Schedule substituted by section 87 of the Taxation Laws Amendment Act, 2014 (Act No. 43 of 2014)]
| (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. |
| 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— |
[Words preceding paragraph 42(1)(a) substituted by section 116(1)(a) of the Taxation Laws Amendment Act, 2012 (Act No. 22 of 2012) - effective 29 February 2012]
| (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— |
[Words preceding paragraph 42(1)(b)(i) substituted by section 55 of the Taxation Laws Amendment Act, 2008 (Act No. 3 of 2008)]
| (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).
[Words following paragraph 42(1)(b)(ii) of the Eighth Schedule substituted by section 50 of the Taxation Laws Amendment Act, 2020 (Act No. 23 of 2020), GG44083, dated 20 January 2021]
| (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. |
[Paragraph 42(2)(c) of the Eighth Schedule substituted by section 99 of the Taxation Laws Amendment Act, 2010 (Act No. 7 of 2010)]
| (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. |
[Paragraph 42(3)(b) of the Eighth Schedule substituted by section 74(1) of the Revenue Laws Amendment Act, 2005 (Act No. 31 of 2005)]
[Paragraph 42(3) of the Eighth Schedule substituted by section 90(1)(b) of the Second Revenue Laws Amendment Act, 2001 (Act No. 60 of 2001)]
| (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 29A, allocated to any policyholder fund of an insurer as defined in that section. |
[Paragraph 42(4) of the Eighth Schedule inserted by section 116(1)(b) of the Taxation Laws Amendment Act, 2012 (Act No. 22 of 2012) - effective 29 February 2012]
| 42A. | [Paragraph 42A of the Eighth Schedule repealed by section 135 of the Taxation Laws Amendment Act, 2013 (Act No. 31 of 2013), GG 37158, dated 12 December 2013] |
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. |
[Paragraph 43(1) of the Eighth Schedule substituted by section 136(1)a) of the Taxation Laws Amendment Act, 2013 (Act No. 31 of 2013) - effective 1 March 2014]
| (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.
[Paragraph 43(1A) of the Eighth Schedule provisio inserted by section 61(a) of the Taxation Laws Amendment Act, 2019 (Act No. 34 of 2019), GG 42951, dated 15 January 2020]
| (2) | [Paragraph 43(2) of the Eighth Schedule deleted by section 136(1)(c) of the Taxation Laws Amendment Act, 2013 (Act No. 31 of 2013), GG 37158, dated 12 December 2013] |
| (3) | [Paragraph 43(3) of the Eighth Schedule deleted by the Revenue Laws Amendment Act, 2002 (Act No. 74 of 2002)] |
| (4) | [Paragraph 43(4) of the Eighth Schedule deleted by the Taxation Laws Amendment Act, 2012 (Act No. 22 of 2012) - effective date 1 March 2013 (as substituted by section 208(1) of the Taxation Laws Amendment Act, 2013 (Act No. 31 of 2013), GG 37158, dated 12 December 2013] |
| (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 paragraphs 12, 38, and 40, be treated as being denominated in that currency. |
[Paragraph 43(5)(b) of the Eighth Schedule substituted by section 61(b) of the Taxation Laws Amendment Act, 2019 (Act No. 34 of 2019), GG 42951, dated 15 January 2020]
| (5A) | [Paragraph 43(5A) of the Eighth Schedule deleted by section 136(1)(d) of the Taxation Laws Amendment Act, 2013 (Act No. 31 of 2013), GG 37158, dated 12 December 2013] |
| (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. |
[Paragraph 43(6) of the Eighth Schedule substituted by section 114(b) of the Taxation Laws Amendment Act, 2015 (Act No. 25 of 2015)]
| (6A) | [Paragraph 43(6A) of the Eighth Schedule deleted by section 61(c) of the Taxation Laws Amendment Act, 2019 (Act No. 34 of 2019), GG 42951, dated 15 January 2020] |
(7) For the purposes of this paragraph—
"foreign currency"
means currency other than local currency; and
"local currency"
means—
| (a) | in relation to a permanent establishment of a person, the functional currency of that permanent establishment (other than the currency of any country in the common monetary area). |
| (b) | in relation to a headquarter company, in respect of amounts which are not attributable to a permanent establishment outside the Republic, the functional currency of that headquarter company; |
[Paragraph 43(7)(b) of the Eighth Schedule substituted by section 136(1)(k) of the Taxation Laws Amendment Act, 2013 (Act No. 31 of 2013), GG 37158, dated 12 December 2013 - effective 1 April 2014]
| (c) | in relation to a domestic treasury management company, in respect of amounts which are not attributable to a permanent establishment outside the Republic, the functional currency of that domestic treasury management company; |
[Paragraph 43(7)(c) of the Eighth Schedule substituted by section 136(1)(l) of the Taxation Laws Amendment Act, 2013 (Act No. 31 of 2013), GG 37158, dated 12 December 2013 - effective 1 April 2014]
| (d) | in relation to an international shipping company defined in section 12Q, in respect of amounts which are not attributable to a permanent establishment outside the Republic, the functional currency of that international shipping company; or |
[Paragraph 43(7)(d) of the Eighth Schedule inserted by section 136(l) of the Taxation Laws Amendment Act, 2013 (Act No. 31 of 2013), GG 37158, dated 12 December 2013 - effective 1 April 2014]
| (e) | in any other case, the currency of the Republic. |
[Paragraph 43(7)(e) of the Eighth Schedule inserted by section 136(l) of the Taxation Laws Amendment Act, 2013 (Act No. 31 of 2013), GG 37158, dated 12 December 2013]
| 43A. | Dividends treated as proceeds on disposal of certain shares |
| (1) | For the purposes of this paragraph— |
[Words preceding definitions in paragraph 43A(1) of the Eighth Schedule substituted by section 80(1)(a) of the Taxation Laws Amendment Act, 2018 (Act No. 23 of 2018), GG 42172, dated 17 January 2019]
means a transaction in respect of which the provisions of PART III of Chapter II were applied;
[Definition of the Eighth Schedule inserted by section 80(1)(b) of the Taxation Laws Amendment Act, 2018 (Act No. 23 of 2018), GG 42172, dated 17 January 2019 - effective 1 January 2019]
"exempt dividend"
means any dividend or foreign dividend to the extent that the dividend or foreign dividend is—
| (a) | not subject to any tax under Part VIII of Chapter II; and |
| (b) | exempt from normal tax in terms of section 10(1)(k)(i) or section 10B(2)(a) or (b). |
in relation to—
| (a) | a preference share, means so much of the amount of any dividend received or accrued in respect of that share as exceeds the amount that would have accrued in respect of that share had it been determined with reference to the consideration for which that share was issued by applying an interest rate of 15 per cent per annum for the period in respect of which that dividend was received or accrued; |
[Definition of the Eighth Schedule substituted by section 62(1)(a) of the Taxation Laws Amendment Act, 2019 (Act No. 34 of 2019), GG 42951, dated 15 January 2020]
| (b) | any other share, means so much of the amount of any dividend received or accrued— |
| (i) | within a period of 18 months prior to the disposal of that share; or |
| (ii) | in respect, by reason or in consequence of that disposal, |
as exceeds 15 per cent of the higher of the market value of that share as at the beginning of the period of 18 months and as at the date of disposal of that share;
[Definition of the Eighth Schedule substituted by section 62(1)(c) of the Taxation Laws Amendment Act, 2019 (Act No. 34 of 2019), GG 42951, dated 15 January 2020]
Provided that a dividend in specie that was distributed in terms of a deferral transaction must not be taken into account to the extent to which that distribution was made in terms of an unbundling transaction as defined in section 46(1)(a) or a liquidation distribution as defined in section 47(1)(a);
[Definition provisio of the Eighth Schedule inserted by section 62(1)(b) of the Taxation Laws Amendment Act, 2019 (Act No. 34 of 2019), GG 42951, dated 15 January 2020 - deemed to come into operation on 30 October 2019 and applies in respect of dividends received or accrued on or after that date (Section 62(2)]
means a preference share as defined in section 8EA(1);
[Definition of the Eighth Schedule inserted by section 80(1)(d) of the Taxation Laws Amendment Act, 2018 (Act No. 23 of 2018), GG 42172, dated 17 January 2019 - effective 19 July 2017]
"qualifying interest"
means an interest held by a company in another company, whether alone or together with any connected persons in relation to that company, that constitutes—
| (a) | if that other company is not a listed company, at least— |
| (i) | 50 per cent of the equity shares or voting rights in that other company; or |
| (ii) | 20 per cent of the equity shares or voting rights in that other company if no other person (whether alone or together with any connected person in relation to that person) holds the majority of the equity shares or voting rights in that other company; or |
| (b) | if that other company is a listed company, at least 10 per cent of the equity shares or voting rights in that other company. |
| (2) | Subject to paragraph (3), where a company holds shares in another company and disposes of any of those shares in terms of a transaction that is not a deferral transaction and that company held a qualifying interest in that other company at any time during the period of 18 months prior to that disposal, the amount of any exempt dividend received by or that accrued to that company in respect of the shares disposed of must— |
| (a) | to the extent that the exempt dividend constitutes an extraordinary dividend; and |
| (b) | if that company immediately before that disposal held the shares disposed of as a capital asset (as defined in section 41), |
be taken into account as part of the proceeds from the disposal of those shares or, if those shares are treated as having been disposed of in terms of subparagraph (4), as a capital gain in respect of those shares, in the year of assessment in which those shares are disposed of or are treated as having been disposed of or, where that dividend is received or accrues after that year of assessment, the year of assessment in which that dividend is received or accrues: Provided that where a company disposes of shares that are treated as having been disposed of previously by that company in terms of subparagraph (4), the amount of any extraordinary dividend in respect of those shares must be included in the proceeds from that disposal only to the extent to which it has not previously been taken into account in respect of those shares in terms of this subparagraph.
[Paragraph 43A(2) of the Eighth Schedule substituted by section 62(1)(d) of the Taxation Laws Amendment Act, 2019 (Act No. 34 of 2019), GG 42951, dated 15 January 2020 - deemed to have come into operation on 20 February 2019 and apply in respect of shares held by a company in a target company if the effective interest held by that company in the shares of that target company is reduced on or after that date (Section 62(3)]
| (3) | Where a company holds shares in another company and disposes of any of those shares in terms of a transaction that is not a deferral transaction within a period of 18 months after having acquired those shares in terms of a deferral transaction, other than an unbundling transaction and— |
[Words preceding paragraph 43B(3)(a) of the Eighth Schedule substituted by section 62(1)(e) of the Taxation Laws Amendment Act, 2019 (Act No. 34 of 2019), GG 42951, dated 15 January 2020]
| (a) | within a period of 18 months prior to the disposal of those shares by that company an exempt dividend in respect of those shares accrued to or was received by a person that— |
| (i) | disposed of those shares in terms of a deferral transaction; and |
| (ii) | was a connected person in relation to that company at any time within that period or immediately after that disposal, |
that dividend must for purposes of this paragraph be treated as a dividend that accrued to or was received by that company in respect of those shares within the period during which that company held those shares; and
| (b) | if that company acquired those shares (hereinafter referred to as "new shares") in terms of that deferral transaction in return for or by virtue of the holding, by that company, of other shares (hereinafter referred to as "old shares") that were disposed of in terms of that deferral transaction and an exempt dividend in respect of the old shares, other than a dividend consisting of new shares, accrued to or was received by that company within a period of 18 months prior to the disposal of the new shares, that dividend must for purposes of this paragraph be treated as an amount that accrued to or was received by that company as an exempt dividend in respect of the new shares. |
[Paragraph 43A(3) of the Eighth Schedule inserted by section 80(1)(f) of the Taxation Laws Amendment Act, 2018 (Act No. 23 of 2018), GG 42172, dated 17 January 2019 - effective 1 January 2019]
| (4) | Where a company holds equity shares in another company (hereinafter referred to as the ‘target company’) and— |
| (a) | the target company issues shares (hereinafter referred to as the ‘new shares’) to a person other than that company; and |
| (b) | the effective interest of that company in the equity shares of the target company is reduced by reason of the new shares issued by the target company, |
that company must for purposes of this paragraph be treated as having disposed, immediately after the new shares were issued, of a percentage of those equity shares that is equal to the percentage by which the effective interest of that company in the equity shares of the target company has been reduced by reason of the new shares issued by the target company: Provided that any new shares that are convertible to equity shares must for purposes of this subparagraph be treated as equity shares.
[Paragraph 43A(4) of the Eighth Schedule inserted by section 62(1)(f) of the Taxation Laws Amendment Act, 2019 (Act No. 34 of 2019), GG 42951, dated 15 January 2020 - deemed to have come into operation on 20 February 2019 and apply in respect of shares held by a company in a target company if the effective interest held by that company in the shares of that target company is reduced on or after that date (Section 62(3)]
| 43B. | Base cost of assets of controlled foreign companies |
Where the functional currency of a controlled foreign company—
[Words preceding paragraph 43B(a) of the Eighth Schedule substituted by section 102(1)(a) of the Taxation Laws Amendment Act, 2010 (Act No. 7 of 2010) - effective 1 January 2011]
| (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), |
[Paragraph 43B(b) of the Eighth Schedule substituted by section 102(1)(b) of the Taxation Laws Amendment Act, 2010 (Act No. 7 of 2010) - effective 1 January 2011]
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 43B of the Eighth Schedule inserted by section 101(1) of Act 7 of 2010 - deemed to have come into operation on 1 January 2009]