Income Tax Act, 1962 (Act No. 58 of 1962)SchedulesEighth Schedule : Determination of Taxable Capital Gains and Assessed Capital Losses (Section 26A)Part XI : Company Distributions |
74. Definitions
For the purposes of this Part, unless the context otherwise dictates—
"capital distribution"
[Definition deleted by section 117(1)(a) of the Taxation Laws Amendment Act, 2011 (Act No. 24 of 2011)];
[Definition deleted by section 113(1)(a) of the Revenue Laws Amendment Act, 2003 ( the Revenue Laws Amendment Act, 2003 (Act No. 45 of 2003)];
"date of distribution"
in relation to any distribution, means—
| (a) | to the extent that the distribution does not consist of a distribution of an asset in specie— |
| (i) | where the company that makes the distribution is a listed company, the date on which the distribution is paid; or |
| (ii) | where the company that makes the distribution is not a listed company, the earlier of the date on which the distribution is paid or becomes due and payable; or |
| (b) | to the extent that the distribution consists of a distribution of an asset in specie, the earlier of the date on which the distribution is paid or becomes due and payable. |
[Definition substituted by section 130(1) of the Taxation Laws Amendment Act, 2012 (Act No. 22 of 2012) - effective 1 April 2012]
"distribution"
[Definition deleted by section 117(1)(c) of the Taxation Laws Amendment Act, 2011 (Act No. 24 of 2011) - effective 1 April 2012]
"share"
[Definition deleted by section 117(1)(d) of the Taxation Laws Amendment Act, 2011 (Act No. 24 of 2011) - effective 1 April 2012]
75. Distributions in specie by company
| (1) | Where a company makes a distribution of an asset in specie to a person holding a share in that company— |
| (a) | that company must be treated as having disposed of that asset to that person on the date of distribution for an amount received or accrued equal to the market value of that asset on that date; and |
[Paragraph 75(1)(a) of the Eighth Schedule substituted by section 147 of the Taxation Laws Amendment Act, 2013 (Act No. 31 of 2013), GG 37158, dated 12 December 2013]
| (b) | that person must be treated as having acquired that asset on the date of distribution and for expenditure equal to the market value of that asset on that date, which expenditure must be treated as an amount of expenditure actually incurred for the purposes of paragraph 20(1)(a). |
[Paragraph 75(1) of the Eighth Schedule substituted by section 131(1) of the Taxation Laws Amendment Act, 2012 (Act No. 22 of 2012) - effective 1 April 2012]
| (2) | [Paragraph 75(2) of the Eighth Schedule deleted by section 114(1)(b) of the Revenue Laws Amendment Act, 2003 (Act No. 45 of 2003)] |
| 76. | Returns of capital and foreign returns of capital by way of distributions of cash or assets in specie |
[Paragraph 76 of the Eighth Schedule heading substituted by section 132(1)(a) of the Taxation Laws Amendment Act, 2012 (Act No. 22 of 2012) - effective 1 January 2011]
| (1) | Subject to subparagraph (2), where a return of capital or foreign return of capital by way of a distribution of cash or an asset in specie (other than a distribution of a share in terms of an unbundling transaction contemplated in section 46(1) is received by or accrues to a holder of a share in respect of that share, that holder must where the date of distribution of that cash or asset occurs— |
| (a) | before valuation date, reduce the expenditure contemplated in paragraph 20 actually incurred before valuation date in respect of that share by the amount of that cash or the market value of that asset; |
| (b) | on or after valuation date but before 1 October 2007 and that share is disposed of by the holder of that share on or before 31 March 2012, treat the amount of that cash or the market value of that asset as proceeds when that share is disposed of; |
| (c) | on or after 1 October 2007 but before 1 April 2012, treat the amount of that cash or the market value of that asset as proceeds when that share is partly disposed of in terms of paragraph 76A. |
[Paragraph 76(1) of the Eighth Schedule substituted by section 148(a) of the Taxation Laws Amendment Act, 2013 (Act No. 31 of 2013), GG 37158, dated 12 December 2013]
| (2) | Where a holder of shares uses the weighted average method in respect of shares that are identical assets as contemplated in paragraph 32(3A)(a) and a return of capital or foreign return of capital by way of a distribution of cash or an asset in specie (other than a distribution of a share in terms of an unbundling transaction contemplated in section 46(1)) is received by or accrues to that holder of shares in respect of those shares on or after valuation date but before 1 October 2007, the weighted average base cost of those shares must be determined by— |
[Words preceding paragraph 76(2)(a) of the Eighth Schedule substituted by section 148(b) of the Taxation Laws Amendment Act, 2013 (Act No. 31 of 2013), GG 37158, dated 12 December 2013]
| (a) | deducting the amount of that cash or the market value of that asset from the base cost of those shares held when that return of capital or foreign return of capital was received or accrued; and |
| (b) | dividing the result by the number of those shares held when that return of capital or foreign return of capital was received or accrued. |
[Paragraph 76(2) of the Eighth Schedule substituted by section 132(1)(d) of the Taxation Laws Amendment Act, 2012 (Act No. 22 of 2012) - effective 1 January 2011]
| (3) | [Paragraph 76(3) of the Eighth Schedule deleted by section 132(1)(e) of the Taxation Laws Amendment Act, 2012 (Act No. 22 of 2012) - effective 1 January 2011] |
(4) Every—
| (a) | company that makes a distribution to any other person; and |
| (b) | person that pays a distribution to any other person on behalf of a company, |
on or after 1 April 2012 must by the time of the distribution or payment, notify that other person in writing of the extent to which the distribution or payment constitutes a return of capital.
[Paragraph 76(4) of the Eighth Schedule substituted by section 132(1)(f) of the Taxation Laws Amendment Act, 2012 (Act No. 22 of 2012) - effective 1 January 2011]
76A. Part-disposal of shares
[Heading of paragraph 76A of the Eighth Schedule substituted by section 61(1)(a) of the Taxation Laws Amendment Act, 2008 (Act No. 3 of 2008)]
(1) Where—
| (a) | a return of capital or foreign return of capital by way of a distribution of cash or an asset in specie (other than a share distributed in terms of an unbundling transaction contemplated in section 46(1)) is received by or accrues to a shareholder in respect of a share; and |
| (b) | that return of capital or foreign return of capital is received by or accrues to that shareholder on or after 1 October 2007 and before 1 April 2012, |
that shareholder must be deemed to have disposed of part of that share on the date that the return of capital or foreign return of capital is received by or accrues to the shareholder.
[Paragraph 76A(1) of the Eighth Schedule substituted by section 133(1)(a) of the Taxation Laws Amendment Act, 2012 (Act No. 22 of 2012) - effective 1 January 2011]
(1A) Subject to paragraph 76(2), where—
| (a) | a return of capital or foreign return of capital by way of a distribution of cash or an asset in specie (other than a share distributed in terms of an unbundling transaction contemplated in section 46(1)) is received by or accrues to a shareholder in respect of a share; |
| (b) | that return of capital or foreign return of capital is received by or accrues to that shareholder on or after valuation date but before 1 October 2007; and |
| (c) | that share is not disposed of before 1 April 2012, |
that return of capital or foreign return of capital must be treated as having been distributed on 1 April 2012.
[Paragraph 76A(1A) of the Eighth Schedule substituted by section 133(1)(b) of the Taxation Laws Amendment Act, 2012 (Act No. 22 of 2012) - effective 1 January 2011]
| (2) | If paragraph 76(2) applies and the base cost of those shares is a negative amount at the end of 31 March 2012— |
| (a) | that shareholder must be treated as having a capital gain on 31 March 2012 equal to that negative amount; and |
| (b) | the base cost of those shares at the end of 31 March 2012 must be treated as nil. |
[Paragraph 76A(2) of the Eighth Schedule substituted by section 120(1)(c) of the Taxation Laws Amendment Act, 2011 (Act No. 24 of 2011) - effective 1 January 2011]
| (3) | For purposes of paragraph 33(1) the market value of the part disposed of under this paragraph must be treated as being equal to the amount of the cash or the market value of the asset received or accrued by way of a return of capital or foreign return of capital. |
[Section 76A(3) of the Eighth Schedule substituted by section 133(1)(c) of the Taxation Laws Amendment Act, 2012 (Act No. 22 of 2012) - effective 1 January 2011]
[Paragraph 76A of the Eighth Schedule inserted by section 85(1) of the Revenue Laws Amendment Act, 2007 (Act No. 35 of 2007)]
| 76B. | Reduction in base cost of shares as result of distributions |
(1) Where—
| (a) | a return of capital or foreign return of capital by way of a distribution of cash or an asset in specie is received by or accrues to a holder of a share in respect of that share; |
| (b) | that return of capital or foreign return of capital is received by or accrues to the holder of that share on or after 1 April 2012 and prior to the disposal of that share; and |
| (c) | that share constitutes a pre-valuation date asset in relation to the holder of that share, |
for purposes of determining the date of acquisition of that share and the expenditure in respect of the cost of acquisition of that share, the holder of that share must be treated as—
[Words preceding paragraph 76B(1)(i) substituted by section 134(1)(a) of the Taxation Laws Amendment Act, 2012 (Act No. 22 of 2012) - effective 1 April 2012]
| (i) | having disposed of that share at a time immediately before the return of capital or foreign return of capital is received or accrues for an amount equal to the market value of the share at that time; and |
| (ii) | having immediately reacquired that share at that time at an expenditure equal to that market value— |
| (aa) | less any capital gain that would have been determined had the share been disposed of at market value at that time; and |
| (bb) | increased by any capital loss that would have been determined had the share been disposed of at market value at that time, |
which expenditure must be treated as an amount of expenditure actually incurred for the purposes of paragraph 20(1)(a):
Provided that the market value of a share listed on a recognised exchange and for which a price was quoted on that exchange is equal to the sum of—
| (i) | the ruling price of that share at the close of business on the last business day before the accrual of the return of capital or foreign return of capital; and |
| (ii) | the amount of the return of capital or foreign return of capital. |
[Proviso to paragraph 76B(1) of the Eighth Schedule inserted by section 79(1) of the Taxation Laws Amendment Act, 2016 (Act No. 15 of 2016)]
(2) Where—
| (a) | a return of capital or foreign return of capital by way of a distribution of cash or an asset in specie is received by or accrues to a holder of a share in respect of that share; and |
| (b) | that return of capital or foreign return of capital is received by or accrues to the holder of that share on or after 1 April 2012 and prior to the disposal of that share, |
the holder of that share must reduce the expenditure in respect of the share by the amount of that cash or the market value of that asset on the date that the asset or that cash is received by or accrues to the holder of that share.
[Words following paragraph 76B(2)(b) substituted by section 122 of the Taxation Laws Amendment Act, 2015 (Act No. 25 of 2015)]
| (3) | Where the amount of a return of capital or foreign return of capital contemplated in subparagraph (2) exceeds the expenditure in respect of the share in respect of which that return of capital or foreign return of capital is received or accrues, the amount of the excess must be treated as a capital gain in determining the aggregate capital gain or aggregate capital loss of the holder of that share for the year of assessment in which that return of capital or foreign return of capital is received by or accrues to the holder of that share. |
[Paragraph 76B(3) of the Eighth Schedule substituted by section 134(1)(b) of the Taxation Laws Amendment Act, 2012 (Act No. 22 of 2012) - effective 1 April 2012]
[Paragraph 76B of the Eighth Schedule inserted by section 121(1) of the Taxation Laws Amendment Act, 2011 (Act No. 24 of 2011) - effective 1 January 2012]
| 77. | Distribution in liquidation or deregistration received by holders of shares |
[Heading of paragraph 77 of the Eighth Schedule substituted by section 92 of the Taxation Laws Amendment Act, 2014 (Act No. 43 of 2014)]
| (1) | A holder of shares in a company that is being wound up, liquidated or deregistered must be treated as having disposed of all the shares held by that holder in that company at the earlier of— |
| (a) | the date of dissolution or deregistration; or |
| (b) | in the case of a liquidation or winding-up, the date when the liquidator declares in writing that no reasonable grounds exist to believe that the holder of shares in the company (or holders of shares holding the same class of shares) will receive any further distributions in the course of the liquidation or winding-up of that company. |
[Paragraph 77(1) of the Eighth Schedule substituted by section 149(1) of the Taxation Laws Amendment Act, 2013 (Act No. 31 of 2013), GG 37158, dated 12 December 2013]
(2) Where—
| (a) | a return of capital or foreign return of capital by way of a distribution of cash or assets in specie is received by or accrues to a holder of shares contemplated in subparagraph (1) in respect of a share that is treated as having been disposed of in terms of that subparagraph; and |
| (b) | that return of capital or foreign return of capital is received by or accrues to that holder after the date contemplated in subparagraph (1) (a) or (b), |
the return of capital or foreign return of capital must be treated as a capital gain in determining that holder’s aggregate capital gain or aggregate capital loss for that year of assessment.
[Paragraph 77(2) of the Eighth Schedule substituted by section 149(b) of the Taxation Laws Amendment Act, 2013 (Act No. 31 of 2013), GG 37158, dated 12 December 2013]
78. Share distributions received by shareholder
[Paragraph 78 of the Eighth Schedule repealed by section 136(1) of the Taxation Laws Amendment Act, 2012 (Act No. 22 of 2012) - effective 1 January 2013]
79. Matching contributions and distributions