Revenue Laws Amendment Act

Link to law: http://www.gov.za/documents/revenue-laws-second-amendment-act-0
Published: 2006-02-01

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Revenue Laws Amendment Act [No. 31 of 2005]


Government Gazette
REPUBLIC OF SOUTH AFRICA

Vol. 488 Cape Town 1 February 2006 No. 28450
THE PRESIDENCY No. 102 1 February 2006
It is hereby notified that the President has assented to the following Act, which is hereby published for general information:–
No. 31 of 2005: Reveune Laws Second Amendment Act, 2005.

GENERAL EXPLANATORY NOTE:
[ ] Words in bold type in square brackets indicate omissions from existing enactments.
Words underlined with a solid line indicate insertions in existing enactments.
ACT To amend the Transfer Duty Act, 1949, so as to provide that the Minister of Finance may reduce the rates of duty; to allow for an exemption from duty in company formation transactions and where property was owned by certain superannuation funds in former TBVC territories; to limit the recovery period of unpaid duty to five years; and to regulate the refunds of duty, additional duty and interest; to amend the Estate Duty Act, 1955, to further regulate the property to be included in the estate of a deceased for purposes of determining the duty payable; to further regulate the deductions from the property for purposes of determining the duty payable; to amend the Income Tax Act, 1962; to further regulate the provisions relating to rebates and foreign tax credits; to provide for deduction of amounts incurred in respect of income of a non-resident which is attributed to a resident; to further regulate the gains made by directors of companies or employees in respect of rights to acquire marketable securities; to further regulate the taxation of amounts derived from broad-based employee share plans; to further regulate the taxation of directors and employees on vesting of equity instruments; to further regulate the circumstances in which amounts are deemed to have been accrued from a source in the Republic; to further regulate the provisions relating to controlled foreign companies; to provide for a cut off date in respect of the specific provisions regulating the taxation of foreign equity instruments; to further regulate the exemptions from normal tax; to further regulate the provisions relating to exemption of the capital element of purchased annuities where the cash consideration and annuity amount are denominated in a foreign currency; to further regulate the deductions from income for purposes of determining taxable income; to amend the provisions relating to the deduction in respect of machinery, plant, implements, utensils and articles used in farming or production of renewable energy; to amend the provisions relating to the deduction in respect of assets used by manufacturers or hotelkeepers, aircraft and ships or assets used for storage and packing of agricultural products; to further regulate the provisions relating to small business corporations; to amend the deduction in respect of learnership agreements; to further regulate the deduction in respect of the erection or improvement of buildings in urban development zones; to effect certain conse- quential amendments to the deductions from income derived from mining operations; to further regulate the deduction of medical and dental expenses; to amend the provisions relating to deductible donations made to public benefit organisations; to clarify the provisions relating to the ring-fencing of assessed losses of certain trades; to further regulate the non-deductibility of certain amounts in the determination of taxable income; to effect certain consequential amendments to the limitation of allowances granted in respect of certain assets and to the provisions relating to sale and leaseback arrangements; to amend the credit agreements and debtors allowance by deleting certain provisions which have become obsolete; to amend the provisions relating to the allowance in respect of
————————— (English text signed by the President.)
(Assented to 27 January 2006.) —————————
films; to further regulate the gains or losses on foreign exchange transactions; to substitute the provisions relating to the determination of taxable income from foreign currency; to further regulate the provisions relating to public benefit organisations; to further regulate the rules relating to corporate restructuring; to make provision for a withholding tax on foreign entertainers and sportspersons who perform in the Republic; to further regulate the provisions relating to donations tax; to further regulate the provisions relating to the imposition of secondary tax on companies; to further regulate the amounts to be deducted or withheld by employers and provisional payments in respect of normal tax; to amend the provisions relating to benefits or advantages derived by reason of employment or the holding of any office; to further regulate the provisions relating to capital gains tax; to amend the list of public benefit activities; and to effect certain textual and consequential amendments; to amend the Customs and Excise Act, 1964, so as to amend and insert certain definitions; to further provide for the rate of rent in respect of goods in the State warehouse; to further regulate provisions relating to goods removed in bond; to amend provisions regulating deficiencies in a customs and excise warehouse; to provide for a tolerance when calculating the quantity of spirits in a container; to provide for the levying of Road Accident Fund levy; to amend certain rebate and refund provisions; to amend the order in which instalments paid to the Commissioner are utilized; to amend provisions relating to goods subject to a lien and to effect certain consequential amendments; to amend the Stamp Duties Act, 1968, so as to provide that the Minister of Finance may reduce the rates of duty; to further delete certain provisions dealing with the issue of marketable securities; to provide for the relief of the administrative burden on the transfer of marketable securities; to clarify the position on the taxation of company share buy-backs and to provide anti-avoidance legislation; to simplify legislation regarding the cancellation and redemption of marketable securities; to regulate the rate and exemption of duty; to amend the Value-Added Tax Act, 1991, so as to amend and insert certain definitions; to insert certain deeming provisions; to provide for certain zero-rating and exemptions; to further provide for the time and value on certain supplies; to align certain provisions with the Customs and Excise Act, 1964; to allow for input tax deduction on motor cars acquired to be awarded as prizes and in certain instances on entertainment; to limit the period to claim input tax to five years from issue of a tax invoice; to further regulate adjustments for public authorities and customs controlled area enterprises; to provide for issues relating to foreign donor funding; to regulate the provisions of bad debts; to amend the Tax on Retirement Funds Act, 1996, so as to amend a definition; to amend the Road Accident Fund Act, 1996, so as to effect consequential amendments resulting from the introduction of a Road Accident Fund levy in the Customs and Excise Act, 1964; to amend the Uncertificated Securities Tax Act, 1998, so as to amend and insert certain definitions; to provide that the Minister of Finance may reduce the rates of duty; to further delete certain provisions dealing with the issue of securities; to provide for the protection of uncertificated securities tax base against changes in beneficial ownership; to amend the Revenue Laws Amendment Act, 2003, so as to substitute a commencement date; and to amend the Second Revenue Laws Amendment Act, 2004, so as to substitute a commencement date; and to provide for matters in connection therewith.
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BE IT ENACTED by the Parliament of the Republic of South Africa, asfollows:— Amendment of section 2 of Act 40 of 1949, as substituted by section 2 of Act 77 of 1964 and amended by section 1 of Act 56 of 1966, section 2 of Act 66 of 1973, section 3 of Act 88 of 1974, section 5 of Act 106 of 1980, section 3 of Act 87 of 1988, section 2 of Act 136 of 1992, section 3 of Act 97 of 1993, section 1 of Act 37 of 1995, section 9 of Act 37 of 1996, section 2 of Act 32 of 1999, section 2 of Act 30 of 2002, section 31 of Act 12 of 2003, section 1 of Act 16 of 2004 and section 1 of Act 9 of 2005
1. Section 2 of the Transfer Duty Act, 1949, is hereby amended by the insertion after subsection (1) of the following subsection:
‘‘(2) The Minister of Finance may announce that, with effect from a date mentioned in that announcement— (a) the rate of transfer duty contemplated in subsection (1) will be reduced to the
extent mentioned in the announcement; or (b) there will be a change in the provision of this Act that will have the effect that
the acquisition of or the renunciation of any interest in or restriction upon a certain class of property will no longer be subject to transfer duty.
(3) If the Minister makes an announcement contemplated in subsection (2), that reduction or change comes into effect on the date determined by the Minister in that announcement and continues to apply for a period of six months from that date unless Parliament passes legislation giving effect to that announcement within that period of six months.’’.
Amendment of section 9 of Act 40 of 1949, as amended by section 3 of Act 31 of 1953, section 12 of Act 80 of 1959, section 3 of Act 70 of 1963, section 3 of Act 77 of 1964, section 1 of Act 81 of 1965, section 7 of Act 103 of 1969, section 2 of Act 89 of 1972, section 3 of Act 66 of 1973, section 5 of Act 88 of 1974, section 77 of Act 54 of 1976, section 2 of Act 95 of 1978, section 6 of Act 106 of 1980, section 2 of Act 99 of 1981, section 2 of Act 118 of 1984, section 3 of Act 81 of 1985, section 3 of Act 86 of 1987, section 4 of Act 87 of 1988, section 36 of Act 9 of 1989, section 1 of Act 69 of 1989, section 79 of Act 89 of 1991, section 6 of Act 120 of 1992, section 4 of Act 136 of 1992, section 5 of Act 97 of 1993, section 2 of Act 37 of 1995, section 3 of Act 32 of 1999, section 3 of Act 30 of 2000, section 2 of Act 5 of 2001, section 8 of Act 60 of 2001, section 3 of Act 30 of 2002, section 4 of Act 74 of 2002, section 3 of Act 45 of 2003, section 2 of Act 16 of 2004 and section 2 of Act 32 of 2004
2. (1) Section 9 of the Transfer Duty Act, 1949, is hereby amended— (a) by the addition to subsection (1) of the following paragraph:
‘‘(m) any person in respect of the transfer of a property from a superannuation fund created and operated mainly for employees of the former TBVC and self-governing territories and other similar funds into the Govern- ment Employees’ Pension Fund.’’;
(b) by the insertion after subsection (15) of the following subsection: ‘‘(15A) No duty shall be payable in respect of the acquisition of any
property under a company formation transaction as contemplated in section 42 of the Income Tax Act, 1962 (Act No. 58 of 1962), where— (a) the supplier and recipient of that property are deemed to be one and
the same person in terms of section 8(25) of the Value-Added Tax Act, 1991; and
(b) the public officer of the company as contemplated in section 101 of the Income Tax Act, 1962, has made a sworn affidavit or solemn declaration that such acquisition of property complies with the provisions of paragraph (a).’’; and
(c) by the deletion of subsections (16) and (17).
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(2) Subsection (1) shall come into operation on the date of promulgation of this Act and applies in respect of any property acquired or interest in or restriction upon in any property renounced on or after that date.
Amendment of section 13 of Act 40 of 1949
3. Section 13 of the Transfer Duty Act, 1949, is hereby amended— (a) by the substitution for subsection (1) of the following subsection:
‘‘(1) Whenever the Commissioner is satisfied that the duty payable under this Act in respect of the acquisition of any property or the renunciation of any interest in or restriction upon the use or disposal of any property has not been paid in full, [he] the Commissioner shall, notwithstanding that the acquisition has already been registered in a deeds registry, recover the difference between the amount of the duty payable and the amount paid.’’; and
(b) by the addition of the following subsection: ‘‘(3) The Commissioner may not recover any amount of duty not fully
paid by any person as contemplated in subsection (1) after the expiration of a period of five years reckoned from the date on which that amount became payable in terms of this Act, if it is shown that— (a) the failure to pay that amount was not due to an intent of that person
or any other person acting on behalf of that person not to make payment of duty; and
(b) that person or other person acted in good faith and on an assumption that the transaction was not subject to duty under this Act which assumption was based on reasonable grounds and not due to negligence on the part of that person or other person.’’.
Substitution of section 20 of Act 40 of 1949, as substituted by section 11 of Act 30 of 1998
4. (1) The following section hereby substitutes section 20 of the Transfer Duty Act, 1949:
‘‘Refunds
20. (1) If any amount of duty, additional duty, penalty or interest paid to the Commissioner by any person in terms of this Act is in excess of the amount of duty, additional duty, penalty or interest, as the case may be, which is properly chargeable under this Act, that excess amount is refundable to that person.
(2) No refund shall be made if— (a) the claim for the refund is received by the Commissioner after five
years from the date of acquisition of the property or renunciation of any interest in or restriction upon the use or disposal of the property concerned; or
(b) the Commissioner is satisfied that the payment was made in accordance with the practice generally prevailing at the date of payment and no objection was lodged by that person as contemplated in section 18.
(3) Where any refund contemplated in subsection (1) is due to any person who has failed to pay any amount of tax, additional tax, duty, levy, charge, interest or penalty levied or imposed under this Act or any other Act administered by the Commissioner within the period prescribed for payment of the amount, the Commissioner may set off against the amount which the person has failed to pay, any amount which has become refundable to the person under this section.’’.
(2) Subsection (1) shall come into operation on the date of promulgation and applies in respect of any amount which is in excess of the amount properly chargeable in terms of the Transfer Duty Act, 1949, on or after that date.
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Amendment of section 3 of Act 45 of 1955, as amended by section 2 of Act 65 of 1960, section 8 of Act 77 of 1964, section 2 of Act 81 of 1965, section 4 of Act 92 of 1971, section 3 of Act 89 of 1972, section 3 of Act 102 of 1979, section 10 of Act 106 of 1980, section 2 of Act 92 of 1983, section 4 of Act 81 of 1985, section 9 of Act 87 of 1988, section 7 of Act 97 of 1993, section 6 of Act 27 of 1997, section 13 of Act 30 of 1998 and section 7 of Act 30 of 2000
5. (1) Section 3 of the Estate Duty Act, 1955, is hereby amended by the substitution in subsection (3) for paragraph (b) of the following paragraph:
‘‘(b) any property donated [under a donation mortis causa] by the deceased in terms of a donation which was exempt from donations tax under section 56(1)(c) or (d) of the Income Tax Act, 1962 (Act No. 58 of 1962), if that property is not otherwise included as property of the deceased for purposes of this Act;’’.
(2) Subsection (1) is deemed to have come into operation on 8 November 2005 and applies in respect of the estate of any person who dies on or after that date.
Amendment of section 4 of Act 45 of 1955, as amended by section 2 of Act 59 of 1957, section 3 of Act 65 of 1960, section 9 of Act 71 of 1961, section 9 of Act 77 of 1964, section 3 of Act 81 of 1965, section 2 of Act 94 of 1967, section 5 of Act 92 of 1971, section 2 of Act 70 of 1975, section 1 of Act 104 of 1976, section 4 of Act 102 of 1979, section 11 of Act 106 of 1980, section 3 of Act 99 of 1981, section 5 of Act 81 of 1985, section 6 of Act 86 of 1987, section 10 of Act 87 of 1988, section 8 of Act 97 of 1993, section 3 of Act 20 of 1994, section 7 of Act 27 of 1997, section 14 of Act 30 of 1998, section 8 of Act 30 of 2000, section 4 of Act 30 of 2002 and section 5 of Act 74 of 2002
6. (1) Section 4 of the Estate Duty Act, 1955, is hereby amended— (a) by the substitution for paragraph (b) of the following paragraph:
‘‘(b) all debts due by the deceased to persons ordinarily resident within the Republic (other than any debt which constitutes a claim by such a person to property donated by the deceased in terms of a donation which was exempt from donations tax under section 56(1)(c) or (d) of the Income Tax Act, 1962 (Act No. 58 of 1962)), which it is proved to the satisfaction of the Commissioner have been discharged from property included in the estate;’’;
(b) by the substitution for paragraph (f) of the following paragraph: ‘‘(f) any debts due by the deceased to persons ordinarily resident outside the
Republic (other than any debt which constitutes a claim by such a person to property donated by the deceased in terms of a donation which was exempt from donations tax under section 56(1)(c) or (d) of the Income Tax Act, 1962 (Act No. 58 of 1962)), which have been discharged from property included in the estate to the extent that the amount of such debts is proved to the satisfaction of the Commissioner to exceed the value of any assets of the deceased outside the Republic and not so included;’’.
(2) Subsection (1) is deemed to have come into operation on 8 November 2005 and applies in respect of the estate of any person who dies on or after that date.
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Amendment of section 6 of Act 58 of 1962, as inserted by section 5 of Act 104 of 1980 and amended by section 5 of Act 96 of 1981, section 5 of Act 91 of 1982, section 4 of Act 94 of 1983, section 4 of Act 121 of 1984, section 3 of Act 96 of 1985, section 4 of Act 85 of 1987, section 4 of Act 90 of 1988, section 4 of Act 70 of 1989, section 3 of Act 101 of 1990, section 4 of Act 129 of 1991, section 4 of Act 141 of 1992, section 5 of Act 21 of 1995, section 4 of Act 36 of 1996, section 3 of Act 28 of 1997, section 22 of Act 30 of 1998, section 5 of Act 32 of 1999, section 15 of Act 30 of 2000, section 6 of Act 19 of 2001, section 11 of Act 30 of 2002, section 35 of Act 12 of 2003, section 6 of Act 16 of 2004 and section 3 of Act 9 of 2005
7. Section 6 of the Income Tax Act, 1962, is hereby amended by the substitution for subsection (4) of the following subsection:
‘‘(4) Where the period assessed is less than 12 months, the amount to be allowed by way of a rebate under subsection (2) shall be such amount as bears to the full amount of such rebate, the same ratio as the period assessed bears to 12 months [unless, where such period terminates at the death of the taxpayer or commences at the death of the spouse of the taxpayer, the Commissioner in the special circumstances of the case otherwise directs].’’.
Amendment of section 6quat of Act 58 of 1962, as inserted by section 5 of Act 85 of 1987 and amended by section 5 of Act 28 of 1997, section 12 of Act 53 of 1999, section 16 of Act 30 of 2000 and substituted by section 4 of Act 59 of 2000, and amended by section 8 of Act 5 of 2001, section 20 of Act 60 of 2001, section 9 of Act 74 of 2002, section 16 of Act 45 of 2003 and section 4 of Act 32 of 2004
8. Section 6quat of the Income Tax Act, 1962, is hereby amended— (a) by the insertion in subsection (1B) of the following subparagraph after
subparagraph (iA) of the proviso to paragraph (a): ‘‘(iB) the taxes contemplated in subsection (1A)(a)(iii) which are attributable
to any taxable capital gain in respect of an asset which is not attributable to a permanent establishment of the resident outside the Republic, must in aggregate be limited to the amount of normal tax which is attributable to that taxable capital gain;’’;
(b) by the substitution in subsection (1B) of the words in subparagraph (ii) of the proviso to paragraph (a) preceding item (aa) of the following words: ‘‘(ii) where the sum of any such taxes proved to be payable (excluding any
taxes contemplated in [paragraph] paragraphs (iA) and (iB) of this proviso) exceeds the rebate as so determined (hereinafter referred to as the excess amount), that excess amount may—’’.
Amendment of section 7 of Act 58 of 1962, as amended by section 5 of Act 90 of 1962, section 8 of Act 88 of 1965, section 9 of Act 55 of 1966, section 7 of Act 94 of 1983, section 2 of Act 30 of 1984, section 5 of Act 90 of 1988, section 5 of Act 70 of 1989, section 4 of Act 101 of 1990, section 7 of Act 129 of 1991, section 5 of Act 141 of 1992, section 6 of Act 21 of 1995, section 23 of Act 30 of 1998, section 13 of Act 53 of 1999, section 5 of Act 59 of 2000, section 10 of Act 74 of 2002, section 17 of Act 45 of 2003 and section 5 of Act 32 of 2004
9. (1) Section 7 of the Income Tax Act, 1962, is hereby amended— (a) by the renumbering in subsection (8) of the existing wording as paragraph (a);
and (b) by the addition to subsection (8) of the following paragraph:
‘‘(b) So much of any expenditure, allowance or loss incurred by the person contemplated in paragraph (a) as does not exceed the amount included in the income of the resident in terms of that paragraph and which would be allowable as a deduction under this Act in the determination of the taxable income derived from that amount had that person been a resident, is deemed to be an expenditure, allowance or loss incurred by that resident for purposes of the determination of the taxable income of that resident from that amount.’’.
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(2) Subsection (1) is deemed to have come into operation on 24 January 2005 and applies in respect of any year of assessment ending on or after that date.
Amendment of section 8A of Act 58 of 1962, as inserted by section 11 of Act 89 of 1969, amended by section 8 of Act 88 of 1971 and section 7 of Act 32 of 2004
10. (1) Section 8A of the Income Tax Act, 1962, is hereby amended by the substitution in subsection (5) for paragraph (b) of the following paragraph:
‘‘(b) any gain made by the taxpayer (other than a gain in respect of which section 8C applies or will apply) by the exercise, cession or release of the second right, shall be determined and included in the taxpayer’s income as though such gain had been made by the exercise, cession or release of the first right, and for the purpose of determining such gain, the amount to be deducted under subsection (2)(a) or (3) in respect of the amount or value of the consideration given by the taxpayer for the second right shall be deemed to be the consideration given by the taxpayer for the first right or the grant of such right, less so much of the amount or value of that consideration as has been offset by any consideration other than the consideration consisting of the second right.’’.
(2) Subsection (1) is deemed to have come into operation on 26 October 2004.
Amendment of section 8B of Act 58 of 1962, as inserted by section 8 of Act 32 of 2004
11. (1) Section 8B of the Income Tax Act, 1962, is hereby amended— (a) by the substitution for subsection (1) of the following subsection:
‘‘(1) There must be included in the income of [an employee] a person for a year of assessment any [amount received by or accrued to] gain made by that [employee] person during that year from the disposal of any qualifying equity share or any right or interest in a qualifying equity share, which[— (a) was acquired by that employee in terms of a broad-based
employee share plan; and (b)] is disposed of by that [employee] person within five years from the
date of grant of that qualifying equity share, otherwise than— (a) in exchange for another qualifying equity share as contem-
plated in subsection (2); (b) on the death of that person; or (c) on the insolvency of that person.’’;
(b) by the substitution for subsection (2) of the following subsection: ‘‘(2) If [an employee] a person as a result of a subdivision,
consolidation, conversion or restructuring of the equity share capital of the employer or any company in the same group of companies as that employer disposes of a qualifying equity share in exchange solely for any other equity share in that employer or any company in the same group of companies as the employer, that other equity [instrument] share acquired in exchange is deemed to be— (a) a qualifying equity share which was acquired by that [employee]
person on the date of grant of the qualifying equity share disposed of in exchange; and
(b) acquired for a consideration equal to any consideration given for the qualifying equity share disposed of in exchange.’’;
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(c) by the insertion after subsection (2) of the following subsections: ‘‘(2A) If a person acquires any equity share by virtue of any qualifying
equity share held by that person, that other equity share so acquired is deemed to be a qualifying equity share which was acquired by that person on the date of grant of the qualifying equity share so held by that person.
(2B) If a person disposes of any right or interest in a qualifying equity share, the amount of consideration incurred in respect of the acquisition of that qualifying equity share that is attributable to that right or interest must be determined in accordance with the ratio that the amount received for the disposal of that right or interest bears to the market value of that qualifying equity share immediately before that disposal.’’;
(d) by the substitution in subsection (3) for paragraph (c) of the definition of ‘‘broad-based employee share plan’’ of the following paragraph: ‘‘(c) the [employees] persons who acquire the equity shares as contemplated
in subsection (1)(a) are entitled to all dividends and full voting rights in relation to those equity shares; and’’;
(e) by the substitution in subsection (3) for subparagraph (ii) and (iii) of paragraph (d) of the definition of ‘‘broad-based employee share plan’’ of the following subparagraphs: ‘‘(ii) a right of any person to acquire those equity shares from the
[employee] person who acquired the equity shares as contemplated in subsection (1)(a) at market value; or
(iii) a restriction in terms of which [that employee] the person who acquired the equity shares as contemplated in subsection (1)(a) may not dispose of those equity shares for a period, which may not extend beyond five years from the date of grant;’’;
(f) by the insertion in subsection (3) of the following definition after the definition of ‘‘date of grant’’:
‘‘ ‘gain’ in relation to the disposal by a person of a qualifying equity share or a right or interest in a qualifying equity share, means the amount by which any amount received by or accrued to that person from that disposal exceeds the consideration given by him or her for that qualifying equity share, right or interest (otherwise than in the form of services rendered or to be rendered or anything done or to be done or not to be done);’’; and
(g) by the substitution in subsection (3) for the definition of ‘‘qualifying equity share’’ of the following definition:
‘‘ ‘qualifying equity share’ in relation to a person means an equity share acquired in a year of assessment in terms of a broad-based employee share plan, where the market value of all equity shares (as determined on the relevant date of grant of each equity share and excluding the market value of any qualifying equity share acquired in the circumstances contemplated in subsection (2A)), which were acquired by that person in terms of that plan in that year and the two immediately preceding years of assessment, does not in aggregate exceed R9 000.’’.
(2) Subsection (1) is deemed to have come into operation on 8 November 2005 and applies in respect of any qualifying equity share disposed of on or after that date.
Amendment of section 8C of Act 58 of 1962, as inserted by section 8 of Act 32 of 2004
12. (1) Section 8C of the Income Tax Act, 1962, is hereby amended— (a) by the substitution in subsection (1) for paragraph (a) of the following
paragraph: ‘‘(a) Notwithstanding section 9B and section 23(m), a taxpayer must include
in or deduct from his or her income for a year of assessment any gain or loss determined in terms of subsection (2) in respect of the vesting during that year of any equity instrument, if that equity instrument was acquired by that taxpayer—
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(i) by virtue of his or her employment or office of director of any company or from any person by arrangement with the taxpayer’s employer; or
(ii) by virtue of any other restricted equity instrument held by that taxpayer in respect of which this section will apply upon vesting thereof.’’.
(b) by the substitution in subsection (1) for subparagraph (i) of paragraph (b) of the following subparagraph:
‘‘(i) was acquired [in exchange for the disposal] by the exercise or conversion of, or in exchange for the disposal of, any other equity instrument [which had already vested in terms of] where this section applied in respect of the vesting of that other equity instrument before that [disposal] exercise, conversion or exchange; or’’;
(c) by the substitution for subsection (2) of the following subsection: ‘‘(2) (a) The gain to be included in the income of a taxpayer [is]—
(i) in the case of— (aa) a disposal contemplated in subsection (5)(c); or (bb) a disposal by way of release, abandonment or lapse of an
option or financial instrument contemplated in paragraph (a) or (b) of the definition of ‘equity instrument’,
is the amount received or accrued in respect of that disposal which exceeds the sum of any consideration in respect of that equity instrument; or
(ii) in any other case, is [the sum of— (aa)] the amount by which the market value of the equity instrument
determined [on the date on which] at the time that it vests in that taxpayer exceeds the sum of any consideration in respect of that equity instrument[; and
(bb) the amount (if any) determined in terms of subsec- tion (4)(b)].
(b) The loss to be deducted from the income of a taxpayer [is]— (i) in the case of—
(aa) a disposal contemplated in subsection (5)(c); or (bb) a disposal by way of release, abandonment or lapse of an
option or financial instrument contemplated in paragraph (a) or (b) of the definition of ‘equity instrument’,
is the amount by which the sum of any consideration in respect of that equity instrument exceeds the amount received or accrued in respect of that disposal; or
(ii) in any other case, is the amount by which the consideration in respect of the equity instrument exceeds the market value of that equity instrument determined [on the date] at the time that it vests in that taxpayer.’’;
(d) by the substitution in subsection (3) for subparagraphs (ii), (iii) and (iv) of paragraph (b) of the following subparagraphs:
‘‘(ii) immediately before that taxpayer disposes of that restricted equity instrument, other than a disposal [in respect of which] contem- plated in subsection (4) or (5)(a), (b) or (c) [applies];
(iii) [when] immediately after that equity instrument, which is an option contemplated in paragraph (a) of the definition of ‘equity instru- ment’ or a financial instrument contemplated in paragraph (b) of that definition, terminates (otherwise than by the exercise or conversion of that equity instrument); and
(iv) immediately before that taxpayer dies, if all the restrictions relating to that equity instrument are or may be lifted on or after death.’’;
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(e) by the substitution for subsection (4) of the following subsection: ‘‘(4) (a) If a taxpayer disposes of a restricted equity instrument which
was acquired in the manner contemplated in subsection (1) for [a consideration] an amount which consists of or includes any other restricted equity instrument which is acquired from the employer, associated institution or other person by arrangement with the employer, that other restricted equity instrument acquired in exchange is deemed to be acquired by that taxpayer by virtue of his or her employment or office of director of any company.
(b) If the [consideration contemplated in subsection (a) includes an amount other than restricted equity instruments and that amount exceeds the consideration] amount received or accrued in respect of the restricted equity instrument which is disposed of as contemplated in paragraph (a) includes any payment in a form other than restricted equity instruments, [the excess] that payment less any consideration attribut- able to that payment must be deemed to be a gain or loss which must be included in or deducted from the income of the taxpayer in the year of assessment during which that restricted equity instrument is so disposed of.’’:
(f) by the substitution in subsection (5) for paragraph (c) of the following paragraph:
‘‘(c) Paragraph (a) does not apply where a taxpayer disposes of any restricted equity instrument (including by way of forfeiture, lapse or cancellation) to his or her employer, an associated institution or other person by arrangement with the employer in terms of a restriction imposed in relation to that equity instrument for an amount [not exceeding the consideration in respect] which is less than the market value of that restricted equity instrument.’’;
(g) by the substitution in subsection (7) for paragraph (b) of the definition of ‘‘consideration’’ of the following paragraph: ‘‘(b) by the taxpayer in respect of any other restricted equity instrument which
had been disposed of by that taxpayer in exchange for that equity instrument, reduced by any amount [received or accrued in respect of that disposal which consisted of something other than that equity instrument to the extent that it has not been included in the income of the taxpayer] attributable to the gain or loss determined in terms of subsection (4)(b); and’’;
(h) by the substitution in subsection (7) for the proviso to the definition of ‘‘consideration’’ of the following proviso:
‘‘Provided that where a taxpayer acquires— (a) an equity instrument in exchange for any other equity instrument, as
contemplated in subsection (4)(a), the market value of the equity instrument given in exchange must not be taken into account in determining the consideration in respect of the equity instrument so acquired; or
(b) a right to acquire any marketable security in exchange for any other such right, as contemplated in section 8A(5), and the right so acquired constitutes an equity instrument acquired in the manner contemplated in subsection (1), the consideration for that equity instrument must be determined as if it was acquired in the manner contemplated in subsection (4)(a);’’;
(i) by the substitution in subsection (7) for paragraph (b) of the definition of ‘‘restricted equity instrument’’ of the following paragraph: ‘‘(b) which is subject to any restriction that could result in the taxpayer
forfeiting ownership or the right to acquire ownership of that equity instrument otherwise than at market value;’’;
(j) by the deletion in subsection (7) of the word ‘‘or’’ at the end of paragraph (e) of the definition of ‘‘restricted equity instrument’’;
(k) by the substitution in subsection (7) for the words in the definition of ‘‘restricted equity instrument’’ following subparagraph (ii) of paragraph (f) of the following words:
‘‘if there is a decline in the value of the equity instrument after that acquisition; [and] or’’;
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(l) by the addition in subsection (7) of the following paragraph to the definition of ‘‘restricted equity instrument’’: ‘‘(g) which is not deliverable to the taxpayer until the happening of an event,
whether fixed or contingent, other than the requirement to pay the consideration in respect of the acquisition of that equity instrument; and’’.
(2) Subsection (1) is deemed to have come into operation on 8 November 2005 and applies in respect of any equity instrument held on or acquired on or after that date.
Amendment of section 9 of Act 58 of 1962, as amended by section 7 of Act 90 of 1962, section 6 of Act 72 of 1963, section 7 of Act 90 of 1964, section 9 of Act 95 of 1967, section 12 of Act 89 of 1969, section 6 of Act 65 of 1973, section 9 of Act 85 of 1974, section 8 of Act 103 of 1976, section 9 of Act 121 of 1984, section 5 of Act 96 of 1985, section 6 of Act 65 of 1986, section 2 of Act 108 of 1986, section 7 of Act 85 of 1987, section 36 of Act 9 of 1989, section 10 of Act 129 of 1991, section 7 of Act 141 of 1992, section 5 of Act 113 of 1993, section 3 of Act 140 of 1993, section 7 of Act 21 of 1994, section 9 of Act 21 of 1995, section 7 of Act 28 of 1997, section 25 of Act 30 of 1998, section 15 of Act 53 of 1999, section 7 of Act 59 of 2000, section 12 of Act 74 of 2002, section 20 of Act 45 of 2003 and section 11 of Act 32 of 2004
13. (1) Section 9 of the Income Tax Act, 1962, is hereby amended— (a) by the substitution in subsection (2) for the words in paragraph (b) preceding
subparagraph (i) and subparagraph (i) of the following words and subpara- graph: ‘‘(b) in the case of any other asset [other than immovable property or any
interest or right to or in immovable property]— (i) that person is a resident and—
(aa) that asset is not attributable to a permanent establishment of that person which is situated outside the Republic; and
(bb) the proceeds from the disposal of that asset are not subject to any taxes on income payable to any sphere of government of any country other than the Republic; or’’;
(b) by the substitution in subsection (2) for the proviso of the following proviso: ‘‘Provided that for the purpose of this subsection, an interest in immovable property held by a person includes any equity shares in a company or ownership or the right to ownership of any other entity [where] or a vested interest in any assets of any trust, if— (aa) 80 per cent or more of the market value [of the net assets of that
company or other entity, determined on the market value basis,] of those equity shares, ownership or right to ownership or vested interest, as the case may be, at the time of disposal thereof, is attributable directly or indirectly to immovable property [(other than immovable property] held [by that company or entity] otherwise than as trading stock[)]; and
(bb) in the case of a company or other entity, that person (whether alone or together with any connected person in relation to that person) directly or indirectly, holds at least 20 per cent [in] of the equity share capital of that company or ownership or right to ownership of that other entity.’’.
(2) Subsection (1)(b) shall come into operation on the date of promulgation of this Act and applies in respect of any disposal on or after that date.
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Amendment of section 9D of Act 58 of 1962, as inserted by section 9 of Act 28 of 1997 and amended by section 28 of Act 30 of 1998, section 17 of Act 53 of 1999, section 19 of Act 30 of 2000, section 10 of Act 59 of 2000, section 9 of Act 5 of 2001 and section 22 of Act 60 of 2001 and substituted by section 14 of Act 74 of 2002 and amended by section 22 of Act 45 of 2003 and section 13 of Act 32 of 2004
14. (1) Section 9D of the Income Tax Act, 1962, is hereby amended— (a) by the substitution in subsection (1) for the definition of ‘‘controlled foreign
company’’ of the following definition: ‘‘ ‘controlled foreign company’ means any foreign company where more than 50 per cent of the total participation rights in that foreign company are held, or more than 50 per cent of the voting rights in that foreign company are directly or indirectly exercisable, by one or more residents [whether directly or indirectly]: Provided that— (a) no regard must be had to any voting rights in any foreign
company— (i) which is a listed company; or
(ii) if the voting rights in that foreign company are exercisable indirectly through a listed company;
(b) any voting rights in a foreign company which can be exercised directly by any other controlled foreign company in which that resident (together with any connected person in relation to that resident) can directly or indirectly exercise more than 50 per cent of the voting rights are deemed for purposes of this definition to be exercisable directly by that resident;
(c) a person [who] is deemed not to be a resident for purposes of determining whether residents directly or indirectly hold more than 50 per cent of the participation rights or voting rights in a foreign company, if— (i) in the case of a listed company or a foreign company the
participation rights of which are held by that person indirectly through a listed company, that person holds less than five per cent of the participation rights of [a foreign] that listed company [which is either a listed company]; or
(ii) in the case of a scheme or arrangement contemplated in paragraph (e)(ii) of the definition of ‘company’ in section 1 or a foreign company the participation rights of which are held and the voting rights of which may be exercised by that person indirectly through such a scheme or arrangement, that person— (aa) holds less than five per cent of the participation rights of
that scheme or arrangement; and (bb) may not exercise at least five per cent of the voting rights
in that scheme or arrangement, [shall be deemed not to be a resident in determining whether residents directly or indirectly hold more than 50 per cent of the participation rights in— (a) that foreign company; or (b) any other foreign company in which that person indirectly
holds any participation rights as a result of the interest in that listed company or scheme or arrangement,]
unless more than 50 per cent of the participation rights or voting rights of that foreign company or other foreign company are held by persons who are connected persons in relation to each other;’’;
(b) by the substitution in subsection (1) for the proviso to the definition of ‘‘foreign financial instrument holding company’’ of the following proviso:
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‘‘Provided that in determining whether [more than half of the market value or two-thirds of actual cost] the prescribed proportion of all the assets of the company and all [controlled group] influenced companies consist of financial instruments, the following assets must be wholly disregarded— (a) any share in any other company in the same associated group of
companies; and (b) any financial instrument which constitutes a loan, advance or debt
entered into between companies which form part of the same associated group of companies;’’;
(c) by the substitution in subsection (1) for the definition of ‘‘participation rights’’ of the following definition:
‘‘ ‘participation rights’ in relation to a foreign company means— (a) the right to participate directly or indirectly in the share capital,
share premium, current or accumulated profits or reserves of that [foreign] company, whether or not of a capital nature; or
(b) in the case where no person has any right in that foreign company as contemplated in paragraph (a) or no such rights can be determined for any person, the right to exercise any voting rights in that company.’’;
(d) by the substitution in subsection (2) for the words in the proviso following subparagraph (ii) of paragraph (A) of the following words:
‘‘in aggregate holds less than 10 per cent of the participation rights and may not exercise at least 10 per cent of the voting rights in that controlled foreign company; or’’;
(e) by the substitution in subsection (2A) for the words preceding the proviso of the following words:
‘‘(2A) For the purposes of this section the ‘net income’ of a controlled foreign company in respect of a foreign tax year is an amount equal to the taxable income of that company determined in accordance with the provisions of this Act as if that controlled foreign company had been a taxpayer, and as if that company had been a resident for purposes of the definition of ‘gross income’, sections 7(8), 10(1)(h), 25B and paragraphs 2(1)(a), [12,] 24, 70, 71, 72 and 80 of the Eighth Schedule:’’;
(f) by the substitution in subsection (2A) for paragraph (c) of the following paragraph: ‘‘(c) no deduction shall be allowed in respect of any interest, royalties, rental
or income of a similar nature paid or payable or deemed to be paid or payable by that company to any other controlled foreign company [in relation to the resident] (including any similar amount adjusted in terms of section 31) or any exchange difference determined in terms of section 24I in respect of any exchange item to which that controlled foreign company and other foreign company are parties where that controlled foreign company and that other controlled foreign company form part of the same group of companies, as contemplated in subsection (9)(fA), unless that resident has elected in terms of subsec- tion (12) that the provisions of subsection (9) shall not apply in respect of the net income of that other controlled foreign company for the relevant foreign tax year;’’;
(g) by the deletion in subsection (2A) of paragraphs (h) and (j); (h) by the substitution for subsection (6) of the following subsection:
‘‘(6) The net income of a controlled foreign company, shall be determined in the currency used by that controlled foreign company for purposes of financial reporting and shall, for purposes of determining the amount to be included in the income of any resident during any year of assessment under the provisions of this section, be translated to the currency of the Republic by applying the average exchange rate for that year of assessment[, as contemplated in section 25D]: Provided that—
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(a) in respect of the disposal of any asset contemplated in para- graph 43(4) of the Eighth Schedule which is not attributable to any permanent establishment of that controlled foreign company outside the Republic, any capital gain or capital loss of that controlled foreign company shall, when applying paragraph 43(4) of the Eighth Schedule, be determined in the currency of the Republic and that capital gain or capital loss shall be translated to the currency used by that controlled foreign company for purposes of financial reporting by applying that average exchange rate; [and]
(b) in respect of the disposal of any foreign equity instrument which constitutes trading stock and which is not attributable to any permanent establishment of that controlled foreign company outside the Republic, the [any] amount to be taken into account in determining the net income of that controlled foreign company [in respect of the disposal of any foreign equity instrument shall, when applying section 9G,] must be determined in the currency of the Republic and that amount shall be translated to the currency so used by that controlled foreign company by applying that average exchange rate; and
(c) for the purposes of section 24I, ‘local currency’ in relation to an exchange item of a controlled foreign company which is not attributable to any permanent establishment of that company outside the Republic, means the currency of the Republic and any exchange difference determined must be translated to the currency so used by that controlled foreign company by applying that average exchange rate.’’;
(i) by the substitution for the words in subsection (9) preceding paragraph (a) of the following words:
‘‘(9) [The provisions of subsection (2) shall not apply to the extent that] In determining the net income of the controlled foreign company in terms of subsection (2A), there must not be taken into account any amount which—’’;
(j) by the substitution in subsection (9) for the words in paragraph (b) preceding the proviso of the following words: ‘‘(b) is attributable to any business establishment (including the disposal or
deemed disposal of any assets forming part of that business establish- ment) of that controlled foreign company in any country other than the Republic:’’;
(k) by the substitution in subsection (9) for subitem (A) of item (bb) of subparagraph (ii) of paragraph (b) of the following subitem: ‘‘(A) those goods or tangible intermediary inputs thereof purchased from
connected persons (in relation to such controlled foreign company) who are residents amount to an insignificant portion of the total goods or tangible intermediary inputs of those goods’’;
(l) by the substitution in subsection (9) for the words in subparagraph (iii) of paragraph (b) preceding item (aa) of the following words:
‘‘any amounts in the form of dividends, interest, royalties, rental, annuities, insurance premiums or income of a similar nature, or any capital gain determined in respect of the disposal or deemed disposal of any asset from which any such amounts are or could be earned, or any foreign currency gain determined in respect of any foreign equity instrument or any foreign currency gain determined in terms of section 24I (other than foreign currency gains which arise in the normal course of business of that controlled foreign company which is not a foreign financial instrument holding company), except—’’;
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(m) by the addition in subsection (9) to subparagraph (iii) of paragraph (b) of the following item: ‘‘(cc) where those amounts arise from the disposal or deemed disposal of any
intangible asset as defined in paragraph 16(2) of the Eighth Schedule (other than an intangible asset created, devised or developed in the Republic), if that intangible asset— (A) formed an integral part of any business conducted by that
controlled foreign company; (B) was not acquired by that controlled foreign company within a
period of 18 months prior to that disposal; and (C) was so disposed of as part of the disposal of that business and
where all the assets which are necessary for carrying on that business are disposed of as a going concern;’’;
(n) by the insertion in subsection (9) after paragraph (b) of the following paragraph: ‘‘(c) is attributable to any policyholder that is not a resident or a controlled
foreign company in relation to a resident in respect of any policy issued by a company licensed to issue any long-term policy as defined in the Long-term Insurance Act, 1998 (Act No. 53 of 1998), in its country of residence;’’;
(o) by the substitution in subsection (9) for paragraph (fA) of the following paragraph: ‘‘(fA) is attributable to any interest, royalties, rental or income of a similar
nature, which is paid or payable or deemed to be paid or payable to that company by any other controlled foreign company (including any similar amount adjusted in terms of section 31), or any exchange difference determined in terms of section 24I in respect of any exchange item to which that [controlled foreign] company and [that] any other controlled foreign company are parties, where that controlled foreign company and that other controlled foreign company form part of the same group of companies;’’;
(p) by the substitution in subsection (9) for paragraph (fB) of the following paragraph: ‘‘(fB) is attributable to [any capital gain of that company, which is
determined in respect of] the disposal of any asset, as defined in the Eighth Schedule, (other than any financial instrument or intangible asset as defined in paragraph 16 of the Eighth Schedule), where that asset was attributable to any business establishment of [that controlled foreign company or] any other controlled foreign company, where that [controlled foreign] company and that other controlled foreign company form part of the same group of companies; or’’;
(q) by the substitution for subsections (12) and (13) of the following subsections: ‘‘(12) A resident who together with any other resident who is a
connected person in relation to that resident, in aggregate holds at least 10 per cent but not 20 per cent or more [than 25 per cent] of the participation rights and voting rights of a controlled foreign company may elect that all the provisions of subsection (9) shall not apply in respect of the net income determined for a relevant foreign tax year of any controlled foreign company in which that resident holds any participation rights.
(13) Any resident who together with any other resident who is a connected person in relation to that resident, in aggregate holds at least 10 per cent but not 20 per cent or more [than 25 per cent] of the participation rights and voting rights of a foreign company may elect that the foreign company be deemed to be a controlled foreign company in relation to that resident in respect of any foreign tax year of that foreign company.’’.
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(2) (a) Subsection (1)(a), (c), (d), (f), (g), (h), (i), (o) and (q) shall come into operation on 8 November 2005 and applies in respect of any foreign tax year which commences on or after that date.
(b) Subsection (1)(b), (j), (k), (l), (m), (n) and (p) come into operation on 8 November 2005 and applies in respect of any foreign tax year which ends during any year of assessment ending on or after that date.
Amendment of section 9G of Act 58 of 1962, as inserted by section 25 of Act 60 of 2001 and amended by section 17 of Act 74 of 2002 and section 25 of Act 45 of 2003
15. Section 9G of the Income Tax Act, 1962, is hereby amended by the substitution for subsection (2) of the following subsection:
‘‘(2) The amount to be included in the gross income of a person in respect of the disposal by that person of any foreign equity instrument acquired during any year of assessment ending before 8 November 2005 and which constitutes trading stock, shall be the amount received or accrued in any currency other than currency of the Republic in respect of that disposal translated into the currency of the Republic at the average exchange rate for the year of assessment during which that foreign equity instrument is disposed of.’’.
Amendment of section 10 of Act 58 of 1962, as amended by section 8 of Act 90 of 1962, section 7 of Act 72 of 1963, section 8 of Act 90 of 1964, section 10 of Act 88 of 1965, section 11 of Act 55 of 1966, section 10 of Act 95 of 1967, section 8 of Act 76 of 1968, section 13 of Act 89 of 1969, section 9 of Act 52 of 1970, section 9 of Act 88 of 1971, section 7 of Act 90 of 1972, section 7 of Act 65 of 1973, section 10 of Act 85 of 1974, section 8 of Act 69 of 1975, section 9 of Act 103 of 1976, section 8 of Act 113 of 1977, section 4 of Act 101 of 1978, section 7 of Act 104 of 1979, section 7 of Act 104 of 1980, section 8 of Act 96 of 1981, section 6 of Act 91 of 1982, section 9 of Act 94 of 1983, section 10 of Act 121 of 1984, section 6 of Act 96 of 1985, section 7 of Act 65 of 1986, section 3 of Act 108 of 1986, section 9 of Act 85 of 1987, section 7 of Act 90 of 1988, section 36 of Act 9 of 1989, section 7 of Act 70 of 1989, section 10 of Act 101 of 1990, section 12 of Act 129 of 1991, section 10 of Act 141 of 1992, section 7 of Act 113 of 1993, section 4 of Act 140 of 1993, section 9 of Act 21 of 1994, section 10 of Act 21 of 1995, section 8 of Act 36 of 1996, section 9 of Act 46 of 1996, section 10 of Act 28 of 1997, section 29 of Act 30 of 1998, section 18 of Act 53 of 1999, section 21 of Act 30 of 2000, section 13 of Act 59 of 2000, sections 9 and 78 of Act 19 of 2001, section 26 of Act 60 of 2001, section 13 of Act 30 of 2002, section 18 of Act 74 of 2002, section 36 of Act 12 of 2003, section 26 of Act 45 of 2003, section 8 of Act 16 of 2004, section 14 of Act 32 of 2004 and section 5 of Act 9 of 2005
16. (1) Section 10 of the Income Tax Act, 1962, is hereby amended— (a) by the substitution in subsection (1) for the words preceding paragraph (a) of
the following words: ‘‘(1) There shall be exempt from [the] normal tax—’’;
(b) by the substitution in subsection (1) for paragraph (cN) of the following paragraph: ‘‘(cN) the receipts and accruals of any public benefit organisation [which has
been] approved by the Commissioner in terms of section 30(3), to the extent that the receipts and accruals are derived— (i) otherwise than from any business undertaking or trading activity;
or (ii) from any business undertaking or trading activity—
(aa) if the undertaking or activity— (A) is integral and directly related to the sole object of that
public benefit organisation as contemplated in para- graph (b) of the definition of ‘public benefit organisation’ in section 30;
(B) is carried out or conducted on a basis substantially the whole of which is directed towards the recovery of cost; and
(C) does not result in unfair competition in relation to taxable entities;
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(bb) if the undertaking or activity is of an occasional nature and undertaken substantially with assistance on a voluntary basis without compensation;
(cc) if the undertaking or activity is approved by the Minister by notice in the Gazette, having regard to— (A) the scope and benevolent nature of the undertaking or
activity; (B) the direct connection and interrelationship of the
undertaking or activity with the sole purpose of the public benefit organisation;
(C) the profitability of the undertaking or activity; and (D) the level of economic distortion that may be caused by
the tax exempt status of the public benefit organisation carrying out the undertaking or activity; or
(dd) other than an undertaking or activity in respect of which item (aa), (bb) or (cc) applies and do not exceed the greater of— (i) 5 per cent of the total receipts and accruals of that public
benefit organisation during relevant year of assessment; or
(ii) R50 000;’’; (c) by the substitution in subsection (1) for paragraph (gB) of the following
paragraph: ‘‘(gB) any—
(i) compensation paid in terms of the Workmen’s Compensation Act, 1941 (Act No. 30 of 1941), or the Compensation for Occupational Injuries and Diseases Act, 1993 (Act No. 130 of 1993); or
(ii) pension paid in respect of the death or disablement caused by any occupational injury or disease sustained or contracted by an employee before 1 March 1994 in the course of employment, where that employee would have qualified for compensation under the Compensation for Occupational Injuries and Diseases Act, 1993, had that injury or disease been sustained or contracted on or after 1 March 1994; and;’’;
(d) by the insertion in subsection (1) after paragraph (gC) of the following paragraph: ‘‘(gD) any funeral benefit payable in terms of section 6F of the Special
Pensions Act, 1996 (Act No. 69 of 1996);’’; (e) by the substitution in subsection (1) for the words in item (dd) of subparagraph
(ii) of paragraph (k) preceding the proviso of the following words: ‘‘(dd) where that person (in the case of a company, together with any other
company in the same group of companies as that person) holds [more than 25] at least 20 per cent of the total equity share capital and voting rights in the company declaring the dividend:’’;
(f) by the substitution in subsection (1) for paragraph (A) of the proviso to item (dd) of subparagraph (ii) of paragraph (k) of the following paragraph: ‘‘(A) in determining the total equity share capital of a company, there shall
not be taken into account any share which would have constituted [an affected] a hybrid equity instrument, as contemplated in section 8E, but for the three year period requirement contained in that section; and’’.
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(g) by the insertion in subsection (1) after paragraph (l) of the following paragraph: ‘‘(lA) any amount received by or accrued to any person who is not a resident
if that amount is subject to tax on foreign entertainers and sportspersons in terms of Part IIIA of this Chapter;’’;
(h) by the substitution in subsection (1) for the words in paragraph (nE) preceding subparagraph (i) and subparagraphs (i) and (ii) of the following words and subparagraphs: ‘‘(nE) any amount (including any taxable benefit determined under the
provisions of the Seventh Schedule, but excluding any gain or loss as a result of any transaction in respect of which section 8C applies or the cancellation of any such transaction) received by or accrued to an employee, as so defined, under a share incentive scheme operated for the benefit of employees of the taxpayer’s employer, as so defined, which was derived— (i) upon the cancellation of a transaction under which the taxpayer
purchased shares under [such] that scheme[, and in respect of which section 8A applies]; or
(ii) upon the repurchase from the taxpayer, at a price not exceeding the selling price to him or her, of shares purchased by him or her under [such] that scheme[, and in respect of which section 8A ap- plies],’’;
(i) by the substitution in subsection (1) for paragraph (A) of the proviso to subparagraph (ii) of paragraph (o) of the following paragraph: ‘‘(A) for purposes of this subparagraph, a person who is in transit through the
Republic between two places outside the Republic and who does not formally enter the Republic through a port of entry a contemplated in section 9(1) of the Immigration Act, 2002 (Act No. 13 of 2002), or at any other place [in the case of a person authorised by] as may be permitted by the Director General of the Department of Home Affairs or the Minister of Home Affairs in terms of [section 31(2)(c) of] that Act, shall be deemed to be outside the Republic; and’’.
(j) by the insertion in subsection (1) after paragraph (x) of the following paragraph: ‘‘(y) any government grant received by or accrued to or in favour of a person
in terms of any programme or scheme which has been approved in terms of the national annual budget process and has been identified by the Minister by notice in the Gazette with effect from a date specified by the Minister in that notice for purposes of this paragraph, having regard to— (i) whether the programme or scheme meets government policy
priorities and objectives with respect to— (aa) the encouragement of economic growth and investment; (bb) the promotion of employment creation; (cc) the development of public infrastructure and transport; (dd) the promotion of public health; (ee) the development of innovation and technology; (ff) the provision of housing and basic services; or
(gg) the provision of relief in the case of natural disasters; (ii) the extent to which the programme or scheme will support the
policy priorities and objectives contemplated in subparagraph (i); (iii) the financial implications for government should government grants
in terms of that programme or scheme be exempt from tax; and (iv) whether the tax implications were taken into account in determining
the appropriation in respect of that programme or scheme;’’; (k) by the deletion in subsection (1) of paragraph (zC);
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(l) by the substitution in subsection (1) for paragraph (zG) of the following paragraph: ‘‘(zG) any amount [which on or after 15 May 1989 was] received by or
accrued to a [film owner (as defined in section 24F)] person by way of a subsidy payable by the State under any scheme designed to promote the production of films (as defined in [the said] section 24F);’’; and
(m) by the substitution in subsection (1) for subparagraph (ii) of paragraph (zI) of the following subparagraph:
‘‘(ii) 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;’’.
(2) (a) Subsection (1)(b) shall come into operation on 1 April 2006 and shall apply in respect of any year of assessment commencing on or after that date.
(b) Subsection (1)(c) shall come into operation on the date of promulgation of this Act and applies in respect of any year of assessment ending on or after that date.
(c) Subsection (1)(d) shall come into operation on the date on which the Special Pensions Amendment Act, 2005, comes into operation.
(d) Subsection (1)(e) is deemed to have come into operation on 8 November 2005 and applies in respect of any dividend received or accrued on or after that date.
(e) Subsection (1)(g) shall come into operation on a date to be fixed by the President by proclamation in the Gazette.
(f) Subsection (1)(h) is deemed to have come into operation on 24 January 2005. (g) Subsection (1)(i) is deemed to have come into operation on 1 July 2005. (h) Subsection (1)(l) is deemed to have come into operation on 1 April 2004 and shall
apply in respect of any subsidy received or accrued on or after that date. (i) Subsection (1)(m) is deemed to have come into operation on 24 January 2005.
Amendment of section 10A of Act 58 of 1962, as inserted by section 8 of Act 65 of 1973 and amended by section 11 of Act 85 of 1974, section 8 of Act 113 of 1993, section 11 of Act 21 of 1995, section 11 of Act 28 of 1997, section 19 of Act 53 of 1999, section 14 of Act 59 of 2000, section 11 of Act 5 of 2001 and section 15 of Act 32 of 2004
17. (1) Section 10A of the Income Tax Act, 1962, is hereby amended by the substitution for subsection (11) of the following subsection:
‘‘(11) Where the cash consideration given by the purchaser and the annuity amount receivable under an annuity contract is denominated in any currency other than the currency of the Republic, the capital element of that annuity amount must be calculated in terms of subsection (3) in that other currency and must be translated to the currency of the Republic by applying the exchange rate applied in terms of section 25D in respect of the annuity amount payable during the relevant year of assessment.’’.
(2) Subsection (1) is deemed to have come into operation on 8 November 2005 and applies in respect of any year of assessment ending on or after that date.
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Amendment of section 11 of Act 58 of 1962, as amended by section 9 of Act 90 of 1962, section 8 of Act 72 of 1963, section 9 of Act 90 of 1964, section 11 of Act 88 of 1965, section 12 of Act 55 of 1966, section 11 of Act 95 of 1967, section 9 of Act 76 of 1968, section 14 of Act 89 of 1969, section 10 of Act 52 of 1970, section 10 of Act 88 of 1971, section 8 of Act 90 of 1972, section 9 of Act 65 of 1973, section 12 of Act 85 of 1974, section 9 of Act 69 of 1975, section 9 of Act 113 of 1977, section 5 of Act 101 of 1978, section 8 of Act 104 of 1979, section 8 of Act 104 of 1980, section 9 of Act 96 of 1981, section 7 of Act 91 of 1982, section 10 of Act 94 of 1983, section 11 of Act 121 of 1984, section 46 of Act 97 of 1986, section 10 of Act 85 of 1987, section 8 of Act 90 of 1988, section 8 of Act 70 of 1989, section 11 of Act 101 of 1990, section 13 of Act 129 of 1991, section 11 of Act 141 of 1992, section 9 of Act 113 of 1993, section 5 of Act 140 of 1993, section 10 of Act 21 of 1994, section 12 of Act 21 of 1995, section 9 of Act 36 of 1996, section 12 of Act 28 of 1997, section 30 of Act 30 of 1998, section 20 of Act 53 of 1999, section 22 of Act 30 of 2000, section 15 of Act 59 of 2000, section 10 of Act 19 of 2001, section 27 of Act 60 of 2001, section 14 of Act 30 of 2002, section 19 of Act 74 of 2002, section 27 of Act 45 of 2003, section 9 of Act 16 of 2004, section 16 of Act 32 of 2004 and section 6 of Act 9 of 2005
18. Section 11 of the Income Tax Act, 1962, is hereby amended— (a) by the substitution in paragraph (e) for the words preceding the proviso of the
following words: ‘‘(e) save as provided in paragraph 12(2) of the First Schedule, such sum as
the Commissioner may think just and reasonable as representing the amount by which the value of any machinery, plant, implements, utensils and articles (other than machinery, plant, implements, utensils and articles in respect of which a deduction may be granted under section 12B, 12C or 12E) owned by the taxpayer or acquired by the taxpayer as purchaser in terms of an agreement contemplated in paragraph (a) of the definition of ‘instalment credit agreement’ in section 1 of the Value- Added Tax Act, 1991 (Act No. 89 of 1991), and used by the taxpayer for the purpose of his or her trade has been diminished by reason of wear and tear or depreciation during the year of assessment:’’;
(b) by the insertion in paragraph (e) of the following paragraph in the proviso after paragraph (i) of the following paragraph: ‘‘(iA) no allowance may be made in respect of any machinery, plant,
implement, utensil or article the ownership of which is retained by the taxpayer as a seller in terms of an agreement contemplated in paragraph (a) of an ‘instalment credit agreement’ as defined in section 1 of the Value-Added Tax Act, 1991;’’.
(c) by the substitution in paragraph (j) for the words preceding the proviso of the following words: ‘‘(j) [such] an allowance as may be made each year by the Commissioner in
respect of [such] so much of any debts due to the taxpayer as [he] the Commissioner considers to be doubtful, if those debts would have been allowed as a deduction under any other provisions of this Part had they become bad:’’;
(d) by the substitution in paragraph (k) for item (aa) of the proviso to subparagraph (ii) of the following item: ‘‘(aa) the deduction to be allowed in respect of any sums so paid (other than
a sum paid by a ‘former member of a non-statutory force or service’ as defined in the Government Employees’ Pension Law, 1996 (Proclama- tion No. 21 of 1996), in terms of Rule 11.9.2.1 of the Rules of the Government Employees’ Pension Fund contained in Schedule 1 to that Proclamation), shall not in the year of assessment exceed the sum of R1 800;’’;
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(e) by the substitution in paragraph (lA) for the words preceding the proviso of the following words: ‘‘(lA) an amount equal to the market value of any qualifying equity share
granted to an employee of that person as contemplated in section 8B, as determined on the date of grant as defined in that section less any consideration given by that employee for that qualifying equity share, which applies in lieu of any other deduction which may otherwise be allowed to that person or any other person in respect of the granting of that share:’’;
(f) by the substitution in paragraph (o) for the words following subparagraph (ii) but preceding the proviso of the following words:
‘‘exceeds the sum of the amount received or accrued from the alienation, loss or destruction, of that asset and the amount of any such capital allowance or deduction allowed in respect of that asset in that year or any previous year of assessment or which was deemed to have been allowed in terms of section 12B(4B) or 12C(4A) or taken into account in terms of section 11(e)(ix), as the case may be:’’.
Amendment of section 12B of Act 58 of 1962, as inserted by section 11 of Act 90 of 1988 and amended by section 13 of Act 101 of 1990, section 10 of Act 113 of 1993, section 6 of Act 140 of 1993, section 13 of Act 28 of 1997, section 17 of Act 59 of 2000, section 11 of Act 16 of 2004 and section 7 of Act 9 of 2005
19. Section 12B of the Income Tax Act, 1962, is hereby amended— (a) by the substitution for the heading of the following heading:
‘‘Deduction in respect of certain machinery, plant, implements, utensils and articles used in farming or production of renewable energy’’;
(b) by the deletion in subsection (1) of paragraphs (a), (b), (c), (d) and (e); (c) by the substitution in subsection (1) for paragraphs (f) and (g) of the following
paragraphs: ‘‘(f) machinery, implement, utensil or article (other than livestock) which is
[on or after 1 July 1988] owned by the taxpayer or acquired by the taxpayer as purchaser in terms of an agreement contemplated in paragraph (a) of an ‘instalment credit agreement’ as defined in section 1 of the Value-Added Tax Act, 1991 (Act No. 89 of 1991), and brought into use for the first time by [any] that taxpayer and used by him or her in the carrying on of his or her farming operations, except any motor vehicle the sole or primary function of which is the conveyance of persons or any caravan or any aircraft (other than an aircraft used solely or mainly for the purpose of crop-spraying) or any office furniture or equipment; or
(g) machinery, plant, implement, utensil or article owned by the taxpayer or acquired by the taxpayer as purchaser in terms of an agreement contemplated in paragraph (a) of an ‘instalment credit agreement’ as defined in section 1 of the Value-Added Tax Act, 1991 (Act No. 89 of 1991), and which was or is brought into use for the first time by the taxpayer for the purpose of his or her trade to be used for the production of bio-diesel or bio-ethanol,’’;
(d) by the addition to subsection (1) of the following paragraph: ‘‘(h) machinery, plant, implement, utensil or article owned by the taxpayer or
acquired by the taxpayer as purchaser in terms of an agreement contemplated in paragraph (a) of an ‘instalment credit agreement’ as defined in section 1 of the Value-Added Tax Act, 1991 (Act No. 89 of 1991), and which was or is brought into use for the first time by that taxpayer for the purpose of his or her trade to be used by that taxpayer in the generation of electricity from— (i) wind; (ii) sunlight; (iii) gravitational water forces to produce electricity of not more than 30
megawatts; and (iv) biomass comprising organic wastes, landfill gas or plants.’’;
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(e) by the substitution for subsection (3) of the following subsection: ‘‘(3) For the purposes of this section the cost to a taxpayer of any asset
acquired by that taxpayer shall be deemed to be the lesser of the actual cost to the taxpayer or the cost which a person would, if he or she had acquired the asset under a cash transaction concluded at arm’s length on the date on which the transaction for the acquisition of the asset was in fact concluded, have incurred in respect of the direct cost of acquisition of the asset, including the direct cost of the installation or erection thereof or, where the asset has been acquired to replace an asset which has been damaged or destroyed, such cost less any amount which has been recovered or recouped in respect of the damaged or destroyed asset and has been excluded from the taxpayer’s income in terms of section 8(4)(e), whether in the current or any previous year of assessment.’’;
(f) by the deletion in subsection (4) of paragraph (e); (g) by the addition in subsection (4) of the word ‘‘or’’ at the end of paragraph (f); (h) by the addition to subsection (4) of the following paragraph:
‘‘(g) any asset the ownership of which is retained by the taxpayer as a seller in terms of an agreement contemplated in paragraph (a) of an ‘instalment credit agreement’ as defined in section 1 of the Value-Added Tax Act, 1991.’’;
(i) by the substitution for subsection (6) of the following subsection: ‘‘(6) Where a lessor of any asset under a lease contemplated in
[paragraph (a) of] subsection (4)(a) has within the period contemplated in subparagraph (ii) of that paragraph, reckoned from the commence- ment of the period for which the asset is let under [such] that lease, disposed of the whole or a portion of [his] that lessor’s interest in the lease or of his or her right to receive rent under the lease, there [shall] must be included in [his] that lessor’s income for the year of assessment during which the disposal is made a sum equal to the aggregate of any deductions allowed to [him] that lessor under this section, section 12(1) or section 27(2)(d), less such amount as the Commissioner may allow in respect of the expired portion of the lease or any portion of [such] that interest or right which has not been disposed of by the lessor.’’.
Amendment of section 12C of Act 58 of 1962, as inserted by section 14 of Act 101 of 1990 and amended by section 11 of Act 113 of 1993, section 7 of Act 140 of 1993, section 11 of Act 21 of 1994, section 13 of Act 21 of 1995, section 18 of Act 59 of 2000, section 11 of Act 19 of 2001, section 15 of Act 30 of 2002, section 30 of Act 45 of 2003 and section 8 of Act 9 of 2005
20. Section 12C of the Income Tax Act, 1962, is hereby amended— (a) by the substitution for the heading of the following heading:
‘‘Deduction in respect of [certain machinery, plant, implements, utensils and articles] assets used by manufacturers or hotelkeepers and in respect of aircraft and ships, and in respect of assets used for storage and packing of agricultural products,’’;
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(b) by the substitution in subsection (1) for paragraphs (a) to (g) of the following paragraphs: ‘‘(a) machinery or plant (other than machinery or plant in respect of which an
allowance has been granted to the taxpayer under paragraph (b)) owned by the taxpayer or acquired by the taxpayer as purchaser in terms of an agreement contemplated in paragraph (a) of an ‘instalment credit agreement’as defined in section 1 of the Value-Added Tax Act, 1991 (Act No. 89 of 1991), and which was or is brought into use for the first time by the taxpayer for the purposes of his trade (other than mining or farming) and is used by him directly in a process of manufacture carried on by him or any other process carried on by him which in the opinion of the Commissioner is of a similar nature; or
(b) machinery or plant (other than machinery or plant in respect of which an allowance has been granted to the taxpayer under paragraph (a)) owned by the taxpayer or acquired by the taxpayer as purchaser in terms of an agreement contemplated in paragraph (a) of an ‘instalment credit agreement’as defined in section 1 of the Value-Added Tax Act, 1991 (Act No. 89 of 1991), and which was or is let by [any] the taxpayer and was or is brought into use for the first time by the lessee for the purposes of the lessee’s trade (other than mining or farming) and is used by the lessee directly in a process of manufacture carried on by him or any other process carried on by him which in the opinion of the Commissioner is of a similar nature; or
(c) machinery or plant (other than machinery or plant in respect of which an allowance has been granted to the taxpayer under paragraph (a)) owned by the taxpayer or acquired by the taxpayer as purchaser in terms of an agreement contemplated in paragraph (a) of an ‘instalment credit agreement’as defined in section 1 of the Value-Added Tax Act, 1991 (Act No. 89 of 1991), and which was or is brought into use for the first time by any agricultural co-operative incorporated or deemed to be incorporated under the Co-operatives Act, 1981 (Act No. 91 of 1981), and is used by it directly for storing or packing pastoral, agricultural or other farm products of its members (including any person who is a member of another agricultural co-operative which is itself a member of such agricultural co-operative) or for subjecting such products to a primary process as defined in section 27(9); or
(d) machinery, implement, utensil or article (other than any machinery, implement, utensil or article in respect of which an allowance has been granted to the taxpayer under paragraph (e)) owned by the taxpayer or acquired by the taxpayer as purchaser in terms of an agreement contemplated in paragraph (a) of an ‘instalment credit agreement’ as defined in section 1 of the Value-Added Tax Act, 1991 (Act No. 89 of 1991), and which was or is brought into use for the first time by [any] the taxpayer for the purposes of his trade as hotelkeeper and is used by him in a hotel, except any vehicle or equipment for offices or managers’ or servants’ rooms; or
(e) machinery, implement, utensil or article (other than any machinery, implement, utensil or article in respect of which an allowance has been granted to the taxpayer under paragraph (d)) owned by the taxpayer or acquired by the taxpayer as purchaser in terms of an agreement contemplated in paragraph (a) of an ‘instalment credit agreement’ as defined in section 1 of the Value-Added Tax Act, 1991 (Act No. 89 of 1991), and which was or is let by [any] the taxpayer and was or is brought into use for the first time by the lessee for the purposes of the lessee’s trade as hotelkeeper and used by him in a hotel, except any vehicle or equipment for offices or managers’ or servants’ rooms; or
(f) aircraft owned by the taxpayer or acquired by the taxpayer as purchaser in terms of an agreement contemplated in paragraph (a) of an ‘instalment credit agreement’ as defined in section 1 of the Value-Added Tax Act, 1991 (Act No. 89 of 1991), and which was or is brought into use [on or after 1 April 1995] for the first time by the taxpayer for the purposes of his or her trade (other than an aircraft in respect of which an allowance has been granted to the taxpayer under section 12B or 14bis); or
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(g) ship owned by the taxpayer or acquired by the taxpayer as purchaser in terms of an agreement contemplated in paragraph (a) of an ‘instalment credit agreement’ as defined in section 1 of the Value-Added Tax Act, 1991 (Act No. 89 of 1991), and which was or is brought into use [on or after 1 April 1995] for the first time by the taxpayer for the purposes of his or her trade (other than a ship in respect of which an allowance has been granted to the taxpayer in terms of section 14(1)(a) or (b)),’’;
(c) by the substitution in subsection (1) of the words following paragraph (g) but preceding the proviso of the following words:
‘‘a deduction equal to 20 per cent of the cost [of such] to that taxpayer to acquire that machinery, plant, implement, utensil, article, ship or aircraft (hereinafter referred to as [an] the asset) shall, subject to the provisions of subsection (4), be allowed in the year of assessment during which the asset is so brought into use and in each of the four succeeding years of assessment:’’;
(d) by the deletion in subsection (1) of paragraph (b) of the proviso; (e) by the substitution in subsection (1) for the words in paragraph (c) of the
proviso following subparagraph (ii) of the following words: ‘‘the deduction under this subsection shall be increased to 40 per cent of the cost to that taxpayer of [such] that machinery or plant in respect of the year of assessment during which the plant or machinery was or is so brought into use for the first time and shall be 20 per cent in each of the three subsequent years of assessment.’’;
(f) by the substitution for subsection (2) of the following subsection: ‘‘(2) For the purposes of this section the cost to a taxpayer of any asset
shall be deemed to be the lesser of the actual cost to the taxpayer to acquire that asset or the cost which a person would, if he had acquired [the said] that asset under a cash transaction concluded at arm’s length on the date on which the transaction for the acquisition of [the said] that asset was in fact concluded, have incurred in respect of the direct cost of acquisition of the asset, including the direct cost of the installation or erection thereof or, where the asset has been acquired to replace an asset which has been damaged or destroyed, [such] that cost less any amount which has been recovered or recouped in respect of the damaged or destroyed asset and has been excluded from the taxpayer’s income in terms of section 8(4)(e), whether in the current or any previous year of assessment.’’;
(g) by the addition to subsection (3) of the following paragraph: ‘‘(e) any asset the ownership of which is retained by the taxpayer as a seller in
terms of an agreement contemplated in paragraph (a) of an ‘instalment credit agreement’ as defined in section 1 of the Value-Added Tax Act, 1991.’’.
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Amendment of section 12E of Act 58 of 1962, as inserted by section 12 of Act 19 of 2001 and amended by section 17 of Act 30 of 2002, section 21 of Act 74 of 2002, section 37 of Act 12 of 2003, section 31 of Act 45 of 2003 and section 9 of Act 9 of 2005
21. Section 12E of the Income Tax Act, 1962, is hereby amended— (a) by the substitution in subsection (1) for the words preceding paragraph (a) of
the following words: ‘‘(1) Where any plant or machinery (hereinafter referred to as an asset)
[of] owned by a taxpayer which qualifies as a small business corporation or acquired by such a taxpayer as purchaser in terms of an agreement contemplated in paragraph (a) of an ‘instalment credit agreement’ as defined in section 1 of the Value-Added Tax Act, 1991 (Act No. 89 of 1991),—’’;
(b) by the substitution in for subsection (2) of the following subsection: ‘‘(2) For the purposes of this section the cost to a taxpayer of any asset
shall be deemed to be the lesser of the actual cost to the taxpayer to acquire that asset or the cost which a person would, if he had acquired the said asset under a cash transaction concluded at arm’s length on the date on which the transaction for the acquisition of the said asset was in fact concluded, have incurred in respect of the direct cost of acquisition of the asset, including the direct cost of the installation or erection thereof or, where the asset has been acquired to replace an asset which has been damaged or destroyed, such cost less any amount which has been recovered or recouped in respect of the damaged or destroyed asset and has been excluded from the taxpayer’s income in terms of section 8 (4) (e), whether in the current or any previous year of assessment.’’.
Amendment of section 12H of Act 58 of 1962, as inserted by section 18 of Act 30 of 2002 and amended by section 32 of Act 45 of 2003
22. Section 12H of the Income Tax Act, 1962, is hereby amended— (a) by the substitution in subsection (1) for paragraph (b) of the following
paragraph: ‘‘(b) a learner [during that year of assessment] employed by that employer
completed any registered learnership agreement during that year of assessment which was entered into by that employer (or by any company which forms part of the same group of companies as that employer) with that learner during that year or any previous year of assessment in the course of any trade carried on by that employer or company, as the case may be.’’;
(b) by the substitution in subsection (2) for item (aa) of subparagraph (i) of paragraph (a) of the following item: ‘‘(aa) [70 per cent] in the case of a learnership with a duration of—
(A) less than 12 months, 70 per cent of the total amount of the remuneration of that learner for the period of that learnership as stipulated in the agreement of employment between that learner and employer; or
(B) 12 months or more, 70 per cent of the annual equivalent of the remuneration of that learner stipulated in the agreement of employment between that learner and employer; or’’;
(c) by the substitution in subsection (2) for item (aa) of subparagraph (ii) of paragraph (a) of the following item: ‘‘(aa) in the case of a learnership with a duration of—
(A) less than 12 months, the total amount of the remuneration of that learner for the period of that learnership as stipulated in the agreement of employment between that learner and employer; or
(B) 12 months or more, the annual equivalent of the remuneration of that learner stipulated in the agreement of employment between that learner and employer; or’’;
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(d) by the substitution in subsection (2) for subparagraph (i) of paragraph (b) of the following paragraph:
‘‘(i) in the case of a learnership with a duration of— (aa) less than 12 months, the total amount of the remuneration of that
learner for the period of that learnership as stipulated in the agreement of employment between that learner and employer; or
(bb) 12 months or more, the annual equivalent of the remuneration of that learner stipulated in the agreement of employment between that learner and employer; or’’.
Amendment of section 13quat of Act 58 of 1962, as inserted by section 33 of Act 45 of 2003 and amended by section 12 of Act 16 of 2004 and section 19 of Act 32 of 2004
23. Section 13quat of the Income Tax Act, 1962, is hereby amended— (a) by the substitution in subsection (1) for the words in the definition of ‘‘cost’’
preceding paragraph (a) of the following words: ‘‘ ‘cost’ means the costs (other than borrowing or finance costs) actually incurred in erecting or extending, adding to or improving a building or part thereof and includes any costs incurred—’’;
(b) by the substitution in subsection (1) for paragraph (c) of the definition of ‘‘costs’’ of the following paragraph:
‘‘(c) in respect of structures or works directly adjoining the building or part so erected, extended, added to or improved, for purposes of providing—
(i) water, power or parking with respect to that building or part; (ii) drainage or security for that building or part;
(iii) means of waste disposal for that building or part; or (iv) access to that building or part, including the frontage
thereof;’’; (c) by the insertion in subsection (1) after the definition of ‘‘cost’’of the following
definitions: ‘‘‘developer’ means a person who— (a) erects, extends, adds to or improves a building or part of a building
with the sole purpose of disposing of that building or part thereof immediately after completion of that erection, extension, addition or improvement; and
(b) does not use the building or part which is to be disposed of as contemplated in paragraph (a) for purposes of his or her trade in any other manner;’’;
‘purchase price’ in relation to any building or part of a building purchased by the taxpayer means the lesser of— (a) the actual cost to the taxpayer to purchase that building or part; or (b) the cost which a person would have incurred had that person
purchased that building or part under a cash transaction concluded at arm’s length on the date on which that taxpayer purchased that building or part;
(d) by the substitution for subsection (2) of the following subsection: ‘‘(2) There [shall] must be allowed to be deducted from the income of
the taxpayer an allowance determined in terms of subsection (3), in respect of the cost of the erection, extension, addition or improvement of any commercial or residential building [within an urban development zone] or part of a building which is owned by the taxpayer and is to be used solely for purposes of that taxpayer’s trade, if— (a) [which] that building is situated within an urban development zone; (b) the erection, extension, addition or improvement was commenced
by the taxpayer or the developer, as the case may be, on or after the date of publication of the notice contemplated in subsection (8) in respect of that urban development zone, in terms of a contract formally and finally signed by all parties thereto on or after that date; [and]
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(c) the erection, extension, addition to or improvement by the taxpayer or developer covers either the entire building or a floor area of at least 1000 m2 of that building;
(d) in the case where the taxpayer purchased that building or part from a developer—
(i) the agreement to purchase was concluded on or after 8 Novem- ber 2005;
(ii) that developer has not claimed any allowance under this section in respect of that building or part; and
(iii) if the developer improved the building or part as contemplated in subsection (3)(b), that developer has incurred expenditure in respect of those improvements which is equal to at least 20 per cent of the purchase price paid by the taxpayer in respect of that building or part; and
[(b)](e) [in respect of which] a certificate of occupancy has been granted in respect of the building or part so erected, extended, added to or improved.’’;
(e) by the insertion after subsection (3) of the following subsection: ‘‘(3A) For purposes of subsections (2) and (3), where the taxpayer
purchased a building or part of a building from a developer— (a) 55 per cent of the purchase price of that building or part, in the case
of a new building erected, extended or added to by that developer as contemplated in subsection (3)(a); and
(b) 30 per cent of the purchase price of that building or part, in the case of a building improved by that developer as contemplated in subsection (3)(b),
is deemed to be costs incurred by that taxpayer in respect of the erection, extension, addition to or improvement of that building or part.’’;
(f) by the substitution in subsection (4) for paragraphs (a), (b) and (c) of the following paragraphs:
‘‘(a) a certificate [from] issued by the municipality to the taxpayer confirming that the building is located within an urban development zone within that municipality;
(b) the total amount of the costs to the taxpayer (other than a taxpayer contemplated in paragraph (d)) of the erection, extension, addition or improvement and the extent that those costs relate to any portion of the building in respect of which a certificate of occupancy has been granted; [and]
(c) particulars as to whether the costs referred to paragraph (b) were incurred in respect of the erection or extension of or addition to a building as contemplated in subsection (3)(a) or the [extension, addition or] improvement of a building as contemplated in subsection (3)(b); and’’;
(g) by the addition to subsection (4) of the following paragraph: ‘‘(d) in the case of a taxpayer who purchased the building or part of a
building from a developer— (i) the purchase price of that building or part;
(ii) the amount of the purchase price deemed to be a cost incurred by the taxpayer in terms of subsection (3A); and
(iii) a certificate from the developer in the form prescribed by the Commissioner confirming that the requirements in subsection (2)(b), (c) and (d) have been met.’’;
(h) by the substitution in subsection (5) for the words preceding paragraph (a) and paragraph (a) of the following words and paragraph:
‘‘(5) No deduction shall be allowed under this section in respect of any building or part of a building—’’; (a) where that taxpayer ceased to use that building, or part solely for
purposes of that taxpayer’s trade during any previous year of assessment: [or]’’;
(i) by the addition in subsection (5) of the word ‘‘or’’ at the end of paragraph (b); (j) by the addition to subsection (5) of the following paragraph:
‘‘(c) which is brought into use by the taxpayer after 31 March 2009.’’;
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(k) by the addition in subsection (6) of the word ‘‘and’’ at the end of paragraph (d) and the deletion of the word ‘‘and’’ at the end of paragraph (e);
(l) by the substitution in subsection (9) for paragraph (c) of the following paragraph:
‘‘(c) the estimated costs incurred by the taxpayer in respect of each building or in the case of a taxpayer who purchased the building or part from a developer, the estimated amount of the allowance to be claimed in respect of that building or part under this section;’’;
(m) by the insertion after subsection (10) of the following subsections: ‘‘(10A) Every developer who erects, extends, adds to or improves any
building within an urban development zone must, if the estimated cost of that erection, extension, addition or improvement is likely to exceed R5 million— (a) inform the Commissioner within 30 days after commencement of
the erection, extension, addition or improvement of the estimated costs thereof in respect of the building or the parts which the developer intends to sell and the estimated selling price of that building or those parts; and
(b) inform the Commissioner within 30 days after sale of the building or all anticipated sales of any parts of the building have been concluded of the actual costs incurred in respect of that building or parts and the actual selling price of that building or parts thereof.
(10B) If the Commissioner has reason to believe that the information provided in the certificate by a developer as contemplated in subsection (4)(d)(iii) is not correct, the Commissioner must disallow any deduction claimed under this section, unless sufficient information is provided to the Commissioner to prove that the information contained in that certificate is correct.’’.
Amendment of section 15 of Act 58 of 1962, as amended by section 20 of Act 55 of 1966, section 18 of Act 129 of 1991 and section 16 of Act 141 of 1992
24. Section 15 of the Income Tax Act, 1962, is hereby amended by the substitution for paragraph (a) of the following paragraph:
‘‘(a) an amount to be ascertained under the provisions of section 36, in lieu of the allowances in section 11(e), (f), (gA), (gC) and (o);’’.
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Amendment of section 18 of Act 58 of 1962, as inserted by section 12 of Act 104 of 1980 and amended by section 15 of Act 96 of 1981, section 15 of Act 121 of 1984, section 11 of Act 96 of 1985, section 14 of Act 90 of 1988, section 11 of Act 70 of 1989, section 16 of Act 101 of 1990, section 19 of Act 129 of 1991, section 18 of Act 141 of 1992, section 16 of Act 21 of 1995, section 23 of Act 53 of 1999, section 26 of Act 59 of 2000 and section 19 of Act 30 of 2002
25. (1) Section 18 of the Income Tax Act, 1962, is hereby amended— (a) by the substitution for subsections (1) and (2) of the following subsections:
‘‘(1) Notwithstanding the provisions of section 23, there [shall] must be allowed to be deducted from the income of any taxpayer who is a natural person an allowance in respect of— (a) any contributions made by [him] that taxpayer during the year of
assessment [to] in respect of that taxpayer, his or her spouse and any dependant, as defined in section 1 of the Medical Schemes Act, 1998 (Act No. 131 of 1998), of that taxpayer to—
(i) any medical scheme registered under the provisions of [the Medical Schemes Act, 1998 (Act No. 131 of 1998)] that Act; or
(ii) any fund which is registered under any similar provision contained in the laws of any other country where the medical scheme is registered; [and]
(b) any amounts (other than amounts recoverable by the taxpayer or his or her spouse) which were paid by the taxpayer during the year of assessment to any duly registered— (i) medical practitioner, dentist, optometrist, homeopath, naturopath, osteo-
path, herbalist, physiotherapist, chiropractor or orthopedist for profes- sional services rendered or medicines supplied to the taxpayer, his or her spouse or his or her children; or
(ii) nursing home or hospital or any duly registered or enrolled nurse, midwife or nursing assistant (or to any nursing agency in respect of the services of such a nurse, midwife or nursing assistant) in respect of the illness or confinement of the taxpayer, his or her spouse or his or her children; or
(iii) pharmacist for medicines supplied on the prescription of any person mentioned in subparagraph (i) for the taxpayer, his or her spouse or his or her children
[, the taxpayer or his spouse or his children or stepchildren]; and (c) any amounts (other than amounts recoverable by the taxpayer or his or her
spouse) which were paid by the taxpayer during the year of assessment in respect of expenditure incurred outside the Republic on services rendered or medicines supplied to the taxpayer or his or her spouse or [his] children [or stepchildren] and which are substantially similar to the services and medicines in respect of which a deduction may be made under paragraph (b) of this subsection; and
(d) any expenditure (other than expenditure recoverable by the taxpayer or his or her spouse) necessarily incurred and paid by the taxpayer in consequence of any physical disability suffered by the taxpayer, his or her spouse or any child [or stepchild:
Provided that any amount paid by the estate of a deceased taxpayer which would, if it had been paid by the taxpayer, have been taken into account for a deduction under this section, shall for the purposes of this section be deemed to have been paid by the taxpayer on the day before his death].
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(2) The allowance under subsection (1) [shall be] is equal to— (a) where the taxpayer is entitled to a rebate under section 6(2)(b), the sum of the
amounts referred to in [that] subsection (1); [or] (b) where the taxpayer, [or] his or her spouse or child [or stepchild referred to
in subsection (1)(d) is a handicapped person and the taxpayer is not entitled to a rebate under section 6(2)(b), so much of the sum of the amounts referred] is a handicapped person, the sum of the amounts referred to in subsection (1) [as exceeds R500]; or
(c) in any other case— (i) so much of the [sum of such amounts as exceeds 5 per cent of the
taxpayer’s taxable income as determined before granting an allow- ance under this section] contributions made by the taxpayer during the relevant year of assessment as contemplated in subsection (1)(a), as does not exceed— (aa) R500 for each month in that year in respect of which those
contributions were made solely with respect to the benefits of that taxpayer;
(bb) R1 000 for each month in that year in respect of which those contributions were made with respect to the benefits of that taxpayer and one dependant; or
(cc) where those contributions are made with respect to the taxpayer and more than one dependant, R1 000 in respect of the taxpayer and one dependant plus R300 for every additional dependant for each month in that year in respect of which those contributions were made:
Provided that the amounts in items (aa) to (cc) must be reduced by any amount contributed by the employer of the taxpayer to any such fund which has by virtue of paragraph 12A of the Seventh Schedule not been included in his or her gross income; and
(ii) so much of— (aa) any contributions contemplated in subsection (1)(a) as have not
been allowed as a deduction under subparagraph (i); and (bb) the sum of all amounts contemplated in subsection (1)(b), (c) and
(d), as in aggregate exceeds 7,5 per cent of the taxpayer’s taxable income as determined before allowing any deduction under this section.’’;
(b) by the substitution in subsection (4) for the words preceding paragraph (a) of the following words:
‘‘(4) For the purposes of this section the expression ‘child [or step-child] in relation to the taxpayer’ means the taxpayer’s child or [stepchild] child of his or her spouse who was alive during any portion of the year of assessment, and who on the last day of the year of assessment—’’;
(c) by the substitution in subsection (4) for paragraph (b) of the following paragraph: ‘‘(b) in the case of any other child [or stepchild], was incapacitated by
physical or mental infirmity from maintaining himself or herself and was wholly or partially dependent for his maintenance upon the taxpayer and has not become liable for the payment of normal tax in respect of the year of assessment:’’;
(d) by the substitution in subsection (4) for the proviso of the following proviso:
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‘‘Provided that any child [or stepchild] of the taxpayer who has become liable for the payment of normal tax in respect of any year of assessment solely by reason of the provisions of section 5(1A) shall be deemed for the purposes of this section not to have become liable for the payment of normal tax in respect of such year.’’; and
(e) by the addition of the following subsection: ‘‘(5) For purposes of this section, any amount contemplated in
subsection (1), which has been paid by— (a) the estate of a deceased taxpayer is deemed to have been paid by the
taxpayer on the day before his or her death; or (b) an employer of the taxpayer must, to the extent that the amount has
been included in the income of that taxpayer as a taxable benefit in terms of the Seventh Schedule, be deemed to have been paid by that taxpayer.’’.
(2) Subsection (1) shall come into operation on 1 March 2006 and applies in respect of any year of assessment commencing on or after that date.
Amendment of section 18A of Act 58 of 1962, as inserted by section 15 of Act 52 of 1970 and substituted by section 16 of Act 96 of 1981 and amended by section 14 of Act 91 of 1982, section 16 of Act 94 of 1983, section 16 of Act 121 of 1984, section 15 of Act 90 of 1988, section 17 of Act 101 of 1990, section 20 of Act 129 of 1991, section 11 of Act 36 of 1996 and substituted by section 24 of Act 30 of 2000 and amended by section 20 of Act 30 of 2002 and section 34 of Act 45 of 2003
26. (1) Section 18A of the Income Tax Act, 1962, is hereby amended— (a) by the substitution in subsection (1) for the words in paragraph (b) preceding
subparagraph (i) and subparagraph (i) of the following words: ‘‘(b) any public benefit organisation approved by the Commissioner
under section 30, which[— (i)] provides funds or assets to any public benefit organisation,
institution, board or body contemplated in paragraph (a); [and] or’’;
(b) by the deletion in subsection (1) of subparagraph (ii) of paragraph (b); (c) by the substitution in subsection (1C) for subparagraph (i) of paragraph (a) of
the following subparagraph: ‘‘(i) that donation is made by that person on or after 1 August 2002, but
on or before [1 August 2005] 31 March 2010; and’’; (d) by the substitution in subsection (2A) for paragraphs (a) and (b) of the
following paragraphs: ‘‘(a) in the case of a public benefit organisation, institution, board or
body contemplated in subsection (1)(a) which carries on activities contemplated in [Part] Parts I and II of the Ninth Schedule, that donation will be utilised solely in carrying on activities contem- plated in Part II of the Ninth Schedule;
(b) in the case of a public benefit organisation contemplated in subsection (1)(b)—
(i) that organisation will within 12 months after the end of the relevant year of assessment distribute or incur the obligation to distribute at least 75 per cent of all funds received by way of donation during that year in respect of which receipts were issued: Provided that the Commissioner may, upon good cause shown and subject to such conditions as he or she may determine, either generally or in a particular instance, waive, defer or reduce the obligation to distribute any funds, having regard to the public interest and the purpose for which the relevant organisation wishes to accumulate those funds; and
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(ii) [which] if that public benefit organisation provides funds to public benefit organisations, institutions, boards or bodies that carry on public benefit activities contemplated in Part II of the Ninth Schedule and to other entities, that donation will be utilised solely to provide funds to a public benefit organisation, institution, board or body contemplated in subsection (1)(a), which will utilise those funds solely in carrying on activities contemplated in Part II of the Ninth Schedule; or’’;
(e) by the substitution for subsection (5) of the following subsection: ‘‘(5) If the Commissioner has reasonable grounds for believing that
any person who is in a fiduciary capacity responsible for the management or control of the income or assets of any public benefit organisation, institution, board or body [has with intent] (other than an institution, board or body in respect of which subsection (5B) applies) has— (a) in any material way failed to ensure that the objects for which the
public benefit organisation, institution, board or body was estab- lished are carried out or has expended moneys belonging to the public benefit organisation, institution, board or body for the purposes not covered by such objects; [or]
(b) issued or allowed a receipt to be issued to any taxpayer for the purposes of this section in respect of any fees or other emoluments payable to [such] that organisation, institution, board or body by [such] that taxpayer; or
(c) issued or allowed a receipt to be issued in contravention of subsection (2A) or utilised a donation in respect of which a receipt was issued for any purpose other than the purpose contemplated in that subsection,’’;
the Commissioner may by notice in writing addressed to that person direct that [donations to such fund shall not qualify for deduction under the provisions of this section in respect of]— (i) any donation in respect of which a receipt was issued by that public
benefit organisation, institution, board or body during any year of assessment specified in [such] that notice, [and any claim by any taxpayer for such deduction shall accordingly be disallowed] will be deemed to be taxable income of that public benefit organisation, institution, board or body in that year; and
(ii) if corrective steps are not taken by that public benefit organisation, institution, board or body within a period stated by the Commissioner in that notice, any receipt issued by that public benefit organisation, institution, board or body in respect of any donation made on or after the date specified in that notice shall not qualify as a valid receipt for purposes of subsection (2).’’;
(f) by the substitution for subsection (5A) of the following subsection: ‘‘(5A) If the Commissioner has reasonable grounds for believing that
any regulating or co-ordinating body of a group of public benefit organisations, institutions, boards or bodies contemplated in section 30(3A) or subsection (6) fails to— (a) [with intent or negligently fails to] take any steps contemplated in
[that] section 30(3A) or subsection (6), to exercise control over any public benefit organisation, institution, board or body in that group; or
(b) [fails to] notify the Commissioner where it becomes aware of any material failure by any public benefit organisation, institution, board or body over which it exercises control to comply with any provision of this section,
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the Commissioner may by notice in writing addressed to that regulating or co-ordinating body direct that [donations to] if corrective steps are not taken by that regulating or co-ordinating body within a period stated by the Commissioner in that notice, any receipt issued by public benefit organisations, institutions, boards or bodies in that group in respect of any donation made on or after the date specified in that notice shall not qualify [for deduction under the provisions of this section in respect of any year of assessment specified in such notice and any claim by any taxpayer for such deduction shall accordingly be disallowed] as a valid receipt for purposes of subsection (2).’’;
(g) by the insertion after subsection (5A) of the following subsections: ‘‘(5B) If the Commissioner has reasonable grounds for believing that
any accounting officer or accounting authority contemplated in the Public Finance Management Act, 1999 (Act No. 1 of 1999), or an accounting officer contemplated in the Local Government: Municipal Finance Management Act, 2003 (Act No. 56 of 2003), as the case may be, for any institution in respect of which that Act applies, has issued or allowed a receipt to be issued in contravention of subsection (2A) or utilised a donation in respect of which a receipt was issued for any purpose other than the purpose contemplated in that subsection, the Commissioner— (a) must notify the National Treasury and the Provincial Treasury (if
applicable) of the contravention; and (b) may by notice in writing addressed to that accounting officer or
accounting authority direct that, if corrective steps are not taken by that accounting officer or accounting authority within a period stated by the Commissioner in that notice, any receipt issued by that institution in respect of any donation made on or after the date specified in that notice shall not qualify as a valid receipt for purposes of subsection (2).’’.
(2) (a) Subsection (1)(a), (b), (d), (e) and (f) shall come into operation on 1 April 2006 and applies in respect of any year of assessment of a public benefit organisation commencing on or after that date.
(b) Subsection (1)(c) is deemed to have come into operation on 1 August 2005.
Amendment of section 20A of Act 58 of 1962, as inserted by section 36 of Act 45 of 2003
27. (1) Section 20A of the Income Tax Act, 1962, is hereby amended by the substitution in subsection (2) for the words preceding paragraph (a) of the following words:
‘‘(2) Subsection (1) applies where the sum of the taxable income of a person for a year of assessment ([before taking into account the set-off of] determined without having regard to the other provisions of this section) and any assessed [losses incurred in carrying on any trade during that year] loss and [the] balance of assessed loss [carried forward from the preceding year)] which were set off in terms of section 20 in determining that taxable income, equals or exceeds the amount at which the maximum marginal rate of tax chargeable in respect of the taxable income of individuals becomes applicable, and where-’’.
(2) Subsection (1) is deemed to have come into operation on 1 March 2004 and applies in respect of any year of assessment commencing on or after that date.
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Amendment of section 23 of Act 58 of 1962, as amended by section 18 of Act 65 of 1973, section 20 of Act 121 of 1984, section 23 of Act 129 of 1991, section 20 of Act 141 of 1992, section 18 of Act 113 of 1993, section 15 of Act 21 of 1994, section 28 of Act 30 of 2000, section 21 of Act 30 of 2002, section 38 of Act 45 of 2003 and section 13 of Act 16 of 2004
28. (1) Section 23 of the Income Tax Act, 1962, is hereby amended— (a) by the deletion in paragraph (m) of the word ‘‘and’’ at the end of subparagraph
(ii); (b) by the substitution in paragraph (m) for subparagraph (iii) of the following
subparagraph: ‘‘(iii) any deduction which is allowable under section 11(a) in respect
of any premium paid by that person in terms of an insurance policy, to the extent that— (aa) [to the extent that] it covers that person against the loss of
income as a result of illness, injury, disability or unemploy- ment; and
(bb) [in respect of which all] the amounts payable in terms of that policy as contemplated in item (aa) constitutes or will constitute income as defined; and’’;
(c) by the addition to paragraph (m) of the following subparagraph: ‘‘(iv) any deduction which is allowable under section 11(a) or (d) in
respect of any rent of, cost of repairs of or expenses in connection with any dwelling house or domestic premises, to the extent that the deduction is not prohibited under paragraph (b);’’;
(d) by the substitution in paragraph (n) for subparagraph (i) of the following subparagraph: ‘‘
(i) is [exempt from] not subject to tax; and’’; (e) by the addition of the following paragraph:
‘‘(o) any expenditure incurred— (i) where the payment of that expenditure or the agreement or
offer to make that payment constitutes an activity contem- plated in Chapter 2 of the Prevention and Combating of Corrupt Activities Act, 2004 (Act No. 12 of 2004); or
(ii) which constitutes a fine charged or penalty imposed as a result of an unlawful activity carried out in the Republic or in any other country if that activity would be unlawful had it been carried out in the Republic.’’.
(2) (a)Subsection (1)(a) and (c) is deemed to have come into operation on 1 March 2005 and applies in respect of any year of assessment commencing on or after that date.
(b) Subsection (1)(b) is deemed to have come into operation on 1 March 2002. (c) Subsection (1)(e) shall come into operation on 1 January 2006 and applies in
respect of any year of assessment commencing on or after that date.
Amendment of section 23D of Act 58 of 1962, as inserted by section 19 of Act 113 of 1993 and amended by section 10 of Act 140 of 1993 and section 20 of Act 21 of 1995
29. Section 23D of the Income Tax Act, 1962, is hereby amended— (a) by the substitution in subsection (1) for paragraph (aA) of the following
paragraph: ‘‘(aA) any invention, patent, design, trade mark, copyright, or any other
property which is of a similar nature, contemplated in section 11(gA) or 11(gC);’’;
(b) by the substitution in subsection (2) for the words following paragraph (d) of the following words:
‘‘and a deduction was previously granted to such lessee, such connected person or such sublessee under section 11(e), 11(gA), 11(gC), 12B, 12C, 13, 14 or 14bis or section 12 prior to the repeal thereof by section 16 of the Income Tax Act, 1991 (Act No. 129 of 1991), or section 27(2)(d) prior to the deletion thereof by section 28(b) of that Act, whether in the current or any previous year of assessment, any deduction or allowance claimed by such lessor in respect of such asset in terms of section 11(e), (gA), (gC) or (o), 12C, 13, 14 or 14bis shall be calculated on an amount
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not exceeding the lesser of the cost or adjustable cost, as the case may be, of such asset to such lessee, such connected person or such sublessee or the market value thereof as determined on the date upon which the asset was acquired by the taxpayer.’’.
Amendment of section 23G of Act 58 of 1962, as inserted by section 16 of Act 28 of 1997
30. Section 23G of the Income Tax Act, 1962, is hereby amended by the substitution in subsection (2) for paragraph (b) of the following paragraph:
‘‘(b) such lessor shall, notwithstanding the provisions of this Act, not be entitled to any deduction in terms of section 11(e), (f) or (gA), (gC), 12B, 12C or 13 in respect of an asset which is the subject matter of such sale and leaseback arrangement.’’.
Amendment of section 24 of Act 58 of 1962, as substituted by section 16 of Act 65 of 1986 and amended by section 6 of Act 108 of 1986, section 23 of Act 101 of 1990 and section 17 of Act 28 of 1997
31. Section 24 of the Income Tax Act, 1962, is hereby amended by the deletion of subsections (3), (4), (5) and (6).
Amendment of section 24F of Act 58 of 1962, as inserted by section 17 of Act 85 of 1987 and amended by section 19 of Act 90 of 1988, section 24 of Act 101 of 1990, section 26 of Act 129 of 1991, section 30 of Act 59 of 2000 and section 25 of Act 74 of 2002
32. (1) Section 24F of the Income Tax Act, 1962, is hereby amended— (a) by the substitution for the heading of the following heading:
‘‘[Taxable income of film owners] Allowance in respect of films’’; (b) by the substitution in subsection (1) for the definition of ‘‘completion date’’ of
the following definition: ‘‘‘completion date’, in relation to— (a) the production of a film, means the date on which [the cut master
negative and conforming sound track of the film are married in an answer print, or, where such film is not a cinematographic film, the date on which the film is completed to an equivalent production stage] it is first in a form in which it can be regarded as ready for copies of it to be made and distributed, for presentation to the general public; or
(b) the acquisition of a film, means the date it was acquired;’’; (c) by the deletion in subsection (1) of the definitions of ‘‘export’’, ‘‘export
country’’, ‘‘film manufacturer’’, ‘‘marketing expenditure’’ and ‘‘South Afri- can export film’’;
(d) by the addition in subsection (1) of the following proviso to the definition of ‘‘production cost’’:
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‘‘Provided that where a film owner acquired the film directly or indirectly from a connected person the total expenditure incurred by the film owner in respect of the acquisition of the film must be limited to the total expenditure incurred by the connected person in respect of the acquisition thereof or production cost to that connected person in respect of the production of the film;’’;
(e) by the substitution in subsection (2) for paragraphs (a) and (b) of the following paragraphs:
‘‘(a) There [shall] must be allowed [to be deducted] as a deduction from the income of any film owner [an allowance, to be known as the film allowance, determined in terms of subsection (3) in respect of the production cost and post-production cost incurred by him in respect of any film used by him in the production of his income or from which any income is received by or accrues to him]—
(i) the total amount of all production costs or post-production costs actually incurred by that film owner in connection with any film used by that film owner in the production of income, if at least 75 per cent of the total amount of those production costs and post-production costs incurred is paid or payable in the Republic in respect of services rendered or goods supplied in the Republic;
(ii) the total amount of all production costs or post-production costs actually incurred by that film owner in connection with any film used by that film owner in the production of income where the film is approved as a co-production in terms of an agreement on audiovisual or film co-production between the South African Government and any other government; or
(iii) in any other case, so much of any production costs or post-production costs actually incurred by that film owner in connection with any film used by that film owner in the production of income, as is paid or payable by that film owner in the Republic in respect of services rendered or goods supplied in the Republic.
(b) There must be allowed as a deduction from the income of a film owner any production costs or post-production costs actually incurred by that film owner in connection with any film used by that film owner in the production of income and which are not allowed under paragraph (a): Provided that the deduction must be limited to 10 per cent of the amount of those costs in the year of assessment in which the completion date of the film falls and 10 per cent in each of the nine following years of assessment.
(c) The [film allowance] deductions in terms of paragraphs (a) and (b) which may be granted in respect of any film [shall] may not in the aggregate exceed the production cost and post-production cost thereof and shall be in lieu of any deduction or allowance in respect of such production cost or postproduction cost which may otherwise be allowable in terms of the provisions of this Act.’’;
(f) by the substitution in subsection (3) for the words preceding paragraph (a) of the following words:
‘‘(3) Subject to the provisions of subsection (4), the amount of the film allowance which may be granted in respect of any one film [shall be] is the sum of—’’;
(g) by the substitution in subsection (4) for the words preceding paragraph (a) and paragraph (a) of the following words and paragraph:
‘‘(4) The film allowance which may be granted in respect of any one film in any year of assessment [shall] must, together with the total film allowances granted in respect of that film in any preceding years of assessment, not exceed the sum of—
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(a) the amounts of production cost and post-production cost in respect of the film which have been paid by the film owner: Provided that where any loan or credit has been used by [him] the film owner for the payment or financing of the whole or any portion of such production cost or post-production cost and any portion of such loan or credit is owed by [him] the film owner on the last day of the year of assessment, the amount which may be taken into account under this paragraph [shall] must be reduced by any portion of such loan or credit so owed by [him] the film owner for which the film owner is not under the provisions of subsection (8) deemed to be at risk on the last day of the year of assessment; and’’;
(h) by the insertion of the following subsection after subsection (4): ‘‘(5) An amount incurred in respect of production costs or post-
production costs of a film shall not be allowed as a deduction in terms of this section unless there is a binding, unconditional obligation to pay that amount within a period of 18 months from the completion date of that film.’’;
(i) by the deletion of subsection (7); and (j) by the substitution for subsection (8) of the following subsection:
‘‘(8) For the purposes of [subsections] subsection (4) [and (7)], a film owner shall be deemed to be at risk to the extent that the payment of the production cost or post-production cost[, print cost or marketing expenditure] incurred by [him] the film owner, or the repayment of any loan or credit used by [him] the film owner for the payment or financing of any such production cost or post-production cost[, print cost or marketing expenditure,] would (having regard to any transaction, agreement, arrangement, understanding or scheme entered into before or after such production cost or post-production cost[, print cost or marketing expenditure] is incurred) result in an economic loss to [him] the film owner were no income to be received by or accrue to [him] the film owner in future years from the exploitation by [him] the film owner of the film: Provided that where the full amount of the loan or credit is not repayable within a period of ten years from the completion date, the film owner is deemed not to be at risk for purposes of this section to the extent the loan or credit is not repayable within a period of ten years from the completion date of the film.’’.
(2) Subsection (1) shall come into operation on 1 April 2006 and applies in respect of any film with a completion date on or after that date.
Amendment of section 24I of Act 58 of 1962, as inserted by section 21 of Act 113 of 1993 and amended by section 11 of Act 140 of 1993, section 18 of Act 21 of 1994, section 13 of Act 36 of 1996, section 18 of Act 28 of 1997, section 35 of Act 30 of 1998, section 26 of Act 53 of 1999, section 31 of Act 59 of 2000, section 36 of Act 60 of 2001, section 27 of Act 74 of 2002, section 42 of Act 45 of 2003 and section 23 of Act 32 of 2004
33. (1) Section 24I of the Income Tax Act, 1962, is hereby amended— (a) by the substitution in subsection (1) for subparagraphs (i) and (ii) of paragraph
(a) of the definition of ‘‘ruling exchange rate’’of the following subparagraphs: ‘‘(i) transaction date, the spot rate on such date[, or in the case where
a related or matching forward exchange contract has been entered into to hedge such loan, advance or debt and the forward rate has been used to record for accounting purposes such loan, advance or debt in accordance with generally accepted accounting practice, the forward rate in terms of such forward exchange contract];
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(ii) the date it is translated, the spot rate on such date[, or in the case where a related or matching forward exchange contract has been entered into to hedge such loan, advance or debt and the forward rate has been used to translate for accounting purposes such loan, advance or debt in accordance with generally accepted accounting practice, the forward rate in terms of such forward exchange contract]; or’’;
(b) by the substitution in subsection (1) for subparagraph (ii) of paragraph (b) of the definition of ‘‘ruling exchange rate’’ of the following subparagraph:
‘‘(ii) the date it is translated, the market-related forward rate available for the remaining period of such forward exchange contract[, or in the case where the forward rate in terms of such forward exchange contract has been used to translate a loan, advance or debt as contemplated in paragraph (a) (ii), the forward rate in terms of such contract, or in respect of a forward exchange contract which is an affected contract, the forward rate in terms of such forward exchange contract];’’;
(c) by the deletion in subsection (1) of the definition of ‘‘spot rate’’; (d) by the substitution in subsection (7) for subparagraph (ii) of paragraph (a) of
the following subparagraph: ‘‘(ii) the devising, developing, creation, production, acquisition or
restoration of any invention, patent, design, trade mark, copyright or other similar property or knowledge contemplated in section 11(gA) or (gC), as the case may be;’’;
(e) by the substitution in subsection (7A) for the words in paragraph (a) preceding subparagraph (i) of the following words:
‘‘(a) Subject to subsection (10), where any exchange difference is to be included in or deducted from the income of any company in terms of subsection (3), there shall, in lieu of such deduction or inclusion, be included in or deducted, as the case may be, from the income of such company during any year of assessment an amount equal to 10 per cent of the deferred amount of such exchange difference arising from a loan or advance obtained or granted during any year of assessment ending before 8 November 2005 owing by such company to any other company or [a loan or advance] owing by any other company to such company (such a loan or advance referred to as a qualifying exchange item for the purposes of this subsection), if—;
(f) by the deletion of subsection (9); and (g) by the substitution for subsection (10) of the following subsection:
‘‘(10) No amount shall in terms of this section be included in or deducted from the income of— (a) any resident [in terms of this section] in respect of any exchange
difference determined on the translation of an exchange item to which that resident and any company are parties, where that company is—
(i) a connected person in relation to that resident; or (ii) a controlled foreign company in relation either to that resident
or to any other company, which is a resident, and which other company forms part of the same group of companies as that resident; or
(b) any controlled foreign company in relation to any exchange item contemplated in paragraph (a); or
(c) any controlled foreign company in relation to a resident in respect of any exchange difference determined on the translation of an exchange item to which that controlled foreign company and any other controlled foreign company in relation either to that resident or to any other resident company and which forms part of the same group of companies as that resident are party.’’.
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(2) Subsection (1)(g) is deemed to have come into operation on 8 November 2005 and applies in respect of years of assessment ending on or after that date.
Amendment of section 24M of Act 58 of 1962, as inserted by section 25 of Act 32 of 2004
34. Section 24M of the Income Tax Act, 1962, is hereby amended by the substitution in subsection (1) for paragraph (a) of the following paragraph:
‘‘(a) cannot be quantified in that year must for purposes of this Act be deemed not to have [been] accrued to that person in that year; and’’.
Substitution of section 25D of Act 58 of 1962, as inserted by section 33 of Act 59 of 2000 and substituted by section 37 of Act 60 of 2001, section 28 of Act 74 of 2002 and section 44 of Act 45 of 2003
35. (1) The following section is hereby substituted for section 25D of the Income Tax Act, 1962:
‘‘Determination of taxable income in foreign currency
25D. (1) Subject to subsections (2) and (3), any amount received by or accrued to, or expenditure or loss incurred by, a person during any year of assessment in any currency other than the currency of the Republic must be translated to the currency of the Republic by applying the spot rate on the date on which that amount was so received or accrued or expenditure or loss was so incurred.
(2) Any amounts received by or accrued to, or expenditure incurred by, a person in any currency other than the currency of the Republic which are attributable to a permanent establishment of that person outside the Republic must be determined in the currency used by that permanent establishment for purposes of financial reporting (other than the currency of any country in the common monetary area) and be translated to the currency of the Republic by applying the average exchange rate for the relevant year of assessment.
(3) Notwithstanding subsection (1), a natural person or a trust (other than a trust which carries on any trade) may elect that all amounts received by or accrued to, or expenditure or losses incurred by that person or trust in any currency other than the currency of the Republic, be translated to the currency of the Republic by applying the average exchange rate for the relevant year of assessment.’’.
(2) Subsection (1) shall come into operation on 8 November 2005 and applies in respect of any year of assessment ending on or after that date.
Amendment of section 30 of Act 58 of 1962, as inserted by section 35 of Act 30 of 2000 and amended by section 16 of Act 19 of 2001, section 22 of Act 30 of 2002, section 31 of Act 74 of 2002, section 45 of Act 45 of 2003 and section 28 of Act 32 of 2004
36. (1) Section 30 of the Income Tax Act, 1962, is hereby amended— (a) by the deletion in subsection (3) of subparagraph (iv) of paragraph (b); and (b) by the substitution in the proviso to subsection (3) for the words ‘‘five years’’
of the words ‘‘seven years’’; (c) by the deletion in subsection (3) of the proviso; (d) by the substitution in subsection (5A) for the words following paragraph (b) of
the following words: ‘‘the Commissioner shall after due notice withdraw the approval of the group of public benefit organisations with effect from the commence- ment of that year of a assessment, where corrective steps are not taken by that [organisation] regulating or co-ordinating body within a period stated by the Commissioner in that notice.’’;
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(e) by the deletion of subsection (12). (2) (a) Subsection (1)(a) and (c), shall come into operation on 1 April 2006 and shall
apply in respect of any year of assessment commencing on or after that date. (b) Subsection (1)(b) is deemed to have come into operation on 8 November 2005.
Amendment of section 41 of Act 58 of 1962, as inserted by section 44 of Act 60 of 2001 and substituted by section 34 of Act 74 of 2002 and amended by section 49 of Act 45 of 2003 and section 32 of Act 32 of 2004
37. (1) Section 41 of the Income Tax Act, 1962, is hereby amended— (a) by the insertion in subsection (1) after the definition of ‘‘asset’’ of the
following definition: ‘‘ ‘associated group of companies’ means two or more companies in which one company (hereinafter referred to as the ‘influencing com- pany’) directly or indirectly holds shares in at least one other company (hereinafter referred to as the ‘influenced company’), to the extent that— (a) at least 20 per cent of the equity shares and voting rights of each
influenced company are directly held by the influencing company, one or more influenced companies or any combination thereof as assets of a capital nature; and
(b) the influencing company directly holds at least 20 per cent of the equity shares and voting rights in at least one influenced company as assets of a capital nature;’’;
(b) by the substitution in subsection (1) for the definition of ‘‘disposal’’ of the following definition:
‘‘‘disposal’ means a disposal as defined in paragraph 1 of the Eighth Schedule and any deemed disposal in terms of this Part;’’;
(c) by the substitution in subsection (1) for the definition of ‘‘domestic financial instrument holding company’’ of the following definition:
‘‘‘domestic financial instrument holding company’ means any com- pany which is a resident, where more than [half of the market value or two-thirds of the actual cost] the prescribed proportion of all the assets of that company, together with the assets of all [controlled group] influenced companies in relation to that company, consist of financial instruments, other than— (a) any financial instrument that constitutes a debt due to that company
or to any [controlled group] influenced company in relation to that company in respect of goods sold or services rendered by that company or [controlled group] influenced company, as the case may be, where—
(i) the amount of that debt is or was included in the income of that company or [controlled group] influenced company, as the case may be (or in the case of a foreign [controlled group] influenced company, would have been so included were that foreign company a resident); and
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(ii) that debt is an integral part of a business conducted as a going concern by that company or [controlled group] influenced company, as the case may be;
(b) any financial instrument held by that company or by any [con- trolled group] influenced company in relation to that company, where that company or [controlled group] influenced company, as the case may be, is—
(i) a bank regulated in terms of the Banks Act, 1990 (Act No. 94 of 1990);
(ii) an authorised user regulated in terms of the Securities Services Act, 2004;
(iii) an insurer regulated in terms of the Long Term Insurance Act, 1998 (Act No. 52 of 1998);
(iv) an insurer regulated in terms of the Short Term Insurance Act, 1998 (Act No. 53 of 1998); or
(v) . . . (vi) a collective investment scheme regulated in terms of the [Unit
Trusts Control Act, 1981, or its successor the] Collective Investment Schemes Control Act, 2002 (Act No. 45 of 2002); or
(c) any financial instrument held by any [controlled group] influenced company in relation to that company if that [controlled group] influenced company is a foreign company as contemplated in paragraph (b) of the definition of ‘foreign financial instrument holding company’:
Provided that in determining whether more than [half of the market value or two-thirds of the actual cost] the prescribed proportion of the assets of the company and [controlled group] influenced companies consist of financial instruments, the following assets must be wholly disregarded—
(i) any share of an [controlled group] influenced company in relation to that company; [and]
(ii) any financial instrument which constitutes a loan, advance or debt entered into between—
(aa) that company and any [controlled group] influenced company in relation to that company; or
(bb) [controlled group] influenced companies in relation to that company; and
(iii) any financial instrument the market value of which is equal to its base cost;’’;
(d) by the substitution in subsection (1) for the definition of ‘‘foreign financial instrument holding company’’ of the following definition:
‘‘‘foreign financial instrument holding company’ means any foreign company as defined in section 9D, where more than [half of the market value or two-thirds of the actual cost] the prescribed proportion of all the assets of that company, together with the assets of all [controlled group] influenced companies in relation to that foreign company, consist of financial instruments, other than— (a) any financial instrument that constitutes a debt due to that foreign
company, or to any [controlled group] influenced company in relation to that foreign company, in respect of goods sold or services rendered by that foreign company or [controlled group] influenced company, as the case may be, where—
(i) the amount of that debt is or was included in the income of that foreign company or [controlled group] influenced company, as the case may be (or would have been so included were that foreign company or [controlled group] influenced company a resident); and
(ii) that debt is an integral part of a business conducted as a going concern by that foreign company or [controlled group] influenced company, as the case may be;
(b) any financial instrument arising from the principal trading activities of that foreign company or of any [controlled group] influenced company in relation to that foreign company which is a bank or
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financier, insurer, dealer or broker [with a licence or registration that allows that foreign company or controlled group company to operate in the same manner as a company] that mainly conducts business [with clients who are residents] in the [same] country of residence [as] of that company and that [foreign] company [or controlled group company in relation to that foreign company either]—
(i) regularly accepts deposits or premiums or makes loans, issues letters of credit, provides guarantees or effects similar transac- tions for the account of clients [from the general public] who are not connected persons in relation to that company; [or] and
(ii) derives more than 50 per cent of its income or gains from principal trading activities with respect to [persons who are not connected persons in relation to that foreign company] those clients; or
(c) any financial instrument held by any [controlled group] influenced company in relation to that foreign company if that [controlled group] influenced company is a [controlled group] influenced company as contemplated in paragraph (b) of the definition of ‘domestic financial instrument holding company’:
Provided that in determining whether more than more than [half of the market value or two-thirds of the actual cost] the prescribed proportion of the assets of the company and all [controlled group] influenced companies consist of financial instruments[,]—
(i) the following assets must be wholly disregarded— [(i)](aa) any share in any other influenced company in the
same associated group of companies; [(ii)](bb) any financial instrument which constitutes a loan,
advance or debt entered into between— [(aa)](A) that company and any [controlled group]
influenced company in relation to that com- pany; or
[(bb)](B) [controlled group] influenced companies in relation to that company; and
(cc) any financial instrument the market value of which is equal to its base cost;
(ii) paragraph (b) will not apply to a foreign company that is potentially eligible for preferential tax treatment in its country of residence if —
(aa) the tax treatment is dependent upon the company conducting business with clients who are not residents of that country; or
(bb) a prerequisite of that tax treatment is that more than 50 per cent of the ownership of that company must be held by persons who are not residents of that country;’’;
(e) by the insertion in subsection (1) after the definition of ‘‘market value’’ of the following definition:
‘‘‘prescribed proportion’ in relation to the assets of a company and influenced companies (if any), means— (a) half of the market value or two-thirds of the actual cost of all assets; or (b) where shares in the equity share capital of that company are to be
disposed of between members of the same group of companies, either—
(i) the proportion determined in the manner contemplated in paragraph (a); or
(ii) half of the book value (as determined for purposes of that company’s most recent audited financial statements) of all assets or two-thirds of the actual cost of all assets:
Provided that in determining the value or cost of all the assets of an influenced company in relation to a company, only such percentage of the value or cost of all those assets, as is equivalent to the percentage of the effective shareholding of that company in that influenced company, must be taken into account; or’’;
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(f) by the substitution in subsection (1) for paragraph (b) of the definition of ‘‘qualifying interest’’ of the following paragraph:
‘‘(b) in any other case, constitute [more than 25] at least 20 per cent of the equity shares and voting rights of that company[;]:’’;
(g) by the deletion of subsections (3) and (6); and (h) by the addition of the following subsections:
‘‘(7) An amount contemplated in paragraph (j) of the definition of ‘gross income’ in section 1 must for purposes of this Part be deemed to be an amount that must be recovered or recouped.
(8) (a) This subsection applies where a capital distribution in respect of any share as contemplated in paragraph 76(1)(b) of the Eighth Schedule has been received by or has accrued to any person, and that person has disposed of that share, after that receipt or accrual, in terms of a disposal or distribution in respect of which the provisions of section 42, 43, 44, 45 or 47 apply.
(b) Where paragraph (a) applies, that capital distribution must for purposes of paragraph 76(1)(b) of the Eighth Schedule be deemed to have been received by or to have accrued to—
(i) the person to whom that share is so disposed of or distributed (other than an acquiring company contemplated in section 43(2)(b)) in respect of that share; and
(ii) the person so disposing of that share, in respect of any share acquired in consequence of that disposal (other than a transferor company contemplated in section 45(1)(a)).’’.
(2) (a) Subsection (1)(a), (d) and (e) is deemed to have come into operation on 8 November 2005 and applies—
(i) for purposes of the application of section 9D of the Income Tax Act, 1962, in respect of any foreign tax year which ends during any year of assessment ending on or after that date;
(ii) for purposes of the application of Part III of Chapter II of that Act, in respect of any transaction entered into on or after that date.
(b) Subsection (1)(b), (c), (f), (g) and (h) is deemed to have come into operation on 8 November 2005 and applies in respect of any transaction entered into on or after that date.
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Amendment of section 42 of Act 58 of 1962, as inserted by section 44 of Act 60 of 2001 and substituted by section 34 of Act 74 of 2002 and amended by section 50 of Act 45 of 2003 and section 33 of Act 32 of 2004
38. (1) Section 42 of the Income Tax Act, 1962, is hereby amended— (a) by the substitution in subsection (1) for the words in paragraph (a) preceding
subparagraph (i) of the following words: ‘‘(a) in terms of which a person [(other than a trust which is not a
special trust)] disposes of an asset (other than an asset which constitutes a restraint of trade or personal goodwill), the market value of which is equal to or exceeds—’’;
(b) by the substitution in subsection (1) for the words in paragraph (a) following subparagraph (ii) of the following words:
‘‘to a company which is a resident, in exchange for an equity share or shares of that company and that person[,]— (aa) at the close of the day on which that asset is disposed of, holds a
qualifying interest in that company; or (bb) is a natural person who will be engaged on a full-time basis in the
business of that company of rendering any service;’’; (c) by the substitution in subsection (6) for the words preceding paragraph (a) of
the following words: ‘‘(6) Where a person disposed of any asset in terms of a company
formation transaction and that person ceases to hold a qualifying interest in that company, as contemplated in paragraph (b) of the definition of ‘‘qualifying interest‘‘, within a period of 18 months after the date of the disposal of that asset (whether or not by way of the disposal of any shares in that company), or ceases within that period to be engaged on a full-time basis in the business of the company of rendering the service contemplated in subsection (1)(a)(ii)(bb), that person must for purposes of subsection (5), section 22 or the Eighth Schedule be deemed to have—’’;
(d) by the substitution in subsection (8) for the words in paragraph (a) preceding subparagraph (i) of the following words:
‘‘(a) any asset which secures any debt [(other than a debt contem- plated in paragraph 20(3)(c) of the Eighth Schedule)] to a company in terms of a company formation transaction and that debt was incurred by that person—’’;
(e) by the substitution in subsection (8) for paragraph (b) of the following paragraph:
‘‘(b) any business undertaking as a going concern to a company in terms of a company formation transaction and that disposal includes any amount of any debt that is attributable to, and arose in the normal course of that business undertaking [(other than any debt that has been taken into account as contemplated in paragraph 20(3)(c) of the Eighth Schedule in determining the base cost of any asset so disposed of as part of that business undertaking)],’’; and
(f) by the deletion of subsection (10). (2) Subsection (1) is deemed to have come into operation on 8 November 2005 and
applies in respect of any disposal on or after that date.
Amendment of section 43 of Act 58 of 1962, as inserted by section 44 of Act 60 of 2001 and substituted by section 34 of Act 74 of 2002 and amended by section 51 of Act 45 of 2003 and section 34 of Act 32 of 2004
39. (1) Section 43 of the Income Tax Act, 1962, is hereby amended— (a) by the substitution in subsection (1) for the words in paragraph (a) preceding
subparagraph (i) of the following words: ‘‘(a) in terms of which a person [(other than a trust which is not a
special trust)] disposes of an equity share, the market value of which is equal to or exceeds—’’; and
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(b) by the substitution in subsection (1) for paragraph (c) of the following paragraph:
‘‘(c) where [the acquiring company]— (i) in the case where that target company is a listed company, the
acquiring company after that disposal and any other share-for- share transaction entered into in terms of any offer made on the same terms as that transaction and which is accepted within a period of 90 days after that disposal, holds— (aa) more than 25 per cent of the equity shares of that target
company, in the case where no other shareholder holds an equal or greater amount of equity shares of that target company; or
(bb) in any other case, at least 35 per cent of the equity shares of the target company; or
(ii) [where the target company is not a company as contem- plated in subparagraph (i)] in any other case, the acquiring company after that disposal holds more than 50 per cent of the equity shares of the target company; and’’;
(c) by the deletion of subsection (8). (2) Subsection (1) is deemed to have come into operation on 8 November 2005 and
applies in respect of any disposal on or after that date.
Amendment of section 44 of Act 58 of 1962, as inserted by section 44 of Act 60 of 2001 and substituted by section 34 of Act 74 of 2002 and amended by section 52 of Act 45 of 2003
40. (1) Section 44 of the Income Tax Act, 1962, is hereby amended— (a) by the substitution in subsection (4) for paragraph (b) of the following
paragraph: ‘‘(b) the assumption by that resultant company of a debt of that
amalgamated company that was incurred by that amalgamated company—
(i) more than 18 months before that disposal; or (ii) within a period of 18 months before that disposal, to the extent
that the debt— (aa) constitutes the refinancing of any debt incurred as
contemplated in subparagraph (i); or (bb) is attributable to and arose in the normal course of a
business undertaking disposed of, as a going concern, to that resultant company as part of that amalgamation transaction.’’;
(b) by the substitution for subsection (6) of the following subsection: ‘‘(6) (a) Subject to subsection (7), this subsection applies where—
(i) a person disposes of any equity shares in an amalgamated company in return for equity shares in the resultant company as part of an amalgamation transaction in respect of which subsection (2) or (3) applied, which equity shares in the resultant company are acquired—
(aa) as either capital assets or trading stock, in the case where that share in the amalgamated company is disposed of as a capital asset; or
(bb) as trading stock in the case where that share in the amalgamated company is disposed of as trading stock; and
(ii) that person at the end of the day during which that disposal is effected, holds a qualifying interest in that resultant company.
(b) The person contemplated in paragraph (a) is deemed to have—
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(i) disposed of the equity share in that amalgamated company for an amount equal to the expenditure incurred by that person in respect of that equity share which is or was allowable in terms of paragraph 20 of the Eighth Schedule or taken into account in terms of section 11(a) or 22(1) or (2), as the case may be;
(ii) acquired the equity shares in the resultant company on the date on which that person acquired the equity share in the amalgamated company for a cost equal to the expenditure incurred by that person as contemplated in subparagraph (i); and
(iii) to have incurred the cost contemplated in subparagraph (ii) on the date on which that person incurred the expenditure in respect of the equity share in the amalgamated company, which cost must be treated as—
(aa) an expenditure actually incurred and paid by that person in respect of those equity shares for the purposes of paragraph 20 of the Eighth Schedule, if those equity shares in the resultant company are acquired as capital assets; or
(bb) the amount to be taken into account by that person in respect of those equity shares for the purposes of section 11(a) or 22(1) or (2), if those equity shares in the resultant company are acquired as trading stock.
(c) Any valuation of the equity share in the amalgamated company which was done by the person contemplated in paragraph (a) within the period contemplated in paragraph 29(4) of the Eighth Schedule, is deemed to have been done by that person in respect of the equity shares in the resultant company.’’.
(c) by the substitution for subsection (10) of the following subsection: ‘‘(10) [So] For purposes of section 64B, so much of the amount of any
other consideration to which a person becomes entitled as contemplated in subsection (7)(b) as does not exceed the amalgamated company’s profits [and reserves] which are available for distribution as contem- plated in section 64C(4)(c) must[, for purposes of section 64B,] be deemed to be a dividend declared and distributed out of profits of that amalgamated company to that person and to have accrued as a dividend to that person on the date on which that person became entitled thereto.’’;
(d) by the substitution in subsection (11) for the words preceding paragraph (a) of the following words:
‘‘(11) Where a person disposed of any equity share in an amalgamated company in terms of a qualifying transaction contemplated in subsec- tion [(7)] (6) and that person ceases to hold an interest in the resultant company, as contemplated in the definition of ‘qualifying interest’ in subsection (1), within a period of 18 months after the disposal in terms of that qualifying transaction (whether or not by way of the disposal of any shares in the resultant company), that person must for purposes of section 22 or the Eighth Schedule be deemed to have—’’;
(e) by the addition of the following subsection: ‘‘(14) The provisions of this section do not apply in respect of any
transaction if the resultant company holds at least 70 per cent of the equity shares in the amalgamated company immediately before the amalgamation, conversion or merger.’’.
(2) Subsection (1) is deemed to have come into operation on 8 November 2005 and applies in respect of any disposal on or after that date.
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Amendment of section 45 of Act 58 of 1962, as inserted by section 44 of Act 60 of 2001 and substituted by section 34 of Act 74 of 2002 and amended by section 53 of Act 45 of 2003, section 17 of Act 16 of 2004 and section 35 of Act 32 of 2004
41. (1) Section 45 of the Income Tax Act, 1962, is hereby amended— (a) by the substitution in subsection (4) for subparagraphs (i) and (ii) of paragraph
(b) of the following subparagraphs: ‘‘(i) except as provided for in subparagraph (ii), be deemed to have disposed
of that asset on the day immediately before the date on which that transferee company ceased to form part of that group of companies for an amount equal to the market value of the asset as at [that] the date of acquisition of that asset by that transferee company as contemplated in paragraph (a) and as having immediately reacquired that asset for an amount equal to the market value of that asset as at that date; and
(ii) for purposes of determining a deduction or allowance to which that transferee company may be entitled as contemplated in the definition of ‘allowance asset’ in section 41, be deemed as having immediately reacquired that asset for an amount equal to the lower of the market value of that asset as at that date or the base cost of that asset immediately prior to that disposal;’’;
(b) by the addition to subsection (4) of the following paragraph: ‘‘(c) Where the transferor company or transferee company contem-
plated in paragraph (b) is liquidated, wound up or deregistered at a time when a company which is a resident (hereinafter referred to as the ‘holding company’) holds at least 75 per cent of the equity shares of that company which is liquidated, wound up or deregistered, the holding company and the company which is liquidated, wound up or deregistered must be deemed to be one and the same company for purposes of paragraph (b).’’;
(c) by the substitution in subsection (4) for paragraph (c) of the following paragraph:
‘‘(c) Where the transferor company or transferee company contem- plated in paragraph (b) is liquidated, wound up or deregistered at a time when a company which is a resident (hereinafter referred to as the ‘holding company’) holds at least [75] 70 per cent of the equity shares of that company which is liquidated, wound up or deregistered, the holding company and the company which is liquidated, wound up or deregistered must be deemed to be one and the same company for purposes of paragraph (b).’’;
(d) by the substitution in subsection (6) for subparagraph (iv) of paragraph (a) of the following subparagraph:
‘‘(iv) that financial instrument constitutes an equity share in a [controlled group] influenced company in relation to that transferor company and that [controlled group] influenced company is not a domestic financial instrument holding company or foreign financial instrument holding company immediately prior to that disposal [: Provided that for purposes of determining whether that controlled group company is a domestic financial instrument holding company or a foreign financial instrument holding company, no regard shall be had to any financial instrument the market value of which is equal to its base cost]; or’’.
(2) (a) Subsection (1)(a), (c) and (d) is deemed to have come into operation on 8 November 2005 and applies in respect of any disposal on or after that date.
(b) Subsection (1)(b) is deemed to have come into operation on 26 October 2004.
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Amendment of section 46 of Act 58 of 1962, as inserted by section 44 of Act 60 of 2001 and amended by section 23 of Act 30 of 2002 and substituted by section 34 of Act 74 of 2002 and amended by section 54 of Act 45 of 2003 and section 36 of Act 32 of 2004
42. (1) Section 46 of the Income Tax Act, 1962, is hereby amended— (a) by the substitution in subsection (1) for the words preceding paragraph (a) of
the following words: ‘‘(1) For purposes of this section, ‘unbundling transaction’ means
any transaction in terms of which all the equity shares of a company which is a resident (hereinafter referred to as the ‘‘unbundled company‘‘) that are held by a company (hereinafter referred to as the ‘‘unbundling company‘‘) which, if listed, is a resident, are [disposed of] distributed by that unbundling company to the shareholder or shareholders of that unbundling company in accordance with the effective interest of that shareholder or those shareholders, as the case may be, in the shares of that unbundling company, but only to the extent to which those shares are so [disposed of] distributed—’’;
(b) by the substitution in subsection (1) for the words in paragraph (i) of the proviso preceding subparagraph (aa) of the following words:
‘‘(i) where that unbundled company is a listed company immediately before that [disposal] distribution—’’;
(c) by the substitution in subsection (1) for paragraph (ii) of the proviso of the following paragraph:
‘‘(ii) where that unbundled company is an unlisted company immediately before that [disposal] distribution, more than 50 per cent of the equity shares of that unbundled company.’’;
(d) by the substitution for subsection (2) of the following subsection: ‘‘(2) Where an unbundling company [disposes of] distributes shares to
a shareholder in terms of an unbundling transaction, that unbundling company must disregard that [disposal] distribution for purposes of determining its taxable income or assessed loss.’’;
(e) by the substitution for subsection (3) of the following subsection: ‘‘(3) (a) If a shareholder acquires equity shares (hereinafter referred to
as ‘unbundled shares’) in terms of an unbundling transaction— (i) that shareholder must—
(aa) allocate a portion of the expenditure and any market value attributable to the equity shares held in the unbundling company (hereinafter referred to as the ‘unbundling shares’) to the unbundled shares in accordance with subparagraph (v); and
(bb) reduce the expenditure and market value attributable to the unbundling shares by the amount so allocated to the unbundled shares;
(ii) the unbundled shares must be deemed to have been acquired on the same date as the unbundling shares;
(iii) the unbundled shares must be deemed to have been acquired as— (aa) trading stock, if the unbundling shares were held as trading
stock; (bb) capital assets, if the unbundling shares were held as capital
assets; (iv) any expenditure allocated to the unbundled shares must be
deemed to have been incurred on the date on which the expenditure was incurred in respect of the unbundling shares; and
(v) the proportionate amount of the expenditure and market value to be allocated to the unbundled shares in terms of subparagraph (i)(aa) must be determined in accordance with the ratio that the market value of the unbundled shares, as at the end of the day after that distribution, bears to the sum of the market value, as at the end of that day, of the unbundling shares and of the unbundled shares.
(b) For the purposes of this subsection— ‘expenditure’ means in relation to unbundled shares acquired as—
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(i) trading stock, the amount taken into account prior to the unbundling transaction in respect of the unbundling shares for the purposes of section 11(a) or 22(1) or (2); and
(ii) capital assets, the expenditure incurred prior to the unbundling transaction in respect of the unbundling shares that is allowable in terms of paragraph 20 of the Eighth Schedule;
‘market value’ in relation to unbundling shares acquired prior to the valuation date as defined in paragraph 1 of the Eighth Schedule, means any market value adopted or determined by the shareholder in respect of those shares within the period contemplated in paragraph 29(4) of the Eighth Schedule.’’;
(f) by the substitution in subsection (4) for the words preceding paragraph (a) of the following words:
‘‘(4) Where those shares are [disposed of] distributed by an unbundling company to a shareholder in terms of an unbundling transaction and that shareholder held the [previously held] unbundling shares [in that unbundling company] as a result of the exercise, by that shareholder, of a right contemplated in section 8A, a portion of any gain made by that shareholder in the exercise of that right to acquire those [previously held] unbundling shares must be included in the income of that shareholder—’’;
(g) by the substitution for subsections (5), (6) and (7) of the following subsections:
‘‘(5) Where shares are [disposed of] distributed by an unbundling company to a shareholder in terms of an unbundling transaction— (a) the [disposal] distribution by that unbundling company of the
shares must be deemed not to be a dividend with respect to that unbundling company for the purposes of section 64B (3); and
(b) any shares acquired by a company in terms of that [transaction] distribution must be deemed not to be a dividend which accrued to that company for the purposes of section 64B (3).
(6) Any shares [disposed of] distributed by an unbundling company in terms of an unbundling transaction, must be deemed to have been [disposed of] distributed first from the share premium account of that unbundling company.
(7) The provisions of this section do not apply— (a) where the unbundling company or the unbundled company is a
domestic financial instrument holding company immediately [prior to] after that disposal; or
(b) in respect of any [disposal] distribution of shares in terms of an unbundling transaction to a shareholder—
(i) who is not subject to normal tax [(as defined in this Act] or ‘tax’ as defined in the Tax on Retirement Funds Act, 1996), in the Republic or who is subject to such tax in the Republic at a reduced rate as a result of the application of any agreement for the avoidance of double taxation; and
(ii) [where that shareholder] who acquires more than five per cent of those shares.’’.
(2) Subsection (1) is deemed to have come into operation on 8 November 2005 and applies in respect of any disposal on or after that date.
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Amendment of section 47 of Act 58 of 1962, as inserted by section 34 of Act 74 of 2002 and amended by section 55 of Act 45 of 2003 and section 37 of Act 32 of 2004
43. (1) Section 47 of the Income Tax Act, 1962, is hereby amended— (a) by the substitution in subsection (1) for subparagraphs (i) and (ii) of paragraph
(a) of the following subparagraphs: ‘‘(i) is subject to normal tax ([as defined in this Act] or ‘tax’ as
defined in the Tax on [Retirements] Retirement Funds Act, 1996), in the Republic, unless that company is [taxed] subject to tax in the Republic at a reduced rate [in the Republic] as a result of the application of any agreement for the avoidance of double taxation; and
(ii) on the date of that disposal holds at least [75] 70 per cent of the equity shares and voting rights of that liquidating company; and’’;
(b) by the insertion after subsection (3) of the following subsection: ‘‘(3A) The provisions of subsections (2) and (3) apply to a disposal of
an asset by a liquidating company to its holding company in terms of a liquidation distribution only to the extent that— (a) equity shares held by that holding company in that liquidating
company are cancelled; and (b) that holding company has not assumed any debt of that liquidating
company which was incurred by that liquidating company within a period of 18 months before that disposal, unless that debt—
(i) constitutes the refinancing of any debt incurred in more than 18 months before that disposal; or
(ii) is attributable to and arose in the normal course of a business undertaking disposed of, as a going concern, to that holding company as part of that liquidation distribution.’’.
(2) Subsection (1) is deemed to have come into operation on 8 November 2005 and applies in respect of any distribution on or after that date.
Insertion of Part IIIA in Chapter II of Act 58 of 1962
44. (1) The following Part is hereby inserted in Chapter II of the Income Tax Act, 1962, after Part III:
‘‘PART IIIA
Taxation of foreign entertainers and sportspersons
Definitions
47A. For purposes of this Part— (a) ‘entertainer or sportsperson’ includes any person who for reward—
(i) performs any activity as a theatre, motion picture, radio or television artiste or a musician;
(ii) takes part in any type of sport; or (iii) takes part in any other activity which is usually regarded as of an
entertainment character; (b) ‘specified activity’ means any personal activity exercised in the
Republic or to be exercised by a person as an entertainer or sportsperson, whether alone or with any other person or persons.
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Imposition of tax
47B. (1) Subject to subsection (3), there must be levied and paid for the benefit of the National Revenue Fund a tax, to be known as the tax on foreign entertainers and sportspersons, in respect of any amount received by or accrued to any person who is not a resident (in this Part referred to as the ‘taxpayer’) in respect of any specified activity exercised or to be exercised by that person or any other person who is not a resident.
(2) The tax on foreign entertainers and sportspersons is a final tax and is levied at a rate of 15% on all amounts received by or accrued to a taxpayer as contemplated in subsection (1).
(3) Subsection (1) does not apply in respect of any person who is not a resident, if that person— (a) is an employee of an employer who is a resident; and (b) is physically present in the Republic for a period or periods exceeding
183 full days in aggregate during any 12 month period commencing or ending during the year of assessment in which the specified activity is exercised.
Liability for payment of tax
47C. (1) A taxpayer must, within 30 days (or within such further period as the Commissioner may approve) after an amount contemplated in section 47B is received by or accrues to that taxpayer, pay to the Commissioner the amount of tax which is leviable in terms of this Part in respect of that amount.
(2) This section does not apply to any amounts received by or accrued to the taxpayer— (a) from which the full amount of tax has been withheld by a resident in
terms of section 47D; or (b) in respect of which the tax has been recovered from a resident in his or
her personal capacity in terms of section 47G(1).
Withholding of amounts of tax
47D. (1) Any resident who is liable to pay to a taxpayer any amount contemplated in section 47B(1) must deduct or withhold from that payment the amount of tax for which the taxpayer is liable under that section in respect of that amount.
(2) A taxpayer from whom an amount has been deducted or withheld in terms of this section is deemed to have received the amount so deducted or withheld.
Payment of amounts of tax deducted or withheld
47E. (1) A resident must pay any amount deducted or withheld in terms of section 47D to the Commissioner before the end of the month following the month during which that amount was so deducted or withheld.
(2) The payment contemplated in subsection (1) is a payment made on behalf of the taxpayer in respect of his or her liability under section 47B.
Submission of return
47F. (1) A taxpayer must, together with the payment contemplated in section 47C(1), submit to the Commissioner a return in the manner and form and containing the information as may be prescribed by the Commissioner.
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(2) A resident who pays to the Commissioner any amount in terms of section 47E, must together with that payment submit to the Commissioner a return in the manner and form and containing the information as may be prescribed by the Commissioner.
Personal liability of resident
47G. (1) A resident who— (a) fails to deduct or withhold an amount of tax in terms of section 47D
from any payment made to a taxpayer; or (b) deducts or withholds an amount of tax but fails to pay that amount over
in terms of section 47E, is personally liable for payment of that amount of tax, which may be recovered from that resident in terms of this Act as if it is a tax due by that resident.
(2) Any amount recovered from a resident in terms of subsection (1) is an amount of tax which is paid on behalf of the relevant taxpayer in respect of his or her liability under section 47B.
(3) Subsection (1)(a) does not apply where the taxpayer has in terms of section 47C(1) paid to the Commissioner the amount of tax payable under this Part in respect of the payment from which the resident has so failed to deduct or withhold the tax.
Recovery of amounts paid to Commissioner
47H. (1) A taxpayer on whose behalf an amount deducted or withheld has been paid to the Commissioner under this Part, is not entitled to recover from the resident the amount so deducted or withheld.
(2) A resident who, in terms of section 47G, has in his or her personal capacity paid any amount of tax for which a taxpayer is liable under this Part, may recover the amount of tax so paid from the taxpayer.
Application of certain provisions
47I. The provisions contained in Chapter III of this Act apply mutatis mutandis in respect of any tax on foreign entertainers and sportspersons payable in terms of this Part.
Currency of payments made to Commissioner
47J. If an amount deducted or withheld by a resident in terms of section 47D is denominated in any currency other than the currency of the Republic, the amount so deducted or withheld and paid to the Commis- sioner must be translated to the currency of the Republic at the spot rate on the date on which that amount was so deducted or withheld.
Notification of specified activity
47K. Any resident who is primarily responsible for founding, organising, or facilitating a specified activity in the Republic and who will be rewarded directly or indirectly for that function of founding, organising or facilitating must, in the manner and form prescribed by the Commissioner— (a) notify the Commissioner of that specified activity within 14 days after
the agreement relating to that founding, organising or facilitating of that specified activity has been concluded; and
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(b) provide to the Commissioner such other details relating thereto as may be required by the Commissioner.’’.
(2) Subsection (1) shall come into operation on a date fixed by the President by proclamation in the Gazette and applies in respect of any specified activity performed on or after that date.
Amendment of section 56 of Act 58 of 1962, as amended by section 18 of Act 90 of 1964, section 25 of Act 55 of 1966, section 33 of Act 89 of 1969, section 38 of Act 85 of 1974, section 21 of Act 113 of 1977, section 13 of Act 101 of 1978, section 23 of Act 96 of 1981, section 31 of Act 94 of 1983, section 4 of Act 30 of 1984, section 28 of Act 121 of 1984, section 18 of Act 96 of 1985, section 21 of Act 85 of 1987, section 26 of Act 90 of 1988, section 28 of Act 141 of 1992, section 32 of Act 113 of 1993, section 18 of Act 36 of 1996, section 39 of Act 30 of 1998, section 38 of Act 30 of 2000, section 41 of Act 59 of 2000, section 45 of Act 60 of 2001, section 24 of Act 30 of 2002, section 35 of Act 74 of 2002, section 56 of Act 45 of 2003 and section 38 of Act 32 of 2004
45. (1) Section 56 of the Income Tax Act, 1962, is hereby amended— (a) by the deletion in subsection (1) of subparagraphs (iv) and (v) of paragraph
(g); (b) by the substitution in subsection (1) for paragraph (k) of the following
paragraph: ‘‘(k) as a voluntary award—
(i) the value of which is required to be included in the gross income of the donee in terms of paragraph (c), (d) or (i) of the definition of ‘gross income’ in section 1; or
(ii) the gain in respect of which must be included in the income of the donee in terms of section 8A, 8B or 8C;’’.
(2) (a) Subsection (1)(a) is deemed to have come into operation on 8 November 2005 and applies in respect of any donation which takes effect on or after that date.
(b) Subsection (1)(b) is deemed to have come into operation on 26 October 2004.
Amendment of section 58 of Act 58 of 1962, as amended by section 39 of Act 32 of 2004
46. Section 58 of the Income Tax Act, 1962, is hereby amended by the substitution in subsection (2) for the words preceding the proviso of the following words:
‘‘(2) Where a person disposes of a restricted equity instrument, as defined in section 8C, [to any other person] under the circumstances contemplated in section 8C(5)(a) or (b), that restricted equity instrument shall for the purposes of this Part be deemed to have been donated by that person at the time that it is deemed to vest for the purposes of section 8C and to have a value equal to the fair market value of that instrument at that time:’’.
Amendment of section 64B of Act 58 of 1962, as inserted by section 34 of Act 113 of 1993 and amended by section 12 of Act 140 of 1993, section 24 of Act 21 of 1994, section 29 of Act 21 of 1995, section 21 of Act 36 of 1996, section 13 of Act 46 of 1996, section 25 of Act 28 of 1997, section 35 of Act 53 of 1999, section 39 of Act 30 of 2000, section 42 of Act 59 of 2000, section 18 of Act 5 of 2001, section 48 of Act 60 of 2001, section 25 of Act 30 of 2002, section 36 of Act 74 of 2002, section 58 of Act 45 of 2003 and section 40 of Act 32 of 2004
47. (1) Section 64B of the Income Tax Act, 1962, is hereby amended— (a) by the substitution in subsection (1) for the definition of ‘‘declared’’ of the
following definition:
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‘‘‘declared’, in relation to any dividend (including a dividend in specie), means the approval of the payment or distribution thereof by the directors of the company or by some other person under authority conferred by the memorandum and articles of association of the company or, in the case of the liquidation of a company, by the liquidator thereof;’’;
(b) by the addition to subsection (1) of the following definition: ‘‘‘profit’ includes any amount deemed in terms of the definition of ‘dividend’ in section 1 to be a profit available for distribution;’’;
(c) by the substitution in subsection (3) for the words preceding the proviso of the following words:
‘‘(3) Subject to subsection (3A), the net amount of any dividend referred to in subsection (2) [shall be] is the amount by which [such] the dividend declared by a company exceeds the sum of any dividends (other than any dividends contemplated in subsection (5)(c)) which have accrued to that company during the dividend cycle in relation to [such] that first-mentioned dividend:’’;
(d) by the substitution in subsection (3) for paragraph (b) of the proviso of the following paragraph:
‘‘(b) in the determination of the net amount of any dividend distributed in the course or in anticipation of the liquidation, [or] winding up, [or] deregistration or final termination of the corporate existence of a company, there shall be allowed as a deduction any dividend contemplated in subsection (5)(c) which has during the current or any previous dividend cycle accrued to the company.’’;
(e) by the substitution in subsection (3A) for paragraph (a) of the following paragraph:
‘‘(a) any dividend contemplated in subsection (5)(b)[, (c)] or (f);’’; (f) by the substitution in subsection (5) for the words in paragraph (c) preceding
subparagraph (i) of the following words: ‘‘(c) so much of any dividend [distributed] declared in the course or in
anticipation of the liquidation, [or] winding up, [or] deregistration or final termination of the corporate existence of a company, as is shown by the company to be a-’’;
(g) by the deletion in subsection (5) of subparagraph (ii) of paragraph (f); (h) by the substitution in subsection (5) for paragraphs (a) and (b) of the proviso
to paragraph (f) of the following paragraphs: ‘‘(a) to have been in existence from the date on which the controlling
group company in relation to that shareholder was formed; and (b) to have been the controlling group company in relation to the
company declaring the dividend from the date on which that company declaring the dividend formed part of the same group of companies as the controlling group company in relation to the shareholder;’’;
(i) by the addition in subsection (5) to paragraph (f) of the following proviso: ‘‘Provided further that this exemption shall not apply to the extent to which that dividend—
(aa) is derived, directly or indirectly, from any profit earned by any company forming part of that group of companies during a period when that company and that shareholder did not form part of the same group of companies; or
(bb) consists of any shares in that shareholder;’’; (j) by the deletion in subsection (5) of paragraph (k).
(2) Subsection (1) is deemed to have come into operation on 8 November 2005 and applies in respect of any dividend declared on or after that date.
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Amendment of section 64C of Act 58 of 1962, as inserted by section 34 of Act 113 of 1993 and amended by section 13 of Act 140 of 1993, section 25 of Act 21 of 1994, section 30 of Act 21 of 1995, section 22 of Act 36 of 1996, section 40 of Act 30 of 1998, section 36 of Act 53 of 1999, section 40 of Act 30 of 2000, section 43 of Act 59 of 2000, section 37 of Act 74 of 2002, section 38 of Act 12 of 2003, section 59 of Act 45 of 2003 and section 41 of Act 32 of 2004
48. (1) Section 64C of the Income Tax Act, 1962, is hereby amended— (a) by the substitution in subsection (2) for paragraph (e) of the following
paragraph: ‘‘(e) that amount represents additional taxable income or reduced
assessed loss of that company by virtue of any transaction with the shareholder or a connected person in relation to such a shareholder, the consideration of which is adjusted or any amount of interest, finance charge or other consideration is disallowed as a deduction in accordance with the provisions of section 31;’’;
(b) by the deletion in subsection (2) of the word ‘‘or’’ at the end of paragraphs (f) and (g);
(c) by the substitution in subsection (4) for paragraph (bA) of the following paragraph:
‘‘(bA) [where the amount constitutes cash or an asset which is transferred by the company in terms of a disposal or acquisition of an asset for consideration which reflects an arm’s length price] to the extent of any consideration received by that company in exchange for— (i) the cash or asset distributed, transferred or otherwise
disposed of; or (ii) any other benefit granted as contemplated in subsection
(2);’’; (d) by the substitution in subsection (4) for paragraph (k) of the following
paragraph: ‘‘(k) to any amount contemplated in subsection (2) (a), (b), (c), (d), or (g)
distributed, transferred, released, relieved, paid, settled, used, applied, granted or made available for the benefit of any shareholder [which is a resident] or any connected person in relation to that shareholder [which is a resident]—
(i) if that shareholder is a company that is a member of the same group of companies as the company which is deemed to have declared that dividend and that shareholder or connected person, as the case may be, would be subject to secondary tax on companies should that shareholder or connected person—
(aa) declare a dividend from profits other than profits derived from any dividend received by that share- holder or connected person; and
(bb) not elect that the exemption provided for in section 64B(5)(f) must apply in respect of that dividend declared; and
(ii) to the extent that the amount does not exceed the company’s profits [and reserves] available for distribution that arose during the period that the shareholder was a member of the same group of companies as the company which is deemed to have declared that dividend: Provided that any profits [and reserves] taken into account for purposes of this paragraph may not be taken into account in applying this paragraph in respect of any future amounts distributed, transferred, released, relieved, paid, settled, used, applied, granted or made available; and’’.
(2) Subsection (1) is deemed to have come into operation on 8 November 2005 and applies in respect of any amount distributed, transferred, released, relieved, paid, settled, used, applied or made available on or after that date.
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Amendment of paragraph 1 of Fourth Schedule to Act 58 of 1962, as added by section 19 of Act 6 of 1963 and amended by section 22 of Act 72 of 1963, section 44 of Act 89 of 1969, section 24 of Act 52 of 1970, section 37 of Act 88 of 1971, section 47 of Act 85 of 1974, section 6 of Act 30 of 1984, section 38 of Act 121 of 1984, section 20 of Act 70 of 1989, section 44 of Act 101 of 1990, section 44 of Act 129 of 1991, section 33 of Act 141 of 1992, section 48 of Act 113 of 1993, section 16 of Act 140 of 1993, section 37 of Act 21 of 1995, section 34 of Act 36 of 1996, section 44 of Act 28 of 1997, section 52 of Act 30 of 1998, section 52 of Act 30 of 2000, section 53 of Act 59 of 2000, section 19 of Act 19 of 2001, section 32 of Act 30 of 2002 and section 46 of Act 32 of 2004
49. (1) Paragraph 1 of the Fourth Schedule to the Income Tax Act, 1962, is hereby amended—
(a) by the substitution in the definition of ‘‘provisional taxpayer’’ for item (a) of the following item:
‘‘(a) any person (other than a company [or a person referred to in sub-paragraph (1) of paragraph 18]) who derives by way of income any amount which does not constitute—
(i) remuneration in terms of the definition of that expression in this paragraph; or
(ii) an allowance or advance contemplated in section 8(1);’’; (b) by the deletion in the definition of ‘‘provisional taxpayer’’ of items (b) and
(bA); (c) by the substitution in the definition of ‘‘remuneration’’ for subitem (ii) of item
(bA) of the following subitem: ‘‘(ii) an allowance or advance paid or granted to that person in respect
of accommodation, meals or other incidental costs while that person is by reason of the duties of his or her office obliged to spend at least one night away from his or her usual place of residence in the Republic: Provided that where—
(aa) such an allowance or advance was paid or granted to a person during any month in respect of a night away from his or her usual place of residence; and
(bb) that person has not by the last day of the following month either spent the night away from his or her usual place of residence or refunded that allowance or advance to his or her employer,
that allowance or advance is deemed not to have been paid or granted to that person during that first-mentioned month in respect of accommodation, meals or other incidental costs, but is deemed to be an amount which has become payable to that person in that following month in respect of services rendered by that person;’’;
(d) by the substitution in the definition of ‘‘remuneration’’ for paragraph (d) of the following paragraph:
‘‘(d) [the market value of any qualifying equity share contemplated] any gain determined in terms of section 8B, [determined on the date of disposal, which has been disposed of by that person and where the receipts and accruals from that disposal] which must be included in that person’s income under that section;’’;
(e) by the substitution in the definition of ‘‘representative taxpayer’’ for paragraph (d) of the following paragraph:
‘‘(d) in the case of any employer who is not [ordinarily] resident in the Republic, any agent of such employer having authority to pay remuneration,’’;
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(f) by the addition of the word ‘‘and’’ at the end of the definition of ‘‘representative employer’’;
(g) by the insertion after the definition of ‘‘representative employer’’ of the following definition:
‘‘ ‘tax threshold’ in relation to a natural person means the maximum amount of taxable income of that person in respect of a year of assessment which would result in no tax payable when the rates of tax contemplated in section 5 of this Act for that year of assessment is applied to the taxable income of that person;’’.
(2) (a) Subsection (1)(a), (b), (f) and (g) shall come into operation on 1 March 2006 and applies in respect of any year of assessment commencing on or after that date.
(b) Subsection (1)(c) shall come into operation on the date of promulgation of this Act and applies in respect of any allowance or advance paid or granted on or after that date.
(c) Subsection (1)(d) shall come into operation on 1 January 2006.
Amendment of paragraph 2 of Fourth Schedule to Act 58 of 1962, as inserted by section 19 of Act 6 of 1963 and amended by section 23 of Act 72 of 1963, section 29 of Act 55 of 1966, section 38 of Act 88 of 1971, section 48 of Act 85 of 1974, section 28 of Act 113 of 1977, section 40 of Act 90 of 1988, section 21 of Act 70 of 1989, section 45 of Act 101 of 1990, section 45 of Act 129 of 1991, section 38 of Act 21 of 1995, section 45 of Act 28 of 1997, section 53 of Act 30 of 2000, section 54 of Act 59 of 2000, section 20 of Act 19 of 2001 and section 21 of Act 16 of 2004
50. (1) Paragraph 2 of the Fourth Schedule to the Income Tax Act, 1962, is hereby amended—
(a) by the deletion in subparagraph (4) of the word ‘‘and’’ at the end of item (c) and the addition of the word ‘‘and’’ at the end of item (d);
(b) by the addition to subparagraph (4) of the following paragraph: ‘‘(e) at the option of the employer, so much of any contribution made by
the employee (other than an employee contemplated in paragraph (d)) to a medical scheme as contemplated in section 18(1)(a) as does not exceed the amount contemplated in section 18(2)(c)(i) and in respect of which proof of payment has been furnished to the employer.’’.
(2) Subsection (1) shall come into operation on 1 March 2006 and apply in respect of years of assessment commencing on or after that date.
Amendment of paragraph 11A of Fourth Schedule to Act 58 of 1962, as inserted by section 45 of Act 89 of 1969 and amended by section 47 of Act 28 of 1997 and section 19 of Act 34 of 2004
51. (1) Paragraph 11A of the Fourth Schedule to the Income Tax Act, 1962, is hereby amended—
(a) by the substitution in subparagraph (1) for item (b) of the following item: ‘‘(b) [the market value] any gain made from the disposal of any
qualifying equity share as [defined] contemplated in section 8B; or’’;
(b) by the substitution in subparagraph (1) for the words following item (c) of the following words:
‘‘the amount of that gain [or that market value] must for the purposes of this Schedule be deemed to be an amount of remuneration which is payable to that employee by the employer by whom that right was granted or from whom that equity instrument or qualifying equity share was acquired, as the case may be.’’;
(c) by the substitution for subparagraph (3) of the following subparagraph: ‘‘(3) The provisions of this Schedule apply in relation to the amount of
employees’ tax deducted or withheld under subparagraph (2) as though that amount had been deducted or withheld from the amount of the gain [or in respect of the market value, as the case may be,] referred to in subparagraph (1).’’;
(d) by the substitution for subparagraph (5) of the following subparagraph:
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‘‘(5) If that employer is, by reason of the fact that the amount to be deducted or withheld by way of employees’ tax exceeds the amount from which the deduction or withholding is to be made, unable to deduct or withhold the full amount of employees’ tax during the year of assessment during which the gain arises [or the qualifying equity share is disposed of, as the case may be], he or she must immediately notify the Commissioner of the fact.’’;
(e) by the substitution for subparagraph (6) of the following subparagraph: ‘‘(6) Where an employee has under any transaction to which the
employer is not a party made any gain or an employee has disposed of any qualifying equity share as contemplated in subparagraph (1), that employee must immediately inform the employer thereof and of the amount of that gain [or the market value of that qualifying equity share, as the case may be].’’.
(2) Subsection (1) shall come into operation on 1 January 2006 and applies in respect of any disposal on or after that date.
Amendment of paragraph 16 of Fourth Schedule to Act 58 of 1962, as inserted by section 19 of Act 6 of 1963 and amended by section 86 of Act 45 of 2003 and section 23 of Act 16 of 2004
52. Paragraph 16 of the Fourth Schedule to the Income Tax Act, 1962, is hereby amended by the substitution for subparagraph (2) of the following subparagraph:
‘‘ (2) Any liability for employees’ tax or interest on employees’ tax or any penalty imposed under this Part of any person who in terms of the definition of ‘employer’ in paragraph 1 is an employer by virtue of his having paid or become liable to pay remuneration in a fiduciary capacity or in his capacity as a trustee in an insolvent estate, an executor, or an administrator of a benefit fund, pension fund, provident fund, retirement annuity fund or any other fund, or [from the] as a representative employer, shall be limited to the extent only of any assets belonging to the person, body, trust, estate or fund represented or administered by him which may be in his possession or under his management, disposal or control.’’.
Amendment of paragraph 18 of Fourth Schedule to Act 58 of 1962, as inserted by section 19 of Act 6 of 1963 and amended by section 28 of Act 90 of 1964, section 42 of Act 88 of 1971, section 49 of Act 85 of 1974, section 19 of Act 104 of 1979, section 26 of Act 65 of 1986, section 9 of Act 108 of 1986, section 23 of Act 70 of 1989, section 50 of Act 113 of 1993, section 37 of Act 36 of 1996, section 24 of Act 19 of 2001, section 34 of Act 30 of 2002, section 58 of Act 74 of 2002, section 24 of Act 16 of 2004 and section 47 of Act 32 of 2004
53. (1) Paragraph 18 of the Fourth Schedule to the Income Tax Act, 1962, is hereby amended—
(a) by the deletion in subparagraph (1) of item (a); and (b) by the insertion in subparagraph (1) after item (b) of the following item:
‘‘(c) any natural person who on the last day of that year will be below the age of 65 years and who does not derive any income from the carrying on of any business, if—
(i) the taxable income of that person for the relevant year of assessment will not exceed the tax threshold; or
(ii) the taxable income of that person for the relevant year of assessment which is derived from interest, dividends and rental from the letting of fixed property will not exceed R10 000.’’.
(2) Subsection (1) shall come into operation on 1 March 2006 and applies in respect of any year of assessment commencing on or after that date.
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Amendment of paragraph 19 of Fourth Schedule to Act 58 of 1962, as inserted by section 19 of Act 6 of 1963 and amended by section 28 of Act 88 of 1965, section 46 of Act 89 of 1969, section 43 of Act 88 of 1971, section 50 of Act 85 of 1974, section 49 of Act 94 of 1983, section 52 of Act 101 of 1990, section 44 of Act 21 of 1995, section 37 of Act 5 of 2001 and section 87 of Act 45 of 2003
54. (1) Paragraph 19 of the Fourth Schedule to the Income Tax Act, 1962, is hereby amended—
(a) by the substitution in subparagraph (1) for item (a) of the following item: ‘‘(a) Every provisional taxpayer (other than a company or a person
contemplated in paragraph 18) shall, during every period within which provisional tax is or may be payable by him as provided in this Part, or any extension of such period granted in terms of paragraph 25(2), submit to the Commissioner, in such form as the Commissioner may prescribe, an estimate of the total taxable income which will be derived by the taxpayer in respect of the year of assessment in respect of which provisional tax is or may be payable by him.’’;
(b) by the substitution in subparagraph (1) for subitem (i) item (d) of the following subitem:
‘‘(i) as respects an estimate submitted by a provisional taxpayer (other than a company) under item (a), the taxpayers’ taxable income, as assessed by the Commissioner, for the latest preceding year of assessment in relation to such estimate, less—
(aa) the amount of any taxable capital gain included therein in terms of section 26A; and
(bb) the taxable portion of any lump sum contemplated in section 7A(4A) and paragraph (d) of the definition of ‘gross income’ in section 1; or’’.
(2) Subsection (1) shall come into operation on 1 March 2006 and applies in respect of any year of assessment commencing on or after that date.
Amendment of paragraph 2 of Seventh Schedule to Act 58 of 1962, as added by section 46 of Act 121 of 1984 and amended by section 27 of Act 96 of 1985, section 56 of Act 101 of 1990, section 49 of Act 28 of 1997, section 54 of Act 30 of 1998 and section 50 of Act 32 of 2004
55. (1) Paragraph 2 of the Seventh Schedule to the Income Tax Act, 1962, is hereby amended—
(a) by the substitution for item (e) of the following item: ‘‘(e) any service (other than a service to which the provisions of item (j)
or paragraph 9(4)(a) apply) has at the expense of the employer been rendered to the employee (whether by the employer or by some other person), [such] where that service has been utilized by the employee for his or her private or domestic purposes and no consideration has been given by the employee to the employer in respect of [such] that service or, if any [such] consideration has been given, the amount thereof is less than the amount of the lowest fare referred to in item (a) of subparagraph (1) of paragraph 10, or the cost referred to in item (b) of [the said] that subparagraph, as the case may be; or’’;
(b) by the substitution for the words in item (h) preceding the proviso of the following words:
‘‘(h) the employer has, whether directly or indirectly, paid any amount owing by the employee to any third person (other than an amount in respect of which item (i) or (j) applies), without requiring the employee to reimburse the employer for the amount paid or the employer has released the employee from an obligation to pay any amount owing by the employee to the employer:’’;
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(c) by the substitution for item (i) of the following item: ‘‘(i) the employer has during any period, directly or indirectly, made
any contribution or payment to any fund contemplated in paragraph (b) of the definition of ‘benefit fund’ in section 1 [of this Act], for the benefit of any employee or the dependants of any [such] employee which exceeds [two thirds of the total contribution or payment in relation to such employee or dependants to such fund during such period] the amount contemplated in paragraph 12A;’’;
(d) by the addition of the following item: ‘‘(j) the employer has, directly or indirectly, incurred any amount (other
than a contribution or payment contemplated in item (i)) in respect of any medical, dental and similar services, hospital services, nursing services or medicines provided to the employee or his or her spouse, child, relative or dependant.’’.
(2) Subsection (1) shall come into operation on 1 March 2006 and applies in respect of any year of assessment commencing on or after that date.
Amendment of paragraph 7 of Seventh Schedule to Act 58 of 1962, as added by section 46 of Act 121 of 1984 and amended by section 30 of Act 96 of 1985, section 10 of Act 108 of 1986, Government Notice No. 956 of 11 May 1988, section 44 of Act 90 of 1988, Government Notice No. R.715 of 14 April 1989, section 25 of Act 70 of 1989, Government Notice No. R.764 of 29 March 1990, section 58 of Act 101 of 1990, section 50 of Act 129 of 1991, section 36 of Act 141 of 1992, section 32 of Act 21 of 1994, section 47 of Act 21 of 1995, section 50 of Act 28 of 1997 and section 45 of Act 53 of 1999
56. (1) Paragraph 7 of the Seventh Schedule to the Income Tax Act, 1962, is hereby amended—
(a) by the substitution in subparagraph (4) for the words in item (a) preceding the proviso of the following words:
‘‘(a) as respects each such month, be an amount equal to [1,8] 2,5 per cent of the determined value of such motor vehicle:’’;
(b) by the substitution in subparagraph (4) for paragraph (i) of the proviso to item (a) of the following paragraph:
‘‘(i) where more than one motor vehicle is made available by an employer to a particular employee at the same time and the provisions of subparagraph (6) are not applicable in the case of such vehicles, the said value shall be an amount equal to [1,8] 2,5 per cent of the determined value of the motor vehicle having the highest determined value and 4 per cent of the determined value of every other such motor vehicle; and’’;
(c) by the substitution in subparagraph (4) for the second proviso to item (a) of the following proviso:
‘‘Provided further that where the employee does not receive an allowance or advance contemplated in section 8(1)(b) in respect of that vehicle and that employee—
(i) bears the cost of all fuel used for the purposes of the private use of the vehicle (including travelling between the employee’s place of residence and his place of employment), the value of private use for each [such] month [as determined in accordance with the foregoing provisions of this subparagraph] shall be [reduced by an amount of R120] determined by deducting 0,22 percentage points from the [amount of the] percentage to be applied to the determined value of that vehicle; or
(ii) bears the full cost of maintaining the vehicle (including the cost of repairs, servicing, lubrication and tyres), the value of private use for each month [as determined in accordance with the foregoing provisions of this subparagraph] shall be [reduced by an amount of R85] determined by deducting 0,18 percentage points from the amount of the percentage to be applied to the determined value of that vehicle; and’’;
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(d) by the substitution in subparagraph (10) for item (b) of the following item: ‘‘(b) the nature of the employee’s duties are such that he or she is regularly
required to use the vehicle for the performance of [such] those duties outside his or her normal hours of work, and he or she is not permitted to use [such] that vehicle for private purposes other than—
(i) travelling between his or her place of residence and his or her place of work; or
(ii) private use which is infrequent or is merely incidental to its business use.’’.
(2) Subsection (1)(a), (b) and (c) shall come into operation on 1 March 2006 and applies in respect of any year of assessment commencing on or after that date.
Amendment of paragraph 9 of Seventh Schedule to Act 58 of 1962, as added by section 46 of Act 121 van 1984 and amended by section 31 of Act 96 of 1985, section 34 of Act 65 of 1986, section 29 of Act 85 of 1987, section 59 of Act 101 of 1990, section 53 of Act 113 of 1993, section 33 of Act 21 of 1994, section 49 of Act 28 of 1997, section 55 of Act 30 of 1998 and section 55 of Act 30 of 2000
57. Paragraph 9 of the Seventh Schedule to the Income Tax Act, 1962, is hereby amended by the deletion in subparagraph (1) of paragraph (c) of the definition of ‘‘remuneration’’.
Amendment of paragraph 10 of the Seventh Schedule to Act 58 of 1962, as inserted by section 32 of Act 96 of 1985 and amended by section 60 of Act 101 of 1990 and section 36 of Act 30 of 2002
58. (1) Paragraph 10 of the Seventh Schedule to the Income Tax Act, 1962, is hereby amended by the addition to subparagraph (2) of the following item:
‘‘(d) any travel facility granted by an employer to the spouse or any minor child of an employee if— (i) that employee is for the duration of the term of his or her employment
stationed for purposes of the business of that employer at a specific place in the Republic further than 250 kilometers away from his or her main residence where he or she ordinarily resides;
(ii) that employee is required to spend more than 183 days during the relevant year of assessment at that specific place for purposes of the business of that employer; and
(iii) that facility is granted in respect of travel between that employee’s main residence where he or she ordinarily resides and that specific place where the employee is so stationed.’’.
Amendment of paragraph 12A of Seventh Schedule to Act 58 of 1962, as inserted by section 56 of Act 30 of 1998
59. (1) Paragraph 12A of the Seventh Schedule to the Income Tax Act, 1962, is hereby amended—
(a) by the substitution for subparagraph (1) of the following subparagraph: ‘‘(1) The cash equivalent of the value of the taxable benefit
contemplated in paragraph 2(i) [shall be] is so much of the amount of [by which the] any contribution or payment made by the employer during the year of assessment, directly or indirectly, to any [fund contemplated in paragraph (b) of the definition of ‘benefit fund’ in section 1 of this Act] medical scheme registered under the Medical Schemes Act, 1998 (Act No. 131 of 1998) for the benefit of any employee or dependants, as defined in that Act, of [such] that employee, [for any period, exceeds two thirds of the total contribution or payment in relation to such employee or dependants of such employee to such fund during such period] as exceeds— (a) R500 for each month in that year for which those contributions were
made solely with respect to the benefits of that employee; (b) R1 000 for each month in that year for which those contributions
were made with respect to the benefits of that employee and one dependant; or
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(c) where those contributions are made with respect to the benefits of that employee and more than one dependant, R1 000 in respect of the employee and one dependant plus R300 for every additional dependant for each month in that year for which those contributions were made.’’;
(b) by the substitution for subparagraph (2) of the following subparagraph: ‘‘(2) Where any contribution or payment made by an employer
contemplated in subparagraph (1) is made in such a manner that an appropriate portion thereof cannot be attributed to the relevant employee or his or her dependants, the amount of that contribution or payment in relation to that employee and his or her dependants is deemed, for purposes of subparagraph (1), to be an amount equal to the total contribution or payment by the employer to the fund during the relevant period for the benefit of all employees and their dependants divided by the number of employees in respect of whom the contribution or payment is made.’’;
(c) by the substitution for subparagraph (3) of the following subparagraph: ‘‘(3) If the Commissioner is in any case satisfied that the apportion-
ment of the [cash equivalent of the value of the benefit] contribution or payment amongst all [members of any fund] employees in accordance with [the formula contemplated in] subparagraph (2) does not reasonably represent a fair apportionment of [such value] that contribu- tion or payment amongst the [members] employees, he or she may direct that [such] the apportionment be made in such other manner as to him or her appears fair and reasonable.’’;
(d) by the addition to subparagraph (5) of the following item: ‘‘(d) a person who during the relevant year of assessment is entitled to a
rebate under section 6(2)(b).’’. (2) Subsection (1) shall come into operation on 1 March 2006 and applies in respect
of any year of assessment commencing on or after that date.
Insertion of paragraph 12B in Seventh Schedule to Act 58 of 1962
60. (1) The following paragraph is hereby inserted in the Seventh Schedule to the Income Tax Act, 1962, after paragraph 12A:
‘‘Incurral of costs relating to medical services
12B. (1) The cash equivalent of the value of the taxable benefit contemplated in paragraph 2(j) is the amount incurred by the employer during any month, directly or indirectly, in respect of any medical, dental and similar services, hospital services, nursing services or medicines in respect of that employee, his or her spouse, child or other relative or dependants.
(2) Where the payment of any amount contemplated in subparagraph (1) is made in such a manner that an appropriate portion thereof cannot be attributed to the relevant employee and his or her spouse, children, relatives and dependants, the amount of that payment in relation to that employee and his or her spouse, children, relatives and dependants is, for purposes of subparagraph (1), deemed to be an amount equal to the total amount incurred by the employer during the relevant period in respect of all medical, dental and similar services, hospital services, nursing services or medicines for the benefit of all employees and their spouses, children, relatives and dependants divided by the number of employees who are entitled to make use of those services.
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(3) No value must be placed in terms of this paragraph on any taxable benefit— (a) resulting from the provision of medical treatment listed in any
category of the prescribed minimum benefits determined by the Minister of Health in terms of section 67(1)(g) of the Medical Schemes Act, 1998 (Act No. 131 of 1998), which is provided to the employee or his or her spouse or children in terms of a scheme or programme of that employer—
(i) which constitutes the carrying on of the business of a medical scheme if that scheme or programme has been approved by the Registrar of Medical Schemes as being exempt from comply- ing with the requirements of medical schemes in terms of that Act; or
(ii) which does not constitute the carrying on of the business of a medical scheme, if the treatment provided in terms of that scheme or programme is available only to employees of that employer who are not members of a medical scheme registered under the provisions of the Medical Schemes Act, 1998 (Act No. 131 of 1998), and to the spouses and children of those employees;
(b) derived from an employer by— (i) a person who by reason of superannuation, ill-health or other
infirmity retired from the employ of that employer; (ii) the dependants of a person after that person’s death, if that
person was in the employ of that employer on the date of death; (iii) the dependants of a person after that person’s death, if that
person retired from the employ of that employer by reason of superannuation, ill-health or other infirmity; or
(iv) a person who during the relevant year of assessment is entitled to a rebate under section 6(2)(b); or
(c) where the services are rendered by the employer to its employees in general at their place of work for the better performance of their duties.’’.
(2) Subsection (1) shall come into operation on 1 March 2006 and applies in respect of any year of assessment commencing on or after that date.
Amendment of paragraph 13 of Seventh Schedule to Act 58 of 1962, as amended by section 51 of Act 129 of 1991, section 37 of Act 141 of 1992 and section 37 of Act 30 of 2002
61. (1) Paragraph 13 of the Seventh Schedule to the Income Tax Act, 1962, is hereby amended—
(a) by the deletion in subparagraph (2) of item (a); (b) by the addition in subparagraph (2) of the word ‘‘or’’ at the end of item (b); (c) by the addition to subparagraph (2) of the following item:
‘‘(c) has paid any portion of the value of a benefit which is payable by a former member of a non-statutory force or service as defined in the Government Employees Pension Law, 1996 (Proclamation No. 21 of 1996), to the Government Employees’ Pension Fund as contemplated in Rule 10(6)(d) or (e) of the Rules of the Government Employees Pension Fund contained in Schedule 1 to that Proclamation.’’.
(2) (a) Subsection (1)(a) shall come into operation on 1 March 2006 and applies in rerspect of any year of assessment commencing on or after that date.
Amendment of paragraph 16 of Seventh Schedule to Act 58 of 1962
62. Paragraph 16 of the Seventh Schedule to the Income Tax Act, 1962, is hereby amended by the substitution in subparagraph (1) for item (a) of the following item:
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‘‘(a) the employer has granted a benefit or advantage (whether directly or indirectly) to a relative of the employee, other than a benefit or advantage in respect of which paragraph 10(2)(d) applies; or’’.
Amendment of paragraph 1 of Eighth Schedule to Act 58 of 1962, as inserted by section 38 of Act 5 of 2001 and amended by section 65 of Act 60 of 2001, section 63 of Act 74 of 2002, section 90 of Act 45 of 2003, section 25 of Act 16 of 2004 and section 51 of Act 32 of 2004
63. Paragraph 1 of the Eighth Schedule to the Income Tax Act, 1962, is hereby amended—
(a) by the insertion in the definition of ‘‘recognised exchange’’ of the word ‘‘or’’ at the end of paragraph (a);
(b) by the substitution in the definition of ‘‘recognised exchange’’of paragraph (c) of the following paragraph:
‘‘(c) an exchange in a country other than the Republic which is similar to an exchange contemplated in paragraph (a) [or (b)] and which has been recognised by the Minister for the purposes of the Schedule by notice in the Gazette;’’.
Amendment of paragraph 2 of Eighth Schedule to Act 58 of 1962, as inserted by section 38 of Act 5 of 2001 and amended by section 25 of Act 19 of 2001, section 66 of Act 60 of 2001, section 64 of Act 74 of 2002, section 91 of Act 45 of 2003 and section 52 of Act 32 of 2004
64. (1) Paragraph 2 of the Eighth Schedule to the Income Tax Act, 1962, is hereby amended by the substitution for subparagraph (2) of the following subparagraph:
‘‘(2) For purposes of subparagraph (1)(b)(i), an interest in immovable property situated in the Republic includes [a direct or indirect interest of at least 20 per cent held by a person (alone or together with any connected person in relation to that person) in the equity share capital of a company or in any other entity, where 80 per cent or more of the value of the net assets of that company or other entity, determined on the market value basis, is, at the time of disposal of shares in that company or interest in that other entity, attributable directly or indirectly to immovable property situated in the Republic, other than immovable property held by that company or other entity as trading stock] any equity shares held by a person in a company or ownership or the right to ownership of a person in any other entity or a vested interest of a person in any assets of any trust, if— (a) 80 per cent or more of the market value of those equity shares, ownership or
right to ownership or vested interest, as the case may be, at the time of disposal thereof is attributable directly or indirectly to immovable property held otherwise than as trading stock; and
(b) in the case of a company or other entity, that person (whether alone or together with any connected person in relation to that person), directly or indirectly, holds at least 20 per cent of the equity share capital of that company or ownership or right to ownership of that other entity.’’.
(2) Subsection (1) shall come into operation on the date of promulgation of this Act and applies in respect of any disposal on or after that date.
Substitution of paragraph 8 of Eighth Schedule to Act 58 of 1962, as inserted by section 38 of Act 5 of 2001
65. The following paragraph is hereby substituted for paragraph 8 of the Eighth Schedule to the Income Tax Act, 1962:
‘‘Net capital gain
8. A person’s net capital gain for the year of assessment is the sum of—
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(a) the amount by which that person’s aggregate capital gain for that year exceeds that person’s assessed capital loss for the previous year of assessment; and
(b) where paragraph 64B(3) becomes applicable during that year of assessment, the amount of the capital gain which was disregarded in terms of paragraph 64B(2) during that year or any previous year, as contemplated in paragraph 64B(3).’’.
Amendment of paragraph 11 of Eighth Schedule to Act 58 of 1962, as inserted by section 38 of Act 5 of 2001 and amended by section 71 of Act 60 of 2001, section 67 of Act 74 of 2002, section 92 of Act 45 of 2003 and section 55 of Act 32 of 2004
66. (1) Paragraph 11 of the Eighth Schedule to the Income Tax Act is hereby amended by the addition to subparagraph (2) of the following item:
‘‘(k) by a person on the cession or release of a right to acquire a marketable security in whole or in part for a consideration which consists of or includes another right to acquire a marketable security in the circumstances contemplated in section 8A(5).’’.
(2) Subsection (1) shall come into operation on the date of promulgation of this Act and applies in respect of any disposal on or after that date.
Amendment of paragraph 12 of Eighth Schedule to Act 58 of 1962, as inserted by section 38 of Act 5 of 2001 and amended by section 72 of Act 60 of 2001, section 68 of Act 74 of 2002, section 93 of Act 45 of 2003 and section 56 of Act 32 of 2004
67. (1) Paragraph 12 of the Eighth Schedule to the Income Tax Act, 1962, is hereby amended—
(a) by the substitution in subparagraph (2) for the words in item (a) preceding subitem (i) of the following words: ‘‘(a) a person who ceases to be a resident or a controlled foreign company, in
respect of all assets of that person other than—’’; (b) by the addition to item (a) of subparagraph (2) of the following subitem:
‘‘(iv) any right to acquire any marketable security contemplated in section 8A;’’;
(c) by the substitution for subparagraph (4) of the following subparagraph: ‘‘(4) A person who commences to be a resident or a controlled foreign
company must, subject to paragraph 24, be treated as having disposed of each of that person’s assets, other than assets in the Republic listed in paragraph 2(1)(b)(i) and (ii), and as having acquired each of those assets at a cost equal to the market value of each of those assets, which cost must be treated as an amount of expenditure actually incurred and paid for the purposes of paragraph 20(1)(a).’’;
(d) by the deletion in subparagraph (5) of the word ‘‘or’’at the end of subitem (aa) of item (a) and the addition of the word ‘‘or’’ at the end of subitem (bb);
(e) by the addition in subparagraph (5) of the following subitem to item (a): ‘‘(cc) that person is a company which is a connected person in relation to
that creditor and that reduction or discharge was made in the course or in anticipation of the liquidation, winding up, deregistration or final termination of the corporate existence of that company to the extent that the amount of that reduction or discharge did not exceed the amount of the creditor’s expenditure contemplated in paragraph 20 of the debt at the time of that reduction or discharge: Provided that this item will not apply if—
(A) that person became a connected person in relation to that creditor after that debt (or any substituted debt) arose; and
(B) these transactions are part of a scheme to avoid any tax otherwise imposed by virtue of this subparagraph.’’;
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(f) by the addition to subparagraph (5) of the following items: ‘‘(c) The exclusion contemplated in item (a)(cc) does not apply where
that company— (i) has not within six months of that reduction or discharge taken
such steps as contemplated in section 41(4) to liquidate, wind up, deregister or finally terminate its corporate existence;
(ii) has at any stage withdrawn any step taken to liquidate, wind up deregister or finally terminate its corporate existence; or
(iii) does anything to invalidate any such step so taken with the result that the company is or will not be liquidated, wound up, deregistered or finally terminate its corporate existence.
(d) Any tax which becomes payable as a result of the application of item (c) in respect of a company, must be recovered from that company and the creditor contemplated in this subparagraph who shall be jointly and severally liable for that tax.’’.
(2) Subsection (1)(d), (e) and (f) shall come into operation on the date of promulgation of this Act and applies in respect of any disposal on or after that date.
Amendment of paragraph 20 of Eighth Schedule to Act 58 of 1962, as inserted by section 38 of Act 5 of 2001 and amended by section 26 of Act 19 of 2001, section 75 of Act 60 of 2001, section 71 of Act 74 of 2002, section 95 of Act 45 of 2003 and section 58 of Act 32 of 2004
68. (1) Paragraph 20 of the Eighth Schedule to the Income Tax Act, 1962, is hereby amended—
(a) by the substitution in subparagraph (1) for subitem (i) of item (h) of the following subitem:
‘‘(i) a marketable security or an equity instrument, the acquisition or vesting, as the case may be, of which resulted in the determina- tion of any gain or loss to be included in or deducted from any person’s income in terms of section 8A or 8C, the market value of that marketable security or equity instrument or amount received or accrued from the disposal thereof, as the case may be, that was taken into account in determining the amount of that gain or loss (including where the gain and loss so determined was nil);’’;
(b) by the deletion in subparagraph (1) of the word ‘‘or’’ at the end of item (h)(ii)(bb) and the addition of the word ‘‘or’’ at the end of item (h)(ii)(cc);
(c) by the addition in subparagraph (1) of the following sub-subitem to subitem (ii) of item (h) of the following sub-subitem.
‘‘(dd) where an amount has been included in that person’s gross income in terms of paragraph (c) of the definition of ‘gross income’ in section 1, the value placed on the asset for the purposes of determining the amount so included in that person’s gross income;’’.
(d) by the substitution in subparagraph (1) for subitem (iii) of item (h) of the following subitem:
‘‘(iii) (aa) a [share] right in a controlled foreign company held directly by a resident, an amount equal to the proportional amount of the net income (without having regard to the percentage adjustments contemplated in paragraph 10) of that company [(or] and of any other controlled foreign company [in relation to that resident] in which that controlled foreign company and that resident directly or indirectly [has] have an interest[)], which was included in the income of that [person] resident in terms of section 9D during any year of assessment [(other than such portion of that proportional amount which relates to the amount of any taxable capital gain included in that proportional amount) plus the proportional amount of the net capital gains of that controlled foreign company], less the amount of any foreign dividend distributed by that company to that [person] resident
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during any year of assessment which was exempt from tax in terms of section 10(1)(k)(ii)(cc); or
(bb) a right in a controlled foreign company held directly by another controlled foreign company, an amount equal tothe proportional amount of the net income (without having regard to the percentage adjustments contem- plated in paragraph 10) of that first mentioned controlled foreign company and of any other controlled foreign company in which both the first and second mentioned controlled foreign companies directly or indirectly have an interest, which was during any year of assessment included in the income of a resident in relation to both companies in terms of section 9D, less the amount of any foreign dividend distributed by that first mentioned controlled foreign company to the second mentioned controlled foreign company if that dividend was exempt from tax in terms of section 10(1)(k)(ii)(cc);’’;
(e) by the addition in subparagraph (1) of the following proviso to item (h): ‘‘Provided that where subitem (i), (ii)(bb) or (dd) applies, that person must for purposes of this paragraph disregard any expenditure actually incurred by that person in respect of that asset prior to the date on which the market value or value placed on the asset under the Seventh Schedule, as the case may be, is determined.’’;
(f) by the substitution in subparagraph (3) for item (b) of the following item: ‘‘(b) has for any reason been reduced or recovered or become recover-
able from or has been paid by any other person (whether prior to or after the incurral of the expense to which it relates), to the extent which such amount[—
(i)] is not taken into account as a recoupment in terms of section 8(4)(a) or paragraph (j) of the definition of ‘‘gross income’’ of an amount contemplated in item (a)[; or
(ii) does not represent the recovery or reduction of an amount contemplated in item (c)].’’.
(2) Subsection (1) shall come into operation on 8 November 2005 and applies in respect of any disposal on or after that date.
Amendment of paragraph 24 of Eighth Schedule to Act 58 of 1962, as inserted by section 38 of Act 5 of 2001 and amended by section 76 of Act 60 of 2001 and section 72 of Act 74 of 2002
69. Paragraph 24 of the Eighth Schedule to the Income Tax Act, 1962, is hereby amended—
(a) by the substitution in subparagraph (2) for the words preceding item (a) of the following words:
‘‘(2) Where an asset contemplated in paragraph 12(4) has been disposed of by a person on or after the date on which that person commenced to be a resident and the proceeds from that disposal and the expenditure allowable in terms of paragraph 20 incurred prior to that date (determined without regard to paragraph 12(4)) in respect of that asset are each lower than the market value of that asset as [at that date] contemplated in paragraph 12(4), that person must be treated as having acquired that asset at a cost equal to the higher of—’’;
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(b) by the substitution in subparagraph (3) for the words preceding item (a) of the following words:
‘‘(3) Where an asset contemplated in paragraph 12(4) has been disposed of by a person on or after the date on which that person commenced to be a resident and the proceeds from the disposal of that asset and the market value of that asset as [at the date on which that person commenced to be a resident] contemplated in paragraph 12(4) are each lower than the expenditure allowable in terms of paragraph 20 incurred prior to that date (determined without regard to paragraph 12(4)) in respect of that asset, that person must be treated as having acquired that asset at a cost equal to the higher of—’’.
Amendment of paragraph 30 of Eighth Schedule to Act 58 of 1962, as inserted by section 38 of Act 5 of 2001 and amended by section 82 of Act 60 of 2001, section 77 of Act 74 of 2002 and section 98 of Act 45 of 2003
70. (1) Paragraph 30 of the Eighth Schedule to the Income Tax Act, 1962, is hereby amended—
(a) by the substitution in subparagraph (1) for item (b) of the following item: ‘‘(b) ‘B’ represents the amount of expenditure incurred prior to the
valuation date in respect of that asset that is allowable before, on or after the valuation date in terms of paragraph 20 [in respect of that asset that is attributable to the period from the date that the asset was acquired to the day before valuation date];’’;
(b) by the substitution in subparagraph (2) for item (d) of the following item: ‘‘(d) ‘B’ represents the amount of expenditure incurred prior to the
valuation date in respect of that asset that is allowable before, on or after the valuation date in terms of paragraph 20 [in respect of that asset that is incurred before valuation date];’’;
(c) by the substitution for subparagraph (3) of the following subparagraph: ‘‘(3) [Despite the provisions of paragraph 20(3)(a) and 35(3)(a),
where in respect of a pre-valuation date asset] A person must determine the time-apportionment base cost of a pre-valuation date asset in terms of subparagraph (4) where—
(a) [a] that person has incurred expenditure contemplated [allow- able] in [terms of] paragraph 20(1)(a), (c) or (e) on or after the valuation date;
(b) any part of the expenditure [allowable] contemplated in [terms of] paragraph 20(1)(a), (c) or (e) before, on or after valuation date which is or was allowable as a deduction in determining the taxable income of that person before the inclusion of any taxable capital gain; and
(c) the proceeds in respect of the disposal of that asset exceed the expenditure allowable in terms of paragraph 20 incurred before, on and after the valuation date in respect of that asset
[that person must determine the time-apportionment base cost of that asset in terms of subparagraph (4)].’’;
(d) by the substitution in subparagraph (4) for items (b), (c) and (d) of the following items:
‘‘(b) ‘P1’ represents the proceeds attributable to the expenditure in B1, [disregarding the provisions of paragraph 35(3)(a)];
(c) ‘A1’ represents the [amount of] sum of the expenditure allowable in terms of paragraph 20 in respect of the asset that is incurred on or after valuation date, and [disregarding the provisions of para- graph 20(3)(a)] any amount of that expenditure that has been recovered or recouped as contemplated in paragraph 35(3)(a) ;
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(d) ‘B1’ represents the sum [amount] of the expenditure allowable in terms of paragraph 20 in respect of the asset that is incurred before valuation date, [disregarding the provisions of paragraph 20(3)(a)] and any amount of that expenditure that has been recovered or recouped as contemplated in paragraph 35(3)(a).’’;
(e) by the substitution in subparagraph (4) for item (f) of the following item: ‘‘(f) ‘R1’ represents the sum of the [total amount of] proceeds [as
determined in terms of paragraph 35 in respect of the disposal of the pre-valuation date asset, disregarding the provisions of paragraph 35(3)(a)] and any amount contemplated in paragraph 35(3)(a) in respect of that asset.’’;
(f) by the addition of the following subparagraph: ‘‘(5) For purposes of this paragraph—
(a) any selling expenses incurred on or after the valuation date must be deducted from the following amounts—
(i) in the case where subparagraph (2) or (3) applies, the amounts represented by the symbols ‘R’ and ‘R1’, respec- tively; and
(ii) in any other case, the amount represented by the symbol ‘P’; (b) except for subparagraph (3)(c) any reference to expenditure
allowable in terms of paragraph 20 must exclude selling expenses; and
(c) ‘selling expenses’ means expenditure— (i) contemplated in paragraph 20(1)(c)(i) to (iv) incurred
directly for the purposes of disposing of that asset; and (ii) which would, but for the provisions of item (b), have
constituted expenditure allowable in terms of paragraph 20.’’.
(2) Subsection (1) is deemed to have come into operation on 8 November 2005 and shall apply in respect of any asset disposed of during any year of assessment ending on or after that date.
Amendment of paragraph 33 of Eighth Schedule to Act 58 of 1962, as inserted by section 38 of Act 5 of 2001 and amended by section 80 of Act 74 of 2002 and substituted by section 99 of Act 45 of 2003 and amended by section 61 of Act 32 of 2004
71. (1) Paragraph 33 of the Eighth Schedule to the Income Tax Act, 1962, is hereby amended—
(a) by the deletion in subparagraph (3) of the word ‘‘or’’ at the end of item (b); (b) by the addition in subparagraph (3) of the following item:
‘‘(c) the improvement or enhancement of immovable property which that person leases from a lessor; or’’.
(2) Subsection (1) comes into operation on the date of promulgation of this Act and applies in respect of any improvement or enhancement effected on or after that date.
Amendment of paragraph 38 of the Eighth Schedule to Act 58 of 1962, as inserted by section 38 of Act 5 of 2001 and amended by section 87 of Act 60 of 2001, section 81 of Act 74 of 2002 and section 63 of Act 32 of 2004
72. (1) Paragraph 38 of the Eighth Schedule to the Income Tax Act, 1962, is hereby amended by the substitution in subparagraph (2) for item (d) of the following item:
‘‘(d) an equity instrument contemplated in section 8C [in respect of which that section applies and which] to an employee or a director, where that equity instrument had not yet vested as contemplated in that section, in that employee or director at the time of that disposal; or’’.
(2) Subsection (1) is deemed to have come into operation on 26 October 2004 and applies in respect of any disposal on or after that date.
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Amendment of paragraph 39 of Eighth Schedule to Act 58 of 1962, as inserted by section 38 of Act 5 of 2001 and amended by section 88 of Act 60 of 2001, section 100 of Act 45 of 2003 and section 26 of Act 16 of 2004
73. (1) Paragraph 39 of the Eighth Schedule to the Income Tax Act, 1962, is hereby amended—
(a) by the substitution in subparagraph (3) for item (b) of the following item: ‘‘(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 [in terms of section 29A (6), or (7)] by such fund to another such fund.’’;
(b) by the addition of the following subparagraph: ‘‘(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.’’.
(2) Subsection (1) shall come into operation on the date of promulgation of this Act and applies in respect of any disposal on or after that date.
Amendment of paragraph 42 of Eighth Schedule to Act 58 of 1962, as inserted by section 38 of Act 5 of 2001 and amended by section 90 of Act 60 of 2001
74. (1) Paragraph 42 of the Eighth Schedule to the Income Tax Act, 1962, is hereby amended by the substitution in subparagraph (3) for item (b) of the following item:
‘‘(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 [in terms of section 29A (6), or (7)] by such fund to another such fund.’’.
(2) Subsection (1) shall come into operation on the date of promulgation of this Act and applies in respect of any disposal on or after that date.
Amendment of paragraph 43 of Eighth Schedule to Act 58 of 1962, as inserted by section 38 of Act 5 of 2001 and amended by section 91 of Act 60 of 2001 and substituted by section 84 of Act 74 of 2002 and amended by section 101 of Act 45 of 2003
75. (1) Paragraph 43 of the Eighth Schedule to the Income Tax Act, 1962, is hereby amended—
(a) by the substitution for subparagraph (1) of the following subparagraph: ‘‘(1) Subject to subparagraph (4), where a person during any year of
assessment disposes of an asset for proceeds in a currency other than currency of the Republic 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 in accordance with the provisions of section 25D [(2)].’’;
(b) by the substitution in subparagraph (2) for the words preceding item (a) of the following words:
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‘‘(2) Where a person disposes of an asset, (other than an asset contemplated in subparagraph (4)), for proceeds which are either received or accrued or denominated for purposes of financial reporting of a permanent establishment of that person in any currency (hereinafter referred to as the ‘currency of disposal’) after having incurred expenditure in respect of that asset which is either actually incurred or so denominated [for purposes of financial reporting] in another currency (hereinafter referred to as the ‘currency of expenditure’), that person must for purposes of determining the capital gain or capital loss on the disposal of that asset—’’;.
(c) by the substitution in subparagraph (2) for subitem (ii) of item (c) of the following subitem:
‘‘(ii) translate the amount of the capital gain or capital loss determined in foreign currency to the local currency at the average exchange rate for the year of assessment during which the asset was disposed of, and must translate the amount of the capital gain or capital loss in accordance with the provisions of section 25D.’’;
(d) by the substitution in subparagraph (4) for subitems (i) and (ii) of item (b) of the following subitems:
‘‘(i) the proceeds into the currency of the Republic [at the average exchange rate for that year of assessment] in accordance with the provisions of section 25D; and
(ii) the expenditure incurred in respect of that foreign equity instrument or that asset, as the case may be, into the currency of the Republic in accordance with section 25D at the spot rate or the average exchange rate, as the case may be, for the year of assessment during which that expenditure was incurred:’’;
(e) by the substitution in subparagraph (6) for item (a) of the following item: ‘‘(a) contemplated in subparagraph (2)(b) and (4), must be translated to
the local currency [of the Republic at the ruling exchange] by applying the spot rate on valuation date; or’’.
(2) Subsection (1) shall come into operation on 8 November 2005 and shall apply in respect of any assets disposed of on or after that date.
Amendment of paragraph 55 of Eighth Schedule to Act 58 of 1962, as inserted by section 38 of Act 5 of 2001 and amended by section 32 of Act 19 of 2001, section 98 of Act 60 of 2001, section 87 of Act 74 of 2002 and section 102 of Act 45 of 2003
76. (1) Paragraph 55 of the Eighth Schedule to the Income Tax Act is hereby amended by the substitution in subparagraph (1) of the words preceding subitem (i) of item (c) of the following words:
‘‘(c) in respect of a policy that was taken out to insure against the death, disability or severe illness of that person by any other person who was a partner of that person, or held any shares or similar interest in a company in which that person held any shares or similar interest, for the purpose of enabling that other person to acquire, upon the death, disability or severe illness of that person, the whole or part of—’’.
(2) Subsection (1) shall come into operation on the date of promulgation of this Act and applies in respect of any disposal on or after that date.
Amendment of paragraph 56 of Eighth Schedule to Act 58 of 1962, as inserted by section 38 of Act 5 of 2001 and substituted by section 99 of Act 60 of 2001 and amended by section 88 of Act 74 of 2002 and section 65 of Act 32 of 2004
77. Paragraph 56 of the Eighth Schedule to the Income Tax Act, 1962, is hereby amended by the substitution in the Afrikaans text for item (a) of subparagraph (2) of the following item:
‘‘(a) ’n kapitaalwins daarstel wat by die vasstelling van die totale kapitaalwins of totale kapitaalverlies van daardie [skuldeiser] skuldenaar ingevolge paragraaf 12 (5) ingesluit is;’’.
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Substitution of paragraph 64 of Eighth Schedule to Act 58 of 1962, as inserted by section 38 of Act 5 of 2001
78. (1) The following paragraph is hereby substituted for paragraph 64 of the Eighth Schedule to the Income Tax Act, 1962:
‘‘Asset used to produce exempt income
64. A person must disregard any capital gain or capital loss in respect of the disposal of an asset— (a) which is used by that person solely to produce amounts which are
exempt from normal tax in terms of section 10, other than receipts and accruals contemplated in paragraphs (i)(xv), (k) and (m) of subsection (1) thereof; or
(b) where substantially the whole of the use of that asset from the valuation date by that person, which is a public benefit organisation approved by the Commissioner in terms of section 30(3), is in carrying on a public benefit activity.’’.
(2) Subsection (1) shall come into operation on 1 April 2006 and applies in respect of any disposal during any year of assessment commencing on or after that date.
Amendment of paragraph 64B of Eighth Schedule to Act 58 of 1962, as inserted by section 105 of Act 45 of 2003
79. (1) Paragraph 64B of the Eighth Schedule to the Income Tax Act, 1962, is hereby amended—
(a) by the substitution for subparagraph (2) of the following subparagraph: ‘‘(2) A person must disregard any capital gain or capital loss
determined in respect of the disposal of any interest in the equity share capital of any foreign company (other than a foreign financial instrument holding company or an interest contemplated in paragraph 2(2)), if—
(a) that person (in the case of a company, together with any other company in the same group of companies as that company) immediately before that disposal—
(i) held [more than 25] at least 20 per cent of the equity share capital in that foreign company; and
(ii) held the interest contemplated in subitem (i) for a period of at least 18 months prior to that disposal, unless that person is a company and that interest was acquired by that company from any other company which forms part of the same group of companies and that company and other company in aggregate held that interest for more than 18 months:
Provided that in determining the total equity share capital in a foreign company, there shall not be taken into account any share which would have constituted [an affected instrument] a hybrid equity instrument, as contemplated in section 8E, but for the three year period requirement contained in that section; and
(b) [in the case where that person is a resident,] that interest is disposed of to a person who is not a resident or is disposed of in the circumstances contemplated in paragraph 12(2)(a).’’;
(b) by the addition of the following subparagraphs: ‘‘(3) Paragraph 8(b) applies in respect of any capital gain determined
in respect of any disposal of any interest in the equity share capital of any foreign company by a person which is or was disregarded in terms of subparagraph (2) in any year of assessment, if—
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(a) the foreign company prior to that disposal was a controlled foreign company in relation to that person or any other company in the same group of companies as that person;
(b) the interest in the equity share capital of that foreign company was disposed of to a connected person in relation to that person either before or after that disposal; and
(c) that person— (i) disposed of that equity share capital for no consider-
ation or for consideration which does not reflect an arm’s length price, other than a distribution contem- plated in (ii);
(ii) disposed of that equity share capital by means of a distribution unless the full amount of that distribu- tion—
(aa) was subject to or would, but for the provisions of section 64B(5)(f), have been subject to secondary tax on companies; or
(bb) was included in the income of a shareholder of that company or would but for the provisions of section 10(1)(k)(ii)(dd) have been so included; or
(iii) disposed of any consideration received or accrued from the disposal of that equity share capital (or any amount received in exchange therefor) in terms of any transac- tion, operation or scheme of which the disposal of the equity share capital forms part—
(aa) for no consideration or for consideration which does not reflect an arm’s length price (other than a distribution contemplated in (bb);
(bb) by means of a distribution in specie as contem- plated in paragraph 75 by a company, unless the full amount of that distribution— (A) was subject to or would, but for the
provisions of section 64B(5)(f), have been subject to secondary tax on companies; or
(B) was included in the income of a share- holder of that company or would but for the provisions of section 10(1)(k)(ii)(dd) have been so included; and
(d) that foreign company ceased in terms of any transaction, operation or scheme of which the disposal of the equity share capital forms part, to be a controlled foreign company in relation to that person or other company in the same group of companies as that person (having regard solely to any rights contemplated in paragraph (a) of the definition of ‘participa- tion rights’ in section 9D and without having regard to any election exercised in terms of section 9D(13)).
(4) Where subsection (3) does not apply due to the fact that any distribution as provided for in subparagraph (3)(c)(ii)(aa)—
(a) would have been subject to secondary tax on companies but for section 64B(5)(f); or
(b) would have been included in the income of the company to which that distribution was made but for section 10(1)(k)(ii)(dd),
and the company to which that distribution was made, disposes of any amount of that distribution in the circumstances contemplated in subparagraph (3)(c)(i), (ii) or (iii), that company must be treated as having disposed of the interest in the equity share capital of that foreign company by means of a disposal which is or was disregarded in terms of subparagraph (2).’’.
(2) Subsection (1) is deemed to have come into operation on 8 November 2005.
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Amendment of paragraph 72 of Eighth Schedule to Act 58 of 1962, as inserted by section 38 of Act 5 of 2001 and amended by section 94 of Act 74 of 2002 and section 112 of Act 45 of 2003
80. (1) Paragraph 72 of the Eighth Schedule to the Income Tax Act, 1962, is hereby amended by the substitution for item (b) of the following item:
‘‘(b) a capital gain (including any amount that would have constituted a capital gain had that person been a resident) attributable to that donation, settlement or other disposition has arisen during a year of assessment and has during that year vested in or is treated as having vested in any person who is not a resident (other than a controlled foreign company, in relation to that resident),’’.
(2) Subsection (1) shall come into operation on the date of promulgation of this Act and applies in respect of any capital gain determined in respect of any disposal on or after that date.
Amendment of paragraph 76 of Eighth Schedule to Act 58 of 1962, as inserted by section 38 of Act 5 of 2001 and amended by section 107 of Act 60 of 2001, section 96 of Act 74 of 2002, section 115 of Act 45 of 2003 and section 30 of Act 16 of 2004
81. (1) Paragraph 76 of the Eighth Schedule to the Income Tax Act, 1962, is hereby amended by the substitution in subparagraph (1) for the words preceding item (a) of the following words:
‘‘(1) Subject to subparagraph (2), where a capital 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, that shareholder must where the date of distribution of that capital distribution occurs—’’.
(2) Subsection (1) shall come into operation on the date of promulgation of this Act and applies in respect of any distribution on or after that date.
Amendment of paragraph 4 of Part I of Ninth Schedule to Act 58 of 1962, as inserted by section 41 of Act 30 of 2002
82. Paragraph 4 of Part I of the Ninth Schedule to the Income Tax Act, 1962, is hereby amended by the substitution for subparagraph (k) of the following subparagraph:
‘‘(k) Career guidance and counseling services provided to persons [for purposes of] attending any school or higher education institution as envisaged in subparagraphs (a) and (b).’’.
Amendment of paragraph 10 of Part I of Ninth Schedule to Act 58 of 1962, as inserted by section 41 of Act 30 of 2002
83. Paragraph 10 of Part I of the Ninth Schedule to the Income Tax Act, 1962, is hereby amended by the substitution for items (i) to (iv) of the following items: ‘‘(i) [any] public benefit organisation which has been approved in terms of section
30; (ii) [any] institution, board or body contemplated in section 10(1)(cA)(i), which
conducts one or more public benefit activities in this part (other than this paragraph);
(iii) [any] association of persons carrying on one or more public benefit activity contemplated in this part (other than this paragraph), in the Republic; or
(iv) [any] department of state or administration in the national or provincial or local sphere of government of the Republic, contemplated in section 10(1)(a) or (b).’’.
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Amendment of paragraph 3 of Part II of Ninth Schedule to Act 58 of 1962, as inserted by section 41 of Act 30 of 2002, and amended by section 129 of Act 45 of 2003
84. Paragraph 3 of Part II of the Ninth Schedule to the Income Tax Act, 1962, is hereby amended by the substitution for subparagraph (m) of the following subpara- graph:
‘‘(m) Career guidance and counseling services provided to persons [for purposes of] attending any school or higher education institution as envisaged in subparagraphs (a) and (b).’’.
Amendment of section 1 of Act 91 of 1964, as amended by section 1 of Act 95 of 1965, section 1 of Act 57 of 1996, section 1 of Act 105 of 1969, section 1 of Act 98 of 1970, section 1 of Act 71 of 1975, section 1 of Act 112 of 1977, section 1 of Act 110 of 1979, sections 1 and 15 of Act 98 of 1980, section 1 of Act 89 of 1984, section 1 of Act 84 of 1987, section 1 of Act 68 of 1989, section 1 of Act 59 of 1990, section 1 of Act 19 of 1994, section 57 of Act 30 of 1998, section 46 of Act 53 of 1999, section 58 of Act 30 of 2000, section 60 of Act 59 of 2000, section 113 of Act 60 of 2001, section 131 of Act 45 of 2003 and section 1 of Act 32 of 2004
85. (1) Section 1 of the Customs and Excise Act, 1964, is hereby amended— (a) by the substitution for the definition of ‘‘fuel levy’’ of the following definition:
‘‘ ‘fuel levy’ means, subject to subsection (4), any duty leviable under Part [5] 5A of Schedule No. 1 on any fuel levy goods which have been manufactured in or imported into the Republic;’’;
(b) by the substitution for the definition of ‘‘fuel levy goods’’ of the following definition:
‘‘ ‘fuel levy goods’ means, subject to subsection (4), any goods specified in Part [5] 5A of Schedule No. 1, except any goods specified in any item of that Part for which a free rate of duty is prescribed as contemplated in section 37A(1)(a), which have been manufactured in or imported into the Republic;’’;
(c) by the insertion after the definition of ‘‘regulation’’ of the following definitions:
‘‘ ‘Road Accident Fund levy’ means, subject to subsection (4), any duty leviable under Part 5B of Schedule No. 1 on any Road Accident Fund levy goods which have been manufactured in or imported into the Republic; ‘Road Accident Fund levy goods’ means, subject to subsection (4), any goods specified in Part 5B of Schedule No. 1;’’; and
(d) by the insertion after subsection (3) of the following subsection: ‘‘(4) Except as otherwise provided in this section or in any other section or as may be provided in any Schedule or rule, any provision in this Act for fuel levy, fuel levy goods or Part 5 of Schedule No. 1 shall be deemed to include in that provision, in respect of— (a) fuel levy, the Road Accident Fund levy; (b) fuel levy goods, Road Accident Fund levy goods; or (c) Part 5 of Schedule No. 1, Part 5A and Part 5B of that Schedule.’’
(2) Subsection (1) shall come into operation on a date fixed by the President by proclamation in the Gazette.
Amendment of section 17 of Act 91 of 1964, as amended by section 3 of Act 110 of 1979 and section 10 of Act 45 of 1995
86. Section 17 of the Customs and Excise Act, 1964 is amended by the substitution for subsection (1) of the following subsection:
‘‘(1) (a) Whenever any goods are taken to and secured in any State warehouse, the Commissioner may require rent to be paid for such period as the goods remain therein, at the rates fixed by rule.
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(b) Goods removed from the State warehouse shall be subject to the rate in force at the time of payment of the rent.’’.
Amendment of section 18 of Act 91 of 1964, as amended by section 2 of Act 95 of 1965, section 6 of Act 105 of 1969, section 4 of Act 71 of 1975, section 3 of Act 105 of 1976, section 3 of Act 112 of 1977, section 4 of Act 84 of 1987, section 13 of Act 59 of 1990, section 11 of Act 45 of 1995, section 48 of Act 53 of 1999, section 37 of Act 19 of 2001, section 119 of Act 60 of 2001, section 102 of Act 74 of 2002 and section 21 of Act 34 of 2004
87. (1) Section 18 of the Customs and Excise Act, 1964, is hereby amended— (a) by the substitution in subsection (3) for the words preceding paragraph (a) of
the following words: ‘‘(3) Subject to the provisions of [sub-section] subsection (4), any
liability for duty in terms of [sub-section] subsection (2) shall cease when it is proved by the person concerned [—] within the period and in compliance with such procedures as may be prescribed by rule—’’;
(b) by the substitution in subsection (3) for paragraph (b) of the following paragraph:
‘‘(b) in the case of goods which were destined for a place beyond the borders of the common customs area, that such goods have been duly taken out of that area or [, in circumstances and in accordance with procedures which the Commissioner may determine by rule,] that the goods have been duly accounted for in the country of destination.’’;
(c) by the substitution for subsection (4) of the following subsection: ‘‘(4) If the [person concerned fails to submit any such proof as is
referred to in subsection (3) within a period as may be prescribed by rule, he shall upon demand by the Controller forthwith pay the duty due on such] goods [.] have been diverted or deemed to have been diverted as contemplated in subsection (13), such person shall upon demand by the Controller pay— (a) the duty and value-added tax due in terms of the Value-Added Tax
Act, 1991 (Act No. 89 of 1991), as if the goods were entered for home consumption on the date of entry for removal in bond; and
(b) any amount that may be due in terms of section 88(2).’’; and (d) by the substitution in subsection (13) for paragraph (a) of the following
paragraph: ‘‘(a) (i) No person shall, without the permission of the Commissioner,
divert any goods removed in bond to a destination other than the destination declared on entry for removal in bond or deliver such goods or cause such goods to be delivered in the Republic except into the control of the [department] Controller at the place of destination.
(ii) Goods shall be deemed to have been so diverted where— (aa) no permission to divert such goods has been granted by the
Commissioner as contemplated in subparagraph (i) and a person fails to furnish proof as contemplated in subsection (3) to the Controller within the period specified by rule; or
(bb) any such proof is the result of fraud or misrepresentation; or (cc) such person makes a false declaration for the purpose of this
section. (iii) Where any person fails to comply with or contravenes any
provision of this subsection the goods shall be liable to forfeiture in accordance with this Act.’’.
(2) Subsection (1) shall come into operation on a date fixed by the President by proclamation in the Gazette.
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Amendment of section 20 of Act 91 of 1964, as amended by section 4 of Act 95 of 1965, section 8 of Act 105 of 1969, section 15 of Act 98 of 1980, section 1 of Act 86 of 1982, section 6 of Act 84 of 1987, section 14 of Act 59 of 1990, section 59 of Act 30 of 1998 and section 41 of Act 19 of 2001
88. Section 20 of the Customs and Excise Act, 1964, is hereby amended by the substitution for subsection (5) of the following subsection:
‘‘(5) Subject to the provisions of any item in any Schedule, [The] the duty on any deficiency in a customs and excise warehouse shall be paid forthwith on demand after detection of such deficiency. [: Provided that in the case of goods manufactured in any customs and excise manufacturing warehouse or in the case of goods in the process of manufacture and removal from one customs and excise manufacturing warehouse to another such warehouse, the Commissioner may allow working, pumping, handling, processing and similar losses and losses due to natural causes, between the time when liability for duty first arises and the time of removal of such goods from the warehouse in which the goods are so manufactured or in which such process of manufacture is completed, to the extent specified in Schedule No. 4 or 6, if he is satisfied that no part of such loss was wilfully or negligently caused.]’’.
Amendment of section 28 of Act 91 of 1964, as amended by section 1 of Act 103 of 1972 and section 19 of Act 45 of 1995
89. Section 28 of the Customs and Excise Act, 1964, is hereby amended by the substitution for subsection (2) of the following subsection:
‘‘(2) The quantity must be calculated and may be adjusted by a tolerance of 0,25% in accordance with such procedures as may be prescribed by rule and the quantity so calculated and so adjusted shall be deemed to be the true quantity of such spirits for the purposes of this Act.’’.
Amendment of section 47 of Act 91 of 1964, as amended by section 11 of Act 95 of 1965, section 17 of Act 105 of 1969, section 2 of Act 7 of 1974, section 7 of Act 105 of 1976, section 10 of Act 112 of 1977, section 6 of Act 110 of 1979, sections 9 and 15 of Act 98 of 1980, section 8 of Act 86 of 1982, section 6 of Act 52 of 1986, section 15 of Act 84 of 1987, section 4 of Act 69 of 1988, section 6 of Act 68 of 1989, section 22 of Act 59 of 1990, section 3 of Act 61 of 1992, section 37 of Act 45 of 1995, section 4 of Act 44 of 1996, section 63 of Act 30 of 1998, section 53 of Act 53 of 1999, section 126 of Act 60 of 2001, section 104 of Act 74 of 2002, section 138 of Act 45 of 2003, section 68 of Act 32 of 2004 and section 3 of Act 10 of 2005
90. (1) Section 47 of the Customs and Excise Act, 1964, is hereby amended— (a) by the substitution for subsection (1) of the following subsection:
‘‘(1) Subject to the provisions of this Act, duty shall be paid for the benefit of the National Revenue Fund on all imported goods, all excisable goods, all surcharge goods, all environmental levy goods [and], all fuel levy goods and all Road Accident Fund levy goods in accordance with the provisions of Schedule No. 1 at the time of entry for home consumption of such goods: Provided that the Commissioner may condone any underpayment of such duty where the amount of such underpayment in the case of— (a) goods imported by post is less than fifty cents; (b) goods imported in any other manner is less than five rand; or (c) excisable goods is less than two rand.’’; and
(b) by the substitution for subsection (7) of the following subsection: ‘‘(7) To the extent that any goods, classifiable under any tariff heading
or subheading of Part 1 of Schedule No. 1 that is expressly quoted in any tariff item, environmental levy item, [or] fuel levy item, Road Accident Fund levy item or item of Part 2, 3, [5] 5A, 5B or 6 of the said Schedule or in any item in Schedule No. 2, are specified in any such tariff item, environmental levy item, [or] fuel levy item, Road Accident Fund levy item or item, the item concerned shall be deemed to include only such goods classifiable under such tariff heading or subheading.’’.
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(2) Subsection (1) shall come into operation on a date fixed by the President by proclamation in the Gazette.
Amendment of section 48 of Act 91 of 1964, as amended by section 6 of Act 57 of 1966, section 18 of Act 105 of 1969, section 3 of Act 98 of 1970, section 1 of Act 68 of 1973, section 8 of Act 105 of 1976, section 11 Act 112 of 1977, sections 10 and 15 of Act 98 of 1980, section 9 of Act 86 of 1982, section 18 of Act 84 of 1987, section 7 of 68 of 1989, section 23 of Act 59 of 1990, section 4 of Act 61 of 1992, section 3 of Act 19 of 1994, section 39 of Act 45 of 1995, section 64 of Act 30 of 1998, section 54 of Act 53 of 1999 and section 140 of Act 45 of 2003
91. (1) Section 48 of the Customs and Excise Act, 1964, is hereby amended by the substitution for subsection (2) of the following subsection:
‘‘(2) The Minister may from time to time by like notice amend or withdraw or, if so withdrawn, insert Part 2, Part 3, Part 4, [or Part 5] Part 5A or Part 5B of Schedule No. 1, whenever he deems it expedient in the public interest to do so: Provided that the Minister may, whenever he deems it expedient in the public interest to do so, reduce any duty specified in the said Parts with retrospective effect from such date and to such extent as may be determined by him in such notice.’’.
(2) Subsection (1) shall come into operation on a date fixed by the President by proclamation in the Gazette.
Amendment of section 75 of Act 91 of 1964, as amended by section 13 of Act 95 of 1965, section 10 of Act 57 of 1966, section 8 of Act 85 of 1968, section 25 of Act 105 of 1969, section 8 of Act 103 of 1972, section 2 of Act 68 of 1973, section 9 of Act 71 of 1975, section 27 of Act of 1977, section 28 of Act 93 of 1978, section 10 of Act 110 of 1979, section 19 of Act 86 of 1982, section 6 of Act 89 of 1984, section 11 of Act 101 of 1985, section 9 of Act 52 of 1986, section 23 of Act 84 of 1987, section 8 of Act 69 of 1988, section 13 of Act 68 of 1989, section 29 of Act 59 of 1990, section 13 of Act 61 of 1992, section 7 of Act 98 of 1993, section 10 of Act 19 of 1994, section 53 of Act 45 of 1995, section 61 of Act 30 of 2000, section 50 of Act 19 of 2001, section 130 of Act 60 of 2001, section 109 of Act 74 of 2002, section 146 of Act 45 of 2003 and section 27 of Act 34 of 2004
92. (1) Section 75 of the Customs and Excise Act, 1964, is hereby amended— (a) by the substitution in subsection (1) for paragraph (b) of the following
paragraph: ‘‘(b) any imported goods described in Schedule No. 4 shall be admitted
under rebate of any customs duties, [or] fuel levy or Road Accident Fund levy applicable in respect of such goods at the time of entry for home consumption thereof, or if duly entered for export and exported in accordance with such entry, to the extent stated in, and subject to compliance with the provisions of the item of Schedule No. 4 in which such goods are specified;’’;
(b) by the substitution in subsection (1) for paragraph (c) of the following paragraph:
‘‘(c) a drawback or a refund of the [ordinary] customs duty, [anti- dumping duty, countervailing duty, safeguard duty,] surcharge [and], fuel levy and Road Accident Fund levy actually paid on entry for home consumption on any imported goods described in Schedule No. 5 shall be paid to the person who paid such duties or any person indicated in the notes to the said Schedule, subject to compliance with the provisions of the item of the said Schedule in which those goods are specified; and’’;
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(c) by the substitution in subsection (1) for paragraph (d) of the following paragraph:
‘‘(d) in respect of any excisable goods or fuel levy goods described in Schedule No. 6, a rebate of the excise duty specified in Part 2 of Schedule No. 1 or of the fuel levy and of the Road Accident Fund levy specified respectively in [Part 5] Part 5A and Part 5B of Schedule No. 1 in respect of such goods at the time of entry for home consumption thereof, or if duly entered for export and exported in accordance with such entry, or a refund of the excise duty, [or] fuel levy or Road Accident Fund levy actually paid at the time of entry for home consumption shall be granted to the extent and in the circumstances stated in the item of Schedule No. 6 in which such goods are specified, subject to compliance with the provisions of the said item and any refund under this paragraph may be paid to the person who paid the duty or any person indicated in the notes to the said Schedule No. 6[;]: Provided that any rebate, drawback or refund of Road Accident Fund levy as contemplated in paragraph (b), (c) or (d), shall only be granted as expressly provided in Schedule No. 4, 5, or 6 in respect of any item of such Schedule.’’;
(d) by the substitution in subsection (1A) for paragraph (a) of the following paragraph:
‘‘(a) (i) a refund of the fuel levy leviable on distillate fuel in terms of Part [5] 5A of Schedule No. 1; and
(ii) a refund of the Road Accident Fund levy leviable on [diesel as contemplated in section 5 of the Road Accident Fund Act, 1996 (Act No.56 of 1996)] distillate fuel in terms of Part 5B of Schedule No. 1; or
(iii) only a refund of such Road Accident Fund levy, shall be granted in accordance with the provisions of this section and of item 540.02 of Schedule No. 5 or item 640.03 of Schedule No. 6 to the extent stated in those items;’’;
(e) by the insertion after subsection (1C) of the following subsection: ‘‘(1D) The provisions of subsections (1A)(c), (1B)(b), (1B)(c) and
(1B)(e), shall only apply in respect of refunds paid by the Commissioner until the day before the levying of the Road Accident Fund levy in terms of this Act comes into operation.’’;
(f) by the deletion of subsection (13); (g) by the substitution in subsection (18) for the words preceding paragraph (a) of
the following words: ‘‘[Subject to the provisions of the proviso to subsection 20(5) and items 412.07, 412.08, 412.09, 531.00, 532.00, 608.01, 608.02, 608.03, 608.04, 615.01, 615.02 and 615.03 of Schedules Nos. 4, 5 and 6 no] No rebate or refund of duty in respect of any loss or deficiency of any nature of any goods shall be allowed, except as provided for in any item of Schedule No. 4, 5 or 6 and the Notes thereto, but the Commissioner may allow the deduction from the dutiable quantity of the undermentioned goods of a quantity equal to the following percentage stated [below] in each case [,namely]—’’;
(h) by the substitution in subsection (18) for paragraph (a) of the following paragraph:
‘‘(a) in the case of unpacked spirits (ethyl alcohol), imported or manufactured in the Republic, received in and entered for use and used in such a customs and excise manufacturing warehouse for such purposes, and in accordance with such procedures as the Commissioner may prescribe by rule, 1,5 per cent of the quantity so entered;’’;
(i) by the substitution in subsection (18) for paragraph (b) of the following paragraph:
‘‘(b) in the case of unpacked spirits, imported or manufactured in the Republic—
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(i) removed between such customs and excise warehouses and received in any such customs and excise warehouse and entered for such purposes and in accordance with such procedures as the Commissioner may prescribe by rule, 0,25 per cent of the quantity so removed; and
(ii) received for such purposes in such customs and excise storage warehouse and entered for such purposes and in accordance with such procedures as the Commissioner may prescribe by rule, 0,25 per cent of the quantity so entered;’’;
(j) by the deletion in subsection (18) of paragraph (bA); (k) by the substitution in subsection (18) for paragraph (c) of the following
paragraph: ‘‘(c) in the case of wine and other fermented beverages manufactured in
the Republic, 0,5 per cent of the quantity so manufactured on which duty is paid;’’;
(l) by the deletion in subsection (18) of paragraph (cA); and (m) by the substitution for subsection (21) of the following subsection:
‘‘(21) Except with the permission of the Commissioner, which shall only be granted in circumstances which he on good cause shown considers to be [exceptional] reasonable and subject to such conditions as he may impose in each case, any goods entered under any item of Schedule No. 3, 4 or 6 for manufacturing purposes or such other purpose as may be specified in the notes to such item shall be used for the purpose specified in such item at the time of such entry, or such other purpose, within [five] two years from the date of such entry.’’.
(2) (a) Subsection (1)(a), (b), (c), (d) and (e) shall come into operation on a date fixed by the President by proclamation in the Gazette.
(b) Subsection (1)(f) to (m) shall come into operation on the date of promulgation of this Act.
Amendment of section 105 of Act 91 of 1964, as substituted by section 2 of Act 111 of 1991 and amended by section 65 of Act 45 of 1995, section 72 of Act 30 of 1998, section 6 of Act 32 of 1999, section 63 of Act 30 of 2000, section 111 of Act 74 of 2002 and section 35 of Act 16 of 2004
93. Section 105 of the Customs and Excise Act, 1964, is hereby amended by the substitution for paragraph (d) of the following paragraph:
‘‘(d) any such instalment paid shall be utilized by the Commissioner to discharge any penalty, fine, [forfeiture,] interest, forfeiture, [and] duty and [other amounts due,] expenses incurred by or charges due to the Commissioner, in that order;’’.
Amendment of section 114 of Act 91 of 1964, as substituted by section 33 of Act 105 of 1969, section 12 of Act 71 of 1975, as inserted by section 36 of Act 112 of 1977, as substituted by section 13 of Act 101 of 1985, section 32 of Act 84 of 1987, section 37 of Act 59 of 1990, section 34 of Act 34 of 1997, section 71 of Act 53 of 1999, section 140 of Act 60 of 2001 and section 112 of Act 74 of 2002
94. Section 114 of the Customs and Excise Act, 1964, is hereby amended— (a) by the substitution in subsection (1) for subparagraph (iv) of paragraph (a) of
the following subparagraph: ‘‘(iv) (aa) (A) Any imported or excisable goods, vehicles, machin-
ery, plant or equipment, any goods in any customs and excise warehouse, any goods in a rebate store room, any goods in the custody or under the control of the Commissioner and any goods in respect of which an excise duty or fuel levy is prescribed, and any materials for the manufacture of such goods, of which such person is the owner, whether imported, exported or manufactured before or after the debt became so due and whether or not such goods are found in or on any premises in the possession or under the control of the person by whom the debt is
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due, may be detained in accordance with the provisions of subsection (2) and shall be subject to a lien until such debt is paid.
(B) Whenever a person alleges that he or she is not the owner of goods as contemplated in subitem (A), he or she must furnish proof thereof to the Commis- sioner within 14 days from the date of the detention of the goods.
(C) Where the person concerned proves that he or she is not the owner of the goods as contemplated in subitem (B), the Commissioner must without delay release such goods from the operation of the lien.
(D) Any person who, without reasonable cause, fails to comply with subitem (B), shall be guilty of an offence and liable on conviction to a fine not exceeding R20 000 or to imprisonment for a period not exceeding five years or to both such fine and such imprisonment.
(E) In the absence of evidence to the contrary which raises a reasonable doubt, proof by the Commis- sioner of the failure by the person concerned to comply with subitem (B) shall be sufficient evidence of the absence of reasonable cause.
(bb) Any imported or excisable goods, vehicles, machinery, plant or equipment, in the possession or under the control of such person or in or on any premises in the possession or under the control of such person and in respect of which such person has entered into any credit agreement as contem- plated in the Credit Agreements Act, 1980 (Act No. 75 of 1980) and of which the right, title or interest of such person may be readily established and excussed, may be detained in accordance with the provisions of subsection (2) and shall, subject to subparagraph (vi) (cc), be subject to a lien until such debt is paid.’’; and
(b) by the substitution in subsection (1) for subparagraph (iv) of paragraph (b) of the following subparagraph:
‘‘(iv) Where, in addition to any amount of duty which is due or is payable by any person in terms of this Act, any fine, penalty, forfeiture or interest is incurred under this Act and is payable by such person, any payment made by that person or any amount recovered pursuant to any sale of such goods as contemplated in this section shall be utilised by the Commissioner to discharge such payment or amount in the order of— (aa) any [duty, interest, fine,] penalty, fine, interest, forfeiture, duty[,]
and expenses incurred by or charges due to the Commissioner; and (bb) payment of the overplus, on application, if any, to the person by
whom the debt was due.’’.
Amendment of section 3 of Act 77 of 1968
95. Section 3 of the Stamp Duties Act, 1968, is hereby amended by the addition of the following subsections:
‘‘(3) The Minister of Finance may announce that, with effect from a date mentioned in that announcement— (a) the rate of stamp duties contemplated in subsection (1) will be reduced to the
extent mentioned in the announcement; or
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(b) there will be a change in the provisions of this Act that will have the effect that any instrument will no longer be subject to stamp duties.
(4) If the Minister makes an announcement contemplated in subsection (3), that reduction or change comes into effect on the date determined by the Minister in that announcement and continues to apply for a period of six months from that date unless Parliament passes legislation giving effect to that announcement within that period of six months.’’.
Amendment of section 7 of Act 77 of 1968, as amended by section 18 of Act 103 of 1969, section 10 of Act 89 of 1972, section 8 of Act 66 of 1973, section 3 of Act 70 of 1975, section 5 of Act 87 of 1982, section 7 of Act 118 of 1984, section 5 of Act 69 of 1989, section 55 of Act 19 of 2001, section 43 of Act 12 of 2003, section 156 of Act 45 of 2003, section 38 of Act 16 of 2004, section 76 of Act 32 of 2004 and section 6 of Act 10 of 2005
96. (1) Section 7 of the Stamp Duties Act, 1968, is hereby amended— (a) by the deletion in subsection (1) of paragraph (g); and (b) by the deletion in subsection (1) of paragraph (j).
(2) Subsection (1)(a) comes into operation on 1 January 2006 and applies in respect of all marketable securities issued on or after that date.
Amendment of section 22 of Act 77 of 1968, as amended by section 19 of Act 103 of 1969, section 11 of Act 114 of 1977, section 6 of Act 95 of 1978, section 6 of Act 102 of 1979, section 24 of Act 87 of 1988, section 7 of Act 69 of 1989, section 6 of Act 20 of 1994 and section 88 of Act 32 of 2004
97. Section 22 of the Stamp Duties Act, 1968, is hereby amended by the deletion of subsection (4).
Amendment of section 23 of Act 77 of 1968, as amended by section 20 of Act 103 of 1969, section 13 of Act 92 of 1971, section 11 of Act 89 of 1972, section 10 of Act 66 of 1973, section 10 of Act 88 of 1974, section 20 of Act 106 of 1980, section 6 of Act 87 of 1982, section 5 of Act 92 of 1983, section 25 of Act 87 of 1988, section 8 of Act 69 of 1989, section 7 of Act 136 of 1991, section 13 of Act 37 of 1996, section 19 of Act 27 of 1997, section 80 of Act 30 of 1998, section 76 of Act 53 of 1999, section 157 of Act 45 of 2003, section 40 of Act 16 of 2004 and section 89 of Act 32 of 2004
98. (1) Section 23 of the Stamp Duties Act, 1968, is hereby amended— (a) by the deletion of subsection (1B); (b) by the deletion in subsection (2) of paragraph (c); (c) by the addition in subsection (4) of the following subparagraph to paragraph
(b): ‘‘(ix) where exemption from duty is claimed under paragraph (a) of the
Exemptions to Item 15(3) of Schedule 1, there is annexed to such instrument a declaration signed by the transferee stating that the aggregate duty payable by the transferee for the purposes of Item 15(3) of Schedule 1, does not exceed an amount of R100 during the six month period calculated from the date of execution of the instrument of transfer.’’;
(d) by the deletion of subsection (10); (e) by the substitution for subsection (11) of the following subsection:
‘‘(11) The duty payable under Item 15(4) of Schedule 1 shall be denoted on a copy of any application to court, take-over offer or resolution, as the case may be, required in respect of any [scheme referred to in subsection (10)] cancellation or redemption of company shares, and the company of which the shares in question are cancelled or redeemed shall endorse on that copy the market value of those shares and the amount payable in respect of the redemption of those shares, including any premium so payable[, as determined in accordance with subsection (10)] and, in the case of any take-over offer, the date of the final acceptance of that offer and must retain that copy, which must at all reasonable times during a period of five years after the relevant date
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referred to in subsection (13), be open for inspection by any person acting under the authority of the Commissioner.’’;
(f) by the deletion of subsection (12); (g) by the substitution in subsection (12A) for the words preceding paragraph (a)
of the following words: ‘‘(12A) For the purposes of section 7(hA) and of [subsections (10),] subsection (11) [and (12)] of this section and Item 15(4) of Schedule 1—’’;
(h) by the substitution in subsection (12A) for paragraph (d) of the following paragraph:
‘‘(d) where shares, stock or debentures are cancelled in part as aforesaid, the consideration to be determined [under subsection (10)] in respect of such part-cancellation shall be deemed to be the full market value of such shares and the amount payable in respect of the redemption of those shares, including any premium so payable, stock or debentures as determined [in accordance with that subsection], less such amount as the Commissioner may determine as the value of such shares, stock or debentures immediately after such part-cancellation.’’; and
(i) by the deletion in subsection (15) of paragraph (c). (2) (a) Subsection (1)(a), (c), (d), (e), (f), (g) and (h) shall come into
operation on 1 January 2006 and applies in respect of all marketable securities issued, acquired, cancelled or redeemed on or after that date.
(b) Subsection (1)(b) and (i) shall come into operation on a date fixed by the President by proclamation in the Gazette.
Amendment of Item 14 of Schedule 1 to Act 77 of 1968, as amended by section 19 of Act 114 of 1977, section 7 of Act 95 of 1978 and section 90 of Act 32 of 2004
99. (1) Item 14 of the Stamp Duties Act, 1968, is hereby amended— (a) by the substitution in paragraph (2) for the words under Amount of Duty of the
following words: ‘‘An amount of duty calculated in accordance with [section 22(4) of this Act] Item 14(1) of this Act.’’;
(b) by the substitution for the Exemptions from the duty under paragraph (1) of the following paragraphs:
‘‘(a) For the purposes of this Item, no duty shall be payable in the event that the duty calculated on a lease or agreement of lease does not in aggregate exceed R200 over the period of the lease: Provided that this exemption shall not apply where the total consideration payable in respect of a lease or agreement of lease is not quantifiable at the time of execution of that lease.
(b) For the purposes of this Item, where the total consideration payable in respect of a lease or agreement of lease is not quantifiable at the time of execution of that lease, no duty shall be payable in the event that the duty calculated on a lease or agreement of lease on the amount of consideration that has become quantifiable—
(i) during any ‘year of assessment’ as defined in section 1 of the Income Tax Act, 1962 (Act No. 58 of 1962), of any lessor who is a ‘taxpayer’ as defined in that Act; or
(ii) in the 12 months ending on the last day of February each year in the case of any other lessor, if that amount does not in aggregate exceed R200 during such year of assessment, or 12 month period, whichever is applicable.’’; and
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(c) by the insertion under paragraph (b) in Exemptions from the duty under paragraph (1) of the following words:
‘‘Provided the duty payable under this Item, calculated on the aggregate amount of rent and any other consideration payable under any lease or agreement of lease shall not exceed 10 per cent of the value of the property in relation to that lease or agreement of lease, which value shall be determined in accordance with the provisions of sections 5, 6, 7 and 8 of the Transfer Duty Act, 1949 (Act No. 40 of 1949).’’.
(2) (a) Subsection (1)(b) shall apply in respect of any lease or agreement of lease where that lease or agreement of lease is executed in the year of assessment, as defined in section 1 of the Income Tax Act, 1962 (Act No. 58 of 1962), of any lessor who is a taxpayer, as defined in section 1 of the Income Tax Act, 1962, commencing on or after the proclamation of the Act in the Gazette, or in the case of any other lessor, on or after 1 March 2006.
(b) Subsection (1)(c) shall apply in respect of any lease or agreement of lease where that lease or agreement of lease is executed on or after 1 January 2006.
Amendment of Item 15 of Act 77 of 1968, as substituted by section 13 of Act 89 of 1972 and amended by section 16 of Act 66 van 1973, section 21 of Act 88 of 1974, section 3 of Act 104 of 1976, section 20 of Act 114 of 1977, section 8 of Act 95 of 1978, section 8 of Act 102 of 1979, section 21 of Act 106 of 1980, section 9 of Act 99 of 1981, section 7 of Act 87 of 1982, section 14 of Act 92 of 1983, section 11 of Act 118 of 1984, section 11 of Act 81 of 1985, section 5 of Act 71 of 1986, section 13 of Act 108 of 1986, section 11 of Act 86 of 1987, section 33 of Act 87 of 1988, section 14 of Act 69 of 1989, section 9 of Act 136 of 1991, section 8 of Act 136 of 1992, section 17 of Act 97 of 1993, section 17 of Act 140 of 1993, section 8 of Act 20 of 1994, section 86 of Act 30 of 1998, section 79 of Act 53 of 1999, section 72 of Act 30 of 2000, section 63 of Act 59 of 2000, section 42 of Act 5 of 2001, section 147 of Act 60 of 2001, section 56 of Act 30 of 2002, section 113 of Act 74 of 2002, section 163 of Act 45 of 2003, section 91 of Act 32 of 2004 and section 18 of Act 9 of 2005
100. (1) Item 15 of the Stamp Duties Act, 1968, is hereby amended— (a) by the deletion of paragraphs (1) and (2); (b) by the deletion of Exemptions from the duty under paragraph (1) or (2); (c) by the insertion in the Exemptions from the duty under paragraph (3) of the
following paragraph before paragraph (b): ‘‘(a) Any registration of transfer of any marketable securities where
the aggregate duty which would, but for the provisions of this subitem, be payable by the transferee under this Item during any six month period equals an amount of R100 or less.’’;
(d) by the substitution in the Exemptions from the duty under paragraph (3) for the words in paragraph (x) following item (cc) of subparagraph (vii) of the following words:
‘‘where the public officer contemplated in section 101 of the Income Tax Act, 1962 (Act No. 58 of 1962), of the relevant company has made a sworn affidavit or solemn declaration that the transfer of that marketable security complies with the provisions of this paragraph.’’;
(e) by the substitution for paragraph (4) of the following paragraph:
‘‘(4) In respect of the cancellation or redemption of any [company shares which any person is in terms of section 23(10) of this Act deemed to have disposed of] marketable securities: for every R10 or part thereof of the [value of the consideration referred to in the said section 23(10)] greater of the market value of those marketable securities immediately prior to the cancellation or redemption and the amount payable in respect of the cancellation or redemption of those marketable securities, including any premium so payable: Provided that the market value must be determined as if those marketable securities had not been and were not about to be cancelled or redeemed.’’.
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(f) by the insertion after paragraph (4) of the following: ‘‘Exemptions from the duty under paragraph (4):
(a) Any cancellation or redemption of any marketable security in respect of which the provisions of the Uncertificated Securities Tax Act, 1998, apply.
(b) Any cancellation or redemption of any marketable security by a company—
(i) in terms of an amalgamation transaction contemplated in section 44 of the Income Tax Act, 1962 (Act No. 58 of 1962);
(ii) in terms of an unbundling transaction contemplated in section 46 of that Act;
(iii) in terms of a liquidation distribution contemplated in section 47 of that Act; or
(iv) in terms of any transaction which would have constituted a transaction or distribution contemplated—
(aa) in subparagraph (i) to (iii) regardless of whether or not an election has been made for the provisions of that section to apply; and
(bb) in subparagraph (i) regardless of the market value of the asset disposed of in exchange for that marketable security; or
(cc) in subparagraphs (i) to (iii) regardless of whether or not that person acquired that marketable security as a capital asset or as trading stock,
where the public officer contemplated in section 101 of the Income Tax Act, 1962, of the relevant company has made a sworn affidavit or solemn declaration that the transfer of that marketable security complies with the provisions of this paragraph.
(c) Where the securities are debentures, including debenture stock, debenture bonds and similar securities of a juristic person, whether constituting a charge on the assets of the juristic person or not, and which constitute instruments as contemplated in section 24J of the Income Tax Act, 1962.’’; and
(g) by the insertion in the Exemptions from the duty under paragraph (5) of the following paragraph after paragraph (c):
‘‘(d) The acquisition of any marketable security where the aggregate duty which would, but for the provisions of this subitem, be payable by the transferee under this Item during any six month period equals an amount of R100 or less.’’.
(2) Subsection (1)(a), (b), (c), (e), (f) and (g) shall come into operation on 1 January 2006, and shall apply to all marketable securities issued, registered, acquired, cancelled or redeemed on or after that date.
Amendment to section 1 of Act 89 of 1991, as amended by section 21 of Act 136 of 1991, paragraph 1 of Government Notice 2695 of 8 November 1991, section 12 of Act 136 of 1992, section 1 of Act 61 of 1993, section 22 of Act 97 of 1993, section 9 of Act 20 of 1994, section 18 of Act 37 of 1996, section 23 of Act 27 of 1997, section 34 of Act 34 of 1997, section 81 of Act 53 of 1999, section 76 of Act 30 of 2000, section 64 of Act 59 of 2000, section 65 of Act 19 of 2001, section 148 of Act 60 of 2001, section 114 of Act 74 of 2002, section 47 of Act 12 of 2003, section 164 of Act 45 of 2003, section 43 of Act 16 of 2004, section 92 of Act 32 of 2004 and section 8 of Act 10 of 2005
101. Section 1 of the Value-Added Tax Act, 1991, is hereby amended— (a) by the insertion after the definition of ‘‘consideration in money’’ of the
following definition: ‘‘ ‘Controller’ has the meaning assigned thereto in section 1 of the Customs and Excise Act;’’;
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(b) by the addition to paragraph (b) of the definition of ‘‘enterprise’’ of the following subparagraph:
‘‘(v) the activities of a foreign donor funded project;’’; (c) by the insertion after the definition of ‘‘fixed property’’ of the following
definition: ‘‘ ‘foreign donor funded project’ means a project established as a result of an international donor funding agreement to which the Government of the Republic is a party, to supply goods or services to beneficiaries;’’;
(d) by the insertion after the definition of ‘‘invoice’’ of the following definition: ‘‘ ‘licensed customs and excise storage warehouse’ means a ware- house licensed by the Commissioner at any place appointed for that purpose under the provisions of the Customs and Excise Act, which has been approved by the Commissioner for the storage of goods as he may approve in respect of that warehouse;’’; and
(e) by the substitution for the definition of ‘‘person’’ of the following definition: ‘‘ ‘person’ includes any public authority, any local authority, any company, any body of persons (corporate or unincorporate), the estate of any deceased or insolvent person, [and] any trust fund and any foreign donor funded project;’’.
Amendment of section 8 of Act 89 of 1991, as amended by section 24 of Act 136 of 1991, paragraph 4 of Government Notice 2695 of 8 November 1991, section 15 of Act 136 of 1992, section 24 of Act 97 of 1993, section 11 of Act 20 of 1994, section 20 of Act 46 of 1996, section 25 of Act 27 of 1997, section 83 of Act 53 of 1999, section 67 of Act 19 of 2001, section 151 of Act 60 of 2001, section 166 of Act 45 of 2003 and section 95 of Act 32 of 2004
102. (1) Section 8 of the Value-Added Tax Act, 1991, is hereby amended— (a) by the insertion after subsection (5A) of the following subsection:
‘‘(5B) For the purposes of this Act, a vendor, being a foreign donor funded project, shall be deemed to supply services to the international donor to the extent of the international donor funding received from an international donor.’’; and
(b) by the addition of the following subsections: ‘‘(24) For the purposes of this Act, a vendor, being a customs
controlled area enterprise, shall be deemed to supply goods in the course or furtherance of an enterprise where movable goods are temporarily removed from a place in a customs controlled area to a place outside the customs controlled area, situated in the Republic, if those goods are not returned to the customs controlled area within 30 days of its removal, or within a period approved in writing by the Controller.
(25) For the purposes of this Act, where any goods or services are supplied by a vendor to another vendor, those vendors must for purposes of that supply or subsequent supplies of those goods or services, be deemed to be one and the same person provided the provisions of section 42, 44, 45 or 47 of the Income Tax Act, 1962, are complied with.
(26) The supply of goods or services under any warranty agreement shall, for the purposes of section 11(2)(v), be deemed to be a supply of services.’’.
Amendment of section 9 of Act 89 of 1991, as amended by section 25 of Act 136 of 1991, section 167 of Act 45 of 2003 and section 96 of Act 32 of 2004
103. Section 9 of the Value-Added Tax Act, 1991, is hereby amended by the addition of the following subsection:
‘‘(11) Where any supply of goods is deemed to be made as contemplated in section 8(24), that supply shall be deemed to take place on the last day of the applicable period contemplated in section 8(24).’’.
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Amendment of section 10 of Act 89 of 1991, as amended by section 26 of Act 136 of 1991, paragraph 5 of Government Notice 2695 of 8 November 1991, section 16 of Act 13 of 1992, section 26 of Act 97 of 1993, section 12 of Act 20 of 1994, section 21 of Act 37 of 1996, section 22 of Act 46 of 1996, section 27 of act 27 of 1997, section 84 of Act 53 of 1999, section 68 of Act 19 of 2001, section 152 of Act 60 of 2001, section 168 of Act 45 of 2003 and section 97 of Act 32 of 2004
104. Section 10 of the Value-Added Tax Act, 1991, is hereby amended by the addition of the following subsection:
‘‘(25) Where any goods are deemed by section 8(24) to be supplied to any person, the consideration in money shall be deemed to be the open market value of those goods on the date contemplated in section 9(11).’’.
Amendment of section 11 of Act 89 of 1991, as amended by section 27 of Act 136 of 1991, paragraph 6 of Government Notice 2695 of 8 November 1991, section 17 of Act 136 of 1992, section 27 of Act 97 of 1993, section 13 of Act 20 of 1994, section 28 of Act 27 of 1997, section 89 of Act 30 of 1998, section 85 of Act 53 of 1999, section 77 of Act 30 of 2000, section 43 of Act 5 of 2001, section 153 of Act 60 of 2001, section 169 of Act 45 of 2003, section 46 of Act 16 of 2004, section 98 of Act 32 of 2004 and section 21 of Act 9 of 2005
105. Section 11 of the Value-Added Tax Act, 1991, is hereby amended— (a) by the substitution in subsection (1) for paragraph (h) of the following
paragraph: ‘‘(h) the goods consist of fuel levy goods [as defined in section 1 of the
Customs and Excise Act] referred to in Fuel Item Levy numbers 195.10.05, 195.10.06, 195.10.07 and 195.10.17 in Part 5 of Schedule No. 1 to the Customs and Excise Act; or’’;
(b) by the substitution in subsection (1) for paragraph (hA) of the following paragraph:
‘‘(hA) the goods consist of petroleum oil and oils obtained from bituminous minerals, known as crude, referred to in Heading No. 27.09 in Chapter 27 of Part 1 of Schedule No. 1 to the Customs and Excise Act when supplied for the purpose of being refined for the production of fuel levy goods as defined in section 1 of the Customs and Excise Act [and any by-product]; or’’;
(c) by the substitution in subsection (1) for paragraph (l) of the following paragraph:
‘‘(l) the goods consist of illuminating kerosene intended for use as fuel for illuminating or heating, referred to in Fuel Item Levy number 195.10.13 in Part 5 of Schedule No. 1 to the Customs and Excise Act and are not mixed or blended with another substance;’’;
(d) by the deletion of paragraph (o) of subsection (1); (e) by the addition to subsection (1) of the following paragraph:
‘‘(q) the goods— (i) are supplied by a vendor to a person who is not a resident of the
Republic and not a vendor and who has contracted with that vendor to deliver goods to a recipient, who is a vendor in the Republic; and
(ii) form part of a supply by the person referred to in paragraph (i) to the recipient; and
(iii) are used by the recipient wholly for the purposes of consump- tion, use or supply in the course of making taxable supplies;’’;
(f) by the substitution in subsection (2) for paragraph (q) of the following paragraph:
‘‘[the services are supplied by a vendor to the extent that the consideration for such services is from donor funds granted under any international agreement to which the Government of the Republic is a party] the services are deemed to be supplied in terms of section 8(5B);’’;
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(g) by the deletion in subsection (2) of the word ‘‘or’’ at the end of paragraph (t) and the addition of the word ‘‘or’’ at the end of paragraph (u); and
(h) by the addition to subsection (2) of the following paragraph: ‘‘(v) the services relate to goods under warranty to the extent that the
services are— (i) provided in terms of that warranty;
(ii) supplied to the warrantor for consideration under that warranty given by the warrantor who is—
(aa) not a resident of the Republic; (bb) not a vendor; and (cc) outside the Republic at the time the services are rendered;
and (iii) in respect of goods that were subject to tax upon importation
(in terms of section 7(1)(b) of this Act);’’.
Amendment of section 13 of Act 89 of 1991, as amended by section 29 of Act 136 of 1991, section 19 of Act 136 of 1992, section 29 of Act 97 of 1993, section 15 of Act 20 of 1994, section 30 of Act 27 of 1997, section 86 of Act 53 of 1999, section 70 of Act 19 of 2001, section 155 of Act 60 of 2001, section 170 of Act 45 of 2003 and section 100 of Act 32 of 2004
106. Section 13 of the Value-Added Tax Act, 1991, is hereby amended— (a) by the substitution in subsection (1) for paragraph (ii) of the proviso of the
following paragraph: ‘‘(ii) where any goods have been imported and entered for storage in a
licensed Customs and Excise storage warehouse but have not been entered for home consumption, any supply of those goods before they are entered for home consumption shall be zero-rated for the purposes of this Act;’’; and
(b) by the substitution for subsection (6) of the following subsection: ‘‘(6) Subject to [the provisions of section 7(1)(b) and this section]
this Act, the provisions of the Customs and Excise Act relating to the importation, transit, coastwise carriage and clearance of goods and the payment and recovery of duty shall mutatis mutandis apply as if enacted in this Act, whether or not the said provisions apply for the purposes of any duty levied in terms of the Customs and Excise Act.’’.
Amendment of section 16 of Act 89 of 1991, as amended by section 30 of Act 136 of 1991, section 21 of Act 136 of 1992, section 30 of Act 97 of 1993, section 16 of Act 20 of 1994, section 23 of Act 37 of 1996, section 32 of Act 27 of 1997, section 91 of Act 30 of 1998, section 87 of Act 53 of 1999, section 71 of Act 19 of 2001, section 156 of Act 60 of 2001 and section 172 of Act 45 of 2003
107. (1) Section 16 of the Value-Added Tax Act, 1991, is hereby amended— (a) by the substitution for the second proviso in subsection (2) of the following
proviso: ‘‘Provided further that no deduction of input tax in relation to that supply or importation shall be made in respect of any tax period which ends more than five years after the end of the tax period during which the [vendor for the first time became entitled to such deduction] tax invoice for that supply should have been issued as contemplated in section 20(1).’’;
(b) by the addition in subsection (3) of the following proviso to paragraph (a):
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‘‘: Provided that this paragraph does not apply where a vendor acquires goods or services that are to be awarded as a prize or winnings and in respect of which that vendor qualifies or will qualify for a deduction in terms of paragraph (d).’’;
(c) by the addition in subsection (3) of the following proviso to paragraph (b): ‘‘: Provided that this paragraph does not apply where a vendor acquires goods or services that are to be awarded as a prize or winnings and in respect of which that vendor qualifies or will qualify for a deduction in terms of paragraph (d).’’;
(d) by the substitution in subsection (3) for paragraph (d) of the following paragraph:
‘‘(d) an amount equal to the tax fraction of any amount paid during the tax period by the supplier of the services contemplated in section 8(13) as a prize or winnings to the recipient of such services: Provided that where the prize awarded constitutes either goods or services, input tax must be limited to the tax incurred on the initial cost of acquiring those goods or services;’’;
(e) by the substitution in subsection (3) for the proviso to paragraph (h) of the following proviso:
‘‘Provided that— (i) where such goods consist of second-hand goods contemplated in
the proviso to paragraph (b) of the definition of ‘input tax’ in section 1, the amount determined in terms of this subsection shall not exceed the amount of transfer duty or stamp duty, as the case may be, which was or would have been payable, less any amount which has previously been deducted in terms of the provisions of subsection (3)(a)(ii) or (b)(i) of this section or section 18(4) or (5), in respect of such acquisition, original issue or registration of transfer, as the case may be;
(ii) this subsection does not apply where— (aa) such goods or services were acquired before 1 April 2005,
or an input tax deduction in respect of that acquisition was denied under proviso (iv) to section 18(4); and
(bb) the vendor is a public authority which registered prior to 1 April 2005, notwithstanding paragraph (b)(i) of ‘enter- prise’ in section 1 or a public entity listed in Part A or C of Schedule 3 to the Public Finance Management Act, 1999 (Act No. 1 of 1999); ’’; and
(f) by the substitution in subsection (3) for the first proviso following paragraph (l) of the following proviso:
‘‘Provided that where any vendor is entitled under the preceding provisions of this subsection to deduct any amount in respect of any tax period from the said sum, the vendor may deduct that amount from the amount of output tax attributable to a later tax period which ends no later than five years after the end of the tax period during which the [vendor for the first time became entitled to such deduction] tax invoice for that supply should have been issued as contemplated in section 20(1) and to the extent that it has not previously been deducted by the vendor under this subsection:’’.
(2) Subsection (1)(e) is deemed to have come into operation on 1 April 2005.
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Amendment of section 17 of Act 89 of 1991, as amended by section 31 of Act 136 of 1991, paragraph 9 of Government Notice 2695 of 8 November 1991, section 22 of Act 136 of 1992, section 31 of Act 97 of 1993, section 17 of Act 20 of 1994, section 33 of Act 27 of 1997, section 92 of Act 30 of 1998, section 88 of Act 53 of 1999, section 173 of Act 45 of 2003 and section 102 of Act 32 of 2004
108. Section 17 of the Value-Added Tax Act, 1991, is hereby amended— (a) by the substitution in subsection (2) for the words preceding paragraph (a) of
the following words: ‘‘(2) Notwithstanding anything in this Act to the contrary, a vendor,
other than a foreign donor funded project, shall not be entitled to deduct from the sum of the amounts of output tax and refunds contemplated in section 16(3), any amount of input tax—’’;
(b) by the deletion in subsection (2)(a) of the word ‘‘or’’ at the end of subparagraph (vii) and the addition of the word ‘‘or’’ to subparagraph (viii);
(c) by the addition to subsection (2)(a) of the following subparagraph: ‘‘(ix) that entertainment is acquired by the vendor for the purpose of
awarding that entertainment as a prize contemplated in section 16(3)(d) in consequence of a supply contemplated in section 8(13);’’; and
(d) by the substitution in subsection (2) for the first and second provisos of the following provisos and by the addition of the third proviso to paragraph (c):
‘‘Provided that— (i) this paragraph shall not apply where [such] that motor car is
acquired by the vendor exclusively for the purpose of making a taxable supply of [such] that motor car in the ordinary course of an enterprise which continuously or regularly supplies motor cars, whether [such] that supply is made by way of sale or under an instalment credit agreement or by way of rental agreement at an economic rental consideration[:Provided further that];
(ii) for the purposes of this paragraph a motor car acquired by such vendor for demonstration purposes or for temporary use prior to a taxable supply by such vendor shall be deemed to be acquired exclusively for the purpose of making a taxable supply; and
(iii) this paragraph shall not apply where— (aa) that motor car is acquired by the vendor for the purposes of
awarding that motor car as a prize contemplated in section 16(3)(d) in consequence of a supply contemplated in section 8(13); or
(bb) the supply of that motor car is in the ordinary course of an enterprise which continuously or regularly supplies motor cars as prizes to clients or customers (other than to any employee or office holder of the vendor or any connected person in relation to that employee, office holder or vendor) to the extent that it is in consequence of a taxable supply made in the course or furtherance of an enterprise; or’’.
Amendment of section 18 of Act 89 of 1991, as amended by section 32 of Act 136 of 1991, section 23 of Act 136 of 1992, section 32 of Act 97 of 1993, section 18 of Act 20 of 1994, section 34 of Act 27 of 1997, section 93 of Act 30 of 1998, section 89 of Act 53 of 1999, section 174 of Act 45 of 2003 and section 103 of Act 32 of 2004
109. (1) Section 18 of the Value-Added Tax Act, 1991, is hereby amended—
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(a) by the substitution in subsection (2) for the proviso of the following proviso: ‘‘Provided that this subsection [shall] does not apply to [any] —
(i) capital goods or services which have an adjusted cost of less than R40 000 (excluding tax) or where such goods or services were deemed to be supplied to the vendor by subsection (4) if the amount which was represented by ‘B’ in the formula contem- plated in that subsection was less than R40 000 when such goods or services were deemed to be supplied to such vendor; or
(ii) capital goods or services acquired by a public authority or public entity listed in Part A or C of Schedule 3 to the Public Finance Management Act, 1999 (Act No. 1 of 1999), if the goods or services were acquired prior to 1 April 2005 or if an input tax deduction in respect thereof was denied under proviso (iv) to section 18(4).’’;
(b) by the substitution in subsection (5) for the first and second provisos of the following provisos:
‘‘Provided that— (i) this subsection [shall] does not apply to [any] —
(aa) capital goods or services which cost less than R40 000 (excluding tax) or where such goods or services were deemed to be supplied to the person by subsection (4) if the amount which was represented by ‘‘B’’ in the formula contemplated in that subsection was less than R40 000 when such goods or services were deemed to be supplied to such person[: Provided further that]; or
(bb) capital goods or services acquired by a public authority or public entity listed in Part A or C of Schedule 3 to the Public Finance Management Act, 1999 (Act No. 1 of 1999), prior to 1 April 2005, or if an input tax deduction in respect thereof was denied under proviso (iv) to section 18(4);
(ii) where [such] the capital goods or services consist of second-hand goods contemplated in the proviso to paragraph (b) of the definition of ‘input tax’ in section 1, the amount determined in terms of this subsection shall not exceed the amount of transfer duty or stamp duty, as the case may be, which is or would have been payable, less any amount which has previously been deducted in terms of the provisions of section 16(3)(a)(ii) or (b)(i), or subsection (4) of this section, in respect of [such] that acquisition, original issue or registration of transfer, as the case may be.’’; and
(c) by the substitution in subsection (10) for the words following paragraph (b) and preceding the formula of the following words:
‘‘and [those goods or services were acquired for the purposes of entertainment in respect of which] where a deduction of input tax would have been denied in terms of section 17(2), those goods or services shall be deemed to be supplied by [him] the vendor concerned in the same tax period in which they were so acquired, in accordance with the formula:’’.
(2) Subsections (1)(a) and (b) are deemed to have come into operation on 1 April 2005.
Amendment of section 22 of Act 89 of 1991, as amended by section 33 of Act 136 of 1991, paragraph 13 of Government Notice 2695 of 8 November 1991, section 27 of Act 136 of 1992, section 25 of Act 37 of 1996, section 36 of Act 27 of 1997, section 95 of Act 30 of 1998 and section 177 of Act 45 of 2003
110. Section 22 of the Value-Added Tax Act, 1991, is hereby amended—
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(a) by the substitution in subsection (3) for the proviso of the following proviso: ‘‘Provided that—
(i) the period of 12 months shall, if any contract in writing in terms of which such supply was made provides for the payment of consideration or any portion thereof to take place after the expiry of the tax period within which such deduction was made, in respect of such consideration or portion be calculated as from the end of the month within which such consideration or portion was payable in terms of that contract; or
(ii) where— (aa) the estate of a vendor is sequestrated, whether voluntarily
or compulsorily; (bb) the vendor is declared insolvent; or (cc) has entered into a compromise or an arrangement in terms
of section 311 of the Companies Act, 1973 (Act No. 61 of 1973), or a similar arrangement with creditors,
within 12 months after the expiry of the tax period within which that deduction was made, not paid the full consideration, the vendor must account for output tax in terms of this section equal to that portion of the consideration which has not been paid at the time of sequestration, declaration of insolvency or the date on which the compromise or the arrangement or similar arrangement was entered into.’’.
Amendment of paragraph 1 of Schedule 1 to Act 89 of 1991
111. Paragraph 1 of Schedule 1 to the Value-Added Tax Act, 1991, is hereby amended—
(a) by the substitution for the words preceding subparagraph (i) of the following words: ‘‘1. Any of the following items imported into the Republic in respect of
which the Controller [of Customs and Excise] has, in terms of the proviso to section 38(1)(a) of the Customs and Excise Act and which shall apply also to imports from or via Botswana, Lesotho, Namibia or Swaziland, granted permission that entry need not be made:’’; and
(b) by the substitution for subparagraph (v) of the following subparagraph: ‘‘(v) goods of a value for customs duty purposes not exceeding [R500.00]
R500, and on which no such duty is payable in terms of Schedule No. 1 to the said Act.’’.
Substitution of paragraph 4 of Schedule 1 to Act 89 of 1991
112. The following paragraph is hereby substituted for paragraph 4 of Schedule 1 to the Value-Added Tax Act, 1991:
‘‘4. Goods temporarily exported from the Republic which are, at the time of export, registered as such with the Controller [of Customs and Excise], in such form as the Commissioner may prescribe, and thereafter returned to the exporter, no change of ownership having taken place, and which can be identified on re-importation.’’.
Substitution of paragraph 5 of Schedule 1 to Act 89 of 1991
113. The following paragraph is hereby substituted for paragraph 5 of Schedule 1 to the Value-Added Tax Act, 1991:
‘‘5. Goods permitted under conditions prescribed by the International Trade Administration Commission which are forwarded unsolicited and free of charge by a non-resident to—
(a) a public authority or a local authority; or (b) any association not for gain, which satisfies the Commissioner that such
goods will be used by that association exclusively—
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(i) for educational, religious or welfare purposes; or (ii) in the furtherance of that association’s objectives directed to the
provision of educational, medical or welfare services or medical or scientific research; or
(iii) for issue to, or treatment of, indigent persons: Provided that the recipient of the goods responsible for the distribution has furnished an undertaking that— (a) such goods are for the exclusive use by the organisation or for free
distribution; (b) such goods will not be sold, leased, hired or otherwise disposed of for
gain; and (c) no consideration or other counter-performance may be accepted by any
person in respect of such goods.’’.
Substitution of paragraph 6 of Schedule 1 to Act 89 of 1991
114. The following paragraph is hereby substituted for paragraph 6 of the Value-Added Tax Act, 1991:
‘‘6. Goods which are shipped or conveyed to the Republic for [transhipment] trans-shipment or conveyance to any export country: Provided that the Controller [of Customs and Excise] ensures that the tax is secured, in part or in full, by the lodging of a provisional payment or bond except where the Commissioner, in exceptional circumstances, otherwise directs, or in the circumstances contemplated in rule 120A.01(c) of Chapter XIIA of the Rules under the Customs and Excise Act. If proof is not furnished to the Commissioner that the goods have been duly taken out of the Republic within a period of 30 days or within such further period as the Commissioner may in exceptional circumstances allow, this exemption shall be withdrawn and tax, penalty and interest must be paid.’’.
Substitution of paragraph 7 of Schedule 1 to Act 89 of 1991
115. The following paragraph is hereby substituted for paragraph 7 of Schedule 1 to the Value-Added Tax Act, 1991:
‘‘7. Goods consisting of [such]— (a) foodstuffs [as are] set forth in Part B of Schedule 2 to this Act, but
subject to such conditions as may be prescribed in the said Part; or (b) goods referred to in section 11(1)(f), but provided that such goods
are supplied to and imported by the South African Reserve Bank, the South African Mint Company (Proprietary) Limited or any bank registered under the Banks Act, 1990 (Act No. 94 of 1990); or
(c) (i) fuel levy goods referred to in fuel levy item no.— (aa) 195.10.05: Petrol, unleaded, as defined in Additional
Note 1(b) to Chapter 27 in Part 1 of Schedule No. 1 to the Customs and Excise Act, put up as 93 octane;
(bb) 195.10.06: Petrol, unleaded, as defined in Additional Note 1(b) to Chapter 27 in Part 1 of Schedule No. 1 to the Customs and Excise Act, excluding that put up as 93 octane;
(cc) 195.10.07: Petrol, leaded, as defined in Additional Note 1(c) to Chapter 27 in Part 1 of Schedule No. 1 to the Customs and Excise Act; and
(dd) 195.10.17: Distillate fuel, as defined in Additional Note 1(g) to Chapter 27 in Part 1 of Schedule No. 1 to the Customs and Excise Act,
in Part 5 of Schedule No. 1 to the Customs and Excise Act; or (ii) petroleum oil and oils obtained from bituminous minerals,
known as crude, referred to in tariff heading no. 27.09 in Part 1 of Schedule No. 1 to the Customs and Excise Act, when supplied and imported for the purposes of being refined for the production of fuel levy goods as defined in section 1 of the Customs and Excise Act; or
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(iii) anti-knock preparations referred to in tariff heading no. 3811.11 in Part 1 of Schedule No. 1 to the Customs and Excise Act; or
(iv) illuminating kerosene as defined in Additional Note 1(f) to Chapter 27 in Part 1 of Schedule No. 1 to the Customs and Excise Act, referred to in fuel levy item no. 195.10.13 in Part 5 of Schedule No. 1 to the Customs and Excise Act and which are not mixed or blended with another substance.’’.
Amendment of paragraph 8 of Schedule 1 to Act 89 of 1991
116. Paragraph 8 of Schedule 1 to the Value-Added Tax Act, 1991, is hereby amended by the substitution for Note 1 and the words following Note 1 but preceding Item 406.00 of the following Note and words, respectively:
‘‘NOTES: 1. The following exemptions, identified by subheadings, shall be subject to
the Notes as contemplated in Schedule No. 1 to the Customs and Excise Act.
[2709.00 Petroleum oils and oils obtained from bituminous minerals, crude
2710.11.03 Petrol, unleaded 2710.11.05 Petrol, leaded 2710.11.30 Distillate fuel 3811.11 Anti-knock preparations based on lead compounds] 4907.00.30 Travellers’ cheques and bills of exchange, denominated in a
foreign currency 4911.10.20 Publications and other advertising matter, relating to fairs,
exhibitions and tourism in foreign countries’’.
Amendment of Item 406.00 of Schedule 1 to Act 89 of 1991
117. Item 406.00 of Schedule 1 to the Value-Added Tax Act, 1991, is hereby amended—
(a) by the substitution for the heading to item no. 406.00 of the following heading:
‘‘406.00 GOODS IMPORTED FOR DIPLOMATIC AND OTHER FOREIGN REPRESENTATIVES:’’;
(b) by the substitution for paragraphs 2, 3, 4, 5 and 6 of the Notes to item no. 406.00 of the following paragraphs, respectively: ‘‘2. This exemption (excluding item no. 406.03) is allowed only if the
Director-General: Foreign Affairs or an official acting under his or her authority has certified that a person requiring this exemption is listed in the register maintained by the Department of Foreign Affairs in accordance with the Diplomatic Immunities and Privileges Act, [1989] 2001.
3. For the purposes of item no. 406.03, ‘an organisation or institution’ means an organisation which the Director-General: Foreign Affairs or an official acting under his or her authority has certified as an organisation or institution with which the Republic has concluded a formal agreement, which provides, inter alia, for the granting of such exemption.
4. This exemption is not allowed to South African citizens or permanent residents of the Republic, unless the Government of the Republic has, by agreement with an organisation or institution contemplated in Note no. 3, undertaken to grant an exemption to a South African citizen who is a representative, member, agent or officer, but excluding a delegate, with or to such organisation or institution.
5. A motor vehicle exempted in terms of [items] item no.’s 406.02, 406.03, 406.05 or 406.07, may not be offered, advertised, lent, hired, leased, pledged, given away, exchanged, sold or otherwise disposed of within a period of two years from the date of importation: Provided that any one of the foregoing acts with this vehicle within a period of two years from the date of importation renders the importer of the vehicle liable to pay tax as determined by the Commissioner in consultation with the Director-General: Foreign Affairs.
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6. For the purposes of [items] item no.’s 406.02, 406.03 and 406.05 ‘members of their families’ means the spouse, any unmarried child under the age of 21 years, any unmarried child between the ages of 21 and 23 years who is undertaking full-time studies at an educational institution, and any unmarried child who is due to physical or mental disability incapable of self-support, and any other relative specially approved by the Minister of Foreign Affairs, who forms part of the household of any such member or person, as the case may be, or who joins any such household during visits to the Republic.’’;
(c) by the substitution in paragraph 7 of the Notes to item no. 406.00 for the words preceeding subparagraph (a) of the following words: ‘‘7. For the purposes of Note no. 6 ‘spouse’ means the partner of [such] that
person—’’; and (d) by the substitution for item no. 406.05/00.00/01.00 of the following item:
‘‘406.05/00.00/01.00 Goods for the official use by a consular mission and goods for the personal or official use by consular representatives accredited to a consular mission and foreign representatives (excluding those referred to in [items] item no.’s 406.02 and 406.03), and members of their families’’.
Amendment of Item 407.00 of Schedule 1 to Act 89 of 1991
118. Item 407.00 of Schedule 1 to the Value-Added Tax Act, 1991, is hereby amended—
(a) by the substitution for paragraphs 1, 2 and 3 of the Notes of the following paragraphs, respectively: ‘‘1. The exemption in terms of item no. 407.01/00.00/01.02 is allowed only
if the goods can be identified as being the same goods which were taken from the Republic.
2. The exemption in terms of item no. 407.02 is not allowed for firearms acquired abroad or at any duty-free shop and imported by residents of the Republic returning after an absence of less than 6 months.
3. (a) The exemption in terms of item no. 407.02 is allowed only once per person during a period of 30 days and is not allowed for goods imported by persons returning after an absence of less than 48 hours.
(b) The exemption in terms of item no. 407.02, with the exception of the exemption in respect of tobacco and alcoholic products, is allowed to children under 18 years of age, whether or not they are accompanied by their parents or guardians, provided the goods are for use by the children themselves.’’;
(b) by the substituition for paragraph 4 of the Notes of the following paragraph: ‘‘4. A member of the crew of a ship or aircraft (including the master or pilot)
is, subject to the conditions laid down by the Commissioner— [(a) only entitled to the exemptions in terms of item no.’s
407.02/22.00/01.00, 407.02/22.00/02.00, 407.02/24.02/01.00, 407.02/24.03/01.00 and 407.02/33.03/01.00 if such member returns to the Republic permanently; and]
(b) only entitled to the exemption in terms of item no. 407.02/00.00/ 01.00 provided the total value of the goods declared under this item does not exceed R500 (or such other amount as the Minister may fix by notice in the Gazette); and
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(c) only entitled to the exemption in terms of item no. 407.02/00.00/ 02.00 provided the total value of the goods declared under this item does not exceed R2 000 (or such other amount as the Minister may fix by notice in the Gazette).’’;
(c) by the substitution for paragraphs 4A, 4B, 4C, 5, 6 and 7 of the Notes of the following paragraphs, respectively:
‘‘4A. The exemption in item no. 407.02/00.00/02.00 is only applicable if the total value of the goods declared under item no. 407.00 (excluding goods provided for in item no. 407.01) does not exceed [R12 000] R15 000 (or such other amount as the Minister may fix by way of a notice in the Gazette).
4B. If the person concerned so desires and indicates accordingly before the goods are cleared, the goods in respect of which the exemption in item no. 407.02/00.00/02.00 is applicable, may be cleared at the rates of duty specified in Schedule No. 1 to the Customs and Excise Act and with payment of VAT at the standard rate.
4C. If a person contravenes any provision of this Act, the Customs and Excise Act or any other law relating to the importation of goods, the Commissioner may refuse to grant any exemption provided for in item no. 407.02.
5. For the purposes of item no. 407.04/87.00/01.00(i) the vehicle in question shall not be deemed to be personally owned and used personally by the importer unless such importer was, at all reasonable times, personally present at the place where the vehicle was used by him or her, and the importer shall be deemed to have used that vehicle from the date on which he or she took physical delivery of the vehicle until the date on which the vehicle was delivered by him or her to the shippers or other agent for the purpose of shipment or dispatch.
6. For the purposes of item no. 407.04, the importer shall, if he or she is absent for a continuous period of longer than 3 months from the place where the vehicle is usually used in the Republic, not be deemed to have imported the vehicle for his or her personal or own use, and tax as determined by the Commissioner is payable as from the date of such absence.
7. The exemption in terms of item no. 407.04 is allowed only once per family during a period of 3 years.’’;
(d) by the insertion of the following item no.’s after Note 7 to item no. 407.00: ‘‘407.01 Personal effects, sporting and recreational equipment,
new or used: 407.02 Goods imported as accompanied passengers’ baggage
either by non-residents or residents of the Republic and cleared at the place where such persons disembark or enter the Republic:’’;
(e) by the insertion before item no. 407.02/22.00/01.00 of the following items: ‘‘407.02/00.00/01.00 New or used goods, of a total value not exceed-
ing R3 000 per person (or such other amount as the Minister may fix by notice in the Gazette)
407.02/00.00/02.00 Additional goods, new or used, of a total value not exceeding R12 000 per person (or such other amount as the Minister may fix by way of a notice in the Gazette), excluding goods of a class or kind specified in item no’s. 407.02/22.00, 407.02/ 24.02, 407.02/24.03 and 407.02/33.03’’;
(f) by the substitution for item no. 407.02/24.02/01.00 of the following item: ‘‘407.02/24.02/01.00 Cigarettes not exceeding [400] 200 and cigars
not exceeding [50] 20 per person’’; (g) by the deletion of item no’s. 407.02/00.00/01.00 and 407.02/00.00/02.00; (h) by the insertion of the following item no. before item no. 407.04/87.00/01.00:
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‘‘407.04 Motor vehicles imported by natural persons for own use on change of permanent residence to the Republic:’’; and
(i) by the insertion of the following item no. before item no. 407.06/00.00/01.00: ‘‘407.06 Goods imported by natural persons for own use on change
of residence to the Republic:’’.
Amendment of Item 409.00 of Schedule 1 to Act 89 of 1991
119. Item 409.00 of Schedule 1 to the Value-Added Tax Act, 1991, is hereby amended—
(a) by the substitution for paragraph 2 of the Notes of the following paragraph: ‘‘2. This exemption (excluding item no. 409.07) is allowed only if the
goods can be identified as being the same goods which were exported.’’;
(b) by the substitution in paragraph 3 of the Notes for the words preceeding subparagraph (a) of the following words:
‘‘3. For the purposes of item no. 409.07—’’; and (c) by the substitution in item no. 409.07/00.00/01.00 for the words preceding
paragraph (i) of the following words: ‘‘409.07/00.00/01.00 Compensating products (excluding goods liable
to the duties specified in Part 2 of Schedule No. 1 to the Customs and Excise Act) obtained abroad from goods temporarily exported for outward processing, in terms of a specific permit issued by the International Trade Ad- ministration Commission, provided—’’.
Amendment of Item 412.00 of Schedule 1 to Act 89 of 1991
120. Item 412.00 of Schedule 1 to the Value-Added Tax Act, 1991, is hereby amended by the substitution for paragraphs 1 and 2 of the Notes of the following paragraphs, respectively:
‘‘1. For the purposes of [items] item no.’s 412.03 and 412.04, the bill of entry or other document prescribed in terms of the Customs and Excise Act must be supported by an inventory of the goods and documentary proof that the goods qualify for exemption under these items.
2. For the purposes of [items] item no.’s 412.26 and 412.27, such exemptions are subject to compliance with sections 39 and 40 of the Customs and Excise Act and which shall apply also to imports from or via Botswana, Lesotho, Namibia or Swaziland.’’.
Amendment of Item 470.00 of Schedule 1 to Act 89 of 1991
121. Item 470.00 of Schedule 1 to the Value-Added Tax Act, 1991, is hereby amended—
(a) by the substitution for paragraph 2 of the Notes of the following paragraph: ‘‘2. (a) The exemption in terms of [items] item no’s 470.01 or 470.03 is
allowed only for goods to be used for the processing or manufacture of goods for export and the processed or manufactured goods must be exported within 12 months from the date of importation thereof.
(b) The exemption in terms of item no. 470.02 is allowed only for parts to be used and the goods submitted for repair, cleaning or reconditioning must be exported within 6 months from the date of importation thereof:’’; and
(b) by the substitution for paragraph 3 of the Notes of the following paragraph: ‘‘3. This exemption is allowed only if the Controller [of Customs and
Excise] ensures that the tax is secured, in part or in full, by the lodging of a provisional payment or bond except where the Commissioner, in exceptional circumstances, otherwise directs, or in the circumstances contemplated in rule 120A.01 (c) of Chapter XIIA of the Rules under the Customs and Excise Act.’’.
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Amendment of Item 480.00 of Schedule 1 to Act 89 of 1991
122. Item 480.00 of Schedule 1 to the Value-Added Tax Act, 1991, is hereby amended—
(a) by the substitution in paragraph 1 of the Notes for the words preceeding subparagraph (a):
‘‘The exemption in terms of item no. 480.35 is allowed—’’; (b) by the substitution in paragraph 1 of the Notes for subparagraph (c) of the
following subparagraph: ‘‘(c) only if each sample is an article representative of a particular
category of goods already produced or to be produced abroad, imported solely for the purpose of being shown or demonstrated free of charge to prospective customers.’’; and
(c) by the substitution for paragraphs 2, 3, and 4 of the Notes of the following paragraphs, respectively:
‘‘2. [Goods] All goods shall be re-exported— (a) in the case of goods under an international carnet within the
period of validity of such carnet; and (b) in the case of other goods within 6 months from the date of
importation, thereof or within such further period as the Commissioner may in exceptional circumstances, allow.
3. This exemption is allowed only if the Controller [of Customs and Excise] ensures that the tax is secured, in part or in full, by the lodging of a provisional payment or bond except where the Commissioner, in exceptional circumstances, otherwise directs, or in the circumstances contemplated in rule 120A.01 (c) of Chapter XIIA of the Rules under the Customs and Excise Act.
4. If proof is not furnished to the Commissioner that the goods have been duly re-exported within the time period prescribed in Note [number] no. 2, this exemption shall be withdrawn and tax, penalty and interest must be paid.’’.
Amendment of Item 490.00 of Schedule 1 to Act 89 of 1991
123. Item 490.00 of Schedule 1 to the Value-Added Tax Act, 1991, is hereby amended—
(a) by the substitution for paragraphs 2 and 3 of the Notes of the following paragraphs, respectively:
‘‘2. This exemption is allowed only if the Controller [of Customs and Excise] ensures that the tax is secured, in part or in full, by the lodging of a provisional payment or bond except where the Commissioner, in exceptional circumstances, otherwise directs, or in the circumstances contemplated in rule 120A.01 (c) of Chapter XIIA of the Rules under the Customs and Excise Act.
3. If proof is not furnished to the Commissioner that the goods have been duly re-exported within the time period prescribed in Note [number] no. 1, this exemption shall be withdrawn and tax, penalty and interest must be paid.’’; and
(b) by the substitution for item no. 490.90/00.00/02.00 of the following item: ‘‘490.90/00.00/02.00 Goods not specified in [items] item no.’s 470.00,
480.00 or 490.00, temporarily admitted for pur- poses approved by the Commissioner.’’.
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Amendment of section 1 of Act 38 of 1996, as amended by section 85 of Act 30 of 2000 and section 66 of Act 59 of 2000
124. Section 1 of the Tax on Retirement Funds Act, 1996, is hereby amended by the substitution in the definition of ‘‘rental income’’ for paragraph (d) of the following paragraph:
‘‘(d) any consideration payable by a borrower to the lender in respect of any ‘‘lending arrangement’’ as defined in section [23 (1) of the Stamp Duties Act, 1968 (Act No. 77 of 1968)]1 of the Uncertificated Securities Tax Act, 1998 (Act No. 31 of 1998), as consideration for the use of any [marketable] security, in so far as such amount is not included in paragraph (a) of the definition of ‘interest’.’’
Amendment of section 1 of Act 56 of 1996
125. (1) Section 1 of the Road Accident Fund Act, 1996, is hereby amended by the deletion of the definition of ‘‘fuel’’.
(2) Subsection (1) shall come into operation on a date fixed by the President by proclamation in the Gazette.
Amendment of section 5 of Act 56 of 1996, as amended by section 74 of Act 19 of 2001
126. (1) Section 5 of the Road Accident Fund Act, 1996, is hereby amended— (a) by the substitution in subsection (1) for paragraph (a) of the following
paragraph: ‘‘(a) by way of a [fuel levy] Road Accident Fund levy [of all fuel sold
within the Republic] as contemplated in the Customs and Excise Act, 1964; and’’;
(b) by the substitution for subsection (2) of the following subsection: ‘‘(2) The Road Accident Fund levy paid into the National Revenue
Fund in terms of the provisions of section 47(1) of the Customs and Excise Act, 1964, less any amount of such levy refunded under that Act, is a direct charge against the National Revenue Fund for the credit of the Fund.’’; and
(c) by the deletion of subsection (3). (2) Subsection (1) shall come into operation on a date fixed by the President by
proclamation in the Gazette.
Amendment of section 1 of Act 31 of 1998, as amended by section 109 of Act 32 of 2004
127. (1) Section 1 of the Uncertificated Securities Tax Act, 1998, is hereby amended—
(a) by the insertion after the definition of ‘‘beneficial ownership’’ of the following definition:
‘‘‘change in beneficial ownership’ in relation to a security includes the cancellation or redemption of that security but does not include any issue of that security;’’; and
(b) by the deletion of the definition of ‘‘issuer’’. (2) Subsections (1)(a) and (b) shall come into operation on 1 January 2006 and shall
apply in respect of the issue of any security, and the cancellation or redemption of any security on or after that date.
Substitution of section 2 of Act 31 of 1998
128. (1) The following section is hereby substituted for section 2 of the Uncertificated Securities Tax Act, 1998:
‘‘Imposition of tax
2. (1) There shall be levied and paid for the benefit of the National Revenue Fund a tax, to be known as the uncertificated securities tax, in
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respect of [the issue of, and] every change in beneficial ownership in any securities, at the rate of 0,25 per cent of the taxable amount of such securities determined in terms of this Act.
(2) The Minister of Finance may announce that, with effect from a date mentioned in that announcement— (a) the rate of uncertificated securities tax contemplated in subsection (1)
will be reduced to the extent mentioned in the announcement; or (b) there will be a change in the provisions of this Act that will have the
effect that the transfer of beneficial ownership in any security will no longer be subject to uncertificated securities tax.
(3) If the Minister makes an announcement contemplated in subsection (2), such reduction or change comes into effect on the date announced and continues to apply for a period of six months from that date unless Parliament passes legislation giving effect to such announcement within that period of six months.’’.
(2) Subsection (1) shall— (a) to the extent that it inserts subsection (2), come into operation on the date of
promulgation of this Act; and (b) to the extent that it amends the rest of section 2, come into operation on
1 January 2006 and applies in respect of the issue of any security on or after that date.
Repeal of section 3 of Act 31 of 1998, as inserted by section 109 of Act 53 of 1999 and amended by section 59 of Act 30 of 2002
129. (1) Section 3 of the Uncertificated Securities Tax Act, 1998, is hereby repealed. (2) Subsection (1) shall come into operation on 1 January 2006 and applies in respect
of the issue of any security on or after that date.
Amendment of section 5 of Act 31 of 1998, as amended by section 110 of Act 32 of 2004
130. (1) Section 5 of the Uncertificated Securities Tax Act, 1998, is hereby amended by the substitution for the heading of the following heading:
‘‘[Other transactions] Change in beneficial ownership in securities effected by a participant’’.
(2) Subsection (1) shall come into operation on 1 January 2006 and applies in respect of every change in beneficial ownership in any security on or after that date.
Insertion of section 5A into Act 31 of 1998
131. (1) The following section is hereby inserted in the Uncertificated Securities Tax Act, 1998, after section 5:
‘‘Other transactions
5A. (1)The taxable amount in respect of every change of the beneficial ownership in securities shall be— (a) the amount declared by the person who acquires beneficial ownership
of those securities as the consideration paid for such securities; or (b) if no amount referred to in paragraph (a) is declared, or if the amount
so declared is less than the lowest price of the securities on the date of the relevant transaction or other manner of acquisition, the closing price of those securities on the date of the relevant transaction or other manner of acquisition:
Provided that this section shall not apply in respect of any change in beneficial ownership in securities in respect of which section 4 or 5 applies.
(2) The person who acquires the beneficial ownership of the securities shall be liable for the tax payable as contemplated in this section.’’.
(2) Subsection (1) shall come into operation on 1 January 2006 and applies in respect of every change in beneficial ownership in any security on or after that date.
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Amendment of section 6 of Act 31 of 1998, as amended by section 15 of Act 32 of 1999, section 87 of Act 30 of 2000, section 75 of Act 19 of 2001, section 180 of Act 60 of 2001, section 60 of Act 30 of 2002, section 122 of Act 74 of 2002, section 191 of Act 45 of 2003 and section 111 of Act 32 of 2004
132. (1) Section 6 of the Uncertificated Securities Tax Act, 1998, is hereby amended by the deletion in subsection (1) of paragraph (a).
(2) Subsection (1) shall come into operation on 1 January 2006 and applies in respect of the issue of any security on or after that date.
Amendment of section 7 of Act 31 of 1998, as amended by section 110 of Act 53 of 1999
133. (1) Section 7 of the Uncertificated Securities Tax Act, 1998, is hereby amended—
(a) by the deletion in subsection (1) of paragraph (a); (b) by the addition of the word ‘‘and’’ in subsection (1) after paragraph (b); and (c) by the insertion in subsection (1) after paragraph (b) of the following
paragraph: ‘‘(c) referred to in section 5A is payable, by the person acquiring the
beneficial ownership of the securities, to the Commissioner by the 14th day of every month in respect of changes in beneficial ownership in securities during the previous month, and that person shall by the same date submit a declaration, in the form and containing the information prescribed by the Commissioner, stating the amount of tax (if any) payable by that person.’’.
(2) Subsection (1) comes into operation on 1 January 2006 and applies in respect of every change in beneficial ownership in any security on or after that date.
Amendment of section 54 of Act 45 of 2003
134. Section 54 of the Revenue Laws Amendment Act, 2003, is hereby amended by the substitution for subsection (2) of the following subsection:
‘‘(2) Subsection (1)(a), (b), (c), (d), (e), (f), (g), (h) and (i) shall be deemed to have come into operation on 6 November 2002 and shall apply in respect of any unbundling transaction which takes effect on or after that date: Provided that where an unbundling transaction took effect after 6 November 2002 but before 22 December 2003, the unbundling company may elect that the provisions of section 46 of the Income Tax Act, 1962, prior to the amendments by this Act, should apply.’’.
Amendment of section 30 of Act 34 of 2004
135. Section 30 of the Second Revenue Laws Amendment Act, 2004 is hereby amended—
(a) by the deletion in subsection (1) of paragraph (b); and (b) by the substitution for subsection (2) of the following subsection:
‘‘(2) Subsection (1) shall come into operation on the date of promulgation of this Act.’’.
Short title and commencement
136. (1) This Act is called the Revenue Laws Amendment Act, 2005. (2) Save in so far as is otherwise provided in this Act or where the context indicates
otherwise, the amendments effected to the Income Tax Act, 1962, by this Act shall for purposes of assessments in respect of normal tax under the Income Tax Act, 1962, deemed to have come into operation as from the commencement of years of assessment ending on or after 1 January 2006.
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