Income Tax Act
REPUBLIC OF SOUTH AFRICA
GOVERNMENT GAZETTE
STAATSKOERANT
VAN DIE REPUBLIEK.VAN SUID-AFRIKA
Registered at the [>ost Office as a Newspaper As 'n Nuusb/ad by die Poskantoor Geregistreer
VoL. 156].
·Price· · 20c ' Prys
Overseas > 30c Oorsee ,
·, POST,FRE~POSVRY.
\ .. ··. . :. ' . ' .. · . CAP~ TOWN, 28 JUNE 1978
. K.AAPSTAD, 28JUNIE 1978 .
t , ;
[No. 6084
DEPARTMENT OF THE PRIME MINISTER . · · DEPARTEMENT VAN DIE EERSTE MINISTER
. . . .. : .. ;· ! i· ,· .
· No. 1345. . 28 June 1978. No. 1345 . . 28 Junie 1978 .
It is hereby notified that the State President has assented to the following Act which is hereby published for general information:- . ' . .. ~ ... _ . ~ . No. 101 of 1978: Iricome·Tax Act,1978. ::
. . , :"·
· Hierby word bekend gemaak dat die Staatspresident sy goedkeuring geheg het aan die .onderstaande Wet wat hierby ter alge!ll~ne inligting gepubliseer word:- ·
No. 101 van 1978: lnkomstebelastingwet, 1978.
Please note that most Acts are published in English and another South African official language. Currently we only have capacity to publish the English versions. This means that this document will only contain even numbered pages as the
other language is printed on uneven numbered pages.
GOVERNMENT GAZETTE; 28 JUNE 1978 No.'6084 3
:·:INCOMETAXAcr; 1978.· ·· ·· Act No. 101, 1978 .
. GENERAL 'EXPLANATORY NOTE:' : ' . ': .' . . . ,'- ! ' ~ . I' · ' ; :· '
[ ·1: ·1 ;_ Wordsoin bold type in square brackets indicate omissions·from '·,., ., ; . . . . -... ;.- ~ e_xi~ting~ ~it~~tinents.: . _· ~.< -·~~--;: ~- ,;· .'·. ' . : :· .
- -· _,._. ___ ._ .. _ . Words· !Jnderlined _with solid line indicate insertions in existing
. enactments.: · · · ·• · · · · · ··
: ''; ( ' .. · ; _ _;, To fbi: the rates of normal tax payable ·by persons other than
·: companies ·in respect 'of taxable incomes for the years· of - assessmeni-ending, on ,28 February -.1979. and 30 June · 1979; and by companies in :respect of taxable incomes for
years of assessment ending during the period of twelve . -_months . ending on· 31 March; 1979; to: provide for the
repayment to taxpayers. concerned of a certain portion of normal tax paid; to amend the Income Tax Act, 1962; to amend the ,Income ~Tax .Act, 1977; and to provide for inddental matters .. ::' ' . . . ·;· .· . , ·
~ . ' : -: .,· . : J' ~- . - . ' ~ . . • . • ' ~· !_ ' ' . .' .'i ' . , .
~ (E_nglish text signet!_ by thf! SJate President.) . · . . (Assented to _20 June 1978. ). . .. ., .
.· ... · l ._ ,_~ ·-------'--- . ·-:: ~ ) ·, .: ':. . ' .. -~
~ '• ~-, ~
BE IT ENACTED by ' th~:st;te :President, the .Senate and the -. : House -of· Assembly of· the. Republic . of South Africa, as follows:- : ·.: · ·· · ...
· ' . ·1. The r~tes ~f no~al tax~ ~o b~ le~ied ht t~~s ·of section 5 (2) Rates of 5 of the Income Tax Act, 1962 (Act No. 58 of 1962), hereinafter nonnal taX •.
referred to as the principal Act, in respect of-:- , . . . · · . . , . ._ (a) th'e.taxable.incoJlle of any, per-Son other than a company
· · · · . . for the year o~ assessment eriding· 28 February 1979 or . , .30 June 1979; and , .-. ·. · · . . . . : " .
10 ;:: : (b) . the taxable income of an:Y_:company determined under · - ·. '. . _·the principal 'Act to·have been derived elsewhere than in
: · · . _ ' · the_ territory of South ·.west ·Africa for any year of _· · '
1 assessment ending during the period of twelve months . . _ , ending on 31 March 1979, _·. . · · · ...
15 shall be as set forth iri the Scheduleto this:Acf' ·: · t \ ._, ;,
20
25
30
:. 2. The pOrtion of the norm~.l iax deterinlned iri' accordance with Certain portion the provisions of Pll!llgraph 1 (h) or (i ).:~f ~e Schedule to t~i~ Act ~;~~~ :: '·; shall· be a loan P?rtton o~ t?at ~;· : .. :'. '', ::··. ' .! taxpayers. ·' · -.. . ·
I :
3; (1) Section 1 of the prinCipal Act is hereby amended- Am~ndment of . ·, (a) by the subStitution for' paragraphs · (a) and (b) of the section 1 of• .
·. definition of "benefit · fund'' of 'the following para- Act ss of 1962• '. , as amended by . · . :. graphs: . · ,_., · ·.: :· -·· . section3of' · · : ..
: r "(a) any friendly society registered under the Friendly Act _90_ of 1962; ·· • · · · ·.· • Societies Act; ·1956 (Act No: 25 of 1956), or [(b) J secttonl or · · .
any fund which is not ·so· registered solely because ~~~no~ ~3• . . of the provisions of section 2 (2) (a) of. [the said) Act 72 of 1963, that Act; or ~ : · · -· • . ; : · , ·· ·. · · · . · section 4 of· .
b - d. al · h · d d · th. · · · · Act 90 of 1964, ( ) any me rc sc erne regrstere un er e provrsrons section 5 of . of the Medical Schemes Act, 1967 (Act No. 72 of Act 88 of 1965, 1967)· or". section S of · · .;.;..;~·~ ' Act SS of 1966,
sectionS of Act 95 of 1967,
GOVERNMENT GAZETTE, 28 JUNE 1978 No. 6084 5
INCOME TAX ACT, "1978.' Act No. 101, 1978
(b) by ·. the addition · at the end of · the definition· · of section s o(, "dividend" of the following further proviso: · : · · Act 76 of 1968,
· · · section 6 of "Provided further that ·a reserve of any·· company Act 89 ofl969, . which consists of· or includes any amount trans erre section 6 of ··
5 fronf the share premium account of the .company shall, Act 52 of 1970, except to ·the extent. to which the Secretary is satisfied ~:~s ~t{971 ,. that such · reserve consists of any · other amount, be section 4 of . · deemed for the purposes of this definition to be a share Act 90 of 1972,
· t f · h ·· ·db section4of .· premiUm acco~~ o,, or s are premiUm receive y, Act 65 of 1973, 10 .. · such company. , and .. • · .. . . . . . .• section 4 of
· (c) . by the substitution for subparagraph (v)of paragraph (b) Act.85 of 1974,' . . of the proviso to the definition of "pension fund" of the sectiOn 4 of
. " 11 · b . ·' h· . Act 69 of 1975, . . •0 owmg su paragrap · • , . . · · · section 4 of '~(v) for the administration of the· fund in such a manner Act 103 of 1976
15 as to preclude the employer, except in the case of a and section 4 of· local authority; from controlling the management or Act 113 of 1977., assets of the furid and·from deriving any monetary · · advantage from moneys paid dnto, or out of the fund, exce t that where the employer is a partner-
20 · · · ' ship;' a member of the partnership may e permltte to derive , such monetary advantage· if he wa previously ail. employee and, on becoming partner; :was permitted to retain his membership o
· the fund·· as though he had· not 'ceased to be a 25 employee, his contributions being based upon hi
· pensionable emoluments during the twelve month which ended on the day on which he ceased to b an employee arid his benefits from.the fund bein calculated accordingly; and";· ·
30, (2) For the· purposes of assessments' under the principal Act- (a) the amendment effected by paragraph (a) of subsection
· · (1) shall be deemed to have taken effect as from the . 'commencement of years of assessment ended or ending .. on or after 1 January 1976; and .
35' ' (b) the ainendment_effected by:paragraph (b) of subsection · · · · (1) shall be deemed to have taken effect in respect of · ., any amount distributed by a· company on or after 13
June 1978; · ··. ; · · ·
40
45
50
55
60
4. (1) Section 10 of tlle· pri~cip~ Act is hereby amended- Amendment of . ·. (a) . by the insertion after subparagraph (xi C) of paragraph Aecti58 1~ ?t62
· . (i) .of subsection (1) of the following subparagraphs: asc:une;ded by' '' xiD so much of the interest on Re ·ublic of South Africa section 8 of
: , per cent reasury on s as m t e case o any Act .90 of 1962, · . taxpayer doeg'not in the year of assessment exceed ~~:~~~ ~t{963 · the sum of three thousand two hundred rand; section 8 of '
· (xiE) interest on· Defence Bonus Bonds issued by the Act 90 of 1964, Treasury and , the amount . of, any . prize paid t section 10 of holders of such bonds designated. for the allocation Act .88 of 1965• f
. , . .d· . .. . . · sectiOn 11 of · · o pnzes; . ; an. . . . .. , . . Act ss of 1966,
.. (b) by the substitution in subparagraph (xiv) of paragraph (i) ~ctio~ 1~ of 7 of subsection (1) for the :words. '.'Bantu Investment se~~i~n ~ SJ6 ' Corporation of South.' AfricaLiriiited" of the words Act 76 of 1968, "Corporation for Economic Development, Limited,". section 13 of
(2) (a) The amendment effected by paragraph (a) of subsection Act.89 °ll(69, ' . (1) shall, for the purposes of assessments under the ~~:~5~ of01970
principal Act, be deemed to 'have takeri effect from the section 7 of ' commencement of years of assessment ended or ending Act.90 of 1972, on or after 1 January 1978. · . , , , . section 7 of
(b) The amendment effected by paragraph (b) of subsection ~~~i~~ ~~ ~~3• (1) shall be deemed to have taken .effect on 15 June Act 85 of 1974,
( -···
1977. · section 8 of ' · . . • . • • . . . Act 69 of 1975,
section 9 of ... ' . ;~
Act 103 of 1976 and section 8 of Act 113 of 1977.
GOVERNMENT GAZETIE, 281UNE 1978 No. 6084 1
·5
10
15 "
.,._
20
25
30
35
40
:• INCOME TAX ACf, 1978. :." Act No.101,·1978 ·
S. Section 11 of the principal Act is' hereby amended;_ . · . Amendment of (a) by the substi~tioll f?r subparag.~~ph (i) of p~agraph (k) ~~~ !f fJ62,
'';.·I_
of the followmg subparagraph: ·. .( .· .. · · as amended by "(i) any sum contributed during the year of assessment section 9 of
. · to any pension fund by .way of current contribution Act 90 of 1962, by :any person [holding] wh~ holds any office or :~7~ ~f0{963• employment, where the making. of such a con- section 9 of tribution is a condition of;. the .. holding of such Act .90 of 1964, office or employm~n_t, or by ·any person who is a ~~~ !f f~s.
, . , partner referred tom subparagraph (v) of paragraph section 12 of · . (b) .. of the· proviso to the definition of 'pensiOn Act .ss of 1966, . fund •: ·Provided that the · total deduction to be ~9~ !f f~1
:allOwed in respe~t of contributions by such ~r8on ~C:76 ~t{968: to [a] anypenston fund or funds not established section 14 of
· · · ! · · by law. or:: for the benefit of employees of a local Act .89 of 1969, authority shall not in the year of assessment exceed ~~~~ !? fho
' '. the. sum of one .. thousand. seven hundred and fifty section 10 of • ·. · :rand;"i'. ·· -.••,::, ... · ... , ... ·:,·. Act.88oft971,
.•. , ·. . · . · . . • , ., .. · · section 8 of '" · · · · ·. ' . · '.· . . · . · , • Act 90 of 1972,
(b) ·by· the substttutton for paragraph (m) of the followmg section 9 of · · paragraph: "·.'·'' . ,. · ·. ' ·: · •·.: ' Act 65 of 1973,
"(m) any amount paid by· way of annuity -~uring the year~~~ 1i fh 4 of assessment by. any taxpayer-:-·:~·.: sec~on ~ 1 of '
(i) to a former employee who has retired from the Act 69 of 1975 .-taxpayer~ s employ: on grounds of old age, ·ill and section 9 of . health or infirmity;· or: · : ; · , , :. Act 113 of ~~77·,',,· .
(ii) to a rson who was for a riod of at least . . . , .. ·five years .a partner in ·an undertaking carried on by the taxpayer 'and 'who retired: from the
: partnership in respect ·of that undertaking on . ·.grounds' of.- old age, ill- health or infirmity,
. , , .., provided the . Secretary ) is satisfied that the : . amount. so paid to such person is reasonable,
, :: having regard to the services rendered by such ' ' '· J , person as a partner in such undertaking prio · ·.· to his retirement and the profits made in such . , , · · undertaking; and that the said amount does not ·.·--,.:_. ·represent consideration·payable to such person :, , . : in respect of his interest in the partnership; or
[(ii) J (iii)· to any person . who is . dependent for his . ,~maintenance u'pon a foimer employee or a
... ' . former partner in an undertaking carried Oii"iiY · ,' the taxpayer or (where such former employee
• . l ~ ~ .
•. \ l
.' , or former: partner is deceased) was so depen- dent immediately prior to his death:
.. ; '.•
i· i. ,·
: ·:. ., ; .. '',•
.•: J:' ..
45 ., Provided that the deduction under · subparagraph · . [(ii)J (iii) .shall not .. exceed in;.respect of the ; persons~ . dependent: on any. one retired or
deceased _employee or former partner, the sum of .. one thousand·rand;"; · · ·· · ,, ·•
•' ~ ' r .'), . ' ' 50· ·· ·(c) . by the substitution in subparagraph (aa)ofparagraph (n)
for the words:. preceding the proviso of the following words: · .. ·.:. · ·
·' . . , '.'(aa) so.much of· the· total current contributions to any
55· I
.. ,.
' · · · retirement aimuity fund· or· funds•'made by any . ·,_r. . person 'as a member of such fund or funds during a
.c.: ·:. ·year -~r'a'ssessment during which l!uch person has
... · . ' caft:ie~ ·on any. _trade. as does. -~vfso· to subsectic"i (5), of ~~~00 ~F ?~2• the followmg proviso: , . . '· ... . . section 5 of
"P 'd d th · · Act 6 of 1963, rovi e at~ · . section 11 of .ill. no allowance shall be made under this subsection in Act 72 of 1963, respect of any building or improvements on any section 12 of · · premises not owned by .the taxpayer unless the Act .90 of 1964,
· · · • • section 14 of .. taxpayer at the date on-which the erection of such 'Act 88 of 1965
· building or the introduction of such ·improvements· section 17 of ' is commenced is entitled to the occupation of such Act .ss of 1966, premises for a period endirig ·not less than ten years sectiOn 13 of after such date·: . . . . . ,. Act _52 of 1970,
• section 13 of Act 88 of 1971,
GOVERNMENT OAZETIE, 28 JUNE 1978 IS
INCOME TAX ACT, 1978. Act No. 101, 1978 ·
s:
10
. ' 15
\ ·.
. I
25.
. · ... ' the references in this subsection to· an rocess section 12 of h. h · th · · f th S · f Act 90 of 1972, w 1c m e opm10n o e ecretary IS o a nature section 13 of
similar to a process of manufacture, shilll not apply Act 6S of 1973, in respect of any building the erection of which is section 16 of commenced after 30 June 1979 orin respect o(any Act 8S ~f.l974
' · b 'ld' · · · ' · • d. af h d and section 13 of · : u1 mg Improvements commence ter t at ate, Act 69 of 197!5 . nor in respect of any building brought into use after ·
30,June 1980 orany improvements completed after that date; · ·· . · · · · · ·
(iii) no allow~nce shall be made 'under this subsection in respect of any building :Jet by the taxpayer or in respect of any ;improvements there.to unless- (aa) the receipts and accruals derived by the lessee
. - . . ~- · · · . in canjing on his' aforementioned trade consti-. · ' tute income for the purposes of this Act; or (bb)the erection ,of the building is, or the improve-
:·
. ments aie;'commemced on or before 30 June · ,1979, the building is erected or the improve-
ments. are' ·effected in pursuance ,of a written agreement conCluded by the taxpayer and a building contractor. before the date of promul- gation.: of the Income Tax Act, 1978, the
. building is or such improvements are specified in such agreement, the taxpayer binds himself
· to pay a price,· stipulated in ~e agreement, for the building or improvements,. and such build- ing' is brought into. use or 'such ;improvements are completed; as the· case may be, not later
·i ' . · than 30 June 1980."; · 30 ~!. assessment, where any_ rule provided in this Act as to in port or - the inclusion in· the income of such taxpayer for such settlement year or as to .the deduction or set-off of any amount
15 of Walvis . from or. against his income for such year, in effect Bay. · · requires that regard shall: be had to anything that has
· been done or has occurred in or in relation to a previous year of assessment, anything that has in fact been done or has in fact 'occurred inor in relation to a
20 ·. · year . of. assessment in respect of which the taxpayer , ; .•. ._,. 1 was· assessable . for taxation' purposes under the Income Tax Ordinance, 1974. (Ordinance No. 5 o
1974), of the territory (including a year of assessment .· iii which falls the firstday of September 1977), shall
25 '-- .'for. the: purposes '·'". ......
R3 750 plus 42 per cent of the . amount., by .: which the 1 taxable : amount exceeds. R IS 000; .
R4 170 ·.ph;;. '44 per: cent of the amount by · which · the taxable amount exceeds R 16 000;
R4 610. plus 46 per cent of the amount . by . which the taxable
' am~unt exceeds R 11. 000;
R5 070 . plus 48 per cent of the . amount . by, which the taxable .-.a~ount exceeds. Rl8 000;
R5 550 plus 50 ~r cent of the ' amount by whtch the taxable amount exc_e_eds R 19 000;
GOVERNMENT GAZETIE, 28 WNE 1978
INCOME TAX ACT, 1978.
exceeds R20 000 but does'· not exceed
R21 000 . " . "
R22000·
R23 oOO
No. 6084 33
Act No. 101, 1978 :
Rates oftax in ~spect of persons who are
· not married persons
R6 050 plus 52 per cent of the ·amount by which ·the taxable · amount exceeds R20 000;
R6 570 plus·· 54 per . cerit of . the · amount by which· the taxable amount exceeds R21 000;
R7 110 plus 56 per cent of the amount . by which . the taxable amount exceeds R22 000;
. . . . . . . . ' . . R7 670 plus · 58 · per cent of the
amount by which . the taxable amount. e~ceeds R23 000;
R8 2SO plus 60 per . cent of the amount by· which the taxable amount exceeds R24 000; . ". .
(b) . on each rand of the taxabie 'income of any compru;y (excluding taxabl~ income 'Jerived from mining operations and.taxable income referred to in subparagraph (e)), forty cents: Provided that there shall be added to the amount of tax calculated in accordance with the preceding provisions of this subparagraph a surcharge. equal to five per cent of such amount;· ;.
(c) on each' rand of the taxable inco~e derived by any'company from nrlning for goid ~therwise than on any post-1966 gold mine (but with the exclusion of so much of the taxable income as the Secretary determines to be. attributable to the inclusion in the gross. income of any amount referred to in paragraph (jJ of the definition of "gross income" in section 1 of the principal Act), a percentage determined in accordance with the formula:
. 36o . y = 60-.x-·
in which formula (and. in' tlie fo~ulae set out in. th~ first and second .·provisos hereto) y ' represents such percentage and x the ratio expressed as a percentage which the taxable income so derived (with the said exclusion) bears to the income so derived (with the said exclusion): Provided that if the taxable income so derived (with the .said .exclusion) does .. not exceed forty thousand rand, the rate of tax shall not exceed a percentage determined in accordance with the formula: · ,- .. _
~ = 20(1 ~i!), .. . . X . , './ ,J.. •! I' ..
' ' • : • .. · • 'j •" . ; ~ ; , '1 ':' ', , • , ', ' ' _ ; :-I and if such taxable income exceeds forty thousand rand, the rate of tax shall not exceed a percentage determined in accordance with a formula arrived at by increasing the number 20 in
the formula y = 20 (I- i!) by one for each completed amount of two thousand five hundred rand X
by which the said taxable income exceeds forty thousand rand: Provided further that where a certificate is given by the Government Mining Engineer to the effect that prescribed conditions have been complied with, the rate of tax in respect of taxable income derived from mining for gold on an assisted gold mine shall not exceed a percentage determined in accordance with the
formula y = 68 - 601 : Provided further that there shall be added to the amount of ta~ calculated X . .
in accordance with the preceding provisions of this subparagraph, excluding the second proviso, a surcharge equal to seven and a half per cent of such amount; . . ·
(d) on each rand of the taxable income derived by any company from mining for gold on any post-1966 gold mine (but with the exclusion of so much of the taxable income as the Secretary determines to be attributable to the inclusion in the gross income of any amount referred to in paragraph (jJ of the definition of "gross income" in section I of the principal Act), a percentage determined in accordance with the formula:
Y =60-480 X '
in which formula (and in the formulae set out in the first proviso hereto) y represents such percentage and x the ratio expressed as a percentage which the taxable income so derived (with the said exclusion) bears to the income so derived (with the said exclusion): Provided that if the taxable income so derived (with the said exclusion) does not exceed forty thousand rand, the rate of tax shall not exceed a percentage determined in accordance with the formula:
y = 20 (I -~). X
and if such taxable income exceeds forty thousand rand, the rate of tax shall not exceed a percentage determined in accordance with a formula arrived at by increasing the number 20 in
GOVERNMENT GAZETIE, 28 JUNE 1978 No. 6084 35
INCOME TAX ACT, 1978. Act No. 101, 1978
8 . . · the formula y = 20 (I --) by one for each completed amount of two thousand five hundred
, X rand by which the said taxable income exceeds forty thousand rand: Provided further that there shall be added to the amount of tax calculated in accordance with the preceding provisions of this subparagraph a surcharge equal to seven and a half per cent of such amount;
(e) on each rand of the taxable income of any company, the sole or principal business of which in the Republic is or has been mining for gold and the determination of the taxable income of which for the period assessed does not result in an assessed loss, which the Secretary determines to be attributable to the inclusion in its gross income of any amount referred to in paragraph (j) of the definition of "gross income" in section I of the principal Act, a rate equal to the average rate of normal tax or thirty-five cents, whichever is the higher;
(f) on each rand of the taxable income derived by any company from mining for diamonds, forty-five cents: Provided that there shall be added to the amount of tax calculated in accordance with the preceding provisions of this subparagraph a surcharge equal to seven and a half per cent of such amount; · . .
• (g) on each rand of the taxable income derived by any company from mining operations (other than mining for gold or diamonds), forty cents: Provided that there shall be added to the amount of tax calculated in accordance with the preceding provisions of this subparagraph a surcharge equal to five per cent of such amount;
(h) in respect of the taxable income of any person other than a company, a sum equal to ten per cent of the amount of tax determined in accordance with subparagraph (a), if such tax is not less than one hundred and fifty rand: Provided that any fraction of a rand of the tax calculated under this subparagraph shall be disregarded;
(i) in respect of the taxable income of any company, a sum equal to fifteen per cent of the aggregate of the amounts of tax determined under subparagraphs (b), (c), (d), (f) and (g), before the. addition . of the surcharges referred to in the proviso to subparagraph (b), the third proviso to subparagraph (c), the second proviso to subparagraph (d), the proviso to subparagraph (f) and the proviso to subparagraph (g): Provided that any fraction of a rand of the tax calculated under. this subparagraph shall be disregarded: Provided further that the tax calculated in· terms of this subparagraph shall not be payable by any company whose liability under this subparagraph would, but for this proviso, be less than five rand. ·
2. (I) For the purposes of paragraph I income derived from mining for gold shall include any income derived from silver, osmiridium, uranium, pyrites or other minerals which may be won in the course of the mining for gold, and any income which, in the opinion of the Secretary, results directly from mining for gold.
(2) For the purposes of subparagraph (e) of paragraph I the average rate of normal tax shall be determined by dividing· the total normal tax (excluding the tax determined in accordance with the said subparagraph for the period assessed) paid by the company concerned in respect of its aggregate taxable income from gold mining for the period from I July 1916 to the end of the period assessed, by the number of rands contained in the said aggregate taxable income.
(3) The tax payable in accordance with any of the subparagraphs of paragraph I shall be payable in addition to the tax determined in accordance with any other of the said subparagraphs. .
3 .. In this Schedule, unless the coniext otherwise indicates, any wofd or expression to which a meaning has been assigned in the principal Act, bears the meaning so assigned thereto.