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Income Tax Act 58 of 1962

INCOME TAX ACT 58 OF 1962
[ASSENTED TO 25 MAY 1962] [DATE OF COMMENCEMENT: 1 JULY 1962]

(English text signed by the State President)
as amended by
Income Tax Amendment Act 90 of 1962
Income Tax Amendment Act 6 of 1963
Income Tax Act 72 of 1963
Income Tax Act 90 of 1964
Income Tax Act 88 of 1965
Income Tax Act 55 of 1966
Income Tax Act 95 of 1967
Income Tax Act 76 of 1968
Income Tax Act 89 of 1969
Income Tax Act 52 of 1970
Income Tax Act 88 of 1971
Insolvency Amendment Act 6 of 1972
Income Tax Act 90 of 1972
Income Tax Act 65 of 1973
Income Tax Act 85 of 1974
Income Tax Act 69 of 1975
Income Tax Act 103 of 1976
Income Tax Act 113 of 1977
Revenue Laws Amendment Act 114 of 1977
Income Tax Act 101 of 1978
Income Tax Act 104 of 1979
Income Tax Act 104 of 1980
Income Tax Act 96 of 1981
Income Tax Act 91 of 1982
Income Tax Act 94 of 1983
Income Tax Amendment Act 30 of 1984
Income Tax Act 121 of 1984
Income Tax Act 96 of 1985
Income Tax Act 65 of 1986
Transfer of Powers and Duties of the State President Act 97 of 1986
Taxation Laws Amendment Act 108 of 1986
Income Tax Act 85 of 1987
Income Tax Act 90 of 1988
Income Tax Amendment Act 99 of 1988
Income Tax Act 70 of 1989
Legal Succession to the South African Transport Services Act 9 of 1989
Income Tax Act 101 of 1990
Income Tax Act 129 of 1991
Taxation Laws Amendment Act 136 of 1991
Income Tax Act 141 of 1992
Income Tax Act 113 of 1993
Revenue Laws Amendment Act 140 of 1993
Income Tax Amendment Act 168 of 1993
Income Tax Act 21 of 1994
Income Tax Act 21 of 1995
Income Tax Act 36 of 1996
Revenue Laws Amendment Act 46 of 1996
General Law Amendment Act 49 of 1996
Income Tax Act 28 of 1997
South African Revenue Service Act 34 of 1997

2 Taxation Laws Amendment Act 30 of 1998
Taxation Laws Amendment Act 32 of 1999
Revenue Laws Amendment Act 53 of 1999
Taxation Laws Amendment Act 30 of 2000
Revenue Laws Amendment Act 59 of 2000
Taxation Laws Amendment Act 5 of 2001
Revenue Laws Amendment Act 19 of 2001
Second Revenue Laws Amendment Act 60 of 2001
Taxation Laws Amendment Act 30 of 2002
Revenue Laws Amendment Act 74 of 2002
Exchange Control Amnesty and Amendment of Taxation Laws Act 12 of 2003
Revenue Laws Amendment Act 45 of 2003
Prevention and Combating of Corrupt Activities Act 12 of 2004
Taxation Laws Amendment Act 16 of 2004
Revenue Laws Amendment Act 32 of 2004
Second Revenue Laws Amendment Act 34 of 2004
Regulations under this Act
ANNUAL GRADING ALLOWANCES FOR HOTEL-KEEPERS
CONDITIONS FOR THE PROVISION OF SCHOLARSHIPS, BURSARIES AND AWARDS FOR
STUDY, RESEARCH AND TEACHING
DETERMINATION OF INTEREST RATE FOR PURPOSES OF PARAGRAPH (a) OF THE
DEFINITION OF ‘OFFICIAL RATE OF INTEREST’ IN PARAGRAPH 1 OF THE SEVENTH
SCHEDULE TO THE INCOME TAX ACT 58 OF 1962
DETERMINATION OF THE DAILY ALLOWANCE IN RESPECT OF MEALS AND INCIDENTAL
COSTS FOR PURPOSES OF SECTION 8(1) OF THE INCOME TAX ACT 58 OF 1962
FIXING OF RATE PER KILOMETRE IN RESPECT OF MOTOR VEHICLES FOR THE
PURPOSES OF SECTION 8(b)(ii) AND (iii)
GENERAL REGULATIONS UNDER THE INCOME TAX ACT, 1962
INSURANCE REGULATIONS
NOTICE FIXING AMOUNT OF TAX IN DISPUTE FOR PURPOSES OF APPEAL TO TAX
BOARD
NOTICE SETTING OUT ARRANGEMENTS FOR PURPOSES OF SECTION 76A(1)(a) AND
SECTION 76A(1)(b)
PROCEDURES FOR SUBMITTING RETURNS IN ELECTRONIC FORMAT AND
REQUIREMENTS FOR ELECTRONIC SIGNATURES
PROCEDURES TO BE OBSERVED IN LODGING OBJECTIONS AND NOTING APPEALS
REGULATIONS MADE UNDER SECTION 12G (7) OF THE INCOME TAX ACT 58 OF 1962
REGULATIONS PRESCRIBING THE STEPS TO BE TAKEN TO LIQUIDATE, WIND UP OR
DEREGISTER A COMPANY
REGULATIONS TO PRESCRIBE ADDITIONAL REQUIREMENTS IN RESPECT OF PUBLIC
BENEFIT ORGANISATIONS
TAX HOLIDAY REGULATIONS
TRADES RECOGNIZED AS EXPORT SERVICE INDUSTRIES, 1974

3 TRADES RECOGNIZED AS EXPORT SERVICE INDUSTRIES, 1976
TRADES RECOGNIZED AS EXPORT SERVICE INDUSTRIES, 1983
TRADES RECOGNIZED AS EXPORT SERVICE INDUSTRIES, 1986
ACT
To consolidate the law relating to the taxation of incomes and donations, to provide for the recovery
of taxes on persons, to provide for the deduction by employers of amounts from the remuneration of
employees in respect of certain tax liabilities of employees, and to provide for the making of
provisional tax payments and for the payment into the National Revenue Fund of portions of the
normal tax and interest and other charges in respect of such taxes, and to provide for related
matters.
[Long title amended by s. 20 of Act 6 of 1963 and substituted by s. 39 of Act 5 of 2001.] ARRANGEMENT OF SECTIONS
PRELIMINARY
Section
1. Interpretation.
CHAPTER I
ADMINISTRATION
2. Act to be administered by Commissioner.
3. Exercise of powers and performance of duties.
4. Preservation of secrecy.
CHAPTER II
THE TAXES
Part I
Normal Tax
5. Levy of normal tax and rates thereof.
5A. ……
[S. 5A inserted by s. 6 of Act 88 of 1971 and repealed by s. 4 of Act 104 of 1980.] 6. Normal tax rebates.
[S. 6 repealed by s. 7 of Act 88 of 1971 and inserted by s. 5 of Act 104 of 1980.] 6bis. Rebate in respect of foreign income taxes on royalties and similar income.
[S. 6bis inserted by s. 7 of Act 88 of 1965.] 6ter. ……
[S. 6ter inserted by s. 8 (1) of Act 95 of 1967 and repealed by s. 6 of Act 129 of 1991.] 6quat. Rebate in respect of foreign taxes on income.
[S. 6quat inserted by s. 9 of Act 89 of 1969, repealed by s. 5 of Act 94 of 1983 and inserted by s. 5 of Act
85 of 1987.] 6quin. ……
[S. 6quin inserted by s. 6 (1) of Act 104 of 1979 and repealed by s. 6 of Act 94 of 1983.] 7. When income is deemed to have accrued or to have been received.
7A. Date of receipt or accrual of antedated salaries or pensions and of certain retirement
gratuities.
[S. 7A inserted by s. 6 of Act 69 of 1975.] 8. Certain amounts to be included in income or taxable income.
8A. Gains made by directors of companies or by employees in respect of rights to acquire
marketable securities.
[S. 8A inserted by s. 11 of Act 89 of 1969.] 8B. Taxation of amounts derived from broad-based employee share plan
[S. 8B inserted by s. 6 (1) of Act 104 of 1980, repealed by s. 6 (1) of Act 101 of 1990 and inserted by s. 8
(1) of Act 32 of 2004.] 8C. Taxation of directors and employees on vesting of equity instruments
[S. 8C inserted by s. 7 (1) of Act 96 of 1981, repealed by s. 7 of Act 101 of 1990 and inserted by s. 8 (1) of
Act 32 of 2004.] 8D. ……
[S. 8D inserted by s. 7 (1) of Act 96 of 1981 and repealed by s. 8 (1) of Act 101 of 1990.]

4 8E. Dividends on certain shares deemed to be interest in relation to the recipient thereof.
[S. 8E inserted by s. 6 of Act 70 of 1989.] 8F. Limitation of deduction of certain interest payments
[S. 8F inserted by s. 10 (1) of Act 32 of 2004.] 9. Circumstances in which amounts are deemed to have accrued from sources within the
Republic.
9A. Blocked foreign funds
[S. 9A inserted by s. 8 of Act 85 of 1987, repealed by s. 8 of Act 59 of 2000 and inserted by s. 13 of Act 74
of 2002.] 9B. Circumstances in which certain amounts received or accrued in relation to disposal of
listed shares are deemed to be of capital nature.
[S. 9B inserted by s. 9 of Act 101 of 1990.] 9C. ……
[S. 9C inserted by s. 9 (1) of Act 28 of 1997 and repealed by s. 9 of Act 59 of 2000.] 9D. Net income of controlled foreign companies
[S. 9D inserted by s. 9 (1) of Act 28 of 1997 and substituted by s. 14 (1) of Act 74 of 2002.] 9E. Taxation of foreign dividends
[S. 9E inserted by s. 20 (1) of Act 30 of 2000 and substituted by s. 15 (1) of Act 74 of 2002.] 9F. Income from foreign sources
[S. 9F inserted by s. 12 of Act 59 of 2000.] 9G. Taxable income in respect of foreign equity instruments.
[S. 9G inserted by s. 25 (1) of Act 60 of 2001.] 10. Exemptions.
10A. Exemption of capital element of purchased annuities.
[S. 10A inserted by s. 8 (1) of Act 65 of 1973.] 11. General deductions allowed in determination of taxable income.
11A. Deductions in respect of expenditure and losses incurred prior to commencement of
trade.
[S. 11A inserted by s. 28 (1) of Act 45 of 2003.] 11B. Deductions in respect of research and development.
[S. 11B inserted by s. 29 of Act 45 of 2003.] 11C. Deductions in respect of foreign dividends
[S. 11C inserted by s. 18 (1) of Act 32 of 2004.] 11bis. ……
[S. 11bis inserted by s. 10 (1) of Act 90 of 1962 and repealed by s. 20 of Act 74 of 2002.] 11ter. Allowance to manufacturers in economic development areas in respect of the cost of
power, water and transport.
[S. 11ter inserted by s. 10 of Act 90 of 1964 and substituted by s. 12 of Act 88 of 1965.] 11quat. Allowance to manufacturers in economic development areas in respect of increased
administrative and manufacturing costs.
[S. 11quat inserted by s. 10 of Act 90 of 1964 and substituted by s. 12 of Act 88 of 1965.] 11quin. Allowance in respect of expenditure on housing for employees of manufacturers in
economic development areas.
[S. 11quin inserted by s. 10 of Act 90 of 1964 and substituted by s. 12 of Act 88 of 1965.] 11sex. Deductions of compensation for railway operating losses.
[S. 11sex inserted by s. 10 of Act 90 of 1972.] 11sept. ……
[S. 11sept inserted by s. 14 (1) of Act 85 of 1974, substituted by s. 9 (1) of Act 104 of 1979 and repealed by
s. 15 of Act 129 of 1991.] 11oct. Allowance in respect of expenditure on submissions relating to undertakings in
economic development areas.
[S. 11oct inserted by s. 10 (1) of Act 91 of 1982.] 12. ……
[S. 12 repealed by s. 16 of Act 129 of 1991.] 12A. ……
[S. 12A inserted by s. 16 of Act 55 of 1966 and repealed by s. 17 of Act 129 of 1991.]

5 12B. Deduction in respect of certain machinery, plant, implements, utensils and articles.
[S. 12B inserted by s. 11 of Act 90 of 1988.] 12C. Deduction in respect of certain machinery, plant, implements, utensils and articles.
[S. 12C inserted by s. 14 (1) of Act 101 of 1990.] 12D. Deduction in respect of certain pipelines, transmission lines and railway lines
[S. 12D inserted by s. 23 (1) of Act 30 of 2000.] 12E. Deductions in respect of small business corporations.
[S. 12E inserted by s. 12 of Act 19 of 2001 and amended by s. 31 (1) (a) of Act 45 of 2003.] 12F. Deduction in respect of certain aircraft hangars, aprons, runways and taxiways.
[S. 12F inserted by s. 12 of Act 19 of 2001.] 12G. Additional industrial investment allowance in respect of industrial assets used for
qualifying strategic industrial projects.
[S. 12G inserted by s. 12 of Act 19 of 2001.] 12H. Deduction in respect of learnership agreements.
[S. 12H inserted by s. 18 (1) of Act 30 of 2002.] 13. Deductions in respect of buildings used in a process of manufacture.
[S. 13 amended by s. 30 of Act 60 of 2001.] 13bis. Deductions in respect of buildings used by hotel keepers.
[S. 13bis inserted by s. 15 of Act 88 of 1965.] 13ter. Deductions in respect of residential buildings.
[S. 13ter inserted by s. 13 (1) of Act 91 of 1982.] 13quat. Deductions in respect of erection or improvement of buildings in urban development
zones.
[S. 13quat inserted by s. 33 of Act 45 of 2003.] 14. Deductions in respect of ships.
14bis. Deductions in respect of aircraft.
[S. 14bis inserted by s. 16 of Act 88 of 1965.] 15. Deductions from income derived from mining operations.
15A. ……
[S. 15A inserted by s. 15 (1) of Act 69 of 1975 and repealed by s. 15 of Act 101 of 1990.] 16. ……
[S. 16 substituted by s. 16 of Act 89 of 1969 and repealed by s. 13 of Act 21 of 1994.] 16A. Deductions of expenses incurred by medical practitioners and dentists on courses or
congresses outside the Republic.
[S. 16A inserted by s. 10 of Act 70 of 1989.] 17. ……
[S. 17 substituted by s. 14 of Act 90 of 1962 and by s. 14 (1) of Act 113 of 1977 and repealed by s. 25 of
Act 59 of 2000.] 17A. Expenditure incurred by a lessor of land let for farming purposes, in respect of soil
erosion works.
[S. 17A inserted by s. 11 of Act 76 of 1968.] 18. Deduction in respect of medical and dental expenses.
[S. 18 repealed by s. 15 of Act 88 of 1971 and inserted by s. 12 of Act 104 of 1980.] 18A. Deduction of donations to certain public benefit organisations.
[S. 18A inserted by s. 15 of Act 52 of 1970 and substituted by s. 16 (1) of Act 96 of 1981 and by s. 24 (1)
of Act 30 of 2000.] 18B. ……
[S. 18B inserted by s. 11 (1) of Act 65 of 1986 and repealed by s. 14 of Act 21 of 1994.] 19. ……
[S. 19 repealed by s. 25 (1) of Act 30 of 2000.] 20. Set-off of assessed losses.
20A. Ring-fencing of assessed losses of certain trades
[S. 20A inserted by s. 19 of Act 89 of 1969, repealed by s. 20 of Act 101 of 1990 and inserted by s. 36 (1)
of Act 45 of 2003.] 20B. Limitation of losses from disposal of certain assets
[S. 20B inserted by s. 20 (1) of Act 32 of 2004.]

6 21. Deduction of alimony, allowance or maintenance.
[S. 21 substituted by s. 16 of Act 90 of 1962.] 21bis. ……
[S. 21bis inserted by s. 7 of Act 6 of 1963, substituted by s. 20 (1) of Act 85 of 1974 and repealed by s. 19
of Act 94 of 1983.] 21ter. Special deduction in respect of industrial undertakings in economic development
areas.
[S. 21ter inserted by s. 20 (1) of Act 89 of 1969.] 21quat. ……
[S. 21quat inserted by s. 17 of Act 65 of 1973 and repealed by s. 17 of Act 90 of 1988.] 22. Amounts to be taken into account in respect of values of trading stocks.
22A. Schemes of arrangement involving trading stock.
[S. 22A inserted by s. 19 (1) of Act 88 of 1971.] 23. Deductions not allowed in determination of taxable income.
23A. Limitation of allowances granted to lessors of certain assets.
[S. 23A inserted by s. 21 (1) of Act 121 of 1984 and substituted by s. 12 of Act 70 of 1989.] 23B. Prohibition of double deductions.
[S. 23B inserted by s. 25 (1) of Act 129 of 1991.] 23C. Reduction of cost or market value of certain assets.
[S. 23C inserted by s. 25 (1) of Act 129 of 1991 and amended by s. 33 (1) (a) of Act 60 of 2001.] 23D. Limitation of allowances granted in respect of certain assets.
[S. 23D inserted by s. 19 (1) of Act 113 of 1993.] 23E. Provisions relating to leave pay.
[S. 23E inserted by s. 19 (1) of Act 113 of 1993.] 23F. Acquisition or disposal of trading stock.
[S. 23F inserted by s. 17 of Act 21 of 1994 and amended by s. 30 (1) of Act 30 of 2000.] 23G. Sale and leaseback arrangements
[S. 23G inserted by s. 16 (1) of Act 28 of 1997.] 23H. Limitation of certain deductions
[S. 23H inserted by s. 31 (1) of Act 30 of 2000.] 24. Credit agreements and debtors allowance.
[S. 24 substituted by s. 16 (1) of Act 65 of 1986.] 24A. Transactions whereby fixed property is or company shares are exchanged for shares.
[S. 24A inserted by s. 23 of Act 89 of 1969 and substituted by s. 20 (1) of Act 88 of 1971.] 24B. Transactions where assets are acquired in exchange for shares issued
[S. 24B inserted by s. 9 (1) of Act 101 of 1978, substituted by s. 13 (1) of Act 104 of 1979, repealed by s.
32 of Act 30 of 2000 and inserted by s. 22 (1) of Act 32 of 2004.] 24C. Allowance in respect of future expenditure on contracts.
[S. 24C inserted by s. 18 (1) of Act 104 of 1980.] 24D. Deduction of certain expenditure incurred in respect of any National Key Point or
specified important place or area.
[S. 24D inserted by s. 20 (1) of Act 96 of 1981.] 24E. ……
[S. 24E inserted by s. 18 of Act 91 of 1982 and repealed by s. 18 of Act 90 of 1988.] 24F. Taxable income of film owners.
[S. 24F inserted by s. 17 (1) of Act 85 of 1987.] 24G. Taxable income of toll road operators.
[S. 24G inserted by s. 20 (1) of Act 90 of 1988.] 24H. Persons carrying on trade or business in partnership.
[S. 24H inserted by s. 21 of Act 90 of 1988.] 24I. Gains or losses on foreign exchange transactions.
[S. 24I inserted by s. 21 of Act 113 of 1993.] 24J. Incurral and accrual of interest.
[S. 24J inserted by s. 21 (1) of Act 21 of 1995.] 24K. Incurral and accrual of amounts in respect of interest rate agreements
[S. 24K inserted by s. 20 (1) of Act 28 of 1997.]

7 24L. Incurral and accrual of amounts in respect of option contracts
[S. 24L inserted by s. 28 (1) of Act 53 of 1999.] 24M. Incurral and accrual of amounts in respect of assets acquired or disposed of for
unquantified amount
[S. 24M inserted by s. 25 (1) of Act 32 of 2004.] 24N. Incurral and accrual of amounts in respect of disposal or acquisition of equity shares
[S. 24N inserted by s. 26 (1) of Act 32 of 2004.] 25. Income of beneficiaries and estates of deceased persons.
25A. Determination of taxable incomes of permanently separated spouses.
[S. 25A inserted by s. 21 (1) of Act 55 of 1966.] 25B. Income of trusts and beneficiaries of trusts.
[S. 25B inserted by s. 27 (1) of Act 129 of 1991 and amended by s. 22 of Act 141 of 1992.] 25C. Income of insolvent estates
[S. 25C inserted by s. 21 of Act 28 of 1997 and substituted by s. 13 of Act 5 of 2001 and by s. 43 of Act 45
of 2003.] 25D. Determination of taxable income in foreign currency.
[S. 25D inserted by s. 33 of Act 59 of 2000 and substituted by s. 37 (1) of Act 60 of 2001, by s. 28 (1) of
Act 74 of 2002 and by s. 44 (1) of Act 45 of 2003.] 26. Determination of taxable income derived from farming.
26A. Inclusion of taxable capital gain in taxable income.
[S. 26A inserted by s. 14 of Act 5 of 2001.] 27. Determination of taxable income of co-operative societies and companies.
28. Determination of taxable income from insurance business.
28bis. ……
[S. 28bis inserted by s. 19 of Act 88 of 1965 and repealed by s. 38 (1) of Act 60 of 2001.] 29. Taxable income of companies carrying on long-term insurance business.
[S. 29 amended by s. 18 of Act 90 of 1962, repealed by s. 23 of Act 121 of 1984 and inserted by s. 25 (1) of
Act 113 of 1993.] 29A. Taxation of long-term insurers
[S. 29A inserted by s. 30 of Act 53 of 1999.] 30. ……
[S. 30 repealed by s. 20 (1) of Act 21 of 1994.] 31. Determination of taxable income of certain persons in respect of international
transactions
[S. 31 substituted by s. 23 (1) of Act 21 of 1995.] 31A. ……
[S. 31A inserted by s. 47 (1) of Act 45 of 2003 and repealed by s. 29 (1) of Act 32 of 2004.] 32. Assessment in the case of submarine cable or wireless business.
33. Assessment of owners or charterers of ships or aircraft who are not residents of the
Republic.
[S. 33 amended by s. 40 of Act 60 of 2001.] 34. ……
[S. 34 repealed by s. 19 of Act 90 of 1962.] 35. Assessment of persons not ordinarily resident or registered, managed or controlled in
the Republic who derive income from royalties or similar payments.
36. Calculation of redemption allowance and unredeemed balance of capital expenditure
in connection with mining operations.
37. Calculation of capital expenditure on sale, transfer, lease or cession of mining
property.
[S. 37 substituted by s. 42 (1) of Act 60 of 2001.] 37A. ……
[S. 37A inserted by s. 27 of Act 89 of 1969 and repealed by s. 26 of Act 94 of 1983.] 37B. ……
[S. 37B inserted by s. 12 (1) of Act 101 of 1978 and repealed by s. 22 (1) of Act 21 of 1994.] 37C. Determination of taxable income of persons previously assessable under certain other
laws.

8 [S. 37C inserted by s. 3 of Act 30 of 1984.] 37D. Determination of taxable income of married women.
[S. 37D inserted by s. 27 of Act 101 of 1990.] 37E. Application of certain provisions where taxpayer carries on value-added process.
[S. 37E inserted by s. 3 (1) of Act 136 of 1991 and substituted by s. 30 (1) of Act 113 of 1993.] 37F. Determination of taxable income derived by persons previously assessable under
certain other laws.
[S. 37F inserted by s. 24 (1) of Act 21 of 1995.] 37G. Determination of taxable income derived from small business undertakings.
[S. 37G inserted by s. 24 (1) of Act 21 of 1995.] 37H. Tax holiday scheme for certain companies.
[S. 37H inserted by s. 12 (1) of Act 46 of 1996.] Part II
Special Provisions relating to Companies
38. Classification of companies.
39. Redetermination of company’s status.
40. Objection and appeal.
40A. Close corporations.
[S. 40A inserted by s. 25 of Act 121 of 1984.] 40B. Conversion of co-operative to company.
[S. 40B inserted by s. 17 of Act 96 of 1985, repealed by s. 29 (1) of Act 101 of 1990 and inserted by s. 31
of Act 113 of 1993.] Part III
Special Rules relating to Company Formations, Share-for-share Transactions, Amalgamation
Transactions, Intra-group Transactions, Unbundling Transactions and Liquidation Distributions
[Part III repealed by s. 25 (1) of Act 21 of 1995, inserted by s. 44 (1) of Act 60 of 2001 and substituted by
s. 34 (1) of Act 74 of 2002.] 41. General.
[S. 41 repealed by s. 25 (1) of Act 21 of 1995, inserted by s. 44 (1) of Act 60 of 2001 and substituted by s.
34 (1) of Act 74 of 2002.] 42. Company formations.
[S. 42 repealed by s. 25 (1) of Act 21 of 1995, inserted by s. 44 (1) of Act 60 of 2001 and substituted by s.
34 (1) of Act 74 of 2002.] 43. Share-for-share transactions.
[S. 43 repealed by s. 25 (1) of Act 21 of 1995, inserted by s. 44 (1) of Act 60 of 2001 and substituted by s.
34 (1) of Act 74 of 2002.] 43A. ……
[S. 43A inserted by s. 29 of Act 94 of 1983 and repealed by s. 25 (1) of Act 21 of 1995.] 44. Amalgamation transactions
[S. 44 substituted by s. 34 (1) of Act 74 of 2002.] 45. Intra-group transactions.
[S. 45 repealed by s. 25 (1) of Act 21 of 1995, inserted by s. 44 (1) of Act 60 of 2001 and substituted by s.
34 (1) of Act 74 of 2002.] 46. Unbundling transactions.
[S. 46 repealed by s. 25 (1) of Act 21 of 1995, inserted by s. 44 (1) of Act 60 of 2001 and substituted by s.
34 (1) of Act 74 of 2002.] 47. Transactions relating to liquidation, winding-up and deregistration.
[S. 47 repealed b s. 25 (1) of Act 21 of 1995 and inserted by s. 34 (1) of Act 74 of 2002.] Part IV
Undistributed Profits Tax
48. ……
[S. 48 repealed by s. 30 (1) of Act 101 of 1990.] 49. ……
[S. 49 repealed by s. 31 (1) of Act 101 of 1990.] 50. ……
[S. 50 repealed by s. 32 (1) of Act 101 of 1990.]

9 51. ……
[S. 51 repealed by s. 33 (1) of Act 101 of 1990.] 52. ……
[S. 52 repealed by s. 34 (1) of Act 101 of 1990.] 53. ……
[S. 53 repealed by s. 35 (1) of Act 101 of 1990.] Part V
Donations Tax
54. Levy of donations tax.
[S. 54 substituted by s. 24 of Act 90 of 1988.] 55. Definitions for purposes of this Part.
56. Exemptions.
57. Donations by a body corporate at the instance of any person.
[S. 57 substituted by s. 26 of Act 21 of 1995.] 57A. Donations by spouses married in community of property.
[S. 57A inserted by s. 27 of Act 21 of 1995.] 58. Property disposed of under certain transactions deemed to have been disposed of
under donations.
59. Persons liable for tax.
60. Payment and assessment of tax.
61. Extension of scope of certain provisions of Act for purposes of donations tax.
62. Value of property disposed of under donations.
63. Objection and appeal.
64. Rate of donations tax.
Part VI
Levy on Financial Services
[Part VI substituted by s. 4 of Act 136 of 1991.] 64A.
[S. 64A inserted by s. 4 of Act 136 of 1991 and substituted by s. 29 (1) of Act 141 of 1992.] Part VII
Secondary Tax on Companies
[Part VII inserted by s. 34 (1) of Act 113 of 1993.] 64B. Levy and recovery of secondary tax on companies
[S. 64B inserted by s. 34 (1) of Act 113 of 1993.] 64C. Certain amounts distributed deemed to be dividends
[S. 64C inserted by s. 34 (1) of Act 113 of 1993.] CHAPTER III
GENERAL PROVISIONS
Part I
Returns
65. Returns to be in form and submitted at place prescribed by Commissioner.
[S. 65 substituted by s. 60 of Act 45 of 2003.] 66. Notice by Commissioner requiring returns for assessment of taxes under this Act and
manner of furnishing returns and interim returns.
67. Registration as taxpayer.
[S. 67 repealed by s. 32 of Act 129 of 1991 and inserted by s. 62 of Act 45 of 2003.] 67A. Registration of tax practitioners.
[S. 67A inserted by s. 9 of Act 34 of 2004.] 68. Income and capital gain of married persons and minor children.
[s. 68 substituted by s. 20 of Act 5 of 2001.] 69. Duty to furnish returns as to employees, their earnings and other matters.
70. Duty of companies to furnish returns.
70A. Return of information by Portfolio of Collective Investment Scheme.
[S. 70A inserted by s. 21 of Act 5 of 2001 and substituted by s. 40 (1) of Act 74 of 2002.] 70B. Return of information in respect of financial instruments administered by portfolio
administrators.

10 [S. 70B inserted by s. 21 of Act 5 of 2001.] 71. Return of payments in respect of bearer warrants.
[S. 71 substituted by s. 41 of Act 74 of 2002.] 72. Return as to shareholdings.
72A. Return relating to controlled foreign company.
[S. 72A inserted by s. 46 of Act 59 of 2000 and substituted by s. 65 (1) of Act 45 of 2003.] 73. Duty of persons submitting accounts in support of returns, or preparing accounts for
other persons.
73A. Record keeping by persons who render returns.
[S. 73A inserted by s. 22 of Act 5 of 2001 and amended by s. 66 (a) of Act 45 of 2003.] 73B. Record keeping in relation to taxable capital gain or assessed capital loss.
[S. 73B inserted by s. 22 of Act 5 of 2001.] 73C. Retention period of records where objection and appeal lodged.
[S. 73C inserted by s. 22 of Act 5 of 2001.] 74. General provisions with regard to information, documents or things.
[S. 74 substituted by s. 14 of Act 46 of 1996.] 74A. Furnishing of information, documents or things by any person.
[S. 74A inserted by s. 14 of Act 46 of 1996.] 74B. Obtaining of information, documents or things at certain premises.
[S. 74B inserted by s. 14 of Act 46 of 1996.] 74C. Inquiry.
[S. 74C inserted by s. 14 of Act 46 of 1996.] 74D. Search and seizure.
[S. 74D inserted by s. 14 of Act 46 of 1996.] 75. Penalty on default.
75A. Publication of names of offenders
[S. 75A inserted by s. 42 (1) of Act 30 of 1998.] 76. Additional tax in event of default or omission.
76A. Reportable arrangements
[S. 76A inserted by s. 69 (1) of Act 45 of 2003.] Part II
Assessments
77. Assessments and recording thereof.
78. Estimated assessments.
79. Additional assessments.
79A. Reduced assessments
[S. 79A inserted by s. 28 of Act 30 of 2002.] 79B. Withdrawal of assessments
[S. 79B inserted by s. 48 of Act 74 of 2002.] 80. Inspection of record of assessments.
Part III
Objections and Appeals
81. Objection against assessment.
[Heading substituted by s. 53 (1) (a) of Act 60 of 2001.] 82. Burden of proof as to exemptions, deductions, abatements, disregarding or exclusions.
[S. 82 substituted by s. 27 of Act 5 of 2001.] 83. Appeals to tax court against assessment.
[Heading substituted by s. 54 (1) (a) of Act 60 of 2001.] 83A. Appeals to tax board.
[Heading substituted by s. 55 (1) (a) of Act 60 of 2001.] [S. 83A inserted by s. 37 of Act 129 of 1991.] 84. Summoning of witnesses and penalty for non-attendance.
85. Contempt of tax court.
[Heading substituted by s. 57 (1) (a) of Act 60 of 2001.] 86. ……
[S. 86 repealed by s. 38 of Act 113 of 1993.]

11 86A. Appeals against decisions of a tax court.
[Heading substituted by s. 58 (1) (a) of Act 60 of 2001.] [S. 86A inserted by s. 24 (1) of Act 103 of 1976.] 87. Members of courts not disqualified from adjudicating.
88. Payment of tax pending appeal.
[S. 88 substituted by s. 30 (1) of Act 121 of 1984.] Part IIIA
Settlement of dispute
[Part IIIA inserted by s. 74 of Act 45 of 2003.] 88A. Definitions.
[S. 88A inserted by s. 74 of Act 45 of 2003.] 88B. Purpose of Part.
[S. 88B inserted by s. 74 of Act 45 of 2003.] 88C. Circumstances where inappropriate to settle.
[S. 88C inserted by s. 74 of Act 45 of 2003.] 88D. Circumstances where appropriate to settle.
[S. 88D inserted by s. 74 of Act 45 of 2003.] 88E. Power to settle and disclosure.
[S. 88E inserted by s. 74 of Act 45 of 2003.] 88F. Procedure for settlement.
[S. 88F inserted by s. 74 of Act 45 of 2003.] 88G. Register of settlements and reporting.
[S. 88G inserted by s. 74 of Act 45 of 2003.] 88H. Alteration of assessment on settlement.
[S. 88H inserted by s. 74 of Act 45 of 2003.] Part IV
Payment and Recovery of Tax
89. Appointment of day for payment of tax and interest in overdue payments.
[S. 89 substituted by s. 13 of Act 6 of 1963.] 89bis. Payments of employees’ tax and provisional tax and interest on overdue payments of
such taxes.
[S. 89bis inserted by s. 14 of Act 6 of 1963.] 89ter. Accounts and recovery proceedings in respect of taxes.
[S. 89ter inserted by s. 14 of Act 6 of 1963 and substituted by s. 37 of Act 89 of 1969.] 89quat. Interest on underpayments and overpayments of provisional tax.
[S. 89quat inserted by s. 46 of Act 85 of 1974, repealed by s. 37 of Act 94 of 1983, inserted by s. 34 (1) of
Act 121 of 1984 and substituted by s. 22 (1) of Act 65 of 1986.] 89quin. Calculation of interest payable under this Act.
[S. 89quin inserted by s. 34 (1) of Act 121 of 1984.] 89sex. Determination of day and time for payment of tax, interest or penalties.
[S. 89sex inserted by s. 33 of Act 28 of 1997 and substituted by s. 75 of Act 45 of 2003.] 90. Persons by whom normal tax payable.
91. Recovery of tax.
92. Correctness of assessment cannot be questioned.
93. Collection of taxes under arrangements made under section 108.
93bis. ……
[S. 93bis inserted by s. 17 of Act 6 of 1963 and repealed by s. 8 of Act 6 of 1972.] 94. Evidence as to assessments.
94A. ……
[S. 94A inserted by s. 39 of Act 89 of 1969 and repealed by s. 38 of Act 94 of 1983.] Part V
Representative Taxpayers
95. Liability of representative taxpayer.
96. Right of representative taxpayer to indemnity.
97. Personal liability of representative taxpayer.
98. Company regarded as agent for absent shareholder.

12 99. Power to appoint agent.
100. Remedies of Commissioner against agent or trustee.
101. Public officers of companies.
Part VI
Miscellaneous
102. Refunds and set off.
[S. 102 substituted by s. 30 of Act 30 of 2002.] 102A. Treatment of certain small tax claims and refunds.
[S. 102A inserted by s. 40 of Act 94 of 1983.] 103. Transactions, operations or schemes for purposes of avoiding or postponing liability
for or reducing amounts of taxes on income.
104. Offences and penalties.
105. Jurisdiction of courts.
[S. 105 substituted by s. 52 of Act 74 of 2002.] 105A. Reporting of unprofessional conduct.
[S. 105A inserted by s. 23 of Act 65 of 1986.] 106. Authentication and service of documents.
107. Regulations.
107A. Rules of tax court.
[S. 107A inserted by s. 63 (1) of Act 60 of 2001.] 107B ……
[S. 107B inserted by s. 63 (1) of Act 60 of 2001 and repealed by s. 77 of Act 45 of 2003.] 108. Prevention of or relief from double taxation.
109. Prevention of or relief from double taxation in the Republic and South-West Africa.
110. Determination of increase in scale of taxation for purposes of certain leases of the
right to mine for gold.
110bis. Application of certain provisions for purposes of provincial ordinances imposing
personal and income taxes.
[S. 110bis inserted by s. 18 of Act 6 of 1963.] 111. Repeal of laws.
111A. ……
[S. 111A inserted by s. 40 of Act 89 of 1969 and repealed by s. 41 of Act 94 of 1983.] 112. Short title and commencement.
First Schedule
COMPUTATION OF TAXABLE INCOME DERIVED FROM PASTORAL, AGRICULTURAL OR
OTHER FARMING OPERATIONS
Second Schedule
COMPUTATION OF GROSS INCOME DERIVED BY WAY OF LUMP SUM BENEFITS FROM
PENSION, PROVIDENT AND RETIREMENT ANNUITY FUNDS
Third Schedule
LAWS REPEALED
Fourth Schedule
AMOUNTS TO BE DEDUCTED OR WITHHELD BY EMPLOYERS AND PROVISIONAL
PAYMENTS IN RESPECT OF NORMAL TAX AND PROVINCIAL TAXES
[Fourth Schedule added by s. 19 of Act 6 of 1963.] Fifth Schedule
LOAN PORTION OF THE NORMAL TAX
[Fifth Schedule added by s. 26 (1) of Act 52 of 1970.] Sixth Schedule
[Sixth Schedule added by s. 28 (1) of Act 90 of 1972 and repealed by s. 51 (1) of Act 113 of 1993.] Seventh Schedule
BENEFITS OR ADVANTAGES DERIVED BY REASON OF EMPLOYMENT OR THE HOLDING OF
ANY OFFICE
[Seventh Schedule added by s. 46 of Act 121 of 1984.] Eighth Schedule
DETERMINATION OF TAXABLE CAPITAL GAINS AND ASSESSED CAPITAL LOSSES

13 [Eighth Schedule added by s. 38 of Act 5 of 2001.] Ninth Schedule
PUBLIC BENEFIT ACTIVITIES
[Ninth Schedule added by s. 41 of Act 30 of 2002.] Cases
PRELIMINARY (s 1)
1 Interpretation
Cases
In this Act, unless the context otherwise indicates-
‘agent’ includes any partnership or company or any other body of persons corporate or
unincorporate acting as an agent;
‘aggregate capital gain’ means an amount determined in terms of paragraph 6 of the Eighth
Schedule;
[Definition of ‘aggregate capital gain’ inserted by s. 5 (a) of Act 5 of 2001.] ‘aggregate capital loss’ means an amount determined in terms of paragraph 7 of the Eighth
Schedule;
[Definition of ‘aggregate capital loss’ inserted by s. 5 (a) of Act 5 of 2001.] ‘assessed capital loss’ means an amount determined in terms of paragraph 9 of the Eighth
Schedule;
[Definition of ‘assessed capital loss’ inserted by s. 5 (a) of Act 5 of 2001.] ‘assessment’ means the determination by the Commissioner, by way of a notice of assessment
(including a notice of assessment in electronic form) served in a manner contemplated in section 106 (2)-
(a) of an amount upon which any tax leviable under this Act is chargeable; or
(b) of the amount of any such tax; or
(c) of any loss ranking for set-off; or
(d) of any assessed capital loss determined in terms of paragraph 9 of the Eighth Schedule,
[Para. (d) added by s. 5 (c) of Act 5 of 2001.] and for the purposes of Part III of Chapter III includes any determination by the Commissioner in respect of
any of the rebates referred to in section 6 and any decision of the Commissioner which is in terms of this
Act subject to objection and appeal;
[Definition of ‘assessment’ amended by s. 3 (a) of Act 90 of 1962, substituted by s. 4 (1) (a) of Act 88 of
1971 and by s. 4 (1) (a) of Act 69 of 1975 and amended by s. 2 (1) (a) of Act 104 of 1980 and by s. 12 (1)
(a) of Act 45 of 2003.] ‘assisted gold mine’ ……
[Definition of ‘assisted gold mine’ inserted by s. 5 (a) of Act 76 of 1986 and deleted by s. 2 (a) of Act 141
of 1992.]

‘average exchange rate’ in relation to a year of assessment means-
(a) the average determined by using the closing spot rates at the end of daily, weekly or
monthly intervals during that year of assessment; or
(b) the weighted average determined by using the closing spot rates at the end of daily,
weekly or monthly intervals during that year of assessment during which income is
received or accrued or expenditure is incurred, which average must be based on-
(i) the net amount of receipts and accruals (excluding those of a capital nature) and
deductible expenditure during each such period; and
(ii) the net amount of capital gains or capital losses determined in respect of any
disposal of assets during that period,
which must be consistently applied within that year of assessment;
[Definition of ‘average exchange rate’ inserted by s. 6 (1) (a) of Act 74 of 2002.] ‘benefit fund’ means-
(a) any friendly society registered under the Friendly Societies Act, 1956 (Act 25 of 1956),
or any fund established before 13 June 1986 which is not so registered solely because of
the provisions of section 2 (2) (a) of that Act; or
[Para. (a) substituted by s. 3 (1) (a) of Act 101 of 1978 and by s. 2 (1) (a) of Act 65 of 1986.] (b) any medical scheme registered under the provisions of the Medical Schemes Act, 1998

14 (Act 131 of 1998); or
[Para. (b) substituted by s. 3 (1) (a) of Act 101 of 1978 and by s. 10 (1) (a) of Act 53 of 1999.] (c) ……
[Para. (c) substituted by s. 2 (a) of Act 21 of 1995 and by s. 19 (1) (a) of Act 30 of 1998 and deleted by s.
19 (1) (b) of Act 30 of 1998.] ‘bonus debentures or securities’ means debentures or securities issued by a company, whether
by way of a bonus award or otherwise, in such a manner that the company’s reserves or unappropriated
profits are in whole or in part applied in paying up such debentures or securities;
[Definition of ‘bonus debentures or securities’ inserted by s. 4 (1) (a) of Act 85 of 1974.] ‘building society’ means a building society registered under the Building Societies Act, 1986 (Act
82 of 1986);
[Definition of ‘building society’ inserted by s. 1 (1) (a) of Act 108 of 1986.] ‘business day’ means any day which is not a Saturday, Sunday or public holiday;
[Definition of ‘business day’ inserted by s. 2 (1) (a) of Act 113 of 1993.] ‘capital gain’ means an amount determined in terms of paragraph 3 of the Eighth Schedule;
[Definition of ‘capital gain’ inserted by s. 5 (d) of Act 5 of 2001.] ‘capital loss’ means an amount determined in terms of paragraph 4 of the Eighth Schedule;
[Definition of ‘capital loss’ inserted by s. 5 (d) of Act 5 of 2001.] ‘capitalization shares’ means shares are issued by a company, whether by way of a bonus award
or otherwise, in such manner that the Company’s reserves (including any share premium account) or
unappropriated profits are in whole or in part applied in paying up such shares;
[Definition of ‘capitalization shares’ inserted by s. 4 (1) (b) of Act 85 of 1974.] ‘Chief Executive Officer’ ……
[Definition of ‘Chief Executive Officer’ inserted by s. 2 (a) of Act 36 of 1996 and deleted by s. 34 (1) of
Act 34 of 1997.] ‘child’, in relation to any person, includes any person adopted by him-
(a) under the provisions of the Adoption of Children Act, 1923 (Act 25 of 1923), or
Children’s Act, 1937 (Act 31 of 1937), or the Children’s Act, 1960 (Act 33 of 1960); or
(b) under the law of any country other than the Republic, provided the adopted person is
under such law accorded the status of a legitimate child of the adoptive parent and the
adoption was made at a time when the adoptive parent was ordinarily resident in such
country;
[Definition of ‘child’ inserted by s. 4 (a) of Act 90 of 1964.] ‘close corporation’ means a close corporation within the meaning of the Close Corporations Act,
1984 (Act 69 of 1984);
[Definition of ‘close corporation’ inserted by s. 2 (1) (a) of Act 121 of 1984.] ‘Commissioner’ means the Commissioner for the South African Revenue Service;
[Definition of ‘Commissioner’ deleted by s. 4 (b) of Act 90 of 1964, inserted by s. 2 (1) (b) of Act 104 of
1980 and substituted by s. 34 (1) of Act 34 of 1997.] ‘company’ includes-
(a) any association, corporation or company (other than a close corporation) incorporated or
deemed to be incorporated by or under any law in force or previously in force in the
Republic or in any part thereof, or any body corporate formed or established or deemed to
be formed or established by or under any such law; or
[Para. (a) substituted by s. 4 (1) (c) of Act 85 of 1974 and by s. 2 (1) (b) of Act 121 of 1984.] (b) any association, corporation or company incorporated under the law of any country other
than the Republic or any body corporate formed or established under such law; or
[Para. (b) substituted by s. 4 (1) (c) of Act 85 of 1974 and by s. 13 (1) (a) of Act 30 of 2000.] (c) ……
[Para. (c) substituted by s. 4 (1) (c) of Act 85 of 1974 and deleted by s. 13 (1) (b) of Act 30 of 2000.] (d) any association (not being an association referred to in paragraph (a) or (f)) formed in the
Republic to serve a specified purpose, beneficial to the public or a section of the public;
or
[Para. (d) substituted by s. 2 (1) (c) of Act 121 of 1984 and by s. 13 (1) (c) of Act 30 of 2000.] (e) any-
(i) portfolio comprised in any collective investment scheme in securities

15 contemplated in Part IV of the Collective Investment Schemes Control Act, 2002,
managed or carried on by any company registered as a manager under section 42
of that Act for purposes of that Part; or
(ii) arrangement or scheme carried on outside the Republic in pursuance of which
members of the public are invited or permitted to invest in a portfolio of a
collective investment scheme, where two or more investors contribute to and hold
a participatory interest in a portfolio of the scheme through shares, units or any
other form of participatory interest; or;
[Para. (e) added by s. 3 (b) of Act 90 of 1962, amended by s. 2 (1) (a) of Act 28 of 1997 and substituted by
s. 13 (1) (d) of Act 30 of 2000 and by s. 6 (1) (b) of Act 74 of 2002.] (f) a close corporation;
[Para. (f) added by s. 2 (1) (d) of Act 121 of 1984.] ‘connected person’ means-
(a) in relation to a natural person-
(i) any relative; and
(ii) any trust of which such natural person or such relative is a beneficiary;
(b) in relation to a trust-
(i) any beneficiary of such trust; and
(ii) any connected person in relation to such beneficiary;
(bA) in relation to a connected person in relation to a trust (other than a collective investment
scheme in property shares managed or carried on by any company registered as a
manager under section 42 of the Collective Investment Schemes Control Act, 2002, for
purposes of Part V of that Act), includes any other person who is a connected person in
relation to such trust;
[Para. (bA) inserted by s. 19 (1) (c) of Act 30 of 1998 and substituted by s. 6 (1) (c) of Act 74 of 2002.] (c) in relation to a member of any partnership-
(i) any other member; and
(ii) any connected person in relation to any member of such partnership;
(d) in relation to a company-
(i) its holding company as defined in section 1 of the Companies Act, 1973 (Act 61
of 1973);
(ii) its subsidiary as so defined;
(iii) any other company where both such companies are subsidiaries (as so defined) of
the same holding company;
(iv) any person, other than a company as defined in section 1 of the Companies Act,
1973 (Act 61 of 1973), who individually or jointly with any connected person in
relation to himself, holds, directly or indirectly, at least 20 per cent of the
company’s equity share capital or voting rights;
[Sub-para. (iv) substituted by s. 2 (1) (a) of Act 21 of 1994 and by s. 2 (1) (b) of Act 28 of 1997.] (v) any other company if at least 20 per cent of the equity share capital of such
company is held by such other company, and no shareholder holds the majority
voting rights of such company;
[Sub-para. (v) substituted by s. 2 (1) (a) of Act 21 of 1994.] (vA) any other company if such other company is managed or controlled by-
(aa) any person who or which is a connected person in relation to such
company; or
(bb) any person who or which is a connected person in relation to a person
contemplated in item (aa); and
[Sub-para. (vA) inserted by s. 2 (1) (d) of Act 28 of 1997 and substituted by s. 19 (1) (d) of Act 30 of
1998.] (vi) where such company is a close corporation-
(aa) any member;
(bb) any relative of such member or any trust which is a connected person in
relation to such member; and
(cc) any other close corporation or company which is a connected person in
relation to-

16 (i)any member contemplated in item (aa); or
(ii) the relative or trust contemplated in item (bb); and
[Item (cc) substituted by s. 2 (1) (e) of Act 28 of 1997.] (e) in relation to any person who is a connected person in relation to any other person in
terms of the foregoing provisions of this definition, such other person,
and in this definition the expression ‘beneficiary’ means any person who has been named in the will or
deed of trust concerned-
(i) as a beneficiary; or
(ii) as a person upon whom the trustee of the trust has the power to confer a benefit from
such trust;
[Definition of ‘connected person’ inserted by s. 2 (1) (b) of Act 113 of 1993.] ‘controlled group company’ means a controlled group company contemplated in the definition of
‘group of companies’;
[Definition of ‘controlled group company’ inserted by s. 6 (1) (d) of Act 74 of 2002.] ‘controlling group company’ means a controlling group company contemplated in the definition
of ‘group of companies’;
[Definition of ‘controlling group company’ inserted by s. 6 (1) (d) of Act 74 of 2002.] ‘controlled foreign company’ means a controlled foreign company as defined in section 9D, and
includes any reference in this Act, prior to the amendment thereof by the Revenue Laws Amendment Act,
2002, to a controlled foreign entity;
[Definition of ‘controlled foreign company’ inserted by s. 6 (1) (d) of Act 74 of 2002.] ‘date of deep level production’ in relation to any deep level gold mine, means the date which the
Government Mining Engineer certifies as the date on which stoping below a vertical depth of seven
thousand five hundred feet from the surface commenced;
‘date of assessment’, in relation to any assessment, means the date specified in the notice of such
assessment as the due date or, where a due date is not so specified, the date of such notice;
[Definition of ‘date of assessment’ inserted by s. 4 (1) (b) of Act 69 of 1975.] ‘date of sequestration’ means-
(a) the date of voluntary surrender of an estate, if accepted by the Court; or
(b) the date of provisional sequestration of an estate, if a final order of sequestration is
granted by the Court;
[Defininition of ‘date of sequestration’ inserted by s. 12 (1) (b) of Act 45 of 2003.] ‘depreciable asset’ means an asset as defined in paragraph 1 of the Eighth Schedule (other than
trading stock), in respect of which a capital deduction or allowance determined with reference to the cost or
value of that asset is allowable in terms of this Act for purposes other than the determination of any capital
gain or capital loss;
[Defininition of ‘depreciable asset’ inserted by s. 12 (1) (b) of Act 45 of 2003.] ‘designated country’ ……
[Definition of ‘designated country’ inserted by s. 6 (1) (e) of Act 74 of 2002 and deleted by s. 12 (1) (c) of
Act 45 of 2003.] ‘dependant’ ……
[Definition of ‘dependant’ substituted by s. 4 (1) (b) of Act 88 of 1971 and by s. 4 (1) (d) of Act 85 of 1974,
amended by s. 3 (1) (a) of Act 104 of 1979 and by s. 2 (1) (c) of Act 104 of 1980 and deleted by s. 2 (b) of
Act 90 of 1988.] ‘director’, in relation to a close corporation, means any person who in respect of such close
corporation holds any office or performs any functions similar to the office or functions of a director of a
company other than a close corporation;
[Definition of ‘director’ inserted by s. 2 (1) (a) of Act 96 of 1985.] ‘dividend’ means any amount distributed by a company (not being an institution to which section
10 (1) (d) applies) to its shareholders or any amount distributed out of the assets pertaining to any portfolio
referred to in paragraph (e) of the definition of ‘company’ in this section to shareholders in relation to such
portfolio (including, in the case of any co-operative society or company referred to in section 27, any
amount distributed on or after 1 April 1977 to its members, whether divided among the members in
accordance with their rights as shareholders or according to the value of business transactions between
individual members and such society or company or on some other basis), and in this definition the
expression ‘amount distributed’ includes-

17 (a) in relation to a company that is being wound up or liquidated, or the corporate existence
of which is finally terminated, any profits distributed, whether in cash or otherwise, other
than those of a capital nature earned before or during the winding-up or liquidation from
the disposal of any asset before 1 October 2001 (any such profits distributed by the
liquidator of the company being deemed for the purposes of this definition to have been
distributed by the company): Provided that the amount of any capital profits so
distributed which are attributable to the disposal of any asset on or after 1 October 2001,
but which was acquired by that company before that date shall, for the purposes of this
definition be limited to the amount of profit determined as if that asset had been acquired
on 1 October 2001 for a cost equal to the market value of that asset as contemplated in
paragraph 29 of the Eighth Schedule;
[Para. (a) substituted by s. 4 (1) (c) of Act 69 of 1975 and by s. 6 (1) (g) of Act 74 of 2002.] (b) in relation to a company that is not being wound up or liquidated, any profits distributed,
whether in cash or otherwise, and whether of a capital nature or not, including an amount
equal to the nominal value, at the time of issue thereof, of any capitalization shares
awarded to shareholders and the nominal value of any bonus debentures or securities
awarded to shareholders;
(c) in the event of the partial reduction or redemption of the capital of a company, including
the acquisition of shares in terms of section 85 of the Companies Act, 1973 (Act 61 of
1973), so much of the sum of any cash and the value of any asset given to a shareholder
as exceeds the cash equivalent of-
(i) the amount by which the nominal value of the shares of that shareholder is
reduced; or
(ii) the nominal value of the shares so acquired from such shareholder, as the case
may be; and
[Para. (c) substituted by s. 4 (1) (d) of Act 69 of 1975 and by s. 10 (1) (b) of Act 53 of 1999.] (d) in the event of the reconstruction of a company, so much of the sum of any cash and the
value of any asset given to a shareholder as exceeds the nominal value of the shares held
by him before the reconstruction,
[Para. (d) substituted by s. 4 (1) (d) of Act 69 of 1975.] but does not include-
(e) the nominal value of any capitalization shares awarded to a shareholder to the extent to
which such shares have been paid up by means of the application of the whole or any
portion of the share premium account of a company; or
(f) subject to the provisions of the first proviso to this definition, any cash and the value of
any asset given to a shareholder to the extent to which the cash and the value of the asset
represents a reduction of the share premium account of a company; or
[Para. (f) substituted by s. 4 (1) (e) of Act 69 of 1975 and by s. 10 (1) (c) of Act 53 of 1999.] (g) ……
[Para. (g) substituted by s. 4 (1) (e) of Act 69 of 1975, amended by s. 2 (1) (c) of Act 113 of 1993 and
deleted by s. 10 (1) (d) of Act 53 of 1999.] (h) the nominal value of any capitalization shares awarded to shareholders as part of the
equity share capital of a company;
[Para. (h) substituted by s. 4 (1) (e) of Act 69 of 1975 and by s. 10 (1) (e) of Act 53 of 1999.] (i) (i) any amount distributed by any co-operative society or company referred to in
section 27 by way of a bonus out of its profits for any year of assessment of such
society or company commencing before 1 April 1977, if such amount is divided
among the members according to the value of the business transactions between
the society or company and the members and is distributed not later than twelve
months after the end of such year of assessment;
(ii) any amount distributed by such society or company by way of a bonus, to the
extent that such amount is allowable as a deduction from the income of such
society or company under the provisions of section 27; and
(iii) any amount distributed out of the stabilization fund referred to in section 27 (2)
(h):
[Para. (i) inserted by s. 4 (1) (b) of Act 113 of 1977.]

18 Provided that, for the purposes of this definition-
(i) where a company has on or after 1 January 1974 transferred any amount from reserves
(excluding any share premium account) or undistributed profits to the share capital or the
share premium account of the company without applying the amount in paying up
capitalization shares or has applied the amount in paying up capitalization shares the
nominal value of which did not in whole or in part constitute an amount distributed as
contemplated in the foregoing provisions of this definition, the amount so transferred
(reduced by so much thereof as constitutes such an amount distributed) shall be deemed-
(aa) to the extent that such amount (as so reduced) is shown to consist of profits of a
capital nature, to be a profit of a capital nature available for distribution by the
company to shareholders who, in the event of a distribution by the company at any
time (whether before or during the winding-up or liquidation of the company) of
profits of a capital nature would be entitled to participate in such a distribution;
and
(bb) to the extent that subparagraph (aa) does not apply, to be a profit which is not of a
capital nature and is available for distribution by the company to shareholders
who, in the event of a distribution by the company at any time (whether before or
during the winding-up or liquidation of the company) of profits which are not of a
capital nature would be entitled to participate in such a distribution,
regardless of whether in either case the company in fact has or has not any profits
available for distribution;
(ii) where the share capital of the company consists of different classes of share capital, any
amount deemed by paragraph (i) of this proviso to be available for distribution to
shareholders shall, in applying that paragraph, be apportioned between such classes of
share capital in accordance with the rights of the holders of the corresponding classes of
shares to participate in distributions of profits of a capital nature or profits which are not
of a capital nature, as the case may be, and the amount deemed by the said paragraph to
be available for distribution to the shareholders in respect of any such class of shares
shall be the amount allocated to the share capital of that class under such apportionment;
(iiA) where any amount is under the provisions of paragraph (i) of this proviso or that
paragraph as applied by paragraph (ii) of this proviso, deemed to be a profit available for
distribution to shareholders and any of the shares of any class (hereinafter referred to as
the original shares) held by any such shareholders are converted into shares of any other
class or the original shares are cancelled and shares of any other class are issued in place
of the original shares, the said amount shall, to the extent that it relates to or may have
been apportioned to the original shares, be deemed to relate to and to be a profit available
for distribution to the shareholders in respect of the shares of such other class and the
provisions of this proviso shall, to the extent that the said amount is deemed to consist of
a profit as aforesaid, apply in respect of such amount as though it were an amount
referred to in paragraph (i) of this proviso, and the shareholders in respect of the shares of
such other class shall, regardless of the rights attaching to such shares, be deemed as
respects the said amount to be entitled to participate in profits of the same nature as the
profit deemed by this paragraph to be available for distribution to the shareholders,
whether such profit is of a capital nature or is not of a capital nature;
[Para. (iiA) inserted by s. 4 (1) (f) of Act 69 of 1975.] (iiB) subject to the provisions of paragraphs (iiA) and (iv) of this proviso, where any amount is
under the provisions of paragraph (i) of this proviso or that paragraph as applied by
paragraph (ii) of this proviso, deemed to be a profit available for distribution to
shareholders and any shares issued by the company are cancelled without a return of the
share capital or any share premium relating to such shares, such share capital or share
premium or any reserve created by reason of the cancellation of such shares shall, to the
extent that the said profit may be apportioned to the said shares, be deemed to consist of a
profit (of the same nature as the aforesaid profit) available for distribution to shareholders
who are or may become interested in such share capital, share premium or reserve, and
where any cash is or any assets are given to shareholders by way of a return of or a
distribution out of such share capital, share premium or reserve the sum of the amount of

19 such cash and the value of such assets shall, to the extent that such sum does not exceed
the amount deemed by this paragraph to consist of a profit available for distribution to
shareholders, be deemed to be a profit (of the same nature as the first-mentioned profit)
distributed to the shareholders;
[Para. (iiB) inserted by s. 4 (i) (f) of Act 69 of 1975.] (iii) if, in the event of the subsequent partial reduction or redemption of the share capital
(including any share premium) of the company, including any acquisition of shares in
terms of section 85 of the Companies Act, 1973 (Act 61 of 1973), or the reconstruction of
the company, any cash or asset is given to shareholders and such cash or asset (or a
portion thereof) represents a return of share capital or share premium, the amount of
share capital or share premium so returned-
(aa) to shareholders entitled to participate in distributions of profits which are not of a
capital nature and in respect of whom any amount is deemed under paragraph (i)
(bb) of this proviso to be such a profit available for distribution to such
shareholders, shall (to the extent that the amount returned to such shareholders
does not exceed the aggregate of the amounts of the profits so deemed to be
available for distribution to such shareholders) be deemed to be a profit, not of a
capital nature, distributed to such shareholders, and the amounts so deemed to be
available for distribution shall be deemed to have been reduced accordingly; or
(bb) to shareholders entitled to participate in distributions of profits of a capital nature
and in respect of whom any amount is deemed under paragraph (i) (aa) of this
proviso to be such a profit available for distribution to such shareholders, shall (to
the extent that the amount returned to such shareholders (less so much thereof as
is deemed under subparagraph (aa) of this paragraph to be a profit, not of a capital
nature, distributed to such shareholders) does not exceed the aggregate of the
amounts of the profits deemed under the said paragraph (i) (aa) to be available for
distribution to such shareholders) be deemed to be a profit of a capital nature
distributed to such shareholders and the amounts so available for distribution shall
be deemed to have been reduced accordingly;
[Para. (iii) amended by s. 4 (1) (g) of Act 69 of 1975 and by s. 10 (1) (h) of Act 53 of 1999.] (iv) where the company has lost some of its paid-up share capital (including any share
premium) as a result of losses actually incurred by it and such share capital is in
consequence partially reduced to take account of such losses, any amounts which in terms
of this proviso are at the date of such partial reduction of such share capital deemed to be
profits available for distribution to shareholders shall be deemed to have been reduced to
the extent that such losses are so accounted for and in such manner that, as far as possible
and on the basis, where necessary, of an apportionment between different classes of share
capital in accordance with the rights of shareholders-
(aa) any such profits which are of a capital nature and relate to shareholders entitled to
participate in profits of that nature, are reduced by so much of the amount by
which the said share capital is reduced as is attributable to losses of a capital
nature; and
(bb) any such profits which are not of a capital nature and relate to shareholders
entitled to participate in profits which are not of a capital nature, are reduced by so
much of the amount by which the said share capital is reduced as is attributable to
losses which are not of a capital nature;
(v) in the event of the winding-up or liquidation of the company-
(aa) any profits which in terms of the preceding provisions of this proviso are, at the
commencement of the winding-up or liquidation, deemed to be available for
distribution to shareholders shall, if the company has lost some of its paid-up
share capital (including any share premium) as a result of losses actually incurred
by it, be deemed to have been reduced in such manner that, as far as possible and
on the basis, where necessary, of an apportionment between different classes of
share capital in accordance with the rights of shareholders-
(A) any such profits which are of a capital nature and relate to shareholders
entitled to participate in profits of that nature, are reduced by so much of

20 the loss of the said share capital as is attributable to losses of a capital
nature; and
(B) any such profits which are not of a capital nature and relate to shareholders
entitled to participate in profits which are not of a capital nature, are
reduced by so much of the loss of the said share capital as is attributable to
losses which are not of a capital nature; and
(bb) the aggregate of any cash and the value of any assets given to shareholders
entitled to participate in profits not of a capital nature shall, to the extent that such
aggregate exceeds so much of the sum of the share capital and any share premium
contributed by such shareholders (less so much of such share capital and share
premium as has been lost) as remains after deducting therefrom an amount equal
to so much of any profits, not of a capital nature, which are deemed by this
proviso (after applying subparagraph (aa) of this paragraph) to be available for
distribution to such shareholders at the commencement of the winding-up or
liquidation, as relates to the said share capital, be deemed to be a profit, not of a
capital nature, distributed to such shareholders, but the amount of that profit shall
not be determined at an amount which exceeds the aforesaid amount:
Provided further that a reserve of any company which consists of or includes any amount transferred from
the share premium account of the company shall, except to the extent to which such reserve consists of any
other amount, be deemed for the purposes of this definition to be a share premium account of, or share
premium received by, such company;
[Definition of ‘dividend’ amended by s. 3 (c) of Act 90 of 1962, substituted by s. 4 (1) (e) of Act 85 of 1974
and amended by s. 4 (1) (a) of Act 113 of 1977, by s. 3 (1) (b) of Act 101 of 1978, by s. 1 (1) (b) of Act
108 of 1986, by s. 2 (1) (d) of Act 113 of 1993, by s. 10 (1) (f) and (g) of Act 53 of 1999, by s. 13 (1) (e) of
Act 30 of 2000, by s. 6 (1) (f) of Act 74 of 2002 and by s. 12 (1) (d) of Act 45 of 2003.] ‘domestic company’ ……
[Definition of ‘domestic company’ inserted by s. 4 (1) (f) of Act 85 of 1974 and deleted by s. 2 (a) of Act 59
of 2000.] ‘entertainment expenditure’ means expenditure incurred in providing hospitality of any kind,
including, without limiting the scope of the definition, expenditure incurred in providing or supplying-
(a) food, drink or accommodation; or
(b) any ticket or voucher entitling any person to admission to any theatre, exhibition or club
or to attend any show, display or performance or to use or enjoy any sporting,
recreational or other facility; or
(c) any gift of goods intended for the personal use or enjoyment of any person; or
(d) any travel facility; or
(e) any voucher entitling the recipient or any holder thereof to exchange it for food, drink or
accommodation or any such ticket, voucher, gift or travel facility,
and expenditure which is incidental to or is incurred in connection with the provision or supply of any such
hospitality, food, drink, accommodation, ticket, voucher, gift or travel facility, but excluding such
expenditure in respect of hospitality as is referred to in section 8 (1) (d);
[Definition of ‘entertainment expenditure’ inserted by s. 2 (1) (e) of Act 121 of 1984.] ‘equity share capital’ means, in relation to any company, its issued share capital excluding any
part thereof which, neither as respects dividends nor as respects capital, carries any right to participate
beyond a specified amount in a distribution, and the expression ‘equity shares’ shall be construed
accordingly;
‘executor’ means any person to whom letters of administration have been granted by a Master or
an Assistant Master of the High Court appointed under the Administration of Estates Act, 1965 (Act 66 of
1965), in respect of the estate of a deceased person under any law relating to the administration of estates,
and includes a person acting or authorized to act under letters of administration granted outside the
Republic but signed and sealed by such a Master or Assistant Master for use within the Republic and, in
any case where the estate is not required to be administered under the supervision of such a Master or
Assistant Master, the person administering the estate;
[Definition of ‘executor’ substituted by s. 2 (1) (f) of Act 28 of 1997.] ‘external company’ ……
[Definition of ‘external company’ inserted by s. 4 (1) (i) of Act 85 of 1974 and deleted by s. 2 (b) of Act 59

21 of 2000.] ‘financial instrument’ includes-
(a) a loan, advance, debt, stock, bond, debenture, bill, share, promissory note, banker’s
acceptance, negotiable certificate of deposit, deposit with a financial institution, a
participatory interest in a portfolio of a collective investment scheme, or a similar
instrument;
(b) any repurchase or resale agreement, forward purchase arrangement, forward sale
arrangement, futures contract, option contract or swap contract;
(c) any other contractual right or obligation the value of which is determined directly or
indirectly with reference to-
(i) a debt security or equity;
(ii) any commodity as quoted on an exchange; or
(iii) a rate index or a specified index;
[Para. (c) substituted by s. 3 (1) (a) of Act 32 of 2004.] (d) any interest-bearing arrangement; and
(e) any financial arrangement based on or determined with reference to the time value of
money or cash flow or the exchange or transfer of an asset;
[Definition of ‘financial instrument’ inserted by s. 6 (1) (h) of Act 74 of 2002.] ‘financial year’, in relation to any company, means-
(a) the period, whether of 12 months or not, commencing upon the date of incorporation or
creation of such company and ending upon the last day of February immediately
succeeding such date or upon such other date as the Commissioner having regard to the
circumstances of the case may approve; or
(b) any period subsequent to the period referred to in paragraph (a), whether of 12 months or
not, commencing immediately after the last day of the immediately preceding financial
year of such company and ending upon the first anniversary of such last day or upon such
other date as the Commissioner having regard to the circumstances of the case may
approve;
[Definition of ‘financial year’ inserted by s. 1 (a) of Act 6 of 1963 and substituted by s. 6 (1) (a) of Act 89
of 1969 and by s. 2 (1) (a) of Act 94 of 1983.] ‘foreign dividend’ means any dividend received by or which accrued to any person from a foreign
company as defined in section 9D;
[Definition of ‘foreign dividend’ inserted by s. 12 (1) (e) of Act 45 of 2003.] ‘foreign equity instrument’ means-
(a) a share or depository receipt in respect of a share listed on any-
(i) stock exchange contemplated in paragraph (b) of the definition of ‘listed
company’;
(ii) any national, regional or local exchange outside the Republic which is comparable
to a stock exchange contemplated in subparagraph (i); or
(iii) any interdealer quotation system outside the Republic that regularly publishes or
releases firm buy or sell quotations by identified brokers or dealers by electronic
means or otherwise;
[Para. (a) substituted by s. 6 (1) (i) of Act 74 of 2002.] (b) a participatory interest in an arrangement or scheme contemplated in paragraph (e) (ii) of
the definition of ‘company’ in section 1;
[Para. (b) substituted by s. 6 (1) (i) of Act 74 of 2002.] (c) any other contractual right or obligation which derives its value from any specified index
outside the Republic; or
(d) any coin made mainly from gold or platinum,
and any option, future or contract relating to such share, participatory interest, investment or contractual
right or obligation or coin;
[Definition of ‘foreign equity instrument’ inserted by s. 17 (1) (a) of Act 60 of 2001 and amended by s. 6 (1)
(j) of Act 74 of 2002.] ‘gross income’, in relation to any year or period of assessment, means-
(i) in the case of any resident, the total amount, in cash or otherwise, received by or accrued
to or in favour of such resident; or

22 (ii) in the case of any person other than a resident, the total amount, in cash or otherwise,
received by or accrued to or in favour of such person from a source within or deemed to
be within the Republic,
during such year or period of assessment, excluding receipts or accruals of a capital nature, but including,
without in any way limiting the scope of this definition, such amounts (whether of a capital nature or not)
so received or accrued as are described hereunder, namely-
(a) any amount received or accrued by way of annuity, including any amount contemplated
in the definition of ‘annuity amount’ in section 10A (1);
[Para. (a) substituted by s. 2 (1) (e) of Act 113 of 1993.] (b) any amount payable to the taxpayer by his spouse or former spouse, under any judicial
order or written agreement of separation or under any order of divorce, by way of
alimony or allowance or maintenance of the taxpayer or any children;
(c) any amount, including any voluntary award, received or accrued in respect of services
rendered or to be rendered or any amount (other than an amount referred to in section 8
(1)) received or accrued in respect of or by virtue of any employment or the holding of
any office: Provided that-
(i) the provisions of this paragraph shall not apply in respect of any benefit or
advantage in respect of which the provisions of paragraph (i) apply;
[Para. (i) substituted by s. 2 (1) (b) of Act 96 of 1985.] (ii) any amount received by or accrued to or for the benefit of any person in respect of
services rendered or to be rendered by any other person shall for the purposes of
this definition be deemed to have been received by or to have accrued to the said
other person;
(iii) to (vi) inclusive ……
[Sub-paras. (iii) to (vi) inclusive deleted by s. 9 (a) of Act 30 of 2002.] [Para. (c) amended by s. 3 (d) of Act 90 of 1962, by s. 5 (a) of Act 55 of 1966 and by s. 4 (1) (h) of Act 69
of 1975 and substituted by s. 2 (1) (f) of Act 121 of 1984.] (cA) any amount received by or accrued to any person who-
(i) is a natural person;
(ii) is or was a labour broker as defined in the Fourth Schedule (other than a labour
broker in respect of which a certificate of exemption has been issued in terms of
that Schedule);
(iii) is or was a personal service company as defined in the Fourth Schedule; or
(iv) is or was a personal service trust as defined in the Fourth Schedule,
as compensation for any restraint of trade imposed on such person;
[Para. (cA) inserted by s. 13 (1) (f) of Act 30 of 2000.] (d) any amount, including any voluntary award, received or accrued in respect of the
relinquishment, termination, loss, repudiation, cancellation or variation of any office or
employment or of any appointment (or right or claim to be appointed) to any office or
employment: Provided that-
(i) the provisions of this paragraph shall not apply to any lump sum award from any
pension fund, provident fund or retirement annuity fund;
(ii) any such amount which becomes payable in consequence of or following upon the
death of any person shall be deemed to be an amount which accrued to such
person immediately prior to his death;
[Para. (d) amended by s. 2 (1) (b) of Act 65 of 1986.] (e) any amount determined in accordance with the provisions of the Second Schedule (other
than any amount included under paragraph (eA)), in respect of lump sum benefits
received by or accrued to such person from or in consequence of his membership or past
membership of-
(i) any fund which has in respect of the current or any previous year of assessment
been approved by the Commissioner, whether under this Act or any previous
Income Tax Act, as a pension fund, provident fund or retirement annuity fund; or
(ii) a fund referred to in paragraph (a) or (b) of the definition of ‘pension fund’,
if such person was a member or past member of such fund during any such year:
Provided that the provisions of paragraph (g) of subsection (1) of section nine shall

23 mutatis mutandis apply in the case of any amount determined as aforesaid;
[Para. (e) amended by s. 3 (e) of Act 90 of 1962, by s. 4 (a) of Act 72 of 1963, by s. 2 (1) (b) of Act 94 of
1983, by s. 2 (1) (g) of Act 28 of 1997, by ss. 19 (1) (e) and (f) of Act 30 of 1998 and by s. 3 (a) of Act 19
of 2001.] (eA) where, in relation to a member who effectively remains in the employment of the same
employer, or the dependants or nominees of a deceased member-
(i) any amount in a fund contemplated in paragraph (a) or (b) of the definition of
‘pension fund’, the rules of which provide that on retirement of such member a
portion of his benefit has to be taken in the form of an annuity, has been
transferred to a fund, the rules of which entitle such member, or the dependants or
nominees of a deceased member, to a benefit on retirement in the form of a lump
sum exceeding one-third of the capitalised value of all benefits (including lump
sum payments and annuities); or
(ii) a fund contemplated in paragraph (a) or (b) of the definition of ‘pension fund’, the
rules of which provide that on retirement of such member a portion of his benefit
has to be taken in the form of an annuity, is wholly or partially converted by way
of an amendment to its rules or otherwise, to entitle such member, or the
dependants or nominees of a deceased member, to a benefit on retirement in the
form of a lump sum exceeding one-third of the capitalised value of all benefits
(including lump sum payments and annuities); or
(iii) any amount in a fund contemplated in paragraph (a) or (b) of the definition of
‘pension fund’ has become payable to the member or is being utilised to redeem a
debt,
[Sub-para. (iii) added by s. 19 (1) (i) of Act 30 of 1998.] an amount equal to two-thirds-
(aa) of the amount so transferred; or
(bb) in the case of a conversion, of the amount representing the amount converted for the
benefit or ultimate benefit of the member or the dependants or nominees of the deceased
member, and such amount shall be deemed to have been received by or accrued to or in
favour of such member, dependants or nominees, as the case may be: Provided that where
a court granting a decree of divorce in respect of such member has made an order that
any part of such amount shall be paid to the former spouse of such member, as provided
for in section 7 (8) of the Divorce Act, 1979 (Act 70 of 1979), such part shall for the
purposes of this paragraph be deemed to be an amount converted for the benefit or
ultimate benefit of such member; or
[Sub-para. (bb) substituted by s. 10 (1) (i) of Act 53 of 1999 and amended by s. 17 (1) (b) of Act 60 of
2001.] (cc) in the case of an amount becoming payable to a member or being utilised to redeem a
debt, of the amount so payable or so utilised:
[Item (cc) added by s. 19 (1) (k) of Act 30 of 1998.] Provided that the Commissioner may, on application by a fund, in particular circumstances,
increase the proportion of one-third contemplated in subparagraph (i) up to a maximum of one-
half on the following conditions:
(a) that on 12 March 1997 the proportion of the benefit on retirement in such fund that could
be taken in the form of a lump sum was greater than one-third, but not greater than one-
half, of the total capitalized value of all benefits;
(b) that the rules of such fund are amended so that the maximum proportion of such
member’s benefit on retirement that can be taken in the form of a lump sum is one-third
of the total capitalized value of all benefits; and
(c) such further conditions as the Commissioner may determine from time to time;
[Para. (eA) inserted by s. 4 (1) (a) of Act 90 of 1972, substituted by s. 4 (1) (a) of Act 65 of 1973, deleted
by s. 2 (1) (f) of Act 113 of 1993, inserted by s. 2 (1) (h) of Act 28 of 1997 and amended by s. 19 (1) (g) of
Act 30 of 1998.] (eB) any amount received by or accrued to any person by way of any distribution by any
pension fund or provident fund to such person (other than any amount recoverable in
terms of the provisions of section 37D of the Pension Funds Act, 1956 (Act 24 of 1956)),

24 where such person or any other person from whom such person received the right to
participate in such fund or distribution has during such year or any previous year of
assessment as an employer contributed any sum to such fund for the benefit of its
employees or former employees;
[Para. (eB) inserted by s. 13 (1) (g) of Act 30 of 2000.] (f) any amount received or accrued in commutation of amounts due under any contract of
employment or service;
(g) any amount received or accrued from another person, as premium or like consideration-
(i) for the use or occupation or the right of use or occupation of land or buildings; or
(ii) for the use or the right of use of plant or machinery; or
(ii)bis for the use or the right of use of any motion picture film or any film or video tape
or disc for use in connection with television or any sound recording or advertising
matter connected with such motion picture film, film or video tape or disc; or
(iii) for the use or right of use of any patent as defined in the Patents Act, 1978 (Act 57
of 1978), or any design as defined in the Designs Act, 1993 (Act 195 of 1993), or
any trade mark as defined in the Trade Marks Act, 1993 (Act 194 of 1993), or any
copyright as defined in the Copyright Act, 1978 (Act 98 of 1978), or any model,
pattern, plan, formula or process or any other property or right of a similar nature;
and
[Sub-para. (iii) substituted by s. 2 (1) (a) of Act 129 of 1991 and by s. 10 (1) (j) of Act 53 of 1999.] [Para. (g) amended by s. 3 (f) and (g) of Act 90 of 1962 and by s. 6 (1) (b) of Act 89 of 1969 and
substituted by s. 4 (1) (b) of Act 65 of 1973.] (gA) any amount received or accrued from another person as consideration (or payment of like
nature) for the imparting of or the undertaking to impart any scientific, technical,
industrial or commercial knowledge or information, or for the rendering of or the
undertaking to render any assistance or service in connection with the application or
utilization of such knowledge or information;
[Para. (gA) inserted by s. 4 (1) (c) of Act 65 of 1973 and substituted by s. 2 (d) of Act 59 of 2000.] (h) in the case of any person to whom, in terms of any agreement relating to the grant to any
other person of the right of use or occupation of land or buildings, or by virtue of the
cession of any rights under any such agreement, there has accrued in any such year or
period the right to have improvements effected on the land or to the buildings by any
other person-
(i) the amount stipulated in the agreement as the value of the improvements or as the
amount to be expended on the improvements; or
(ii) if no amount is so stipulated, an amount representing the fair and reasonable value
of the improvements;
[Sub-para. (ii) substituted by s. 2 (1) (g) of Act 113 of 1993.] (i) the cash equivalent, as determined under the provisions of the Seventh Schedule, of the
value during the year of assessment of any benefit or advantage granted in respect of
employment or to the holder of any office, being a taxable benefit as defined in the said
Schedule, and any amount required to be included in the taxpayer’s income under section
8A;
[Para. (i) substituted by s. 6 (1) (c) of Act 89 of 1969, by s. 6 (a) of Act 52 of 1970 and by s. 2 (1) (g) of
Act 121 of 1984.] (j) so much of the sum of any amounts received or accrued during any year of assessment in
respect of disposals of assets the cost of which has in whole or in part been included in
capital expenditure taken into account (whether under this Act or any previous Income
Tax Act) for the purposes of any deduction in respect of any mine under section 15 (a) of
this Act or the corresponding provisions of any previous Income Tax Act, as exceeds the
sum of so much of any capital expenditure as in the case of such mine is unredeemed at
the commencement of the said year of assessment and the capital expenditure that is
incurred during that year in respect of such mine, as determined before applying the
definition of ‘capital expenditure incurred’ in section 36 (11);
[Para. (j) substituted by s. 6 (1) (d) of Act 89 of 1969, by s. 4 (1) (d) of Act 65 of 1973, by s. 4 (1) (j) of Act
85 of 1974, by s. 2 (1) (c) of Act 94 of 1983 and by s. 2 (b) of Act 141 of 1992.]

25 (jA) any amount received by or accrued to any person during the year of assessment from the
disposal of any asset manufactured, produced, constructed or assembled by that person,
which is similar to any other asset manufactured, produced, constructed or assembled by
that person for purposes of manufacture, sale or exchange by that person or on that
person’s behalf;
[Para. (jA) inserted by s. 17 (1) (c) of Act 60 of 2001.] (k) any amount received or accrued by way of a dividend: Provided that where any foreign
dividend declared by a foreign company-
(i) is received by or accrues to a portfolio of a collective investment scheme referred
to in paragraph (e) (i) of the definition of ‘company’; and
(ii) is distributed by that portfolio by way of a dividend, or a portion of a dividend, to
any person who is entitled to that dividend by virtue of being a holder of any
participatory interest in that portfolio,
that foreign dividend shall, to the extent that it is declared to that person as contemplated
in subparagraph (ii), be deemed to have been declared by that foreign company directly
to that person and to be a foreign dividend which is received by or accrued to that person;
[Para. (k) substituted by s. 4 (1) (c) of Act 88 of 1971, by s. 13 (1) (h) of Act 30 of 2000, by s. 2 (e) of Act
59 of 2000, by s. 17 (1) (d) of Act 60 of 2001 and by s. 12 (1) (f) of Act 45 of 2003.] (l) any amount received or accrued by way of grant or subsidy in respect of any soil erosion
works referred to in section 17A (1) or any of the matters mentioned in items (a) to (i),
inclusive, of paragraph 12 (1) of the First Schedule;
[Para. (l) substituted by s. 5 (b) of Act 76 of 1968, by s. 4 (1) (c) of Act 113 of 1977 and by s. 2 (1) (h) of
Act 113 of 1993.] (lA) ……
[Para. (lA) inserted by s. 5 of Act 95 of 1967 and deleted by s. 2 (c) of Act 141 of 1992.] (lB) any amount received by or accrued to or in favour of any person from the State by way of
a subsidy or reimbursement under any scheme designed to encourage the establishment,
expansion or carrying on of industrial or commercial undertakings in an economic
development area;
[Para. (lB) inserted by s. 3 (1) (a) of Act 91 of 1982.] (m) any amount received or accrued under or upon the surrender or disposal of, or by way of
any loan or advance granted on or after 1 July 1982 by the insurer concerned under or
upon the security of, any policy of insurance upon the life of any person who, at any time
while the policy was in force, was an employee of the taxpayer or, where the taxpayer is
a company, was a director or employee of that company, if any premium paid in respect
of such policy is or was deductible from the taxpayer’s income, whether in the current or
any previous year of assessment, under the provisions of section 11: Provided that where
any amount received or accrued under or upon the surrender or disposal of any such
policy falls to be included in the taxpayer’s gross income, the amount so to be included in
his gross income shall be reduced by the amount of any loan or advance under or upon
the security of that policy which has been included in his gross income, whether in the
current or any previous year of assessment: Provided further that where any such policy
has been terminated by the insurer and a paid-up policy has been issued the terminated
policy and the paid-up policy shall for the purposes of this paragraph be deemed to be
one and the same policy;
[Para. (m) substituted by s. 4 (1) (d) of Act 88 of 1971 and by s. 3 (1) (b) of Act 91 of 1982 and amended
by s. 2 (1) (d) of Act 94 of 1983.] (n) any amount which in terms of any other provision of this Act is specifically required to
be included in the taxpayer’s income, and for the purposes of this paragraph all amounts
which in terms of subsection (4) of section eight are required to be included in the
taxpayer’s income shall be deemed to have been received by or to have been accrued to
the taxpayer from a source within the Republic notwithstanding that such amounts may
have been recovered or recouped outside the Republic:
Provided that where during any year of assessment the taxpayer has become entitled to any amount which
is payable on a date or dates falling after the last day of such year, there shall be deemed to have accrued to
him during such year-

26 (a) if the taxpayer has on or before 23 May 1990 submitted a return of income drawn on the
basis that the present value of such amount has accrued to him during such year, the
present value of such amount; or
(b) in any other case, such amount:
Provided further that where the provisions of paragraph (a) of the first proviso are applicable, there shall be
deemed to have accrued to the taxpayer during any subsequent year of assessment in which he receives
such amount or any portion thereof, a sum equal to the difference between such amount or portion thereof
and the present value of such amount or portion thereof so deemed to have accrued to him during the first-
mentioned year of assessment;
[Definition of ‘gross income’ amended by s. 2 (1) (a) of Act 101 of 1990 and by s. 2 (c) of Act 59 of 2000.] ‘group of companies’ means two or more companies in which one company (hereinafter referred
to as the ‘controlling group company’) directly or indirectly holds shares in at least one other company
(hereinafter referred to as the ‘controlled group company’), to the extent that-
(a) at least 75 per cent of the equity shares of each controlled group company are directly
held by the controlling group company, one or more other controlled group companies or
any combination thereof; and
(b) the controlling group company directly holds 75 per cent or more of the equity shares in
at least one controlled group company;
[Definition of ‘group of companies’ inserted by s 6 (1) (k) of Act 74 of 2002.] ‘hotel keeper’ means any person carrying on the business of hotel keeper or boarding or lodging
house keeper where meals and sleeping accommodation are supplied to others for money or its equivalent;
[Definition of ‘hotel keeper’ substituted by s. 6 (1) (e) of Act 89 of 1969 and by s. 2 (b) of Act 36 of 1996.] ‘income’ means the amount remaining of the gross income of any person for any year or period of
assessment after deducting therefrom any amounts exempt from normal tax under Part I of Chapter II;
‘insolvent estate’ means an insolvent estate as defined in section 2 of the Insolvency Act, 1936
(Act 24 of 1936);
[Definition of ‘insolvent estate’ inserted by s. 2 (1) (i) of Act 28 of 1997.] ‘international headquarter company’ ……
[Definition of ‘international headquarter company’ inserted by s. 2 (f) of Act 59 of 2000 and deleted by s. 12
(1) (g) of Act 45 of 2003.] ‘listed company’ means a company where its shares or depository receipts in respect of its shares
are listed on-
(a) an exchange as defined in section 1 and licensed under section 10 of the Securities
Services Act, 2004; or
[Para. (a) substituted by s. 3 (1) (b) of Act 32 of 2004.] (b) a stock exchange in a country other than the Republic which has been recognised by the
Minister as contemplated in paragraph (c) of the definition of ‘recognised exchange’ in
paragraph 1 of the Eighth Schedule;
[Definition of ‘listed company’ inserted by s 6 (1) (l) of Act 74 of 2002.] ‘local authority’ means-
(a) any rural council, municipal council, town council, village council, town board, local
board, village management board, health committee or school board or any district
council;
(b) the Rand Water Board, the Far West Rand Dolomitic Water Association formed on 6 July
1964, any water board constituted in terms of section 108 (2) of the Water Act, 1956 (Act
54 of 1956), or regional water services corporation, or any other institution which has
powers similar to those of any such water board or water services corporation; and
(c) any regional services council established under section 3 of the Regional Services
Councils Act, 1985 (Act 109 of 1985), or any joint services board established under
section 4 of the KwaZulu and Natal Joint Services Act, 1990 (Act 84 of 1990);
[Definition of ‘local authority’ amended by s. 4 (b) of Act 72 of 1963 and substituted by s. 5 (a) of Act 88 of
1965 and by s. 2 (d) of Act 141 of 1992.] ‘married’ ……
[Definition of ‘married’ deleted by s. 5 (e) of Act 5 of 2001.] ‘married person’ ……
[Definition of ‘married person’ substituted by s. 3 (h) of Act 90 of 1962, by s. 5 (b) of Act 88 of 1965, by s.

27 4 (1) (e) of Act 88 of 1971 and by s. 4 (1) (b) of Act 90 of 1972 and amended by s. 2 (1) of Act 104 of
1980, by s. 1 of Act 30 of 1984, by s 2 (a) of Act 90 of 1988 and by s. 2 (a) of Act 70 of 1989 and deleted
by s. 2 (b) of Act 21 of 1995.] ‘married woman’ does not include a married woman who is living apart from her husband in
circumstances which indicate that the separation is likely to be permanent;
[Definition of ‘married woman’ inserted by s. 2 (b) of Act 70 of 1989 and substituted by s. 5 (f) of Act 5 of
2001.] ‘mining for gold’ or ‘to mine for gold’ includes mining for uranium or to mine for uranium;
‘mining operations’ and ‘mining’ include every method or process by which any mineral
(including natural oil) is won from the soil or from any substance or constituent thereof;
[Definition of ‘mining operations’ and ‘mining’ amended by s. 4 (c) of Act 72 of 1963.] ‘Minister’ means the Minister of Finance;
[Definition of ‘Minister’ inserted by s. 13 (1) (i) of Act 30 of 2000.] ‘mutual building society’ means a mutual building society registered under the Mutual Building
Societies Act, 1965 (Act 24 of 1965);
[Definition of ‘mutual building society’ inserted by s. 1 (1) (c) of Act 108 of 1986.] ‘natural oil’ means any liquid or solid hydrocarbon or combustible gas existing in a natural
condition in the earth’s crust, but does not include coal or bituminous shales or other stratified deposits
from which oil can be obtained by destructive distillation, or gas arising from marsh or other surface
deposits;
[Definition of ‘natural oil’ inserted by s. 4 (d) of Act 72 of 1963.] ‘neighbouring country’ means Botswana, Lesotho, Namibia and Swaziland;
[Definition of ‘neighbouring country’ inserted by s. 2 (1) (a) of Act 85 of 1987 and substituted by s. 2 (e) of
Act 141 of 1992 and by s. 2 (c) of Act 36 of 1996.] ‘new deep level gold mine’ ……
[Definition of ‘new deep level gold mine’ deleted by s. 2 (c) of Act 70 of 1989.] ‘new gold mine’ ……
[Definition of ‘new gold mine’ amended by s. 4 (e) of Act 72 of 1963 and deleted by s. 2 (c) of Act 70 of
1989.] ‘nominal value’ means-
(a) in relation to shares issued by a company-
(i) if the shares have a par value, such par value; or
(ii) if the shares do not have a par value, an amount equal to the amount at which the
par value of those shares would be determined if the company were to convert the
shares into shares having a par value:
Provided that in the case of capitalization shares the nominal value thereof at the time of
the issue thereof shall be deemed to be the amount of the company’s reserves (including
any share premium account) and unappropriated profits applied in paying up such shares
as contemplated in the definition of ‘capitalization shares’ in this section and the amount
of such reserves applied in paying up any share premium in respect of the said shares; or
(b) in relation to bonus debentures or securities issued by a company, the amount of the
company’s reserves or unappropriated profits applied in paying up such debentures or
securities as contemplated in the definition of ‘bonus debentures or securities’ in this
section;
[Definition of ‘nominal value’ inserted by s. 4 (1) (k) of Act 85 of 1974.] ‘other deep level gold mine’ means any producing gold mine in respect of which the Government
Mining Engineer has upon application made to him recognized on or before 22 May 1989 that its principal
object is the mining of gold bearing ores at vertical depths exceeding 2286 metres from the surface and in
respect of which he is satisfied, at the time the application is lodged with him, that mining at such depths
has commenced or will be commenced within a period of five years;
[Definition of ‘other deep level gold mine’ substituted by s. 2 (d) of Act 70 of 1989.] ‘pension fund’ means-
(a) (i) any superannuation, pension, provident or dependants’ fund or pension scheme
established by law; or
(ii) any superannuation, pension, provident or dependants’ fund or pension scheme
established for the benefit of the employees of any local authority; or

28 (iii) any fund contemplated in subparagraph (ii) which includes as members employees
of any municipal entity created in accordance with the provisions of the Municipal
Systems Act, 2000 (Act 32 of 2000), over which one or more local authorities
exercise ownership control as contemplated by that Act, where such fund was
established-
(aa) on or before 14 November 2000, and such employees were employees of a
local authority immediately prior to becoming employees of such
municipal entity; or
(bb) after 14 November 2000, and such fund has been approved by the
Commissioner subject to such limitations, conditions and requirements as
contemplated in paragraph (c);
[Sub-para. (iii) substituted by s. 6 (1) (m) of Act 74 of 2002.] [Para. (a) substituted by s. 2 (c) of Act 21 of 1995 and by s. 3 (b) of Act 19 of 2001.] (b) with effect from a date determined by the Commissioner in relation to any fund
hereinafter referred to (not being a date earlier than 4 December 1981), any pension fund
established for the benefit of employees of a control board as defined in section 1 of the
Marketing of Agricultural Products Act, 1996 (Act 47 of 1996), or for the benefit of
employees of the Development Bank of Southern Africa, if the Commissioner is satisfied
that the rules of such fund are in all material respects identical to those of the
Government Employees’ Pension Fund; or
[Para. (b) substituted by s. 2 (1) (c) of Act 96 of 1985 and by s. 2 (1) (j) of Act 28 of 1997.] (c) the Municipal Councillors Pension Fund provisionally registered under the Pension
Funds Act, 1956 (Act 24 of 1956), on 23 May 1988, or any fund (other than a retirement
annuity fund or a fund contemplated in paragraph (a) or (b) which is approved by the
Commissioner in respect of the year of assessment in question and, in the case of any
such fund established on or after 1 July 1986, is registered under the provisions of the
said Act: Provided that the Commissioner may approve a fund subject to such limitations
or conditions as he may determine, and shall not approve a fund in respect of any year of
assessment unless he is in respect of that year of assessment satisfied-
(i) that the fund is a permanent fund bona fide established for the purpose of
providing annuities for employees on retirement from employment or for the
dependants or nominees of deceased employees, or mainly for the said purpose
and also for the purpose of providing benefits other than annuities for the persons
aforesaid; and
[Para. (i) substituted by s. 2 (d) of Act 21 of 1995.] (ii) that the rules of the fund provide-
(aa) that all annual contributions of a recurrent nature to the fund shall be in
accordance with specified scales;
(bb) that membership of the fund throughout the period of employment shall be
a condition of the employment by the employer of all persons of the class
or classes specified therein who enter his employment on or after the date
upon which the fund comes into operation;
(cc) that persons who immediately prior to the said date were employed by the
employer and who on the said date fall within the said class or classes may,
on application made within a period of not more than 12 months as from
the said date, be permitted to become members of the fund on such
conditions as may be specified in the rules;
(dd) that not more than one-third of the total value of the annuity or annuities to
which any employee becomes entitled, may be commuted for a single
payment, except where the annual amount of such annuity or annuities
does not exceed R1 800 or such other amount as the Minister of Finance
may from time to time fix by notice in the Gazette;
[Sub-para. (dd) substituted by s. 2 (1) (b) of Act 101 of 1990 and amended by s. 2 (1) (i) of Act 113 of
1993.] (ee) for the administration of the fund in such a manner as to preclude the
employer from controlling the management or assets of the fund and from

29 deriving any monetary advantage from moneys paid into or out of the fund,
except-
(A) any monetary advantage approved by the Registrar of Pension
Funds; or
(B) that where the employer is a partnership, a member of the
partnership may be permitted to derive such monetary advantage
if he was previously an employee and, on becoming a partner, was
permitted to retain his membership of the fund as though he had
not ceased to be an employee, his contributions being based upon
his pensionable emoluments during the 12 months which ended
on the day on which he ceased to be an employee and his benefits
from the fund being calculated accordingly;
[Item (ee) substituted by s. 2 (g) of Act 59 of 2000.] (ff) that the Commissioner shall be notified of all amendments of the rules; and
(gg) that no portion of any annuity payable to the dependant or nominee of a
deceased member shall be commuted later than six months from the date of
the death of such member; and
[Sub-para. (gg) substituted by s. 2 (e) of Act 21 of 1995.] (iii) that the rules of the fund have been complied with;
[Para. (c) amended by s. 2 (1) (c) of Act 65 of 1986 and by s. 1 (1) of Act 99 of 1988.] [Definition of ‘pension fund’ amended by s. 3 (i) of Act 90 of 1962, by s. 4 (1) (c) of Act 90 of 1972, by s. 3
(1) (c) of Act 101 of 1978, by s. 3 (1) (c) of Act 104 of 1979 and by s. 3 (1) (c) of Act 91 of 1982 and
substituted by s. 2 (1) (e) of Act 94 of 1983.] ‘permanent establishment’ means a permanent establishment as defined from time to time in
Article 5 of the Model Tax Convention on Income and on Capital of the Organisation for Economic Co-
operation and Development;
[Definition of ‘permanent establishment’ inserted by s. 5 (g) of Act 5 of 2001.] ‘person’ includes an insolvent estate, the estate of a deceased person and any trust;
[Definition of ‘person’ substituted by s. 2 (1) (b) of Act 129 of 1991, by s. 2 (f) of Act 141 of 1992 and by s.
2 (1) (k) of Act 28 of 1997.] ‘post-1966 gold mine’ ……
[Definition of ‘post-1966 gold mine’ inserted by s. 5 (b) of Act 55 of 1966 and deleted by s. 2 (1) (c) of Act
129 of 1991.] ‘post-1973 gold mine’ means an independent workable proposition in respect of which the State
President or the Minister of Mines has, after 1 January, 1974, on the recommendation of the Mining Leases
Board signified in writing his decision to grant a lease of the right to mine for gold, and includes any other
gold mine which, in the opinion of the Government Mining Engineer, is an independent workable
proposition which was established as such after the said date;
[Definition of ‘post-1973 gold mine’ inserted by s. 4 (1) (l) of Act 85 of 1974.] ‘post-1990 gold mine’ means a gold mine which, in the opinion of the Director-General: Mineral
and Energy Affairs, is an independent workable proposition and in respect of which a mining authorization
for gold mining was issued for the first time after 14 March 1990;
[Definition of ‘post-1990 gold mine’ inserted by s. 2 (1) (c) of Act 101 of 1990 and amended by s. 2 (g) of
Act 141 of 1992.] ‘prescribed’ means prescribed or deemed to be prescribed by or under this Act;
‘prescribed rate’ in relation to any interest payable in terms of this Act, means for the purposes
of-
(a) interest payable to any taxpayer under the provisions of section 89quat (4), a rate
determined at four percentage points below the rate contemplated in paragraph (b); or
(b) any other provision of this Act, such rate as the Minister may from time to time fix by
notice in the Gazette in terms of section 80 (1) (b) of the Public Finance Management
Act, 1999 (Act 1 of 1999): Provided that where the Minister fixes a new rate in terms of
that Act, that new rate applies for purposes of this Act from the first day of the second
month following the date on which that new rate came into operation;
[Para. (b) substituted by s. 3 of Act 16 of 2004.] [Definition of ‘prescribed rate’ inserted by s. 2 (1) (h) of Act 121 of 1984, substituted by s. 2 (1) (b) of Act

30 85 of 1987, amended by GN R780 of 14 April 1989, by s. 2 (1) (j) of Act 113 of 1993, by GN 465 of 11
March 1994, by GN 1503 of 20 November 1998, by GN 538 of 22 April 1999, by GN R1021 of 27 August
1999 and by GN 182 of 25 February 2000 and substituted by s. 13 (1) (j) of Act 30 of 2000 and by s. 6 (1)
(n) of Act 74 of 2002 .] ‘provident fund’ means any fund (other than a pension fund, benefit fund or retirement annuity
fund) which is approved by the Commissioner in respect of the year of assessment in question and, in the
case of any such fund established on or after 1 July 1986, is registered under the provisions of the Pension
Funds Act, 1956 (Act 24 of 1956): Provided that the Commissioner may approve a fund subject to such
limitations or conditions as he may determine, and shall not approve a fund in respect of any year of
assessment unless he is in respect of that year of assessment satisfied-
(a) that the fund is a permanent fund bona fide established solely for the purpose of
providing benefits for employees on retirement from employment or solely for the
purpose of providing benefits for employees on retirement from employment or solely for
the purpose of providing benefits for the dependants or nominees of deceased employees
or deceased former employees or solely for a combination of such purposes; and
[Para. (a) substituted by s. 2 (f) of Act 21 of 1995.] (b) that the rules of the fund contain provisions similar in all respects to those required to be
contained in the rules of a pension fund in terms of subparagraphs (aa), (bb), (cc), (ee)
and (ff) of paragraph (ii) of the proviso to paragraph (c) of the definition of ‘pension
fund’; and
[Para. (b) substituted by s. 2 (1) (f) of Act 94 of 1983.] (c) that the rules of the fund have been complied with;
[Definition of ‘provident fund’ amended by s. 2 (1) (d) of Act 65 of 1986.] ‘Public Private Partnership’ means a Public Private Partnership as defined in regulation 16 of
the Treasury Regulations issued in terms of section 76 of the Public Finance Management Act, 1999 (Act 1
of 1999);
[Definition of ‘Public Private Partnership’ inserted by s. 3 (1) (c) of Act 32 of 2004.] ‘qualifying statutory rate’ ……
[Definition of ‘qualifying statutory rate’ inserted by s. 6 (1) (o) of Act 74 of 2002 and deleted by s. 12 (1)
(h) of Act 45 of 2003.] ‘regulation’ means a regulation in force under this Act;
‘relative’ in relation to any person, means the spouse of such person or anybody related to him or
his spouse within the third degree of consanguinity, or any spouse of anybody so related, and for the
purpose of determining the relationship between any child referred to in the definition of ‘child’ in this
section and any other person, such child shall be deemed to be related to its adoptive parent within the first
degree of consanguinity;
[Definition of ‘relative’ inserted by s. 4 (c) of Act 90 of 1964.] ‘representative taxpayer’ means-
(a) in respect of the income of a company, the public officer thereof;
(b) in respect of the income under his management, disposition or control, the agent of any
person, including an agent appointed as such under the provisions of section ninety-nine,
and for the purposes of this paragraph the term ‘agent’ includes every person in the
Republic having the receipt, management or control of income on behalf of any person
permanently or temporarily absent from the Republic or remitting or paying income to or
receiving moneys for such person;
(c) in respect of income the subject of any trust or in respect of the income of any minor or
mentally disordered or defective person or any other person under legal disability, the
trustee, guardian, curator or other person entitled to the receipt, management, disposal or
control of such income or remitting or paying to or receiving moneys on behalf of such
person under disability;
(d) in respect of income paid under the decree or order of any court or judge to any receiver
or other person, such receiver or person, whoever may be entitled to the benefit of such
income, and whether or not it accrues to any person on a contingency or an uncertain
event;
(e) in respect of the income received by or accrued to any deceased person during his
lifetime and the income received by or accrued to the estate of any deceased person, the

31 executor or administrator of the estate of such deceased person,
(f) in respect of the income received by or accrued to an insolvent estate, the trustee or
administrator of such insolvent estate,
[Para. (f) added by s. 2 (1) (l) of Act 28 of 1997.] but nothing in this definition shall be construed as relieving any person from any liability, responsibility or
duty imposed upon him by this Act: Provided that for the purposes of this definition income includes any
amount received or accrued or deemed to have been received or accrued in consequence of the disposal of
any asset envisaged in the Eighth Schedule;
[Definition of ‘representative taxpayer’ amended by s. 5 (h) of Act 5 of 2001.] ‘Republic’ means the Republic of South Africa;
[Definition of ‘Republic’ inserted by s. 6 (1) (f) of Act 89 of 1969, substituted by s. 6 (b) of Act 52 of 1970
and by s. 4 (1) (d) of Act 90 of 1972 and amended by s. 4 (1) (m) of Act 85 of 1974 and by s. 2 (1) (g) of
Act 94 of 1983.] ‘resident’ means any-
(a) natural person who is-
(i) ordinarily resident in the Republic; or
(ii) not at any time during the relevant year of assessment ordinarily resident in the
Republic, if that person was physically present in the Republic-
(aa) for a period or periods exceeding 91 days in aggregate during the relevant
year of assessment, as well as for a period or periods exceeding 91 days in
aggregate during each of the three years of assessment preceding such year
of assessment; and
(bb) for a period or periods exceeding 549 days in aggregate during such three
preceding years of assessment,
in which case that person will be a resident with effect from the first day of that
relevant year of assessment:
Provided that-
(A) a day shall include a part of a day, but shall not include any day that a
person is in transit through the Republic between two places outside the
Republic and that person does not formally enter the Republic through a
‘port of entry’ as contemplated in section 9 (1) of the Immigration Act,
2002 (Act 13 of 2002), or at any other place in the case of a person
authorised by the Minister of Home Affairs in terms of section 31 (2) (c) of
that Act; and
[Item (A) substituted by s. 6 (1) (p) of Act 74 of 2002 and by s. 12 (1) (k) of Act 45 of 2003.] (B) where a person who is a resident in terms of this subparagraph is physically
outside the Republic for a continuous period of at least 330 full days
immediately after the day on which such person ceases to be physically
present in the Republic, such person shall be deemed not to have been a
resident from the day on which such person so ceased to be physically
present in the Republic; or
[Sub-para. (ii) amended by s. 12 (1) (i) and (j) of Act 45 of 2003.] (b) person (other than a natural person) which is incorporated, established or formed in the
Republic or which has its place of effective management in the Republic;
[Para. (b) substituted by s. 12 (1) (l) of Act 45 of 2003.] but does not include any person who is deemed to be exclusively a resident of another country for purposes
of the application of any agreement entered into between the governments of the Republic and that other
country for the avoidance of double taxation;
[Definition of ‘resident’ inserted by s. 2 (h) of Act 59 of 2000 and amended by s. 33 (1) of Act 12 of 2003.] ‘retirement annuity fund’ means any fund (other than a pension fund, provident fund or benefit
fund) which is approved by the Commissioner in respect of the year of assessment in question and, in the
case of any such fund established on or after 1 July 1986, is registered under the provisions of the Pension
Funds Act, 1956 (Act 24 of 1956): Provided that the Commissioner may approve a fund subject to such
limitations or conditions as he may determine, and shall not approve any fund in respect of any year of
assessment unless he is in respect of that year of assessment satisfied-
(a) that the fund is a permanent fund bona fide established for the sole purpose of providing

32 life annuities for the members of the fund or annuities for the dependants or nominees of
deceased members; and
[Para. (a) substituted by s. 2 (g) of Act 21 of 1995.] (b) that the rules of the fund provide-
(i) for contributions by the members, including contributions made by way of transfer
of members’ interests in approved pension funds, provident funds or other
retirement annuity funds;
[Sub-para. (i) amended by s. 4 (d) of Act 90 of 1964 and substituted by s. 2 of Act 96 of 1981.] (ii) that not more than one-third of the total value of any annuities to which any
person becomes entitled, may be commuted for a single payment, except where
the annual amount of such annuities does not exceed R1 800 or such other amount
as the Minister of Finance may from time to time fix by notice in the Gazette;
[Sub-para. (ii) substituted by s. 4 (1) (e) of Act 90 of 1972, amended by s. 3 (1) (d) of Act 91 of 1982,
substituted by s. 2 (1) (d) of Act 101 of 1990 and amended by s. 2 (1) (k) of Act 113 of 1993.] (iii) that no portion of any annuity payable to the dependant or nominee of a deceased
member may be commuted later than six months from the date of the death of
such member;
[Sub-para. (iii) substituted by s. 2 (h) of Act 21 of 1995.] (iv) adequate security to safeguard the interests of persons who may become entitled
to annuities;
(v) that no member shall become entitled to the payment of any annuity after he
reaches the age of seventy years or, except in the case of a member who becomes
permanently incapable through infirmity of mind or body of carrying on his
occupation, before he reaches the age of fifty-five years;
(vi) that where a member dies before he becomes entitled to the payment of an
annuity, the benefits shall not exceed a refund to his estate or to his dependants or
nominees of the sum of the amounts (with or without reasonable interest thereon)
contributed by him and an annuity or annuities to his dependants or nominees;
[Sub-para. (vi) substituted by s. 2 (i) of Act 21 of 1995.] (vii) that where a member dies after he has become entitled to an annuity no further
benefit shall be payable other than an annuity or annuities to his dependants or
nominees;
[Sub-para. (vii) substituted by s. 2 (i) of Act 21 of 1995.] (viii) ……
[Sub-para. (viii) substituted by s. 6 (1) (g) of Act 89 of 1969 and deleted by s. 4 (a) of Act 103 of 1976.] (ix) ……
[Sub-para. (ix) substituted by s. 6 (1) (g) of Act 89 of 1969 and deleted by s. 4 (a) of Act 103 of 1976.] (x) that a member who discontinues his contributions prematurely shall be entitled
either to an annuity (payable from the date on which he would have become
entitled to the payment of an annuity if he had continued his contributions)
determined in relation to his actual contributions or to be reinstated as a full
member under conditions prescribed in the rules of the fund;
(xi) that upon the winding up of the fund a member’s interest therein must either be
used to purchase a policy of insurance which the Commissioner is satisfied
provides benefits similar to those provided by such fund or be paid for the
member’s benefit into another approved retirement annuity fund;
(xii) that save-
(aa) as is contemplated in subparagraph (ii); or
(bb) for the transfer of any member’s total interest in any approved retirement
annuity fund into another approved retirement annuity fund prior to the
member becoming entitled to the payment of an annuity,
no member’s rights to benefits shall be capable of surrender, commutation or
assignment or of being pledged as security for any loan;
[Sub-para. (xii) substituted by s. 19 (1) (l) of Act 30 of 1998.] (xiii) that the Commissioner shall be notified of all amendments of the rules; and
(c) that the rules of the fund have been complied with;

33 [Definition of ‘retirement annuity fund’ amended by s. 2 (1) (e) of Act 65 of 1986.] ‘retirement-funding employment’ means-
(a) in relation to any employee or the holder of an office (including a member of a body of
persons whether or not established by or in terms of any law), who-
(i) in the case of such employee, derives in respect of his employment any income
constituting remuneration as defined in paragraph 1 of the Fourth Schedule (but
leaving out of account the provisions of paragraph (c) of that definition and
including the amount of any allowance or advance in respect of transport expenses
contemplated in section 8 (1) (b), but not an allowance or advance contemplated
in section 8 (1) (b) (iii) which is based on the actual distance travelled by the
recipient, and which is calculated at a rate per kilometre which does not exceed
the appropriate rate per kilometre fixed by the Minister of Finance under the said
section 8 (1) (b) (iii)) and is a member of or, as an employee, contributes to a
pension fund or provident fund established for the benefit of employees of the
employer from whom such income is derived; or
[Sub-para. (i) substituted by s. 2 (1) (l) of Act 113 of 1993, by s. 2 (1) (b) of Act 21 of 1994 and by s. 6 (1)
(q) of Act 74 of 2002.] (ii) in the case of such holder of an office, derives in respect of his office any income
by way of salary, emoluments, fees or other remuneration and is, as respects such
office, a member of or contributes to a pension fund or provident fund established-
(aa) by law or for the benefit of holders of office; or
(bb) for the benefit of employees of the person from whom such income is
derived,
the employment of such employee or the holding of such office, as the case may be, as
respects that part of his said income as is taken into account in the determination of the
contributions made by him or on his behalf to such pension fund or provident fund; or
[Para. (a) substituted by s. 2 (1) (i) of Act 121 of 1984.] (b) in relation to any member of a partnership who has retained his membership of a pension
fund as contemplated in paragraph (ii) (ee) of the proviso to paragraph (c) of the
definition of ‘pension fund’ in section 1, his membership of the partnership, as respects
that part of his income from the partnership in the form of his share of profits as does not
exceed the amount of his pensionable emoluments contemplated in the said paragraph (ii)
(ee);
[Para. (b) substituted by s. 2 (1) (h) of Act 94 of 1983.] [Definition of ‘retirement-funding employment’ inserted by s. 3 (1) (d) of Act 104 of 1979.] ‘scientific research’ ……
[Definition of ‘scientific research’ deleted by s. 12 (1) (m) of Act 45 of 2003.] ‘Secretary’ ……
[Definition of ‘Secretary’ inserted by s. 4 (e) of Act 90 of 1964 and deleted by s. 2 (1) (e) of Act 104 of
1980.] ‘securities lending arrangement’ means a ‘lending arrangement’ as defined in the Uncertificated
Securities Tax Act, 1998 (Act 31 of 1998);
[Definition of ‘securities lending arrangement’ inserted by s. 12 (1) (n) of Act 45 of 2003.] ‘shareholder’-
(a) in relation to any company referred to in paragraph (a), (b), (c) or (d) of the definition of
‘company’ in this section, means the registered shareholder in respect of any share, except
that where some person other than the registered shareholder is entitled, whether by
virtue of any provision in the memorandum or articles of association of the company or
under the terms of any agreement or contract, or otherwise, to all or part of the benefit of
the rights of participation in the profits, income or capital attaching to the share so
registered, that other person shall, to the extent that such other person is entitled to such
benefit, also be deemed to be a shareholder; or
[Para. (a) substituted by s. 12 (1) (o) of Act 45 of 2003.] (b) in relation to any company referred to in paragraph (e) of the said definition, the
registered holder of any participatory interest included in the relevant portfolio, except
that where some person other than the holder of any participatory interest is entitled,

34 whether by virtue of any provision in the trust deed entered into for the purposes of the
relevant collective investment scheme or under the terms of any agreement or contract, or
otherwise, to all or part of the benefit of the rights of participation in the profits, income
or capital attaching to the participatory interest, that other person shall, to the extent that
such other person is entitled to such benefit, also be deemed to be a shareholder; or
[Para. (b) substituted by s. 6 (1) (r) of Act 74 of 2002 and by s. 12 (1) (o) of Act 45 of 2003.] (c) in relation to any close corporation, means a member of such corporation.
[Para. (c) added by s. 2 (1) (j) of Act 121 of 1984.] [Definition of ‘shareholder’ substituted by s. 3 (j) of Act 90 of 1962.] ‘South African company’ ……
[Definition of ‘South African Company’ inserted by s. 4 (1) (w) of Act 85 of 1974, substituted by s. 4 (b) of
Act 103 of 1976, by s. 2 (1) (d) of Act 96 of 1985 and by s. 2 (d) of Act 36 of 1996 and deleted by s. 2 (i)
of Act 59 of 2000.] ‘South African Revenue Service’ means the South African Revenue Service established by
section 2 of the South African Revenue Service Act, 1997;
[Definition of ‘South African Revenue Service’ inserted by s. 34 (1) of Act 34 of 1997.] ‘special trust’ means a trust created-
(a) solely for the benefit of a person who suffers from-
(i) any ‘mental illness’ as defined in section 1 of the Mental Health Act, 1973 (Act 18
of 1973); or
(ii) any serious physical disability,
where such illness or disability incapacitates such person from earning sufficient income
for the maintenance of such person, or from managing his or her own financial affairs:
Provided that where the person for whose benefit the trust was so created dies, such trust
shall be deemed not to be a special trust in respect of years of assessment ending on or
after the date of such person’s death; or
(b) by or in terms of the will of a deceased person, solely for the benefit of beneficiaries who
are relatives in relation to that deceased person and who are alive on the date of death of
that deceased person (including any beneficiary who has been conceived but not yet born
on that date), where the youngest of those beneficiaries is on the last day of the year of
assessment of that trust under the age of 21 years.; and
[Definition of ‘special trust’ inserted by s. 5 (i) of Act 5 of 2001 and substituted by s. 9 (b) of Act 30 of
2002.] ‘specified date’, in relation to any company, means-
(a) in respect of the year of assessment ending the thirtieth day of June, 1962, that date or, if
such company’s return is under the proviso to subsection (13) of section sixty-six accepted
in respect of a period ending upon some other date, such other date; or
(b) in respect of any other year of assessment, the last day of such other year of assessment;
[Definition of ‘specified date’ substituted by s. 1 (b) of Act 6 of 1963.] ‘specified period’, in relation to a year of assessment of any company commencing on or after 1
April 1977, means-
(a) where such year of assessment is the first financial year of such company, the period
commencing on the first day of such year and ending six months after the specified date
in respect of such year; and
(b) where such year of assessment is a subsequent financial year of such company, the period
commencing the day after the end of the specified period in respect of the immediately
preceding year of assessment and ending six months after the specified date in respect of
the year of assessment in question:
Provided that where by reason of the amalgamation under section 94 of the Co-operative Societies Act,
1939 (Act 29 of 1939), of two or more agricultural co-operative (as defined in section 27 (9) of this Act),
the assets and liabilities of such co-operative have vested in a new agricultural co-operative (as so defined),
the Commissioner may, having regard to the circumstances of the case, direct that the specified period of
each of the co-operatives which have so amalgamated, as applicable in relation to the final year of
assessment of the co-operative in question be extended so as to end on such day as the Commissioner may
determine;
[Definition of ‘specified period’ inserted by s. 4 (1) (d) of Act 113 of 1977 and substituted by s. 3 (1) (e) of

35 Act 104 of 1979.] ‘spouse’, in relation to any person, means a person who is the partner of such person-
(a) in a marriage or customary union recognised in terms of the laws of the Republic;
(b) in a union recognised as a marriage in accordance with the tenets of any religion; or
(c) in a same-sex or heterosexual union which the Commissioner is satisfied is intended to be
permanent,
and ‘married’, ‘husband’ or ‘wife’ shall be construed accordingly: Provided that a marriage or union
contemplated in paragraph (b) or (c) shall, in the absence of proof to the contrary, be deemed to be a
marriage or union without community of property;
[Definition of ‘spouse’ inserted by s. 5 (j) of Act 5 of 2001.] ‘tax’ or ‘the tax’ or ‘taxation’ means any levy or tax leviable under this Act; and for the purposes
of Part IV of Chapter III includes any levy or tax leviable under any previous Income Tax Act;
[Definition of ‘tax’ or ‘the tax’ or ‘taxation’ amended by s. 1 (c) of Act 6 of 1963 and substituted by s. 19 (1)
(m) of Act 30 of 1998.] ‘taxable amount’ ……
[Definition of ‘taxable amount’ inserted by s. 4 (1) (f) of Act 88 of 1971 and deleted by s. 2 (1) (f) of Act
104 of 1980.] ‘taxable capital gain’ means an amount determined in terms of paragraph 10 of the Eighth
Schedule;
[Definition of ‘taxable capital gain’ inserted by s. 5 (k) of Act 5 of 2001.] ‘taxable income’ means the aggregate of-
(a) the amount remaining after deducting from the income of any person all the amounts
allowed under Part I of Chapter II to be deducted from or set off against such income;
and
(b) all amounts to be included or deemed to be included in the taxable income of any person
in terms of this Act;
[Definition of ‘taxable income’ substituted by s. 4 (1) (g) of Act 88 of 1971, by s. 2 (1) (g) of Act 104 of
1980 and by s. 5 (l) of Act 5 of 2001.] ‘taxpayer’ means any person chargeable with any tax leviable under this Act and includes every
person required by this Act to furnish any return;
[Definition of ‘taxpayer’ amended by s. 1 (d) of Act 6 of 1963 and substituted by s. 19 (1) (n) of Act 30 of
1998 and by s. 6 (1) (s) of Act 74 of 2002.] ‘territory’ ……
[Definition of ‘territory’ inserted by s. 6 (1) (h) of Act 89 of 1969, substituted by s. 2 (h) of Act 141 of 1992
and deleted by s. 2 (j) of Act 59 of 2000.] ‘this Act’ includes the regulations;
‘trade’ includes every profession, trade, business, employment, calling, occupation or venture,
including the letting of any property and the use of or the grant of permission to use any patent as defined
in the Patents Act, 1978 (Act 57 of 1978), or any design as defined in the Designs Act, 1993 (Act 195 of
1993), or any trade mark as defined in the Trade Marks Act, 1993 (Act 194 of 1993), or any copyright as
defined in the Copyright Act, 1978 (Act 98 of 1978), or any other property which is of a similar nature;
[Definition of ‘trade’ substituted by s. 6 (1) (i) of Act 89 of 1969, by s. 2 (1) (d) of Act 129 of 1991 and by
s. 10 (1) (k) of Act 53 of 1999.] ‘trading stock’ includes-
(a) anything-
(i) produced, manufactured, constructed, assembled, purchased or in any other
manner acquired by a taxpayer for the purposes of manufacture, sale or exchange
by him or on his behalf; or
[Sub-para. (i) substituted by s. 17 (1) (e) of Act 60 of 2001.] (ii) the proceeds from the disposal of which forms or will form part of his gross
income, otherwise than in terms of paragraph (j) or (m) of the definition of ‘gross
income’, or as a recovery or recoupment contemplated in section 8 (4) which is
included in gross income in terms of paragraph (n) of that definition; or
[Sub-para. (ii) substituted by s. 6 (1) (t) of Act 74 of 2002.] (b) any consumable stores and spare parts acquired by him to be used or consumed in the
course of his trade,

36 but does not include a foreign currency option contract and a forward exchange contract as defined in
section 24I (1);
[Definition of ‘trading stock’ substituted by s. 2 (1) (e) of Act 101 of 1990, by s. 2 (1) (m) of Act 113 of
1993 and by s. 13 (1) (k) of Act 30 of 2000.] ‘trust’ means any trust fund consisting of cash or other assets which are administered and
controlled by a person acting in a fiduciary capacity, where such person is appointed under a deed of trust
or by agreement or under the will of a deceased person;
[Definition of ‘trust’ inserted by s. 2 (i) of Act 141 of 1992.] ‘trustee’, in addition to every person appointed or constituted as such by act of parties, by will, by
order of declaration of court or by operation of law, includes an executor or administrator, tutor or curator,
and any person having the administration or control of any property subject to a trust, usufruct,
fideicommissum or other limited interests or acting in any fiduciary capacity or having, either in a private
or in an official capacity, the possession, direction, control or management of any property of any person
under legal disability;
‘year of assessment’ means any year or other period in respect of which any tax or duty leviable
under this Act is chargeable, and any reference in this Act to any year of assessment ending the last or the
twenty-eighth or the twenty-ninth day of February shall, unless the context otherwise indicates, in the case
of a company be construed as a reference to any financial year of that company ending during the calendar
year in question.
[Definition of ‘year of assessment’ substituted by s. 1 (e) of Act 6 of 1963, amended by s. 4 (f) of Act 72 of
1963 and substituted by s. 4 (f) of Act 90 of 1964 and by s. 9 (c) of Act 30 of 2002.] CHAPTER I
ADMINISTRATION (ss 2-4)
2 Act to be administered by Commissioner
Cases
(1) The Commissioner shall be responsible for carrying out the provisions of this Act.
(2) ……
[Sub-s. (2) deleted by s. 34 (1) of Act 34 of 1997.] 3 Exercise of powers and performance of duties
Cases
(1) The powers conferred and the duties imposed upon the Commissioner by or under the
provisions of this Act may be exercised or performed by the Commissioner personally, or by any officer or
person engaged in carrying out the said provisions under the control, direction or supervision of the
Commissioner.
[Sub-s. (1) substituted by s. 13 (1) (a) of Act 45 of 2003.] (2) Any decision made and any notice or communication issued or signed by any such officer or
person may be withdrawn or amended by the Commissioner or by the officer or person concerned, and
shall for the purposes of the said provisions, until it has been so withdrawn, be deemed to have been made,
issued or signed by the Commissioner: Provided that a decision made by any such officer in the exercise of
any discretionary power under the provisions of this Act or of any previous Income Tax Act shall not be
withdrawn or amended after the expiration of three years from the date of the written notification of such
decision or of the notice of assessment giving effect thereto, if all the material facts were known to the said
officer when he made his decision.
[Sub-s. (2) amended by s. 3 (1) of Act 141 of 1992 and by s. 13 (1) (b) of Act 45 of 2003.] (3) Any written decision made by the Commissioner personally in the exercise of any
discretionary power under the provisions of this Act or of any previous Income Tax Act shall not be
withdrawn or amended by the Commissioner if all the material facts were known to him when he made his
decision.
(4) Any decision of the Commissioner under the definitions of ‘benefit fund’, ‘pension fund’,
‘provident fund’, ‘retirement annuity fund’ and ‘spouse’ in section 1, section 6, section 8 (4) (b), (c), (d) and
(e), section 9D, section 10 (1) (cH), (cK), (e), (iA), (j) and (nB), section 11 (e), (f), (g), (gA), (j), (l), (t), (u)
and (w), section 12C, section 12E, section 12G, section 13, section 14, section 15, section 22 (1), (3) and
(5), section 24 (2), section 24A (6), section 24C, section 24D, section 24I, section 25D, section 27, section
30, section 31, section 35 (2), section 38 (4), section 41 (4), section 57, section 76A, paragraphs 6, 7, 9, 13,
13A, 14, 19 and 20 of the First Schedule, paragraph (b) of the definition of ‘formula A’ in paragraph 1 and

37 paragraph 4 of the Second Schedule, paragraphs 18, 19 (1), 20, 21, 24 and 27 of the Fourth Schedule,
paragraphs 2, 3, 6, 9 and 11 of the Seventh Schedule and paragraphs 29 (2A), 29 (7), 31 (2), 65 (1) (d) and
66 (1) (e) of the Eighth Schedule, shall be subject to objection and appeal.
[Sub-s. (4) added by s. 3 (1) of Act 21 of 1994 and substituted by s. 3 (1) of Act 21 of 1995, by s. 20 (1) of
Act 30 of 1998, by s. 3 of Act 59 of 2000, by s. 6 of Act 5 of 2001, by s. 4 of Act 19 of 2001, by s. 18 of
Act 60 of 2001, by s. 7 of Act 74 of 2002, by s. 13 (1) (c) of Act 45 of 2003 and by s. 4 (a) of Act 16 of
2004.] (5) The Commissioner may, in writing, and on such conditions as may be agreed upon between
the Commissioner and the executive officer of the Financial Services Board appointed in terms of section
13 of the Financial Services Board Act, 1990 (Act 97 of 1990), delegate to that executive officer his or her
power-
(a) to approve a fund contemplated in the definition of a ‘pension fund’, ‘provident fund’ or
‘retirement fund’, subject to-
(i) any limitation or condition as may be determined by the Commissioner in terms of
those definitions; and
(ii) the compliance by any such fund with the requirements under those definitions;
and
(b) to withdraw any such approval if any of the limitations, conditions or requirements listed
in paragraph (a) are not met.
[Sub-s. (5) added by s. 4 (b) of Act 16 of 2004.] (6) Any person aggrieved by a decision of the executive officer to approve or to withdraw an
approval of a fund in terms of subsection (5) must, notwithstanding section 26 (2) of the Financial Services
Board Act, 1990, lodge his or her objection with the Commissioner in the manner contemplated in Part III
of Chapter III of this Act.
[Sub-s. (6) added by s. 4 (b) of Act 16 of 2004.] (7) A decision by the executive officer against which an objection has been lodged is, for the
purpose of subsection (6), deemed to be a decision of the Commissioner.
[Sub-s. (7) added by s. 4 (b) of Act 16 of 2004.] 4 Preservation of secrecy
Cases
(1) Every person employed or engaged by the Commissioner in carrying out the provisions of this
Act shall preserve and aid in preserving secrecy with regard to all matters that may come to his or her
knowledge in the performance of his or her duties in connection with those provisions, and shall not
communicate any such matter to any person whatsoever other than the taxpayer concerned or his or her
lawful representative nor suffer or permit any such person to have access to any records in the possession
or custody of the Commissioner except in the performance of his or her duties under this Act or by order of
a competent court: Provided that-
(a) any information obtained by the Commissioner in the performance of his duties under the
provisions of this Act or any previous Income Tax Act may be used by him for the
purposes of the provisions of any other fiscal law administered by him;
[Para. (a) substituted by s. 3 (a) of Act 85 of 1987 and substituted by s. 34 (1) of Act 34 of 1997.] (b) the Auditor-General shall in the performance of his duties in terms of section 3 of the
Auditor-General Act, 1995 (Act 12 of 1995), have access to documents in the possession
or custody of the Commissioner;
[Para. (b) substituted by s. 4 of Act 21 of 1994 and by s. 21 (a) of Act 30 of 1998.] (c) the provisions of this subsection shall not be construed as preventing the Commissioner
from-
(i) disclosing to the Chief of the Central Statistical Services such information in
relation to any person as may be required by such Chief in connection with the
collection of statistics in complying with the provisions of the Statistics Act, 1976
(Act 66 of 1976), or any regulation thereunder; or
(ii) publishing a list of approved public benefit organisations for the purposes of the
provisions of sections 18A and 30;
(iii) disclosing to the Governor of the South African Reserve Bank or any other person
to whom the powers, functions and duties have been delegated by the Minister in

38 terms of Exchange Control Regulations, 1961, issued in terms of section 9 of the
Currency and Exchanges Act, 1933 (Act 9 of 1933), such information as may be
required for purposes of exercising any power or performing any function or duty
in terms of those Regulations.
[Sub-para. (iii) added by s. 34 of Act 12 of 2003.] [Para. (c) added by s. 3 (a) of Act 36 of 1996, deleted by s. 34 (1) of Act 34 of 1997, added by s. 21 (b) of
Act 30 of 1998 and substituted by s. 11 (a) of Act 53 of 1999 and by s. 14 (a) of Act 30 of 2000.] [Sub-s. (1) amended by s. 4 of Act 104 of 1979.] (d) the provisions of this subsection shall not be construed as preventing the Commissioner
from disclosing to the Board administering the National Student Financial Aid Scheme,
any information relating to the name and address of the employer of any borrower or
bursar to whom any loan or bursary has been granted in terms of such scheme; and
[Para. (d) added by s. 11 (b) of Act 53 of 1999.] (e) the Commissioner shall disclose information in respect of any class of taxpayers to the
Director-General of the National Treasury, to the extent necessary for the purposes of tax
policy design or revenue estimation;
[Para. (e) added by s. 19 (a) of Act 60 of 2001.] [Sub-s. (1) amended by s. 14 (a) of Act 45 of 2003.] (1A) The Statistician-General or any person acting under the direction and control of such
Statistician-General, shall not disclose any information supplied under subsection (1)(c) to any person or
permit any person to have access thereto, except in the exercise of his powers or the carrying out of his
duties to publish statistics in any anonymous form.
[Sub-s. (1A) inserted by s. 3 (b) of Act 85 of 1987, deleted by s. 34 (1) of Act 34 of 1997, inserted by s. 21
(c) of Act 30 of 1998 and substituted by s. 11 (c) of Act 53 of 1999.] (1B) The Commissioner may apply ex parte to a judge in chambers for an order allowing him or
her to disclose to the National Commissioner of the South African Police Service, contemplated in section
6 (1) of the South African Police Service Act, 1995 (Act 68 of 1995), or the National Director of Public
Prosecutions, contemplated in section 5 (2) (a) of the National Prosecuting Authority Act, 1998 (Act 32 of
1998), such information, which may reveal evidence-
(a) that an offence, other than an offence in terms of this Act or any other Act administered
by the Commissioner or any other offence in respect of which the Commissioner is a
complainant, has been or may be committed, or where such information may be relevant
to the investigation or prosecution of such an offence, and such offence is a serious
offence in respect of which a court may impose a sentence of imprisonment exceeding
five years; or
(b) of an imminent and serious public safety or environmental risk,
and where the public interest in the disclosure of the information outweighs any potential harm to the
taxpayer concerned should such information be disclosed: Provided that any information, document or
thing provided by a taxpayer in any return or document, or obtained from a taxpayer in terms of section
74A, 74B or 74C, which is disclosed in terms of this subsection, shall not, unless a competent court
otherwise directs, be admissible in any criminal proceedings against such taxpayer, to the extent that such
information, document or thing constitutes an admission by such taxpayer of the commission of an offence
contemplated in paragraph (a).
[Sub-s. (1B) inserted by s. 3 (b) of Act 36 of 1996, deleted by s. 34 (1) of Act 34 of 1997 and inserted by s.
19 (b) of Act 60 of 2001.] (1C) For the purposes of subsection (1B), the Commissioner may delegate the powers vested in
him or her by that subsection, to any other officer.
[Sub-s. (1C) inserted by s. 19 (b) of Act 60 of 2001.] (1D) The Director-General or any person acting under the direction and control of such Director-
General shall not disclose any information supplied under subsection (1) (e) to any other person or permit
any other person to have access thereto, except in the performance of any function contemplated in
subsection (1) (e).
[Sub-s. (1D) inserted by s. 19 (b) of Act 60 of 2001.] (1E) The National Police Commissioner or the National Director of Public Prosecutions or any
person acting under the direction and control of such National Police Commissioner or National Director of
Public Prosecutions, shall not disclose any information supplied under subsection (1B) to any other person

39 or permit any other person to have access thereto, except in the exercise of his or her powers or the carrying
out of his or her duties-
(a) for purposes of any investigation of, or prosecution for, an offence contemplated in
subsection (1B); or
(b) to combat any public safety or environmental risk contemplated in subsection (1B).
[Sub-s. (1E) inserted by s. 19 (b) of Act 60 of 2001 and substituted by s. 8 (a) of Act 74 of 2002.] (2) (a) Every person employed or engaged as contemplated in subsection (1) shall, before acting
under this Act, take and subscribe before a magistrate or justice of the peace or a commissioner of oaths,
such oath or solemn declaration, as the case may be, of fidelity or secrecy as may be prescribed.
[Para. (a) substituted by s. 6 of Act 55 of 1966, amended by s. 3 of Act 96 of 1981 and substituted by s. 3
(c) of Act 36 of 1996, by s. 34 (1) of Act 34 of 1997 and by s. 14 (b) of Act 45 of 2003.] (b) Any oath of secrecy taken and subscribed under the provisions of any previous Income Tax
Act by any person who is employed in carrying out the provisions of this Act shall be deemed to be an oath
taken and subscribed in terms of this subsection.
(c) The Director-General of the National Treasury, and any person acting under the direction and
control of that Director-General, who performs any function as contemplated in subsection (1) (e), shall
take and subscribe before a magistrate or justice of the peace or a commissioner of oaths, such oath or
solemn declaration, as the case may be, of fidelity or secrecy as may be prescribed.
[Para. (c) added by s. 19 (c) of Act 60 of 2001.] (2A) No person shall in any manner publish or make known to any other person (not being an
officer carrying out his duties under the control, direction or supervision of the Commissioner) the contents
or tenor of any instruction or communication given or made by the Commissioner or any such officer in the
performance of his or their duties under this Act for or concerning the examination or investigation of the
affairs of any taxpayer or class of taxpayers or the fact that such instruction or communication has been
given or made, or any information concerning the tax matters of a taxpayer or class of taxpayers: Provided
that the provisions of this subsection shall not be construed-
(i) as preventing any taxpayer or his representative who is or may be affected by any such
examination, investigation or furnishing of information from publishing or making
known information concerning his own tax matters; or
(ii) subject to the provisions of subsection (1), as in any way limiting the duties or powers of
the Commissioner or any such officer; or
(iii) as preventing any person from publishing or making known anything which has been
published or made known by the taxpayer or his representative as contemplated in
paragraph (i) or by the Commissioner or any such officer in the exercise of his duties or
powers.
[Sub-s. (2A) inserted by s. 3 (a) of Act 70 of 1989.] (2B) The provisions of this section shall not apply in respect of any information relating to any
person, where that person has consented that such information may be published or made known to any
other person.
[Sub-s. (2B) inserted by s. 19 (d) of Act 60 of 2001.] (3) Any person who contravenes the provisions of subsection (1), (1A), (1D), (1E) or (2A), shall
be guilty of an offence and liable on conviction to a fine or to imprisonment for a period not exceeding two
years.
[Sub-s. (3) substituted by s. 3 (c) of Act 85 of 1987, by s. 3 (b) of Act 70 of 1989, by s. 3 (d) of Act 36 of
1996, by s. 34 (1) of Act 34 of 1997, by s. 14 (b) of Act 30 of 2000 and by s. 8 (b) of Act 74 of 2002.] (4) Any person employed or engaged as contemplated in subsection (1) who carries out any
provisions of the Act as contemplated in subsection (1) before he or she has taken the prescribed oath or
solemn declaration shall be guilty of an offence and liable on conviction to a fine not exceeding R500.
[Sub-s. (4) substituted by s. 3 (e) of Act 36 of 1996 and by s. 14 (c) of Act 45 of 2003.] CHAPTER II
THE TAXES (ss 5-64C)
Part I
Normal Tax (ss 5-37H)
5 Levy of normal tax and rates thereof
Cases

40 (1) Subject to the provisions of the Fourth Schedule there shall be paid annually for the benefit of
the National Revenue Fund, an income tax (in this Act referred to as the normal tax) in respect of the
taxable income received by or accrued to or in favour of-
(a) ……
[Para. (a) deleted by s. 10 (1) (a) of Act 30 of 2002.] (b) ……
[Para. (b) substituted by s. 10 (1) (b) of Act 30 of 2002 and deleted by s. 15 (a) of Act 45 of 2003.] (c) any person (other than a company) during the year of assessment ended the last day of
February each year; and
[Para. (c) substituted by s. 10 (1) (b) of Act 30 of 2002 and by s. 15 (b) of Act 45 of 2003.] [Sub-s. (1) substituted by s. 5 of Act 90 of 1964 and amended by s. 5 (a) of Act 103 of 1976 and by s. 41 of
Act 36 of 1996.] (1A) Notwithstanding the provisions of subsection (1) (c)-
(a) where the income of any person for any year of assessment includes any net remuneration
as defined in paragraph 11B of the Fourth Schedule, the normal tax payable by such
person in respect of such year shall not be less than the sum of the amounts of Standard
Income Tax on Employees required to be determined in relation to such net remuneration
under the provisions of the said paragraph; and
(b) where the taxable income of any person for any year of assessment was derived solely
from such net remuneration and the employees tax required to be deducted or withheld
from such net remuneration under the said Schedule consisted solely of such Standard
Income Tax on Employees, the normal tax payable by him in respect of such year shall
be an amount equal to the sum of the amounts of such Standard Income Tax on
Employees required to be so determined.
[Sub-s. (1A) inserted by s. 5 (a) of Act 88 of 1971, deleted by s. 3 (a) of Act 104 of 1980 and inserted by s.
3 of Act 90 of 1988.] (2) Subject to the provisions of subsections (2A) and (3) to (7), inclusive, and the provisions of the
Fourth Schedule, the rates of tax chargeable in respect of taxable income shall be fixed annually by
Parliament, but the rates fixed by Parliament in respect of any year of assessment or financial year or, if the
rates so fixed have been varied by the Minister of Finance by way of an amendment made under subsection
(3), which is still in force, the rates as so varied, shall be deemed to continue in force until the next such
determination or variation of rates and shall be applied for the purposes of calculating the tax payable in
respect of any such taxable income received by or accrued to or in favour of any person during the next
succeeding year of assessment or financial year, as the case may be, if in the opinion of the Commissioner
the calculation and collection of the tax chargeable in respect of such taxable income cannot without risk of
loss of revenue be postponed until after the rates for that year have been determined.
[Sub-s. (2) substituted by s. 6 (1) (a) of Act 95 of 1967, by s. 5 (b) of Act 103 of 1976 and by s. 5 (a) of Act
113 of 1977.] (2A) (a) In the case of any company which derives taxable income from mining for natural oil, the
normal tax payable in respect of such taxable income shall be determined in accordance with the rates
referred to in subsection (2) which are in force in respect of the year of assessment in question, and in
addition thereto there shall, in respect of such taxable income, be paid by such company, by way of
additional normal tax, an amount equal to 40 per cent of the amount remaining after deducting the said
amount of normal tax from such taxable income.
(b) The normal tax and the additional normal tax chargeable in respect of taxable income referred
to in paragraph (a), shall be reduced to or by such an amount, and on such conditions, as the Minister of
Mineral and Energy Affairs may with the concurrence of the Minister of Finance determine.
(c) For the purposes of this subsection where sulphur, salt or any other mineral is won by any
company in the course of mining for natural oil, the income derived from the mining of such sulphur, salt
or other mineral shall be deemed to be derived from the mining for natural oil.
[Sub-s. (2A) inserted by s. 6 (1) (b) of Act 95 of 1967 and substituted by s. 7 (a) of Act 89 of 1969, by s. 5
(b) of Act 113 of 1977 and by s. 3 (a) of Act 129 of 1991.] (2B) (a) Notwithstanding the provisions of subsection (1), any portion of the normal tax which in
terms of paragraph (b) of this subsection, the Income Tax Act, 1970, or any subsequent Income Tax Act is
a loan portion of such tax and has been paid by the person concerned, shall be repayable to such person in
the manner and at the time provided in the Fifth Schedule.

41 (b) The portions of the normal tax determined in accordance with the provisions of paragraph 1 (g)
or (h) of the Schedule to the Income Tax Act, 1965 (Act 88 of 1965), paragraph 1 (g) or (h) of the Schedule
to the Income Tax Act, 1966 (Act 55 of 1966), paragraph 1 (h) or (i) of the Schedule to the Income Tax
Act, 1967 (Act 95 of 1967), paragraph 1 (h) or (i) of the Schedule to the Income Tax Act, 1968 (Act 76 of
1968), and paragraph 2 (h) or (i) of the Schedule to the Income Tax Act, 1969 (Act 89 of 1969), shall be
loan portions of the normal tax.
[Sub-s. (2B) inserted by s. 7 of Act 52 of 1970.] (3) After the promulgation of any Act of Parliament fixing rates of normal tax for years of
assessment specified therein, before the date mentioned in subsection (6) and when Parliament is not in
session the Minister of Finance may from time to time by notice in the Gazette amend the provisions of
such Act so as to effect a variation or further variation of the said rates-
(a) by increasing or reducing the rate at which any loan portion of the normal tax is payable
in terms of the said Act; or
(b) where no loan portion of the normal tax is in terms of the said Act payable by taxpayers
of any category, by imposing a charge in respect of the normal tax payable by such
taxpayers which shall be a loan portion of such tax and be payable in addition to the tax
chargeable under the said Act:
Provided that the rates fixed under the said Act shall not be varied under this subsection so as to impose
upon any taxpayer, in addition to the tax payable by him under the said Act, any charge or charges to tax in
excess of ten per cent of the basic tax payable by him under that Act.
[Sub-s. (3) added by s. 6 of Act 88 of 1965, substituted by s. 6 (1) (c) of Act 95 of 1967 and by s. 7 (b) of
Act 89 of 1969, deleted by s. 5 (1) (a) of Act 65 of 1973 and inserted by s. 5 (c) of Act 103 of 1976.] (4) For the purposes of subsection (3) the basic tax payable by any taxpayer in respect of any year
of assessment referred to in that subsection shall be deemed to be the normal tax payable by him for such
year in terms of the Act referred to in the said subsection before the addition of any loan portion
contemplated in the said subsection and before the deduction of any discount provided for in the said Act
but after the deduction of any rebate provided for in section 6 of this Act.
[Sub-s. (4) added by s. 6 of Act 88 of 1965, substituted by s. 6 of Act 76 of 1968, deleted by s. 5 (1) (a) of
Act 65 of 1973, inserted by s. 5 (c) of Act 103 of 1976 and substituted by s. 3 (b) of Act 104 of 1980.] (5) Any amendment made in terms of subsection (3)-
(a) may be made so as to apply only to persons other than companies or only to companies or
both to such persons and to companies, and may differentiate between such persons and
companies; or
(b) may, subject to the provisions of the proviso to subsection (3), be made so as to provide
that the loan portion of the normal tax payable by companies shall be calculated at rates
which differ according to the various categories of taxable income in respect of which
rates of normal tax have been enacted in the Act referred to in subsection (3).
[Sub-s. (5) added by s. 6 of Act 88 of 1965, amended by s. 7 (1) (a) of Act 55 of 1966, deleted by s. 5 (1)
(a) of Act 65 of 1973 and inserted by s. 5 (c) of Act 103 of 1976.] (6) Any amendment made under subsection (3) which is in force immediately before the date of
promulgation of the Act of Parliament fixing rates of normal tax for the years of assessment succeeding the
years of assessment referred to in subsection (3), shall, unless Parliament otherwise provides, lapse on that
date, and in such case it shall as from that date cease to have the force of law.
[Sub-s. (6) added by s. 6 of Act 88 of 1965, deleted by s. 5 (1) (a) of Act 65 of 1973 and inserted by s. 5 (c)
of Act 103 of 1976.] (7) Subject to the provisions of sections 79 and 102 and the provisions of the Fourth Schedule,
where a taxpayer has been assessed for normal tax in respect of any year of assessment and the rate of the
tax payable by him has been subsequently fixed or varied, his assessment for such year shall be adjusted,
any amounts paid in excess being refundable to him and amounts shortpaid being recoverable from him.
[Sub-s. (7) added by s. 6 of Act 88 of 1965, substituted by s. 7 (1) (b) of Act 55 of 1966, deleted by s. 5 (1)
(a) of Act 65 of 1973 and inserted by s. 5 (c) of Act 103 of 1976.] (8) ……
[Sub-s. (8) added by s. 6 of Act 88 of 1965, substituted by s. 6 (1) (d) of Act 95 of 1967 and deleted by s. 5
(1) (a) of Act 65 of 1973.] (9) For the purposes of subsection (10) ‘special remuneration’ means any amount received by or
accrued to any mineworker over and above his normal remuneration and any regular allowance, in respect

42 of special services rendered by him (otherwise than in the course of his normal duties) in combating any
fire, flood, subsidence or other disaster in a mine or in rescuing persons trapped in a mine or in performing
any hazardous task during any emergency in a mine, if such services are rendered by him as a member of a
team recognized by the management of the mine and the members of such team have been appointed for
the purpose of rendering such services.
[Sub-s. (9) added by s. 7 (c) of Act 89 of 1969 and substituted by s. 5 (b) of Act 88 of 1971 and by s. 3 (a)
of Act 94 of 1983.] (10) Where any taxpayer’s income includes any special remuneration, or where the provisions of
section 7A (4A) or paragraph 15 (3) or 17 or 19 (1) of the First Schedule or paragraph 7 of the Second
Schedule are applicable in the case of the taxpayer in respect of any year of assessment, the normal tax
payable by the taxpayer in respect of such year (as determined before the deduction of any rebate) shall be
determined in accordance with the formula-

in which formula-
(a) ‘Y’ represents the amount of normal tax to be determined;
(b) ‘A’ represents the amount of normal tax (as determined before the deduction of any
rebate) calculated at the full rate of tax chargeable for the said year in respect of a taxable
income equal to the amount represented by the expression ‘B + D – (C + L)’ in the
formula;
[Para. (b) substituted by s. 4 (b) of Act 91 of 1982, by s. 3 of Act 65 of 1986 and by s. 5 (b) of Act 21 of
1994, amended by s. 4 (b) of Act 21 of 1995 and substituted by s. 7 (1) (b) of Act 5 of 2001.] (c) ‘B’ represents the taxpayer’s taxable income for the said year;
(d) ‘C’ represents an amount equal to the sum of-
(i) the amount of any special remuneration (as defined in subsection (9)) which is
included in the taxpayer’s income for the said year.
(iA) ……
[Sub-para. (iA) inserted by s. 4 (b) of Act 96 of 1981, substituted by s. 4 (c) of Act 91 of 1982, amended by
s. 3 (c) of Act 94 of 1983, substituted by s. 4 (c) of Act 21 of 1995 and deleted by s. 7 (1) (c) of Act 5 of
2001.] (ii) where the provisions of paragraph 15 (3) of the First Schedule are in the case of
the taxpayer applicable in respect of the said year, an amount determined in
accordance with those provisions as being the amount, if any, by which the
taxable income derived by the taxpayer during the said year from the disposal of
plantations and forest produce exceeds the annual average taxable income derived
by him from that source over the three years of assessment immediately preceding
the said year;
(iii) where the provisions of paragraph 17 of the First Schedule are in the case of the
taxpayer applicable in respect of the said year, an amount equal to so much of the
taxable income of the taxpayer for such year as has been derived from the disposal
of sugar cane as a result of fire in his cane fields and but for such fire would not
have been derived by him in that year;
[Sub-para. (iii) substituted by s. 3 (b) of Act 129 of 1991.] (iiiA) where the provisions of subparagraph (1) of paragraph 19 of the First Schedule are
in the case of the taxpayer applicable in respect of the said year, the amount by
which his taxable income derived from farming for that year exceeds his average
taxable income from farming as determined in relation to that year in accordance
with subparagraph (2) of the said paragraph; and
[Sub-para. (iiiA) inserted by s. 3 (d) of Act 94 of 1983.] (iv) ……
[Sub-para. (iv) substituted by s. 4 (e) of Act 21 of 1995 and deleted by s. 7 (1) (c) of Act 5 of 2001.] (v) ……
[Sub-para. (v) deleted by s. 5 (c) of Act 21 of 1994.]

43 (e) ‘D’ represents an amount equal to so much of any current contribution to a retirement
annuity fund as is allowable as a deduction in terms of section 11 (n) (aa) (A) solely by
reason of the inclusion in the taxpayer’s income of any amount contemplated in paragraph
(d) (i), (ii), (iii) and (iiiA) and paragraph (f);
[Para. (e) inserted by s. 4 (d) of Act 91 of 1982, deleted by s. 3 (b) of Act 121 of 1984 and added by s. 4 (f)
of Act 21 of 1995.] (f) ‘L’ represents an amount equal to the sum of-
(i) in relation to any amount which accrued to the taxpayer on or after 1 September
1995 to which the provisions of section 7A (4A) are applicable in respect of the
said year, the lesser of-
(aa) that amount; or
(bb) an amount equal to three times the annual average of the amounts derived
by such taxpayer during the three years of assessment which immediately
preceded the year of assessment under charge by way of remuneration as
defined in paragraph 1 of the Fourth Schedule, including any amount
referred to in paragraph (vii) of that definition but excluding so much of
the sum of any other amounts contemplated in the said section 7A (4A) as
were included in the amounts represented by the symbols ‘C’ and ‘L’ in
respect of the said year and any previous year of assessment; and
(ii) in relation to any amount which accrued to the taxpayer on or after 1 September
1995 to which the provisions of paragraph 7 of the Second Schedule are
applicable, any amount determined in accordance with the provisions of that
Schedule and included in his income for the said year; and
[Para. (f) added by s. 4 (f) of Act 21 of 1995.] (g) ‘R’ represents the greater of the amounts determined by applying the formula-

in respect of the said year and the preceding year of assessment, in which formula-
(i) the amounts represented by the symbols ‘B’, ‘C’, ‘D’ and ‘L’ shall be determined in
accordance with the aforegoing provisions of this subsection as applicable in the
said year or in the said preceding year, as the case may be;
(ii) ‘F’ represents the amount of normal tax (as determined before the deduction of any
rebate) calculated at the full rate of tax chargeable for the said year or the said
preceding year in respect of a taxable income equal to the amount represented by
the expression ‘B + D – (C + L + G)’ in the formula for that year or preceding year,
as the case may be; and
(iii) ‘G’ represents an amount of the taxable capital gain included in the taxable income
in terms of section 26A for the said year or the said preceding year, as the case
may be:
Provided that where, as a result of the death or insolvency of the taxpayer, the period
assessed is less than 12 months, the symbol ‘R’ shall be determined with reference to the
said year only
[Para. (g) added by s. 4 (f) of Act 21 of 1995 and substituted by s. 7 (1) (d) of Act 5 of 2001 and by s. 5 (1)
of Act 19 of 2001.] Provided that in no case shall the amount of normal tax so payable be less than the amount of normal tax
which would be chargeable at the relevant rate fixed in terms of subsection (2) in respect of the first rand of
taxable income, and nothing in this section contained shall be construed as relieving any person from
liability for taxation under this Act upon any portion of his taxable income: Provided further that where the
sum of the amounts included in symbol ‘L’exceed the taxpayer’s taxable income for the said year, the
amount of normal tax so payable shall be calculated on the taxpayer’s total taxable income for the said year,
at the greater of the relevant rate contemplated in the preceding proviso and the amount determined as
symbol ‘R’ in relation to the preceding year only.
[Sub-s. (10) added by s. 5 (c) of Act 88 of 1971, amended by s. 5 (b) of Act 90 of 1972, by s. 5 (1) (b) and

44 (c) of Act 65 of 1973 and by s. 5 (d) of Act 103 of 1976, substituted by s. 3 (c) of Act 104 of 1980 and
amended by s. 4 (a) of Act 96 of 1981, by s. 4 (a) and (e) of Act 91 of 1982, by s. 3 (b) of Act 94 of 1983,
by s. 3 (a) and (c) of Act 121 of 1984, by s. 5 (a) of Act 21 of 1994, by ss. 4 (a) and (g) of Act 21 of 1995
and by s. 7 (1) (a) of Act 5 of 2001.] [S. 5 substituted by s. 2 of Act 6 of 1963.] 5A ……
[S. 5A inserted by s. 6 of Act 88 of 1971, amended by s. 5 (1) of Act 85 of 1974, by s. 5 of Act 69 of 1975,
by s. 6 of Act 103 of 1976, by s. 6 of Act 113 of 1977 and by s. 5 of Act 104 of 1979 and repealed by s. 4
of Act 104 of 1980.] 6 Normal tax rebates
(1) There shall be deducted from the normal tax payable by any natural person an amount equal to
the sum of the amounts allowed to the taxpayer by way of rebates under subsection (2).
[Sub-s. (1) substituted by s. 4 (a) of Act 90 of 1988, by s. 4 (1) (a) of Act 70 of 1989, by s. 4 (a) of Act 129
of 1991 and by s. 5 (a) of Act 21 of 1995.] (2) In the case of a natural person there shall, subject to the provisions of subsection (4), be
allowed by way of-
(a) a primary rebate, an amount of R5 800; and
[Para. (a) amended by s. 4 of Act 36 of 1996, by s. 3 of Act 28 of 1997, by s. 22 (a) of Act 30 of 1998, by s.
5 (a) of Act 32 of 1999, by s. 15 (a) of Act 30 of 2000, by s. 6 (a) of Act 19 of 2001 and by s. 11 of Act 30
of 2002 and substituted by s. 35 of Act 12 of 2003 and by s. 6 of Act 16 of 2004.] (b) a secondary rebate, if the taxpayer was or, had the taxpayer lived, would have been at
least 65 years of age on the last day of the year of assessment, an amount of R3 200.
[Para. (b) amended by s. 22 (b) of Act 30 of 1998, by s. 5 (b) of Act 32 of 1999, by s. 15 (b) of Act 30 of
2000 and by s. 6 (b) of Act 19 of 2001 and substituted by s. 35 of Act 12 of 2003 and by s. 6 of Act 16 of
2004.] [Sub-s. (2) amended by s. 5 (a) and (b) of Act 91 of 1982, by s. 4 of Act 121 of 1984, by s. 3 (a) and (b) of
Act 96 of 1985, by s. 4 of Act 85 of 1987 and by s. 4 (b) and (c) of Act 90 of 1988, substituted by s. 4 (1)
(a) of Act 70 of 1989, amended by s. 3 of Act 101 of 1990, by s. 4 of Act 129 of 1991 and by s. 4 of Act
141 of 1992 and substituted by s. 5 (a) of Act 21 of 1995.] (3) ……
[Sub-s. (3) amended by s. 5 of Act 96 of 1981, by s. 5 of Act 91 of 1982, by s. 4 of Act 94 of 1983, by s. 3
of Act 96 of 1985, by s. 4 of Act 90 of 1988, by s. 4 of Act 70 of 1989, by s. 3 of Act 101 of 1990, by s. 4
of Act 129 of 1991 and by s. 4 of Act 141 of 1992 and deleted by s. 5 (b) of Act 21 of 1995.] (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.
[Sub-s. (4) substituted by s. 4 (e) of Act 90 of 1988 and by s. 5 (c) of Act 21 of 1995.] [S. 6 amended by s. 4 of Act 90 of 1962, by s. 3 of Act 6 of 1963, by s. 5 of Act 72 of 1963, by s. 8 of Act
55 of 1966, by s. 7 of Act 95 of 1967, by s. 7 of Act 76 of 1968 and by s. 8 (1) of Act 89 of 1969, repealed
by s. 7 of Act 88 of 1971 and inserted by s. 5 of Act 104 of 1980.] 6bis ……
[S. 6bis inserted by s. 7 of Act 88 of 1965, substituted by s. 6 of Act 85 of 1974 and by s. 5 of Act 129 of
1991 and repealed by s. 4 of Act 28 of 1997.] 6ter ……
[S. 6ter inserted by s. 8 (1) of Act 95 of 1967, amended by s. 7 of Act 85 of 1974 and repealed by s. 6 of
Act 129 of 1991.] 6quat Rebate in respect of foreign taxes on income
(1) Subject to the provisions of subsection (2), a rebate determined in accordance with this section
shall be deducted from the normal tax payable by any resident in whose taxable income there is included-
(a) any income received by or accrued to such resident from any source outside the Republic
(other than any foreign dividend contemplated in paragraph (d)) which is-
(i) not deemed to be from a source within the Republic; or
(ii) ……
[Sub-para. (ii) deleted by s. 9 (1) (a) of Act 74 of 2002.]

45 (b) any proportional amount contemplated in section 9D; or
(c) ……
(d) any foreign dividend; or
[Para. (d) substituted by s. 16 (1) (a) of Act 45 of 2003.] (e) any taxable capital gain contemplated in section 26A, from a source outside the Republic
which is not deemed to be from a source in the Republic; or
[Para. (e) added by s. 8 (b) of Act 5 of 2001 and substituted by s. 9 (1) (b) of Act 74 of 2002.] (f) any amount-
(i) contemplated in paragraphs (a), (b) or (d) which is received by or accrued to any
other person and which is deemed to have been received by or accrued to such
resident in terms of section 7;
(ii) of capital gain of any other person from a source outside the Republic which is not
deemed to be from a source in the Republic and which is attributed to that resident
in terms of paragraph 68, 69, 70, 71, 72 or 80 of the Eighth Schedule; or
(iii) contemplated in paragraphs (a), (b), (d) or (e) which represents capital of a trust,
and which is included in the income of that resident in terms of section 25B (2A)
or taken into account in determining the aggregate capital gain or aggregate
capital loss of that resident in terms of paragraph 80 (3) of the Eighth Schedule,
[Para. (f) added by s. 20 (1) (b) of Act 60 of 2001 and substituted by s. 9 (1) (b) of Act 74 of 2002.] (1A) For the purposes of subsection (1), the rebate shall be an amount equal to the sum of any
taxes on income proved to be payable to any sphere of government of any country other than the Republic,
without any right of recovery by any person (other than a right of recovery in terms of any entitlement to
carry back losses arising during any year of assessment to any year of assessment prior to such year of
assessment), by-
(a) such resident in respect of-
(i) any income contemplated in subsection (1) (a); or
(ii) any dividend contemplated in subsection (1) (d); or
[Sub-para. (ii) substituted by s. 8 (d) of Act 5 of 2001.] (iii) any amount of taxable capital gain as contemplated in subsection (1) (e); or
[Sub-para. (iii) added by s. 8 (e) of Act 5 of 2001.] (b) any controlled foreign company, in respect of such proportional amount contemplated in
subsection (1) (b), subject to section 72A (3);
[Para. (b) substituted by s. 9 (1) (d) of Act 74 of 2002 and by s. 16 (1) (c) of Act 45 of 2003.] (c) ……
[Para. (c) deleted by s. 16 (1) (d) of Act 45 of 2003.] (d) ……
[Para. (d) substituted by s. 9 (1) (e) of Act 74 of 2002 and deleted by s. 16 (1) (d) of Act 45 of 2003.] (e) any portfolio of a collective investment scheme in respect of the amount of any foreign
dividend which is deemed to have been declared to such resident in terms of the proviso
to paragraph (k) of the definition of ‘gross income’ and included in the taxable income of
that resident; or
[Para. (e) added by s. 20 (1) (d) of Act 60 of 2001 and substituted by s. 9 (1) (f) of Act 74 of 2002 and by s.
16 (1) (e) of Act 45 of 2003.] (f) any other person contemplated in subsection (1) (f) (i) or (ii) or any trust contemplated in
subsection (1) (f) (iii), in respect of the amount included in the taxable income of that
resident as contemplated in subsection (1) (f),
[Para. (f) added by s. 20 (1) (d) of Act 60 of 2001.] which is so included in that resident’s taxable income: Provided that where such resident is a member of
any partnership or a beneficiary of any trust and such partnership or trust is liable for tax as a separate
entity in such other country, a proportional amount of any tax payable by such entity, which is attributable
to the interest of such resident in such partnership or trust, shall be deemed to have been payable by such
resident.
[Sub-s. (1A) amended by s. 8 (c) and (f) of Act 5 of 2001 and by s. 9 (1) (c) of Act 74 of 2002.] (1B) Notwithstanding the provisions of subsection (1A)-
(a) the rebate or rebates of any tax proved to be payable as contemplated in subsection (1A),
shall not in aggregate exceed an amount which bears to the total normal tax payable the

46 same ratio as the total taxable income attributable to the income, proportional amount,
foreign dividend, taxable capital gain or amount, as the case may be, which is included as
contemplated in subsection (1), bears to the total taxable income: Provided that-
(i) in determining the amount of the taxable income that is attributable to that
income, proportional amount, foreign dividend, taxable capital gain or amount,
any allowable deductions contemplated in sections 11 (n), 18 and 18A must be
deemed to have been incurred proportionately in respect of income derived from
sources within and outside the Republic;
(iA) the taxes contemplated in subsection (1A) (b) that are attributable to any
proportional amount which-
(aa) is taken into account in the determination of the taxable income of the
resident by virtue of an election made by that resident in terms of section
9D (12) or 9D (13); or
(bb) relates to any amount contemplated in section 9D (9) (b) (ii) or (iii) which
are not excluded from the application of section 9D (2) in terms of those
subparagraphs,
shall in aggregate be limited to the amount of the normal tax which is attributable
to those proportional amounts;
[Para. (iA) inserted by s. 16 (1) (g) of Act 45 of 2003.] (ii) where the sum of any such taxes proved to be payable (excluding any taxes
contemplated in paragraph (iA) of this proviso) exceeds the rebate as so
determined (hereinafter referred to as the excess amount), that excess amount
may-
(aa) be carried forward to the immediately succeeding year of assessment and
shall be deemed to be a tax on income paid to the government of any other
country in that year; and
(bb) be set off against the amount of any normal tax payable by that resident
during that year of assessment in respect of any amount derived from any
other country which is included in the taxable income of that resident
during that year, as contemplated in subsection (1), after any tax payable to
the government of any other country in respect of any amount so included
during such year of assessment which may be deducted in terms of
subsection (1) and (1A), has been deducted from the amount of such
normal tax payable in respect of such amount so included; and
[Para. (ii) amended by s. 16 (1) (h) of Act 45 of 2003.] (iii) the excess amount shall not be allowed to be carried forward for more than seven
years reckoned from the year of assessment when such excess amount was for the
first time carried forward;
[Para. (a) substituted by s. 9 (1) (g) of Act 74 of 2002 and amended by s. 16 (1) (f) of Act 45 of 2003.] (b) …
(c) ……
[Para. (c) amended by s. 9 (1) (h) of Act 74 of 2002 and deleted by s. 16 (1) (i) of Act 45 of 2003.] (d) ……
[Para. (d) amended by s. 9 (1) (i) of Act 74 of 2002 and deleted by s. 16 (1) (i) of Act 45 of 2003.] (e) no rebate shall be allowed in respect of any tax payable on any amount contemplated in
subsection (1) (d), if the resident has elected to deduct the amount of withholding tax as
contemplated in section 11C (4).
[Para. (e) substituted by s. 16 (1) (j) of Act 45 of 2003 and by s. 4 (1) of Act 32 of 2004.] (2) The rebate under subsection (1) shall not be granted in addition to any relief to which the
resident is entitled under any agreement between the governments of the Republic and the said other
country for the prevention of or relief from double taxation, but may be granted in substitution for the relief
to which the resident would be so entitled.
(3) For the purposes of this section-
‘controlled company’ ……
[Definition of ‘controlled company’ deleted by s. 9 (1) (j) of Act 74 of 2002.] ‘controlling company’ ……

47 [Definition of ‘controlling company’ deleted by s. 9 (1) (j) of Act 74 of 2002.] ‘group of companies’ ……
[Definition of ‘group of companies’ deleted by s. 9 (1) (j) of Act 74 of 2002.] ‘qualifying interest’ ……
[Definition of ‘qualifying interest’ deleted by s. 16 (1) (k) of Act 45 of 2003.] ‘taxes on income’ does not include any compulsory payment to the government of any other
country which constitutes a consideration for the right to extract any mineral or natural oil;
[Definition of ‘taxes on income’ inserted by s. 9 (1) (k) of Act 74 of 2002.] (4) For the purposes of this section the amount of any foreign tax proved to be payable as
contemplated in subsection (1A) in respect of any amount which is included in the taxable income of any
resident during any year of assessment, shall be converted to the currency of the Republic on the last day of
that year of assessment by applying the average exchange rate for that year of assessment.
[Sub-s. (4) substituted by s. 9 (1) (l) of Act 74 of 2002.] (5) Where a rebate was allowed in terms of this section against the normal tax payable by any
resident in any previous year of assessment in respect of any amount of tax which was proved to be payable
to the government of any other country, and-
(a) it is proved by that resident that the amount of the tax actually payable to such
government exceeds the amount of tax in respect of which the rebate was so allowed; or
(b) the Commissioner is satisfied that the amount of the tax actually payable to such
government is less than the amount of tax in respect of which the rebate was so allowed,
the Commissioner may, notwithstanding the provisions of section 79 or section 81 (5), but subject to
subsection (1B) (a) issue a reduced or additional assessment, as the case may be, reflecting the amount of
the rebate in respect of that amount of tax actually payable in that other currency translated to the currency
of the Republic at the average exchange rate applicable for that previous year of assessment, which shall be
allowed against normal tax: Provided that the Commissioner shall not issue any such reduced or additional
assessment after the expiration of six years from the date of the assessment in terms of which the rebate of
the amount of tax proved to be payable was so allowed, unless the Commissioner is satisfied that the fact
that the amount of tax proved to be payable to such other government was incorrectly reflected was due to
fraud or misrepresentation or non-disclosure of material facts.
[Sub-s. (5) amended by s. 9 (1) (m) of Act 74 of 2002.] [S. 6quat inserted by s. 9 of Act 89 of 1969, repealed by s. 5 of Act 94 of 1983, inserted by s. 5 of Act 85 of
1987, amended by s. 5 of Act 28 of 1997, by s. 12 of Act 53 of 1999 and by s. 16 of Act 30 of 2000 and
substituted by s. 4 of Act 59 of 2000.] 6quin ……
[S. 6quin inserted by s. 6 (1) of Act 104 of 1979 and repealed by s. 6 of Act 94 of 1983.] 7 When income is deemed to have been accrued or to have been received
Cases
(1) Income shall be deemed to have accrued to a person notwithstanding that such income has
been invested, accumulated or otherwise capitalized by him or that such income has not been actually paid
over to him but remains due and payable to him or has been credited in account or reinvested or
accumulated or capitalized or otherwise dealt with in his name or on his behalf, and a complete statement
of all such income shall be included by any person in the returns rendered by him under this Act.
(2) Any income received by or accrued to any person married with or without community of
property (hereinafter referred to as the recipient) shall be deemed for the purposes of this Act to be income
accrued to such person’s spouse (hereinafter referred to as the donor) if-
(a) such income was derived by the recipient in consequence of a donation, settlement or
other disposition made by the donor on or after 20 March 1991 or of a transaction,
operation or scheme entered into or carried out by the donor on or after that date, and the
sole or main purpose of such donation, settlement or other disposition or of such
transaction, operation or scheme was the reduction, postponement or avoidance of the
donor’s liability for any tax, levy or duty which, but for such donation, settlement, other
disposition, transaction, operation or scheme, would have become payable by the donor
under this Act or any other Act administered by the Commissioner; or
(b) income was received by or accrued to the recipient-
(i) from any trade carried on by the recipient in partnership or association with the

48 donor or which is in any way connected with any trade carried on by the donor; or
(ii) from the donor or any partnership of which the donor was at the time of such
receipt or accrual a member or any private company of which the donor was at
such time the sole or main shareholder or one of the principal shareholders,
and such income represents the whole or any portion of the total income so received by or
accrued to the recipient which exceeds the amount of income to which the recipient
would reasonably be entitled having regard to the nature of the relevant trade, the extent
of the recipient’s participation therein, the services rendered by the recipient or any other
relevant factor; or
(c) ……
[Para. (c) deleted by s. 6 of Act 21 of 1995.] [Sub-s. (2) amended by s. 5 of Act 90 of 1962, substituted by s. 8 of Act 88 of 1965, amended by s. 2 of
Act 30 of 1984 and by s. 5 of Act 90 of 1988 and substituted by s. 5 of Act 70 of 1989, by s. 4 of Act 101
of 1990 and by s. 7 of Act 129 of 1991.] (2A) In the case of spouses who are married in community of property-
(a) any income (other than income derived from the letting of fixed property) which has been
derived from the carrying on of any trade shall, if such trade is carried on-
(i) by only one of the spouses, be deemed to have accrued to that spouse; or
(ii) jointly by both spouses, be deemed, subject to the provisions of subsection (2) (b),
to have accrued to both spouses in the proportions determined by them in terms of
the agreement that regulates their joint trade or, if there is no such agreement, in
the proportion to which each spouse would reasonably be entitled having regard to
the nature of the relevant trade, the extent of each spouse’s participation therein,
the services rendered by each spouse or any other relevant factor; and
(b) any income derived from the letting of fixed property and any income derived otherwise
than from the carrying on of any trade shall be deemed to have accrued in equal shares to
both spouses: Provided that any such income which does not fall into the joint estate of
the spouses shall be deemed to be income accrued to the spouse who is entitled thereto.
[Sub-s. (2A) inserted by s. 5 (1) of Act 141 of 1992.] (2B) So much of any deduction or allowance which may be made under the provisions of this Act
in the determination of the taxable income derived from any income derived to in subsections (2) and (2A)
as relates to any portion of such income which is under the provisions of that subsection deemed to be
income accrued to a spouse shall be deemed to be a deduction or allowance which may be made in the
determination of the taxable income of such spouse.
[Sub-s. (2B) inserted by s. 5 (1) of Act 141 of 1992.] (2C) For the purposes of subsection (2A)-
(a) any benefit paid or payable to a spouse in his capacity as a member or past member of a
pension fund, provident fund, benefit fund, retirement annuity fund or any other fund of a
similar nature shall be deemed to be income derived by such spouse from a trade carried
on by him;
[Para. (a) substituted by s. 23 (1) of Act 30 of 1998.] (b) any annuity amount (as defined in section 10A) paid or payable to a spouse shall be
deemed to be income derived by such spouse from a trade carried on by him; and
(c) where any spouse is the-
(i) registered holder of a patent as defined in the Patents Act, 1978 (Act 57 of 1978),
or any design as defined in the Designs Act, 1993 (Act 195 of 1993), or any trade
mark as defined in the Trade Marks Act, 1993 (Act 194 of 1993); or
[Sub-para. (i) substituted by s. 13 of Act 53 of 1999.] (ii) author of a work on which copyright has been conferred in terms of the Copyright
Act, 1978 (Act 98 of 1978), or the owner of such a copyright by reason of
assignment, testamentary disposition or operation of law; or
(iii) holder of any other property or right of a similar nature,
any income derived from the grant of the right of use of such patent, design, trade mark,
copyright or other property or right shall be deemed to be income derived by such spouse
from a trade carried on by him.
[Sub-s. (2C) inserted by s. 5 (1) of Act 141 of 1992.]

49 (3) Income shall be deemed to have been received by the parent of any minor child, if by reason of
any donation, settlement or other disposition made by that parent of that child-
(a) it has been received by or has accrued to or in favour of that child or has been expended
for the maintenance, education or benefit of that child; or
(b) it has been accumulated for the benefit of that child.
(4) Any income received by or accrued to or in favour of any minor child of any person, by reason
of any donation, settlement or other disposition made by any other person, shall be deemed to be the
income of the parent of such minor child, if such parent or his spouse has made a donation, settlement or
other disposition or given some other consideration in favour directly or indirectly of the said other person
or his family.
(5) If any person has made any donation, settlement or other disposition which is subject to a
stipulation or condition, whether made or imposed by such person or anybody else, to the effect that the
beneficiaries thereof or some of them shall not receive the income or some portion of the income
thereunder until the happening of some event, whether fixed or contingent, so much of any income as
would, but for such stipulation or condition, in consequence of the donation, settlement or other disposition
be received by or accrue to or in favour of the beneficiaries, shall, until the happening of that event or the
death of that person, whichever first takes place, be deemed to be the income of that person.
[Sub-s. (5) substituted by s. 9 of Act 55 of 1966.] (6) If any deed of donation, settlement or other disposition contains any stipulation that the right to
receive any income thereby conferred may, under powers retained by the person by whom that right is
conferred, be revoked or conferred upon another, so much of any income as in consequence of the
donation, settlement or other disposition is received by or accrues to or in favour of the person on whom
that right is conferred, shall be deemed to be the income of the person by whom it is conferred, so long as
he retains those powers.
(7) If by reason of any donation, settlement or other disposition made, whether before or after the
commencement of this Act, by any person (hereinafter referred to as the donor)-
(a) the donor’s right to receive or have paid to him or for his benefit any amount by way of
rent, dividend, interest, royalty or similar income in respect of any movable or
immovable property (including without limiting the foregoing any lease, company share,
marketable security, deposit, loan, copyright, design or trade mark) or in respect of the
use of, or the granting of permission to use, such property, is ceded or otherwise made
over to any other person or to a third party for that other person’s benefit in such manner
that the donor remains the owner of or retains an interest in the said property or if the said
property or interest is transferred, delivered or made over to the said other person or to a
third party for the said other person’s benefit, in such manner that the donor is or will at a
fixed or determinable time be entitled to regain ownership of or the interest in the said
property; or
(b) the donor’s right to receive or have paid to him or for his benefit any income that is or
may become due to him by any other person acting in a fiduciary capacity is ceded or
otherwise made over to any other person or to a third party for that other person’s benefit
in such manner that the donor is or will at a determinable time be entitled to regain the
said right,
any such rent, dividend, interest, royalty or income (including any amount which, but for this subsection,
would have been exempt from tax in the hands of the said other person) as is received by or accrues to or
for the benefit of the said other person on or after 1 July 1983 and which would otherwise, but for the said
donation, settlement or other disposition, have been received by or have accrued to or for the benefit of the
donor, shall be deemed to have been received by or to have accrued to the donor.
[Sub-s. (7) added by s. 7 (1) of Act 94 of 1983.] (8) Where by reason of or in consequence of any donation, settlement or other disposition (other
than a donation, settlement or other disposition to an entity which is not a resident and which is similar to a
public benefit organisation contemplated in section 30) made by any resident, any amount is received by or
accrued to any person who is not a resident (other than a controlled foreign company in relation to such
resident), which would have constituted income had that person been a resident, there shall be included in
the income of that resident so much of that amount as is attributable to that donation, settlement or other
disposition.
[Sub-s. (8) added by s. 5 of Act 59 of 2000, substituted by s. 10 (1) of Act 74 of 2002, amended by s. 17 of

50 Act 45 of 2003 and substituted by s. 5 (1) of Act 32 of 2004.] (9) Where any asset has been disposed of for a consideration which is less than the market value of
such asset, the amount by which such market value exceeds such consideration shall for the purposes of
this section be deemed to be a donation.
[Sub-s. (9) added by s. 5 of Act 59 of 2000.] (10) Any resident who, at any time during any year of assessment makes any donation, settlement
or other disposition as contemplated in this section, shall disclose such fact to the Commissioner in writing
when submitting his return of income for such year and at the same time furnish such information as may
be required by the Commissioner for the purposes of this section.
[Sub-s. (10) added by s. 5 of Act 59 of 2000.] 7A Date of receipt or accrual of antedated salaries or pensions and of certain retirement
gratuities
(1) For the purposes of this section-
‘antedated salary or pension’ means an amount of salary or pension which has become payable to
any person under a permanent grant, made with retrospective effect, of a salary or pension or of an increase
in a salary or pension, and which in terms of such grant is payable in respect of a period ending on or
before the date on which the grant has become effective;
‘pension’ means an annuity payable under any law or under the rules of a pension fund or
provident fund or by an employer to a former employee of that employer or to the dependant or nominee of
a deceased person who was employed by such employer;
[Definition of ‘pension’ substituted by s. 7 (1) (a) of Act 21 of 1995.] ‘salary’ means salary, wages or similar remuneration payable by an employer to an employee, but
does not include any bonus or any amount referred to in subsection (4).
(2) Where any antedated salary or pension has been received by or has accrued to any person
during any year or period of assessment and the period in respect of which such antedated salary or pension
has become payable (hereinafter referred to as the accrual period) commenced before the commencement
of the said year or period of assessment, such antedated salary or pension shall at the opinion of the
taxpayer be deemed-
(a) if the accrual period commenced not more than two years before the commencement of
the said year or period of assessment, to have been received by or to have accrued to the
said person in part during each of the years or periods of assessment in which any portion
of the accrual period falls (the part of the said amount relating to any such year or period
of assessment being determined on the basis of a reasonable apportionment of the whole
of the said amount between all the said years or periods of assessment); or
(b) if the accrual period commenced more than two years before the commencement of the
first-mentioned year or period of assessment, to have been received by or to have accrued
to the said person in three equal annual instalments (the first and second instalments two
years and one year respectively before the date on which the said amount accrued to the
said person and the third instalment on the said date).
(3) Where any member of the citizen force or of the commandos has bound himself to serve in
such force or the commandos for a continuous period of service of at least eighteen months as contemplated
in section 22 (6A) or 44 (5A) of the Defence Act, 1957 (Act 44 of 1957), the provisions of subsection (2)
shall mutatis mutandis apply in respect of any gratuity which has become payable to him by the State upon
and by reason of the completion of such period of service, as though such gratuity were antedated salary or
pension granted permanently and with retrospective effect, in respect of the said period of service.
[Sub-s. (3) substituted by s. 7 (1) of Act 103 of 1976.] (4) ……
[Sub-s. (4) amended by s. 4 (1) (a) of Act 65 of 1986 and deleted by s. 8 (1) (a) of Act 129 of 1991.] (4A) Where the taxable income of any taxpayer for any year of assessment includes any amount
(other than an amount contemplated in paragraph (e) of the definition of ‘gross income’ in section 1)
received by or accrued to him as an employee or the holder of any office by way of bonus, gratuity or
compensation upon or because of the termination of his services or because of the impending termination
of his services within five years (or such longer period as the Commissioner may approve) from the date of
actual receipt or accrual of such amount, and-
(a) the taxpayer has attained the age of 55 years; or
[Para. (a) substituted by s. 7 (1) (c) of Act 21 of 1995.]

51 (b) the termination or impending termination of the taxpayer’s services is due to
superannuation, ill-health or other infirmity; or
[Para. (b) substituted by s. 8 (1) (b) of Act 129 of 1991.] (c) ……
[Para. (c) substituted by s. 8 (1) (b) of Act 129 of 1991 and deleted by s. 7 (1) (d) of Act 21 of 1995.] (d) the Commissioner is satisfied that-
(i) the termination or impending termination of the taxpayer’s services is due to his
employer having ceased to carry on or intending to cease carrying on the trade in
respect of which the taxpayer was employed or to the taxpayer having become
redundant in consequence of his employer having effected a general reduction in
personnel or a reduction in personnel of a particular class; and
[Sub-para. (i) substituted by s. 3 of Act 113 of 1993.] (ii) the circumstances of the case warrant this concession,
[Para. (d) inserted by s. 4 (1) (c) of Act 65 of 1986.] the normal tax payable by the taxpayer in respect of such year shall, subject to the provisions of section 5,
be determined in accordance with the provisions of section 5 (10), but nothing herein contained shall be
construed as relieving any person from liability for taxation under this Act upon any portion of his taxable
income.
[Sub-s. (4A) inserted by s. 6 of Act 96 of 1981 and amended by s. 7 (1) (b) of Act 21 of 1995.] (5) ……
[Sub-s. (5) deleted by s. 5 of Act 36 of 1996.] [S. 7A inserted by s. 6 of Act 69 of 1975.] 8 Certain amounts to be included in income or taxable income
Cases
(1) (a) (i) There shall be included in the taxable income of any person (hereinafter referred to as
the ‘recipient’) for any year of assessment any amount which has been paid or granted during that year by
his or her principal as an allowance or advance, excluding any portion of any allowance or advance actually
expended by that recipient-
(aa) on travelling on business, as contemplated in paragraph (b);
(bb) on any accommodation, meals and other incidental costs, as contemplated in paragraph
(c), while such recipient is by reason of the duties of his or her office or employment
obliged to spend at least one night away from his or her usual place of residence in the
Republic;1
* or
(cc) by reason of the duties attendant upon his or her office, as contemplated in paragraph (d).
(ii) There shall not be included in the taxable income of a person in terms of the provisions of
paragraph (a) (i), any amount paid or granted by a principal in reimbursement of, or as an advance for, any
expenditure incurred or to be incurred by the recipient-
(aa) on the instruction of his or her principal in the furtherance of the trade of that principal;
and
(bb) where that recipient must produce proof to that principal that such expenditure was
wholly incurred as aforesaid and must account to that principal for that expenditure:
Provided that where that expenditure was incurred to acquire any asset, the ownership in that asset must
vest in that principal.
(iii) For the purposes of this paragraph, ‘principal’ in relation to a recipient includes his or her
employer or the authority, company, body or other organisation in relation to which any office is held, or
any associated institution, as defined in the Seventh Schedule, in relation to such employer, authority,
company, body or organisation.
(iv) The provisions of this paragraph shall not apply in respect of any allowance or advance
received by or accrued to a person contemplated in section 9 (1) (e) stationed outside the Republic which is
attributable to that person’s services rendered outside the Republic.
[Sub-para. (iv) added by s. 11 (1) (a) of Act 74 of 2002.] [Para. (a) substituted by s. 6 (a) of Act 141 of 1992 and by s. 12 (1) (a) of Act 30 of 2002.] (b) For the purposes of paragraph (a) (i) (aa)-
(i) any allowance or advance in respect of transport expenses shall, to the extent to which
such allowance or advance has been expended by the recipient on private travelling

52 (including travelling between his place of residence and his place of employment or
business or any other travelling done for his private or domestic purposes), be deemed
not to have been actually expended on travelling on business;
[Sub-para. (i) amended by s. 4 (a) of Act 96 of 1985 and by s. 9 (a) of Act 129 of 1991.] (ii) subject to the provisions of subparagraph (iii), where such allowance or advance has been
paid to the recipient in order that it may be utilized for defraying expenditure in respect of
any motor vehicle used by the recipient, the portion of the allowance expended by the
recipient during the year of assessment for business purposes shall, unless an acceptable
calculation based on accurate data is furnished by the recipient, be deemed to be an
amount calculated by applying the rate per kilometre2
* determined in the manner
prescribed by the Minister of Finance by notice in the Gazette for the category of vehicle
used, on a distance travelled during the said year for business purposes (other than private
travelling as contemplated in subparagraph (i): Provided that where an allowance or
advance has been paid to a recipient in relation to a motor vehicle in respect of which he
has been granted the right of use as contemplated in paragraph 7 of the Seventh Schedule,
no regard shall be had to such rate per kilometre in order to determine the portion of such
allowance or advance expended by the recipient for business purposes: Provided further
that-
(aa) the recipient shall, unless the contrary appears, be deemed to have used the vehicle
during such year for such business purposes over a distance equal to the difference
between the total number of kilometres travelled by him in such vehicle during
such year (but not exceeding 32 000 kilometres) and a distance of 14 000
kilometres;
[Para. (aa) substituted by s. 9 (b) of Act 129 of 1991 and amended by s. 6 (1) (a) of Act 28 of 1997.] (bb) where the vehicle has been used for business purposes during a period in such
year which is less than the full period of such year, the reference in paragraph (aa)
of this proviso to the distances of 32 000 kilometres and 14 000 kilometres shall
be construed as a reference to the distances which bear to 32 000 kilometres and
14 000 kilometres, respectively, the same ratio as the period of use for business
purposes bears to 12 months;
[Para. (bb) substituted by s. 9 (b) of Act 129 of 1991 and amended by s. 6 (1) (a) of Act 28 of 1997.] (cc) where the recipient has during the whole or any portion of the year of assessment
interchangeably used more than one vehicle for business purposes, the provisions
of paragraphs (aa) and (bb) of this proviso shall be applied separately to each such
vehicle;
[Para. (cc) substituted by s. 24 (1) of the Act 30 of 1998.] [Sub-para. (ii) substituted by s. 6 (a) of Act 85 of 1987 and amended by s. 8 (1) (a) of Act 21 of 1995.] (iii) where such allowance or advance is based on the actual distance travelled by the recipient
in using a motor vehicle on business (excluding the said private travelling), or such actual
distance is proved to the satisfaction of the Commissioner to have been travelled by the
recipient, the amount expended by the recipient on such business travelling shall, unless
the contrary appears, be deemed to be an amount determined on such actual distance at
the rate per kilometre3
* fixed by the Minister of Finance by notice in the Gazette for the
category of vehicle used;
(iv) where any motor vehicle which is owned or leased by an employee, his spouse or his
child, whether directly or indirectly by virtue of an interest in a company or trust or
otherwise, has been let to the employer or any associated institution in relation to the
employer, the sum of the rental paid by the employer or associated institution and any
expenditure defrayed by the employer or associated institution in respect of the vehicle,
shall be deemed to be an allowance paid to the employee in respect of transport expenses,
and in such case the said rental shall for the purposes of this Act (excluding this
paragraph) be deemed not to have been received by or to have accrued to the lessor of
such motor vehicle, and for the purposes of paragraph 2 (b) of the Seventh Schedule such
employee shall be deemed not to have been granted the right to use such motor vehicle.
[Sub-para. (iv) added by s. 5 (1) (a) of Act 101 of 1990.] [Para. (b) amended by s. 12 (1) (b) of Act 30 of 2002.]

53 (c) A recipient shall, for the purposes of paragraph (a) (i) (bb), be deemed to have actually
expended-
(i) where that recipient proves to the Commissioner the amount of the expenses incurred by
him or her in respect of accommodation, meals or other incidental costs (other than any
amount of expenditure borne by the employer otherwise than by way of payment or
granting of the allowance), the amount so actually incurred but limited to the amount of
the allowance or advance paid or granted to meet those expenses; or
(ii) for each day or part of a day in the period during which that recipient is absent from his
or her usual place of residence, an amount in respect of meals and other incidental costs,
or incidental costs only, determined by the Minister for the relevant year of assessment
by way of notice in the Gazette, but limited to the amount of the allowance paid or
granted to meet those expenses: Provided that this subparagraph does not apply to the
extent that-
(aa) the employer has borne the expenses (otherwise than by way of granting
the allowance or advance) in respect of which the allowance was paid or
granted for that day or part of that day; or
(bb) the recipient has proved to the Commissioner any amount of actual
expenditure in respect of meals or incidental costs for that day or part of
that day, as contemplated in subparagraph (i).
[Sub-para. (ii) substituted by s. 11 (1) (b) of Act 74 of 2002.] [Para. (c) amended by s. 4 (c) of Act 96 of 1985, by s. 5 of Act 65 of 1986, by s. 6 (b) and (c) of Act 85 of
1987 and by s. 5 (1) (b) of Act 101 of 1990 and substituted by s. 12 (1) (c) of Act 30 of 2002.] (d) Any allowance granted to the holder of any public office contemplated in paragraph (e) to
enable him to defray expenditure incurred by him in connection with such office shall for the purposes of
paragraph (a) be deemed to have been so expended by him to the extent that expenditure relevant to such
allowance and not otherwise recoverable by him has actually been incurred by him for the purposes of his
office in respect of-
(i) secretarial services, duplicating services, stationery, postage, telephone calls, the hire of
office accommodation and the maintenance of such accommodation;
(ii) travelling;
(iii) hospitality extended at any official or civic function which the holder of such office is by
reason of the nature of such office normally expected to arrange;
(iv) ……
[Sub-para. (iv) deleted by s. 12 (1) (d) of Act 30 of 2002.] (v) subsistence and incidental costs incurred in the circumstances contemplated in paragraph
(c).
[Para. (d) amended by s. 6 (d) of Act 85 of 1987.] (e) For the purposes of paragraph (d) the holder of a public office includes-
(i) the President, Deputy President, a Minister, Deputy Minister, a member of the
National Assembly, a permanent delegate to the National Council of Provinces, a
Premier, a member of an Executive Council or a member of a provincial
legislature;
[Sub-para. (i) substituted by s. 4 (d) of Act 96 of 1985, by s. 6 (e) of Act 85 of 1987, by s. 6 (1) (a) of Act
21 of 1994 and by s. 14 (1) (a) of Act 53 of 1999.] (ii) any member of a municipal council, a traditional leader, a member of a provincial House
of Traditional Leaders and a member of the Council of Traditional Leaders; and
[Sub-para. (ii) substituted by s. 14 (1) (a) of Act 53 of 1999.] (iii) a person occupying the office of president, chairman or chief executive officer of any
non-profitmaking organization which is organized on a national or regional basis to
represent persons with common interests and the funds of which are derived wholly or
mainly from subscriptions of members or donations from the general public.
[Sub-para. (iii) substituted by s. 6 (b) of Act 141 of 1992.] (f) Where it is expected of any person contemplated in paragraph (e)(i) to defray any
expenditure referred to in paragraph (d) out of his salary received as the holder of any
public office, an amount equal to a portion (which shall be determined by the National
Assembly or the President, as the case may be, as provided for in the Remuneration of

54 Public Office Bearers Act, 1998 (Act 20 of 1998)) of such salary shall for the purposes of
paragraph (d) be deemed to be an allowance granted to such person.
[Para. (f) added by s. 6 (1) (b) of Act 21 of 1994 and substituted by s. 14 (1) (b) of Act 53 of 1999.] (g) Where, during any year of assessment, any person contemplated in paragraph (e) has held a
public office for less than 12 months, the amount determined in terms of paragraph (f), shall be reduced to
an amount which bears to the relevant amount, the same ratio as the number of months (in the
determination of which a part of a month shall be reckoned as a full month), for which the office was held
bears to 12 months.
[Para. (g) added by s. 6 (1) (b) of Act 21 of 1994 and substituted by s. 17 (1) (a) of Act 30 of 2000 and by s.
12 (1) (e) of Act 30 of 2002.] [Sub-s. (1) substituted by s. 5 (1) (a) of Act 121 of 1984.] (2) ……
[Sub-s. (2) amended by s. 6 (1) (a), (b) and (c) of Act 90 of 1962, substituted by s. 8 (a) of Act 85 of 1974,
amended by s. 7 (1) (a) of Act 69 of 1975 and deleted by s. 6 (c) of Act 141 of 1992.] (3) ……
[Sub-s. (3) amended by s. 6 (1) (d) of Act 90 of 1962 and by s. 8 (b) and (c) of Act 85 of 1974 and deleted
by s. 6 (c) of Act 141 of 1992.] (4) (a) There shall be included in the taxpayer’s income all amounts allowed to be deducted or set
off under the provisions of sections 11 to 20, inclusive, section 24D, section 24F, section 24G, section 24I,
section 24J and section 27 (2) (b) and (d) of this Act, except section 11 (k), (p) and (q), section 11quin,
section 12 (2) or section 12 (2) as applied by section 12 (3), section 12A (3), section 13 (5), or section 13
(5) as applied by section 13 (8), or section 13bis (7), or section 15 (a), or section 15A, or under the
corresponding provisions of any previous Income Tax Act, whether in the current or any previous year of
assessment which have been recovered or recouped during the current year of assessment: Provided that the
provisions of this paragraph shall not apply in respect of any such amount so recovered or recouped which
has been included in the gross income of such taxpayer in terms of paragraph (eB) or (jA) of the definition
of ‘gross income’.
[Para. (a) amended by s. 6 (1) (a) of Act 90 of 1964, substituted by s. 9 (1) (a) of Act 88 of 1965, by s. 10
(1) (a) of Act 55 of 1966, by s. 10 (a) of Act 89 of 1969, by s. 8 (d) of Act 85 of 1974, by s. 7 (1) (b) of Act
69 of 1975, by s. 7 (1) (a) of Act 113 of 1977, by s. 8 (a) of Act 94 of 1983, by s. 5 (1) (b) of Act 121 of
1984 and by s. 6 (f) of Act 85 of 1987 and amended by s. 6 (a) of Act 90 of 1988, by s. 17 (1) (b) of Act 30
of 2000, by s. 21 (1) (a) of Act 60 of 2001 and by s. 6 of Act 32 of 2004.] (b) If any amount referred to in paragraph (a) of this subsection is an amount which has been
recovered or recouped during any year of assessment by a resident who carries on any business as owner or
charterer of any ship as a result of the loss, sale or disposal in any other manner by that person of a ship,
and if that person satisfies the Commissioner that-
(i) he will within a period of one year (or such longer period as the Commissioner in the
circumstances of the case may allow) after the end of that year of assessment conclude a
contract for the acquisition by him of a further ship to replace the aforesaid ship;
(ii) such further ship will be used by him for the purposes of his trade for a period of not less
than ten years or, if the said amount was recovered or recouped by him on or after the
seventeenth day of August, 1966, for a period of not less than seven years; and
(iii) such further ship will be a ship in relation to which the provisions of section 14 (1) (b)
will apply and will continue to apply for the said period of not less than ten years or, if
the said amount was recovered or recouped by him on or after the seventeenth day of
August, 1966, the further ship will be a ship in relation to which the provisions of section
14 (1) (a) or (b) will apply and will continue to apply for the said period of not less than
seven years,
the said amount shall, notwithstanding anything to the contrary contained in paragraph (a) of this
subsection, but subject to the provisions of paragraphs (c), (d) and (dA) of this subsection-
(aa) if it was recovered or recouped before the seventeenth day of August, 1966, not be
included in the income of that person for the aforesaid year of assessment, but shall be
included in his income for the period of assessment ending on the date of his death,
insolvency or liquidation (in the case of a company), as the case may be; or
(bb) if it was recovered or recouped on or after 17 August, 1966, not be included in the
income of that person for the aforesaid year of assessment except to the extent that such

55 amount is not, in terms of the definition of ‘adjustable cost’ or ‘adjustable cost price’ in
section 14 (2), deductible from the cost or estimated cost price of such further ship:
[Sub-para. (bb) substituted by s. 8 (e) of Act 85 of 1974.] Provided that the provisions of this paragraph shall not apply to any amount which has been recovered or
recouped as a result of any such loss, sale or disposal which has taken or takes place on or after 1 April
1995.
[Para. (b) amended by s. 6 (1) (e) of Act 90 of 1962, substituted by s. 10 (1) (b) of Act 55 of 1966 and
amended by s. 8 (1) (b) of Act 21 of 1995 and by s. 6 (a) of Act 59 of 2000.] (c) Within three months after the end of the year of assessment during which any amount referred
to in paragraph (b) has been recovered or recouped by the person concerned in respect of any ship of more
than two hundred gross register tons, there shall be deposited by the said person with the Public Debt
Commissioners for such period and on such conditions as may be approved by the Commissioner an
amount equal to the amount to be excluded from such person’s income in terms of that paragraph, less such
amount, if any, as has in the meantime been paid by the said person in respect of the cost price of the
further ship referred to in that paragraph.
[Para. (c) substituted by s. 10 (1) (b) of Act 55 of 1966 and by s. 6 of Act 90 of 1972.] (d) If owing to any occurrence (other than the loss by the said person of the further ship referred to
in paragraph (b) or because of any circumstance arising during any year of assessment the Commissioner is
no longer satisfied in regard to the matters in regard to which he is in terms of that paragraph or the
corresponding provisions of any previous Income Tax Act required to be satisfied, the amount not included
in the taxpayer’s income in terms of that paragraph or the corresponding provisions of any previous Income
Tax Act shall be included in the income of the taxpayer for the year of assessment during which such
occurrence takes place or such circumstance arises.
[Para. (d) substituted by s. 10 (1) (b) of Act 55 of 1966.] (dA) If as a result of the loss, sale or disposal in any other manner by the person concerned of the
further ship referred to in paragraph (b) there has accrued to or has been received by the taxpayer an
amount in excess of the cost thereof less the amount not included in the taxpayer’s income in terms of
subparagraph (bb) of the said paragraph, so much of the excess as does not exceed such lastmentioned
amount shall (unless such lastmentioned amount has been included in income in terms of paragraph (d)) be
deemed to have been recovered or recouped and shall, in addition to any amount referred to in paragraph
(a) which has been recovered or recouped, be included in the taxpayer’s income for the year of assessment
during which such further ship was so lost, sold or disposed of.
[Para. (dA) inserted by s. 10 (1) (c) of Act 55 of 1966.] (dB) For the purposes of paragraph (a), where any company which is or was a parent company
contemplated in paragraph (b) of the definition of ‘South African ship’ in section 14 (2) has-
(i) exercised the election in terms of section 14 (1D) in relation to any other company which
is or was a subsidiary company contemplated in the last-mentioned paragraph; and
(ii) sold or disposed of in any other manner any shares held in such other company during
any year of assessment,
such company shall be deemed to have recovered or recouped during such year of assessment an amount
equal to the lesser of-
(aa) the total of all amounts allowed to be deducted or set off under the provisions of sections
11 (o), 12C and 14, whether in such or any previous year of assessment, in the
determination of such company’s taxable income in respect of any ship owned by such
other company, at the date of sale or disposal of such shares; and
(bb) the market value of such ship as at the date of sale or disposal of such shares.
[Para. (dB) inserted by s. 6 (1) (a) of Act 36 of 1996.] (e) Notwithstanding paragraph (a), but subject to paragraph (eB), (eC), (eD) and (eE), there shall
not be included in the income of a person any amount recovered or recouped as a result of the disposal of
any asset, where that person has elected that paragraph 65 or 66 of the Eighth Schedule applies in respect of
the disposal of that asset.
[Para. (e) amended by s. 6 (1) (b) of Act 90 of 1964, substituted by s. 10 (b) of Act 89 of 1969 and by s. 7
(1) (b) of Act 113 of 1977, amended by s. 8 (b) of Act 94 of 1983, by s. 6 (b) of Act 90 of 1988, by s. 5 (1)
(c) of Act 101 of 1990, by s. 8 (1) (c) of Act 21 of 1995, by s. 17 (1) (c) of Act 30 of 2000 and by s. 7 of
Act 19 of 2001 and substituted by s. 18 (1) (a) of Act 45 of 2003.] (eA) Where a person acquires more than one asset (hereinafter referred to as ‘the replacement

56 asset or assets’) contemplated in paragraph (e), that person must, in applying paragraphs
(eB), (eC) and (eD), apportion the amount recovered or recouped to each replacement
asset in the same ratio as the receipts and accruals from that disposal respectively
expended in acquiring each replacement asset bear to the total amount of those receipts
and accruals expended in acquiring all those replacement assets.
[Para. (eA) inserted by s. 18 (1) (b) of Act 45 of 2003.] (eB) Where a replacement asset in relation to an asset of a person as contemplated in
paragraph (e) constitutes a depreciable asset, that person shall be deemed to have
recovered or recouped in a year of assessment so much of the amount contemplated in
paragraph (e) apportioned to that asset as contemplated in paragraph (eA) as bears to the
total amount of the recovery or recoupment contemplated in paragraph (e) the same ratio
as the amount of any capital deduction or allowance allowed in that year of assessment in
respect of that replacement asset bears to the total amount of the capital deduction or
allowance (determined with reference to the cost or value of that asset at the time of
acquisition thereof) allowable for all years of assessment in respect of that replacement
asset.
[Para. (eB) inserted by s. 18 (1) (b) of Act 45 of 2003.] (eC) Where a person during any year of assessment disposes of a replacement asset in relation
to an asset contemplated in paragraph (e) and any portion of the recovery or recoupment
which is apportioned to that replacement asset has not been included in the income of that
person in terms of paragraph (eB) or (eD), that portion must be deemed to be an amount
recovered or recouped by that person in respect of that replacement asset in that year of
assessment.
[Para. (eC) inserted by s. 18 (1) (b) of Act 45 of 2003.] (eD) Where during any year of assessment a person ceases to use a replacement asset in
relation to an asset contemplated in paragraph (e), in respect of which paragraph 66 of the
Eighth Schedule applies, for the purposes of that person’s trade and any portion of the
amount which is apportioned to that replacement asset has not been included in the
income of that person in terms of paragraph (eB) or (eC), that portion must be deemed to
be an amount recovered or recouped in that year of assessment.
[Para. (eD) inserted by s. 18 (1) (b) of Act 45 of 2003.] (eE) Where a person contemplated in paragraph (e) fails to conclude a contract or fails to
bring any replacement asset into use within the period prescribed in paragraphs 65 or 66
of the Eighth Schedule, as the case may be, paragraph (e) shall not apply and that person
must-
(i) deem the amount contemplated in paragraph (e) to be an amount recovered or
recouped for purposes of paragraph (a) on the date on which the relevant period
ends;
(ii) determine interest at the prescribed rate on the amount recovered or recouped
from the date of the disposal contemplated in paragraph (e) to the date
contemplated in subparagraph (i); and
(iii) deem that interest to be an amount recovered or recouped for purposes of
paragraph (a) on the date contemplated in subparagraph (i).
[Para. (eE) inserted by s. 18 (1) (b) of Act 45 of 2003.] (f) If as a result of the loss, sale or disposal in any other manner by the taxpayer of the further asset
referred to in paragraph (e) there has accrued to or has been received by the taxpayer an amount in excess
of the cost thereof less the amount referred to in the said paragraph, so much of the excess as does not
exceed such last-mentioned amount shall (unless such lastmentioned amount has been included in income
in terms of the proviso to the said paragraph) be deemed to have been recovered or recouped and shall be
included in the taxpayer’s income for the year of assessment during which such further asset was so lost,
sold or disposed of in addition to any recovery or recoupment referred to in paragraph (a).
[Para. (f) substituted by s. 8 (1) (d) of Act 21 of 1995.] (g) If any amount referred to in paragraph (a) of this subsection is an amount which has been
recovered or recouped by any person during any year of assessment as a result of the loss, sale or disposal
in any other manner by such person of an aircraft, and if that person satisfies the Commissioner that-
(i) he will within a period of one year (or such longer period as the Commissioner in the

57 circumstances of the case may allow) after the end of that year of assessment conclude a
contract for the acquisition by him of a further aircraft to replace the aforesaid aircraft;
and
(ii) such further aircraft will be used by him for the purposes of his trade for a period of not
less than three years,
the said amount shall, notwithstanding anything to the contrary contained in paragraph (a), but subject to
the provisions of paragraphs (h), (i) and (j), not be included in the income of that person for the aforesaid
year of assessment, except to the extent that such amount is not in terms of paragraph (a) of subsection (2)
of section fourteen bis deductible from the cost or estimated cost price of such further aircraft: Provided
that the provisions of this paragraph shall not apply to any amount which has been recovered or recouped
as a result of any such loss, sale or disposal which takes place on or after 1 August 1992.
[Para. (g) added by s. 9 (1) (b) of Act 88 of 1965 and amended by s. 6 (d) of Act 141 of 1992.] (h) Within three months after the end of the year of assessment during which any amount referred
to in paragraph (g) has been recovered or recouped by the person concerned, there shall be deposited by the
said person with the Public Debt Commissioners for such period and on such conditions as may be
approved by the Commissioner an amount equal to the amount to be excluded from such person’s income in
terms of that paragraph, less such amount, if any, as has in the meantime been paid by the said person in
respect of the cost price of the further aircraft referred to in that paragraph.
[Para. (h) added by s. 9 (1) (b) of Act 88 of 1965.] (i) If owing to any occurrence (other than the loss by the person concerned of the further aircraft
referred to in paragraph (g)) or because of any circumstance arising during any year of assessment, the
Commissioner is no longer satisfied in regard to the matters to which he is in terms of that paragraph
required to be satisfied, the amount not included in the taxpayer’s income in terms of that paragraph shall be
included in the income of the taxpayer for the year of assessment during which such occurrence takes place
or such circumstance arises.
[Para. (i) added by s. 9 (1) (b) of Act 88 of 1965.] (j) If as a result of the loss, sale or disposal in any other manner by the person concerned of the
further aircraft referred to in paragraph (g) there has accrued to or has been received by the taxpayer an
amount in excess of the cost thereof less the amount not included in the taxpayer’s income in terms of the
said paragraph, so much of the excess as does not exceed such last-mentioned amount shall (unless such
last-mentioned amount has been included in income in terms of paragraph (i)) be deemed to have been
recovered or recouped and shall, in addition to any amount referred to in paragraph (a) which has been
recovered or recouped, be included in the taxpayer’s income for the year of assessment during which such
further aircraft was so lost, sold or disposed of.
[Para. (j) added by s. 9 (1) (b) of Act 88 of 1965.] (k) For the purposes of paragraph (a), where during any year of assessment any person has-
(i) donated any asset;
(ii) transferred in whatever manner or form any asset to any shareholder of that company; or
[Sub-para. (ii) substituted by s. 11 (1) (c) of Act 74 of 2002.] (iii) disposed of any asset to a person who is a connected person in relation to that person,
in respect of which a deduction or an allowance has been granted to such person in terms of any of the
provisions referred to in that paragraph, such person shall be deemed to have recovered or recouped an
amount equal to the market value of such asset as at the date of such donation, transfer or disposal.
[Para. (k) added by s. 4 (1) of Act 113 of 1993, substituted by s. 7 (g) of Act 19 of 2001 and by s. 21 (1) (b)
of Act 60 of 2001 and amended by s. 11 (1) (d) of Act 74 of 2002.] (l) For the purposes of paragraph (a), where-
(i) any person was entitled to a deduction in respect of any interest or related finance charges
(including a discount or premium), which was incurred or deemed to have been incurred
by such person in relation to any financial arrangement during any year of assessment
and such interest or related finance charges were allowed as a deduction in terms of the
provisions of this Act during such year of assessment in the hands of such person;
(ii) such person has transferred such financial arrangement during any year of assessment to
any other person; and
(iii) any obligation or part thereof in respect of such interest or related finance charges which
such person is legally liable to pay has, as a result of such transfer, been transferred to
such other person,

58 such person shall be deemed to have recovered or recouped an amount equal to the amount of such
obligation or part thereof so transferred during the year of assessment in which such obligation or part
thereof has been so transferred.
[Para. (l) added by s. 6 (1) (b) of Act 36 of 1996.] (m) Subject to the provisions of section 20, where-
(i) as a result of the cancellation, termination or variation of an agreement or due to
the prescription, waiver or release of a claim for payment, any person was during
any year of assessment relieved or partially relieved from the obligation to make
payment of any expenditure actually incurred;
(ii) such expenditure was at the date on which such person was so relieved or partially
relieved not paid; and
(iii) such expenditure or any allowance in relation to such expenditure was in the
current or any previous year of assessment allowed as a deduction from such
person’s income,
such person shall for the purposes of paragraph (a) be deemed to have recovered or
recouped an amount equal to the amount of the obligation from which the person was so
relieved or partially relieved during the year of assessment in which the person was so
relieved or partially relieved.
[Para. (m) added by s. 6 (1) (b) of Act 28 of 1997.] (n) Where a taxpayer disposes of an industrial asset contemplated in section 12G before
completion of the write off period of that asset for purposes of section 11 (e), 12C or 13, as applicable,
there shall be included in the taxpayer’s income, all amounts allowed to be deducted in respect of that
industrial asset under section 12G, whether in the current year or any previous year of assessment, which
have been recovered or recouped during the current year of assessment, in addition to the inclusion of those
amounts in terms of paragraph (a).
[Para. (n) added by s. 7 (h) of Act 19 of 2001.] (4A) The provisions of subsection (4) (a), (e), (f) or (k) shall not apply in respect of any amount
which is deemed to have been allowed as a deduction in terms of subparagraph (ix) of the proviso to
section 11 (e), section 11 (o) (bb), section 12B (4B), section 12C (4A), section12D (3A), section 13 (1A),
section 13bis (3A) or section 13ter (6A).
[Sub-s. (4A) inserted by s. 6 (b) of Act 59 of 2000.] (5) (a) Any amount which has been paid, whether in the form of rent or otherwise, by any person
for the right of use or occupation of any movable or immovable property and has been allowed as a
deduction in the determination of such person’s taxable income, and which or the equivalent of which is
upon the subsequent acquisition of such property by that or any other person applied in reduction or
towards settlement of the purchase price of such property, shall be included in the income of the person by
whom the property is acquired as aforesaid for the year of assessment in which such person exercises the
option or concludes the agreement, as the case may be, in consequence of which the property is acquired by
him: Provided that the provisions of this subsection shall not apply in any case where, in consequence of
the acquisition of such property, the person who has acquired the property or any other person has derived a
taxable benefit the cash equivalent of which has been included in his gross income in terms of the
provisions of paragraph (i) of the definition of ‘gross income’ in section 1.
[Para. (a) amended by s. 4 (e) of Act 96 of 1985.] (b) Where any amount has been paid by any person for the right of use or occupation of any
property which is thereafter acquired by that or any other person for a consideration which in the opinion of
the Commissioner is not an adequate consideration or for no consideration, it shall for the purposes of
paragraph (a) be deemed, unless the Commissioner having regard to the circumstances of the case
otherwise decides, that the said amount, or so much thereof as does not exceed the fair market value of such
property as determined by the Commissioner less the amount of the consideration, if any, for which it has
been acquired as aforesaid, has been applied in reduction or towards settlement of the purchase price of
such property.
[Para. (b) substituted by s. 8 (c) of Act 94 of 1983.] (bA) If after the termination on or after 1 September 1983 by the effluxion of time or otherwise of
a lease of property consisting of corporeal movable goods or of any machinery or plant in respect of which
the lessor under such lease was entitled to any allowance under the provisions of this Act, the person who
was the lessee under such lease (hereinafter referred to as the former lessee) is, with the express or implied

59 consent or acquiescence of the person who was the lessor under such lease (hereinafter referred to as the
former lessor) or of the owner of the property, allowed to use, enjoy or deal with the property as the former
lessee may deem fit-
(i) without the payment of any consideration; or
(ii) in the case of a lease entered into on or after 1 September 1983, without the payment of
any rental or other consideration or subject to the payment of any consideration which is
nominal in relation to the fair market value of the property,
[Sub-para. (ii) substituted by s. 5 (1) (c) of Act 121 of 1984.] the former lessee shall be deemed for the purposes of paragraph (b) to have acquired the property for no
consideration and, if the property was owned by the former lessor, the fair market value thereof shall,
unless and until that value is otherwise determined to the satisfaction of the Commissioner, be deemed for
the said purposes to be the cost to the former lessor of the property (or, where the said lease was a financial
lease as defined in section 1 of the Sales Tax Act, 1978 (Act 103 of 1978), the cash value of the property
contemplated in paragraph 2 of Schedule 4 to the said Act), less a depreciation allowance calculated in
accordance with paragraph (bB) (i) for the period from the commencement to the termination of the lease.
[Para. (bA) inserted by s. 8 (d) of Act 94 of 1983.] (bB) For the purposes of paragraph (bA)-
(i) the depreciation allowance shall be calculated as an aggregate of annual allowances for
the years in the period for which the depreciation allowance may be made, the allowance
for the first year in the said period being calculated at the rate of 20 per cent of the said
cost or cash value, as the case may be, of the property in question and the allowance for
each succeeding year in that period being calculated at the said rate on the balance of the
said cost or cash value, as the case may be, remaining after the deduction therefrom of the
allowance or allowances calculated for the year or years preceding such succeeding year;
(ii) the former lessor of the property in question, or the owner thereof, as the case may be,
shall, unless and until the contrary is proved, be deemed to have consented to the former
lessee using, enjoying or dealing with the property as contemplated in the said paragraph
if, at the end of a period of three months reckoned after the date on which the lease in
question terminated, the former lessor has not instituted proceedings to compel the
former lessee to return the property to the former lessor or to relinquish possession
thereof or to dispose thereof in accordance with the terms of the lease: Provided that if
such lease terminated on or before 31 December 1983 the said period of three months
shall be reckoned from that date;
[Sub-para. (ii) substituted by s. 5 (1) (d) of Act 121 of 1984.] (iii) where any consideration is payable in respect of the property in question for the period
after the termination of the lease in question, such consideration shall be deemed to be
nominal in relation to the fair market value of the property if that consideration, in
relation to the period for which it is payable, amounts to less than 10 per cent per annum
of the said fair market value;
(iv) if after the termination of a lease referred to in the said paragraph (bA) the former lessee
is required to pay a consideration in respect of his right to use, enjoy or deal with the
property in question but ceases to pay such consideration or, in the case of a lease
referred to in subparagraph (ii) of the said paragraph (bA), pays a consideration in respect
of such right which is nominal in relation to the fair market value of the property, the said
lease shall be deemed to have been terminated on the date from which the former lessee
is no longer required to pay such consideration or in the case of a lease referred to in the
said subparagraph (ii), whereafter the consideration payable by him becomes nominal as
aforesaid;
[Sub-para. (iv) added by s. 5 (1) (e) of Act 121 of 1984.] (v) where in the circumstances contemplated in paragraph 3B of Schedule 4 to the Sales Tax
Act, 1978, a lease is deemed to be part of a lease which has ceased to exist, the leases
shall be deemed to be one lease.
[Sub-para. (v) added by s. 5 (1) (e) of Act 121 of 1984.] [Para. (bB)inserted by s. 8 (d) of Act 94 of 1983.] (bC) Any person who, as a former lessor of property referred to in paragraph (bA) or as the owner
thereof, has after the termination of the lease of such property consented to the former lessee thereof using,

60 enjoying or dealing with such property as contemplated in the said paragraph, or is deemed to have so
consented under the provisions of paragraph (bB) (ii) shall not later than 14 days after the end of three
months after the termination of the relevant lease advise the former lessee of the fair market value of such
property as determined in accordance with paragraph (bA), and shall furnish the Commissioner with a copy
of such advice.
[Para. (bC) inserted by s. 8 (d) of Act 94 of 1983.] (c) Any decision of the Commissioner under paragraph (b) or (bA) shall be subject to objection
and appeal.
[Para. (c) substituted by s. 8 (e) of Act 94 of 1983.] 8A Gains made by directors of companies or by employees in respect of rights to acquire
marketable securities
Cases
(1) (a) There shall be included in the taxpayer’s income for the year of assessment the amount of
any gain made by the taxpayer after the first day of June, 1969, by the exercise, cession or release during
such year of any right to acquire any marketable security (whether such right be exercised, ceded or
released in while or part), if such right was obtained by the taxpayer before 26 October 2004 as a director
or former director of any company or in respect of services rendered or to be rendered by him as an
employee to an employer.
[Para. (a) substituted by s. 7 of Act 32 of 2004.] (b) Where the taxpayer has exercised such right but, by reason of a condition imposed by the said
company or employer or the grantor of the right, the taxpayer is not entitled to dispose of the marketable
security until after the end of the said year of assessment, the gain made by the exercise of the right shall, if
the taxpayer makes an election as provided in paragraph (c), not be included in his income for such year of
assessment but shall be included in his income for the year of assessment during which he becomes entitled
to dispose of the marketable security: Provided that in the event of the taxpayer’s death or insolvency before
he becomes entitled to dispose of the marketable security the said gain shall be deemed to have been made
by him on the day before the date of his death or insolvency, as the case may be, and shall be assessed
accordingly.
[Para. (b) substituted by s. 8 (a) of Act 88 of 1971.] (c) The taxpayer may, in the circumstances contemplated in paragraph (b), elect that the provisions
of that paragraph shall apply in respect of the gain referred to in that paragraph, and such election shall be
in writing and shall be furnished to the Commissioner not later than the date on which the taxpayer’s return
of income is furnished for the year of assessment referred to in paragraph (a), or within such further time as
the Commissioner may allow.
(2) For the purposes of this section-
(a) a gain shall be deemed to have been made by the taxpayer by the exercise of a right to
acquire any marketable security if the amount by which the market value of such
marketable security at the time such right was exercised exceeds the consideration given
by the taxpayer for such marketable security and any consideration given by him for such
right or the grant of such right: Provided that such market value shall for the purpose of
this paragraph be deemed to be the sum which a person having the right freely to dispose
of such marketable security might reasonably expect to obtain from a sale of such
marketable security in the open market;
(b) where the taxpayer for a consideration accepts a restriction upon his right to acquire any
marketable security such right shall be deemed to be released in part;
(c) where any gain is made by the exercise, cession or release of a right to acquire any
marketable security, such gain shall be deemed to be made at the time when such right is
exercised, ceded or released, as the case may be.
(3) The amount to be included in the taxpayer’s income in respect of any gain referred to in
subsection (1) shall be-
(a) where such gain is made by the exercise of a right to obtain any marketable security, the
amount referred to in subsection (2) (a); or
(b) where such gain is made by the cession or release of a right to obtain any marketable
security, the amount by which the amount or value of the consideration received by or
accrued to the taxpayer for the cession or release, exceeds the amount or value of any

61 consideration given by the taxpayer for such right or the grant of such right.
(4) In determining under subsections (2) (a) and (3) whether any gain has been made by the
exercise, cession or release of a right to obtain any marketable security, and in determining the amount of
such gain-
(a) where any consideration was given by the taxpayer for such right or the grant of such
right and the right is exercised, ceded or released in part only or the consideration was
given for something in addition to the right, only the portion of such consideration which
relates to so much of the right as is exercised, ceded or released, as the case may be, shall
be deductible and for that purpose a fair apportionment of such consideration shall be
made; and
(b) no deduction shall be made in respect of any consideration in the form of services
rendered or to be rendered or anything done or to be done or not to be done.
(5) Where any right (hereinafter referred to as the first right) to acquire any marketable security is
ceded or released by the taxpayer in whole or in part for a consideration which consists of or includes
another right (hereinafter referred to as the second right) to acquire such marketable security or any other
marketable security-
(a) the second right shall for the purposes of this section not be deemed to be consideration
for the cession or release of the first right; and
(b) any gain made by the taxpayer 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.
[Para. (b) substituted by s. 8 (b) of Act 88 of 1971.] (6) For the purposes of this section, a gain made by any person other than the taxpayer by the
exercise, cession or release of a right to acquire any marketable security shall be deemed to be made by the
taxpayer and shall be included in the taxpayer’s income as though it were a gain referred to in subsection
(1)-
(a) if that right was originally obtained by any person other than the taxpayer by reason of
the taxpayer’s office or former office as a director of any company or any services
rendered or to be rendered by the taxpayer as an employee of any employer; or
(b) if that right was originally obtained by the taxpayer as a director or former director of any
company or in respect of services rendered or to be rendered by him as an employee to an
employer, and-
(i) the right was ceded by the taxpayer to any person otherwise than by or under a
cession made by way of a bargain at arm’s length; or
(ii) the gain was made by a relative of the taxpayer.
[Sub-s. (6) substituted by s. 8 (c) of Act 88 of 1971.] (7) The provisions of subsections (2), (3), (4) and (5) shall mutatis mutandis apply in relation to
the determination of any gain referred to in subsection (6).
(8) Where any gain is made after the first day of June, 1969, by the exercise, cession or release of
a right to acquire any marketable security granted to any person on or before that date, the amount required
to be included in income under this section in respect of such gain shall be reduced by an amount which
bears to the amount of the gain, as determined under the preceding provisions of this section, the same ratio
as the exemption period, as determined under subsection (9) in relation to the said gain, bears to the accrual
period, as so determined.
[Sub-s. (8) substituted by s. 8 (1) of Act 52 of 1970.] (9) For the purposes of determining any reduction to be made under subsection (8) in respect of
any gain made by the exercise, cession or release or any right to acquire any marketable security-
(a) the exemption period shall be deemed to be the period commencing on the date on which
the person referred to in subsection (8) was granted such right and ending on the first day
of June, 1969; and

62 (b) the accrual period shall be deemed to be the period commencing on the first day of the
exemption period and ending on the date on which such right is exercised, ceded or
released, as the case may be.
(10) For the purposes of this section ‘marketable security’ means any security, stock, debenture,
share, option or other interest capable of being sold in a share-market or exchange or otherwise.
[S. 8A inserted by s. 11 of Act 89 of 1969.] 8B Taxation of amounts derived from broad-based employee share plan
Cases
(1) There must be included in the income of an employee for a year of assessment any amount
received by or accrued to that employee 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 within five years from the date of grant of that qualifying
equity share, otherwise than in exchange for another qualifying equity share as
contemplated in subsection (2).
(2) If an employee 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 acquired in
exchange is deemed to be a qualifying equity share which was acquired by that employee on the date of
grant of the qualifying equity share disposed of in exchange.
(3) For the purposes of this section-
‘broad-based employee share plan’ of an employer means a plan in terms of which-
(a) equity shares in that employer, or in a company in the same group of companies as the
employer, are acquired by employees of that employer, for consideration which does not
exceed the minimum consideration required by the Companies Act, 1973 (Act 61 of
1973);
(b) employees who participate in any other equity scheme of that employer or of a company
in the same group of companies as that employer are not entitled to participate and where
at least 90 per cent of all other employees who are employed by that employer on a
permanent basis on the date of grant (and who have continuously been so employed on a
full-time basis for at least one year) are entitled to participate;
(c) the employees who acquire the equity shares are entitled to all dividends and full voting
rights in relation to those equity shares; and
(d) no restrictions have been imposed in respect of the disposal of those equity shares, other
than-
(i) a restriction imposed by legislation;
(ii) a right of any person to acquire those equity shares from the employee at market
value; or
(iii) a restriction in terms of which that employee may not dispose of those equity
shares for a period, which may not extend beyond five years from the date of
grant;
‘date of grant’ in relation to an equity share means the date on which the granting of that equity
share is approved by the directors or some other person or body of persons with comparable authority
conferred under or by virtue of the memorandum and articles of association of the employer company;
‘market value’ in relation to an equity share means the price which could be obtained upon the sale
of that equity share between a willing buyer and a willing seller dealing freely at arm’s length in an open
market and without having regard to any restrictions imposed in respect of that equity share;
‘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), 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.
(4) The provisions of section 25 do not apply in respect of any amount received or accrued from
the disposal of any qualifying equity share after the date of death of the person contemplated in subsection

63 (1).
[S. 8B inserted by s. 6 (1) of Act 104 of 1980, amended by s. 6 of Act 121 of 1984, repealed by s. 6 (1) of
Act 101 of 1990 and inserted by s. 8 (1) of Act 32 of 2004.] 8C Taxation of directors and employees on vesting of equity instruments
(1) (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 by virtue of his or her employment or office of director of any company.
(b) This section does not apply in respect of any equity instrument which-
(i) was acquired in exchange for the disposal of any other equity instrument which had
already vested in terms of this section before that disposal; or
(ii) constitutes a qualifying equity share contemplated in section 8B.
(2) (a) The gain to be included in the income of a taxpayer is-
(i) in the case of a disposal contemplated in subsection (5) (c), 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, the sum of-
(aa) the amount by which the market value of the equity instrument determined on the
date on which 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 subsection (4) (b).
(b) The loss to be deducted from the income of a taxpayer is-
(i) in the case of a disposal contemplated in subsection (5) (c), 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, the amount by which the consideration in respect of the equity
instrument exceeds the market value of that equity instrument determined on the date that
it vests in that taxpayer.
(3) An equity instrument acquired by a taxpayer is deemed for the purposes of this section to vest
in that taxpayer-
(a) in the case of the acquisition of an unrestricted equity instrument, at the time of that
acquisition; or
(b) in the case of the acquisition of a restricted equity instrument, at the earliest of-
(i) when all the restrictions, which result in that equity instrument being a restricted
equity instrument, cease to have effect;
(ii) immediately before that taxpayer disposes of that restricted equity instrument,
other than a disposal in respect of which subsection (4) or (5) applies;
(iii) when that equity instrument, which is an option contemplated in paragraph (a) of
the definition of ‘equity instrument’, terminates; and
(iv) immediately before that taxpayer dies.
(4) (a) If a taxpayer disposes of a restricted equity instrument which was acquired in the manner
contemplated in subsection (1) for a consideration 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 paragraph (a) includes an amount other than restricted
equity instruments and that amount exceeds the consideration in respect of the restricted equity instrument
which is disposed of as contemplated in paragraph (a), the excess amount must be deemed to be a gain
which must be included in the income of the taxpayer in the year of assessment during which that restricted
equity instrument is so disposed of.
(5) (a) If a restricted equity instrument which was acquired by a taxpayer in the manner
contemplated in subsection (1) is disposed of by that taxpayer to any person-
(i) otherwise than by or under a disposal made in terms of a transaction at arm’s length; or
(ii) who is a connected person in relation to that taxpayer,
the provisions of subsections (2), (3) and (4) apply mutatis mutandis in the determination of any gain or
loss made by that person as if that person had been the taxpayer, and that gain or loss is for purposes of

64 subsection (1) deemed to be made by that taxpayer in respect of the vesting of that equity instrument.
(b) If an equity instrument was acquired by any person other than the taxpayer by virtue of the
taxpayer’s employment or office of director, that equity instrument must, for purposes of this section, be
deemed to have been so acquired by that taxpayer and disposed of to that person in the manner
contemplated in paragraph (a).
(c) Paragraph (a) does not apply where a taxpayer disposes of any restricted equity instrument 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 of that restricted equity instrument.
(6) If a person who acquires a restricted equity instrument from the taxpayer as contemplated in
subsection (5), disposes of that restricted equity instrument to any other person in the manner contemplated
in subsection (5) (a) (i) or to a connected person in relation to the taxpayer, subsection (5) applies in respect
of that other person as if he or she had acquired that restricted equity instrument directly from that taxpayer.
(7) For purposes of this section, unless the context otherwise indicates-
‘associated institution’ means an associated institution as contemplated in paragraph 1 of the
Seventh Schedule;
‘consideration’ in respect of an equity instrument means any amount given or to be given
(otherwise than in the form of services rendered or to be rendered or anything done, to be done or not to be
done)-
(a) by the taxpayer in respect of that equity instrument;
(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 in terms of subsection (4) (b); and
(c) by any person contemplated in subsection (5) in respect of that equity instrument or other
equity instrument contemplated in paragraph (b), which would have been taken into
account had it been given by the taxpayer in respect of that equity instrument or other
equity instrument, but does not include any amount given or to be given by that person to
the taxpayer or to any other person contemplated in subsection (5):
Provided that where a taxpayer acquires 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;
’employer’ means an employer as contemplated in paragraph 1 of the Seventh Schedule;
‘equity instrument’ means a share or part thereof in the equity share capital of a company or a
member’s interest in a company which is a close corporation, and includes-
(a) an option to acquire such a share, part of a share or member’s interest; and
(b) any other financial instrument that is convertible to a share, part of a share or member’s
interest;
‘market value’ in relation to an equity instrument means the price which could be obtained upon
the sale of that equity instrument between a willing buyer and a willing seller dealing freely at arm’s length
in an open market and, in the case of a restricted equity instrument, had the restriction to which that equity
instrument is subject not existed;
‘restricted equity instrument’ in relation to a taxpayer means an equity instrument-
(a) which is subject to any restriction (other than a restriction imposed by legislation) that
prevents the taxpayer from freely disposing of that equity instrument at market value;
(b) which is subject to any restriction that could result in the taxpayer forfeiting ownership of
that equity instrument otherwise than at market value;
(c) if any person has retained the right to impose a restriction contemplated in paragraph (a)
or (b) on the disposal of that equity instrument;
(d) which is an option contemplated in paragraph (a) of the definition of ‘equity instrument’
and where the equity instrument which can be acquired in terms of that option will be a
restricted equity instrument;
(e) which is a financial instrument contemplated in paragraph (b) of the definition of ‘equity
instrument’ and where the equity instrument to which that financial instrument can be
converted will be a restricted equity instrument; or

65 (f) if the employer, associated institution in relation to the employer or other person by
arrangement with the employer has at the time of acquisition by the taxpayer of the
equity instrument undertaken to-
(i) cancel the transaction under which that taxpayer acquired the equity instrument;
or
(ii) repurchase that equity instrument from that taxpayer at a price exceeding its
market value on the date of repurchase, if there is a decline in the value of the
equity instrument after that acquisition; and
‘unrestricted equity instrument’ means an equity instrument which is not a restricted equity
instrument.
(2) Subsection (1) shall come into operation on 26 October 2004 and applies-
(a) to the extent it inserts section 8B, in respect of any qualifying equity share acquired in
terms of a broad-based employee share plan approved on or after that date by the
directors or some other person or body of persons with comparable authority conferred
under or by virtue of the memorandum and articles of association of the company; and
(b) to the extent it inserts section 8C, in respect of any equity instrument acquired on or after
that date, otherwise than by way of the exercise of any right granted before that date and
in respect of which section 8A applies.
[S. 8C inserted by s. 7 (1) of Act 96 of 1981, amended by s. 7 of Act 121 of 1984, repealed by s. 7 of Act
101 of 1990 and inserted by s. 8 (1) of Act 32 of 2004.] 8D ……
Cases
[S. 8D inserted by s. 7 (1) of Act 96 of 1981, amended by s. 8 of Act 121 of 1984 and repealed by s. 8 (1)
of Act 101 of 1990.] 8E Dividends on certain shares deemed to be interest in relation to the recipient thereof
(1) For the purposes of this section-
‘affected instrument’ ……
[Definition of ‘affected instrument’ amended by s. 19 (1) of Act 45 of 2003 and deleted by s. 9 (1) (a) of
Act 32 of 2004.] ‘date of issue’ in relation to a share in a company means-
(a) the date on which it is issued by that company;
(b) the date on which the holder at any time after the share is issued acquires a right of
disposal in respect of that share, otherwise than as a result of the acquisition of that share
by that holder;
(c) the date on which the company at any time after the share is issued undertakes the
obligation to redeem that share in whole or in part; and
(d) the date on which the holder at any time after the share is issued obtains the right to
require that share to be redeemed in whole or in part, otherwise than as a result of the
acquisition of that share by that holder;
[Definition of ‘date of issue’ inserted by s. 9 (1) (b) of Act 32 of 2004.] ‘effective date’ means 23 March 1989;
‘hybrid equity instrument’ means-
(a) any redeemable preference share which the relevant company is obliged to redeem in
whole or in part within a period of three years from the date of issue thereof, or which
may at the option of the holder be redeemed in whole or in part within the said period, or
in respect of which the holder has a right of disposal which may be exercised within the
said period; or
(b) any other share, if-
(i) the holder has a right of disposal in respect of such share which may be exercised
within a period of three years from the date of issue thereof or at the time of issue
of that share, the existence of the company issuing that share is to be terminated
within a period of three years or is likely to be terminated within such period upon
a reasonable consideration of all the facts at the time that share is issued; and
(ii) such share does not rank pari passu as regards its participation in dividends with
all other ordinary shares in the capital of the relevant company or, where the

66 ordinary shares in such company are divided into two or more classes, with the
shares of at least one of such classes, or any dividend payable on such share is to
be calculated directly or indirectly with reference to-
(aa) any specified rate of interest;
(bb) the amount of capital subscribed for such share; or
(cc) the amount of any loan or advance made directly or indirectly by the
shareholder or by any connected person in relation to the shareholder;
[Definition of ‘hybrid equity instrument’ inserted by s. 9 (1) (c) of Act 32 of 2004.] ‘right of disposal’ means a right which the holder of an hybrid equity instrument has to require any
party-
(a) to acquire that hybrid equity instrument from that holder; or
(b) to procure, facilitate or assist with the redemption in whole or in part of that hybrid equity
instrument or the repayment in whole or in part of the capital subscribed for that hybrid
equity instrument or the conversion of that hybrid equity instrument into any other share
which is redeemable in whole or in part within a period of three years from the date of
issue thereof.
[Definition of ‘right of disposal’, previously ‘right of acquisition’, substituted by s. 9 (1) (d) of Act 32 of
2004.] (2) Any dividend declared by a company on, a hybrid equity instrument which is declared on or
after the date that the share becomes a hybrid equity instrument, shall for the purposes of this Act be
deemed in relation to the recipient thereof only to be an amount of interest received by him from a source
within the Republic.
[Sub-s. (2) substituted by s. 9 (1) (e) of Act 32 of 2004.] (3) ……
[Sub-s. (3) deleted by s. 9 (1) (f) of Act 32 of 2004.] (4) ……
[Sub-s. (4) deleted by s. 9 (1) (f) of Act 32 of 2004.] [S. 8E inserted by s. 6 of Act 70 of 1989.] 8F Limitation of deduction of certain interest payments
(1) For purposes of this section, unless the context otherwise indicates, any word to which a
meaning has been ascribed in section 24J bears the meaning so ascribed, and-
‘date of issue’ in relation to an instrument means-
(a) the date on which it is issued; and
(b) the date on which that instrument becomes convertible into or exchangeable for a share at
any time in the future;
‘hybrid debt instrument’ means an instrument, where-
(a) that instrument is at the option of the issuer convertible into or exchangeable for any
share in that issuer or any connected person in relation to that issuer within three years
from the date of issue of that instrument;
(b) the issuer in relation to that instrument is entitled to repay that instrument in whole or in
part within three years from the date of issue of that instrument by the issue of shares by
the issuer or any connected person in relation to the issuer to the holder of the instrument;
(c) the issuer in relation to that instrument is entitled to repay that instrument in whole or in
part within three years from the date of issue of that instrument and is entitled at the time
of that repayment to require the holder of that instrument to subscribe for or acquire
shares in the issuer or any connected person in relation to the issuer; or
(d) that instrument, other than a listed instrument issued by a listed company, is at the option
of the holder convertible into or exchangeable for any share in the issuer or any
connected person in relation to the issuer within three years from the date of issue and it
is determined on the date of issue that the value of that share at the time of conversion or
exchange is likely to exceed the value of the instrument by at least 20 per cent.
(2) No deduction shall be allowed in terms of this Act in respect of any amount paid or payable by
an issuer in terms of a hybrid debt instrument, which is paid or becomes payable after that instrument
becomes a hybrid debt instrument.
[S. 8F inserted by s. 10 (1) of Act 32 of 2004.] 9 Circumstances in which amounts deemed to have accrued from sources within the Republic

67 Cases
(1) An amount shall be deemed to have accrued to any person from a source within the Republic if
it has been received by or has accrued to or in favour of such person by virtue of-
(a) ……
[Para. (a) deleted by s. 7 (a) of Act 59 of 2000.] (b) the use or right of use in the Republic of, or the grant of permission to use in the
Republic-
(i) any patent, design, trade mark, copyright, model, pattern, plan, formula or process
or any other property or right of a similar nature; or
(ii) motion picture film, or any film or video tape or disc, any sound recording or
advertising matter,
contemplated in section 35;
[Para. (b) substituted by s. 7 (a) of Act 90 of 1962, amended by s. 12 (a) of Act 89 of 1969, substituted by
s. 6 (1) (a) of Act 65 of 1973 and by s. 9 (a) of Act 85 of 1974, amended by s. 7 (1) (a) of Act 85 of 1987,
by s. 10 (a) of act 129 of 1991 and by s. 15 (a) of Act 53 of 1999, deleted by s. 7 (a) of Act 59 of 2000 and
inserted by s. 12 (1) (a) of Act 74 of 2002.] (bA) the imparting of or undertaking to impart any scientific, technical, industrial or
commercial knowledge or information for use in the Republic or rendering or
undertaking to render any assistance or service in connection with the application or
utilization of such knowledge or information, as contemplated in section 35;
[Para. (bA) inserted by s. 6 (1) (b) of Act 65 of 1973, deleted by s. 7 (a) of Act 59 of 2000 and inserted by
s. 12 (1) (a) of Act 74 of 2002.] (c) ……
[Para. (c) substituted by s. 9 (b) of Act 85 of 1974 and deleted by s. 7 (a) of Act 59 of 2000.] (cA) any contract made by such person for the disposal of any mineral (including natural oil)
won by him or her in the course of mining operations carried on by him or her under any-
(i) mining authorization granted under the Minerals Act, 1991 (Act 50 of 1991); or
(ii) prospecting right, mining right, exploration right or production right or mining
permit issued in terms of the Mineral and Petroleum Resources Development Act,
2002 (Act 28 of 2002), wheresoever such contract was made or such mining
operations were carried on;
[Para. (cA) inserted by s. 9 (1) (a) of Act 95 of 1967 and substituted by s. 7 (a) of Act 141 of 1992 and by
s. 11 (1) (a) of Act 32 of 2004.] (cB) ……
[Para. (cB) inserted by s. 5 (b) of Act 96 of 1985 and deleted by s. 7 (a) of Act 59 of 2000.] (d) ……
[Para. (d) deleted by s. 7 (a) of Act 59 of 2000.] (d)bis ……
[Para. (d)bis inserted by s. 7 (b) of Act 90 of 1962 and deleted by s. 7 (a) of Act 59 of 2000.] (e) (i) any services rendered by such person to or work or labour done by such person for
or on behalf of any employer in the national or provincial sphere of government or
any local authority in the Republic or any national or provincial public entity if
not less than 80 per cent of the expenditure of such entity is defrayed directly or
indirectly from funds voted by Parliament, notwithstanding that such services are
rendered or that such work or labour is done outside the Republic, provided such
services are rendered or such work or labour is done in accordance with a contract
of employment entered into with the Government or local authority or national or
provincial public entity; or
[Sub-para. (i) substituted by s. 25 (1) (a) of Act 30 of 1998 and by s. 7 (b) of Act 59 of 2000.] (ii) the holding of a public office to which such person has been appointed or is
deemed to have been appointed in terms of an Act of Parliament, notwithstanding
that such public office is held outside the Republic:
[Para. (e) amended by s. 6 of Act 72 of 1963, substituted by s. 7 of Act 90 of 1964, amended by s. 12 (b) of
Act 89 of 1969 and by s. 9 of Act 121 of 1984, substituted by s. 9 (a) of Act 21 of 1995 and amended by s.
7 (c) of Act 59 of 2000 and by s. 12 (1) (b) of Act 74 of 2002.]

68 [NB: In terms of s. 36 (2) of the Legal Succession to the South African Transport Services Act 9 of 1989,
the reference to ‘the Railway Administration’ in the above provision shall be construed as including the
Company (Transnet Limited) and the Corporation (the South African Rail Commuter Corporation
Limited).] (f) ……
[Para. (f) amended by s. 5 of Act 113 of 1993 and by s. 3 (1) of Act 140 of 1993 and deleted by s. 7 (a) of
Act 59 of 2000.] (fA) any services rendered by that person to, or work or labour done by that person for, any
other person upon, beneath or above the continental shelf referred to in section 8 of the
Maritime Zones Act, 1994 (Act 15 of 1994), in the course of any operations connected
with operations carried on by any person under any-
(i) prospecting permit or mining authorization issued or which may be issued under
the Minerals Act, 1991 (Act 50 of 1991);
(ii) prospecting or mining lease granted under the Mining Rights Act, 1967 (Act 20 of
1967), or under any sublease granted or which may be granted under any such
lease; or
(iii) prospecting right, mining right, exploration right or production right, mining
permit, retention permit or reconnaissance permission issued in terms of the
Mineral and Petroleum Resources Development Act, 2002 (Act 28 of 2002),
wheresoever payment for such services or work or labour is or is to be made;
[Para. (fA) inserted by s. 9 (1) (b) of Act 95 of 1967 and substituted by s. 10 (b) of Act 129 of 1991, by s. 7
(b) of Act 141 of 1992, by s. 15 (b) of Act 53 of 1999 and by s. 11 (1) (b) of Act 32 of 2004.] (g) any pension or annuity granted to such person, wheresoever payment of that pension or
annuity is made and wheresoever the funds from which payment is made are situate-
(i) by the Government, any provincial administration, or by any local authority in the
Republic; or
(ii) by any person, whether residing or carrying on business in the Republic or not, if
the services in respect of which that pension or annuity was granted were
performed within the Republic for at least two years during the ten years
immediately preceding the date from which the pension or annuity first became
due: Provided that if the pension or annuity was granted in respect of services
which were rendered partly within and partly outside the Republic, only so much
of such pension or annuity as bears to the amount of such pension or annuity the
same ratio as the period during which the services were rendered in the Republic
bears to the total period during which the services were rendered, shall be deemed
to be derived from a source within the Republic: Provided further that any
services rendered in the territory of the former Republic of Transkei,
Bophuthatswana, Venda or Ciskei shall be deemed to have been rendered within
the Republic;
[Sub-para. (ii) amended by s. 9 (b) of Act 21 of 1995.] [Para. (g) amended by s. 36 (6) of Act 9 of 1989.] (h) a judicial order or written agreement of separation or an order of divorce, if the taxable
income of such person’s spouse or former spouse has been reduced by such amount in
terms of section twenty-one, wheresoever such judicial order or order of divorce was
granted or such agreement was made or such amount is paid or payable and whether such
person’s spouse or former spouse is resident in or out of the Republic.
[Para. (h) added by s. 7 (c) of Act 90 of 1962.] (1A) For the purposes of paragraph (g) (ii) the services referred to in paragraph (fA) shall be
deemed to have been performed within the Republic.
[Sub-s. (1A) inserted by s. 7 (1) of Act 21 of 1994 and substituted by s. 7 (d) of Act 59 of 2000.] (2) The capital gain or capital loss from the disposal of an asset of a person shall be deemed to be
from a source in the Republic, where-
(a) in the case of immovable property held by that person or any interest or right of whatever
nature of that person to or in immovable property, that property is situated in the
Republic;
(b) in the case of any asset other than immovable property or any interest or right to or in

69 immovable property-
(i) that person is a resident and that asset is not attributable to a permanent
establishment of that person which is situated outside the Republic; or
(ii) that person is not a resident, but that asset is attributable to a permanent
establishment of that person which is situated in the Republic:
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 other entity, where-
(aa) 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 attributable directly or indirectly to immovable
property, (other than immovable property held by that company or entity as trading
stock); and.
[Para. (aa) substituted by s. 20 of Act 45 of 2003.] (bb) that person (whether alone or together with any connected person in relation to that
person) holds at least 20 per cent in the equity share capital of that company or other
entity.
[Sub-s. (2) added by s. 7 (d) of Act 90 of 1962, amended by s. 12 (c) of Act 89 of 1969, substituted by s. 8
of Act 103 of 1976, by s. 6 of Act 65 of 1986 and by s. 2 (1) of Act 108 of 1986, deleted by s. 7 of Act 28
of 1997 and inserted by s. 12 (1) (c) of Act 74 of 2002.] (3) ……
[Sub-s. (3) added by s. 7 (d) of Act 90 of 1962, amended by s. 12 (d) of Act 89 of 1969, substituted by s. 9
(c) of Act 85 of 1974 and deleted by s. 7 of Act 28 of 1997.] (4) ……
[Sub-s. (4) added by s. 7 (1) (b) of Act 85 of 1987 and deleted by s. 7 of Act 28 of 1997.] (5) ……
[Sub-s. (5) added by s. 7 (1) (b) of Act 85 of 1987 and deleted by s. 7 (e) of Act 59 of 2000.] (6) Any interest as defined in section 24J shall for the purposes of this Act be deemed to have been
received or accrued from a source within the Republic, where such interest was derived from the utilisation
or application in the Republic by any person of any funds or credit obtained in terms of any form of
interest-bearing arrangement.
[Sub-s. (6) added by s. 25 (1) (b) of Act 30 of 1998.] (7) For the purposes of subsection (6) the place of utilisation or application shall, until the contrary
is proved, be deemed to be, in the case where such funds are or credit is utilised or applied by-
(a) a natural person, the place where such person is ordinarily resident; or
(b) a person other than a natural person, its place of effective management.
[Sub-s. (7) added by s. 25 (1) (b) of Act 30 of 1998.] 9A Blocked foreign funds
Where any amount, or any portion of any amount-
(a) received by or accrued to any person which is required to be included in the gross income
or taxable income of that person; or
(b) of the net income of a controlled foreign company which is taken into account in
determining an amount which is required to be included in the income of any resident in
terms of the provisions of section 9D,
during any year of assessment, may not be remitted to the Republic during that year of assessment as a
result of currency or other restrictions or limitations imposed in terms of the laws of the country where the
amount arose, that amount or any portion thereof shall be deemed not to have been received or accrued to
that person, or shall not be included in the income of that resident, as the case may be, during that year and
that amount or portion thereof shall be included in the gross income or taxable income of that person or the
income of that resident during the year of assessment during which that amount or portion thereof may be
so remitted to the Republic.
[S. 9A inserted by s. 8 (1) of Act 85 of 1987, amended by s. 8 (1) of Act 141 of 1992, by s. 8 of Act 21 of
1994 and by s. 8 of Act 28 of 1997, repealed by s. 8 of Act 59 of 2000 and inserted by s. 13 of Act 74 of
2002.] 9B Circumstances in which certain amounts received or accrued in relation to disposal of listed
shares are deemed to be of capital nature
(1) For the purposes of this section ‘affected share’, in relation to any taxpayer, means a listed
share in a company as contemplated in paragraph (a) of the definition of ‘listed company’, which has been

70 disposed of by the taxpayer who immediately prior to such disposal had been the owner of such share as a
listed share for a continuous period of at least five years: Provided that-
(a) where the taxpayer is a company which acquired such share from any other company in
the same ‘group of companies’ as defined in section 48 of the Taxation Laws Amendment
Act, 1988 (Act 87 of 1988), and such company qualified for an exemption from stamp
duty in respect of the registration of transfer of such share in terms of the said section,
both such companies shall be deemed to be one and the same company;
(b) where any other share or shares are issued to such taxpayer by the company in which he
holds such share in substitution for any such share by reason of a subdivision of any such
share or any similar arrangement, or any capitalization share in relation to such share is
issued by such company to such taxpayer, such share and such other share or shares or
such capitalization share shall be deemed to be one and the same share if-
(i) such taxpayer’s participation rights and interests, whatsoever, in such company
remain unaltered; and
(ii) no consideration whatsoever passes directly or indirectly from such taxpayer to
such company in relation to the issue of such other share or shares or such
capitalization share;
(c) the taxpayer shall be deemed to have disposed of a share if the share has been cancelled
or redeemed or if the relevant company has been liquidated or deregistered;
(d) where the taxpayer is a registered insurer in terms of the Insurance Act, 1943 (Act 27 of
1943), and has acquired a share in accordance with a transfer of insurance business as
contemplated in section 25A of that Act from another insurer who carried on long-term
and short-term insurance business, both such insurers shall be deemed to be one and the
same insurer; and
[Para. (d) added by s. 9 (1) (b) of Act 141 of 1992.] (e) where-
(i) any share has been lent by a lender to a borrower in terms of a securities lending
arrangement, such share shall for the purposes of the lender be deemed not to have
been disposed of by the lender; and
[Sub-para. (i) substituted by s. 21 (1) of Act 45 of 2003.] (ii) any other share of the same kind and of the same or equivalent quantity and
quality has been returned by the borrower to the lender, such share and such other
share shall be deemed to be one and the same share in the hands of the lender.
[Para. (e) added by s. 7 (1) (c) of Act 36 of 1996.] [Sub-s. (1) amended by s. 9 (1) (a) of Act 141 of 1992, by s. 16 (1) (a) of Act 53 of 1999 and by s. 12 (1) of
Act 32 of 2004.] (2) Any taxpayer may elect that any amount received by or accrued to or in favour of him as a
result of the disposal on or after 14 March 1990 of an affected share, be deemed to be of a capital nature for
the purposes of the definition of ‘gross income’ in section 1: Provided that where the taxpayer is a natural
person who dies or is declared insolvent during his ownership in an affected share or is a company which is
liquidated during its ownership in such share, the executor of such person’s deceased estate or the curator of
such person’s insolvent estate or the liquidator of such company may exercise the election in terms of this
subsection.
(3) The election referred to in subsection (2) shall be exercised in respect of the first affected share
disposed of by any taxpayer on or after 14 March 1990, and such election shall be made by such taxpayer
in his return of income in respect of the relevant year of assessment in which he disposed of such affected
share.
(3A) (a) Any election made under subsection (2) in respect of an affected share disposed of prior
to 18 March 1992, may be withdrawn by the taxpayer or the executor, curator or liquidator referred to in
the proviso to the said subsection and be replaced by a new election which shall be exercised in respect of
the first affected share disposed of by the taxpayer on or after that date.
(b) The provisions of subsections (2), (3) and (4) shall mutatis mutandis apply to a new election
made under paragraph (a).
[Sub-s. (3A) inserted by s. 9 (1) (c) of Act 141 of 1992.] (4) An election made under subsection (2) shall be binding upon the taxpayer in respect of each
succeeding disposal of an affected share during the year of assessment in which he exercised his election

71 and every succeeding year of assessment.
(5) The provisions of this section shall not apply to any affected shares where such shares
constitute shares which were deemed to be trading stock of the taxpayer in terms of section 24A (2) (a) of
this Act.
[Sub-s. (5) deleted by s. 11 of Act 129 of 1991 and inserted by s. 16 (1) (b) of Act 53 of 1999.] (6) If any taxpayer has elected that the provisions of this section shall apply to him, there shall in
the year of assessment in which any affected share is disposed of by him, be included in his income any
expenditure or losses (excluding so much of any such expenditure or losses as may be allowable as a
deduction in the determination of the taxable income derived by the taxpayer from dividends) incurred in
respect of such affected share and allowed as a deduction from the income of such taxpayer during such or
any previous year of assessment, and any amount allowed to be deducted from the cost price of such
affected share under the provisions of section 22 (1) in any such year.
(7) Where the taxpayer holds affected shares in any company which were acquired by him on
different dates and he has disposed of any of those shares, he shall for the purposes of this section be
deemed to have disposed of the affected shares held by him for the longest period of time.
(8) For the purposes of this section any amount included in the income of any company in terms of
the provisions of section 22 (8) (b) as a result of the application, disposal or distribution of any affected
share as contemplated in that section, shall be deemed to be an amount which has accrued to such company
as a result of the disposal of such affected share.
[Sub-s. (8) added by s. 6 of Act 113 of 1993 and substituted by s. 26 of Act 30 of 1998.] [S. 9B inserted by s. 9 of Act 101 of 1990.] 9C ……
[S. 9C inserted by s. 9 (1) of Act 28 of 1997, amended by s. 27 (1) of Act 30 of 1998 and by s. 18 (1) of Act
30 of 2000 and repealed by s. 9 of Act 59 of 2000.] 9D Net income of controlled foreign companies
(1) For the purposes of this section-
‘business establishment’, in relation to a controlled foreign company, means-
(a) a place of business with an office, shop, factory, warehouse or other structure which is
used or will continue to be used by the controlled foreign company for a period of not
less than one year, whereby the business of such company is carried on, and where-
(i) that place of business is suitably equipped with on-site operational management,
employees, equipment and other facilities for the purposes of conducting the
primary operations of that business; and
(ii) that place of business is utilised outside the Republic for a bona fide business
purpose (other than the avoidance, postponement or reduction of any liability for
payment of any tax, duty or levy imposed by this Act or by any other Act
administered by the Commissioner);
(b) a mine, oil or gas well, a quarry or any other place of extraction of natural resources,
where that controlled foreign company has a right to directly explore or extract those
natural resources, or any area where that controlled foreign company has the right to
carry on prospecting operations preliminary to the establishment of a mine, oil or gas
well, quarry or other place of extraction, and where that controlled foreign company
carries on those exploration, extraction or prospecting operations;
(c) a site for the construction or installation of buildings, bridges, roads, pipelines, heavy
machinery or other projects of comparable magnitude which lasts for a period of not less
than six months, where that controlled foreign company carries on those construction or
installation activities;
(d) agricultural land used for bona fide farming activities directly carried on by that
controlled foreign company; or
(e) a vessel or an aircraft solely engaged in transportation within a single country, or a
fishing vessel or a vessel used for prospecting, exploration or extraction, where that
vessels or aircraft is operated directly by that controlled foreign company;
‘controlled foreign company’ means any foreign company where more than 50 per cent of the total
participation rights in that foreign company are held by one or more residents whether directly or
indirectly: Provided that a person who holds less than five per cent of the participation rights of a foreign
company which is either a listed company or a scheme or arrangement contemplated in paragraph (e) (ii) of

72 the definition of ‘company’ in section 1, 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 of that foreign company or other foreign company
are held by persons who are connected persons in relation to each other;
‘foreign company’ means any association, corporation, company, arrangement or scheme
contemplated in paragraph (a), (b) or (e) of the definition of ‘company’ in section 1, which is not a resident;
[Definition of ‘foreign company’ substituted by s. 22 (1) (a) of Act 45 of 2003.] ‘foreign financial instrument holding company’ means a foreign financial instrument holding
company as defined in section 41: Provided that in determining whether more than half of the market value
or two-thirds of actual cost of the assets of the company and all controlled group companies consist of
financial instruments, the following assets must be wholly disregarded-
(a) any share in any other company in the same 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 group of companies;
[Definition of ‘foreign financial instrument holding company’ substituted by s. 22 (1) (b) of Act 45 of
2003.] ‘foreign tax year’ in relation to a controlled foreign company means the year or period of reporting
for foreign income tax purposes or, if that company is not subject to foreign income tax, the annual period
of financial reporting by that company;
‘participation rights’ in relation to a foreign company means 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.
(2) There shall be included in the income for the year of assessment of any resident who holds any
participation rights in a controlled foreign company-
(a) on the last day of the foreign tax year of that controlled foreign company which ends
during that year of assessment, an amount equal to-
(i) where that foreign company was a controlled foreign company for the entire
foreign tax year, the proportional amount of the net income of that controlled
foreign company determined for that foreign tax year, which bears to the total net
income of that company during that foreign tax year, the same ratio as the
percentage of the participation rights of that resident in relation to that company
bears to the total participation rights in relation to that company on that last day;
or
(ii) where that foreign company became a controlled foreign company at any stage
during that foreign tax year, at the option of the resident, either-
(aa) an amount which bears to the proportional amount determined in
accordance with subparagraph (i), the same ratio as the number of days
during that foreign tax year that the foreign company was a controlled
foreign company bears to the total number of days in that foreign tax year;
or
(bb) the proportional amount determined in the manner contemplated in
subparagraph (i) (as if the day that foreign company commenced to be a
controlled foreign company was the first day of its foreign tax year), of the
net income of that company for the period commencing on the day that the
foreign company commenced to be a controlled foreign company and
ending on the last day of that foreign tax year; or
[Item (bb) substituted by s. 22 (1) (c) of Act 45 of 2003.] (b) immediately before that foreign company ceased to be a controlled foreign company at
any stage during that year of assessment before the last day of the foreign tax year of that
controlled foreign company, an amount which shall be equal to, at the option of the
resident, either-
(i) an amount determined in accordance with paragraph (a) (ii) (aa); or
(ii) the proportional amount determined in the manner contemplated in paragraph (a)

73 (i) (as if the day that foreign company ceased to be a controlled foreign company
was the last day of its foreign tax year), of the net income of that company
determined for the period commencing on the first day of that foreign tax year and
ending on the date that the company so ceased to be a controlled foreign company:
Provided that this subsection shall not apply-
(A) where that resident (together with any connected person in relation to that resident)-
(i) at the end of the last day of the foreign tax year of the controlled foreign company;
or
(ii) in the case where that foreign company ceased to be a controlled foreign company
during the relevant foreign tax year, immediately before that foreign company so
ceased to be a controlled foreign company,
in aggregate holds less than 10 per cent of the participation rights in that controlled
foreign company; or
(B) to the extent that the participation rights are held by that resident indirectly through any
company which is a resident.
(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: Provided that-
(a) any deductions or allowances which may be allowed, or any amounts which may be set
off against, the income of that foreign company in terms of this Act shall be limited to the
amount of that income;
(b) any amount whereby such deductions or allowances or amounts exceed the amount of
such income, shall be carried forward to the immediately succeeding foreign tax year and
be deemed to be a balance of assessed loss which may be set off against the income of
such company in such succeeding year for the purposes of section 20;
(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, as contemplated in subsection (9) (fA), unless that
resident has elected in terms of subsection (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;
[Para. (c) substituted by s. 22 (1) (e) of Act 45 of 2003.] (d) ……
(e) where a foreign company becomes a controlled foreign company after 1 October 2001,
the valuation date for purposes of the determination of any taxable capital gain or
assessed capital loss in terms of the Eighth Schedule, shall be the date that such company
becomes a controlled foreign company;
(f) where the resident contemplated in subsection (2) is a natural person, special trust or an
insurer in respect of its individual policyholder fund, the taxable capital gain of the
controlled foreign company shall, for the purposes of paragraph 10 of the Eighth
Schedule, be 25 per cent of that company’s net capital gain for the relevant foreign tax
year;
(h) for the purposes of section 24I, ‘local currency’ in relation to an exchange item of a
controlled foreign company which is not attributable to a permanent establishment of that
company, means any currency used by that company for purposes of financial reporting;
(i) for the purposes of section 31-
(aa) any transaction, operation or scheme between that controlled foreign company and
any connected person in relation to that controlled foreign company shall be
deemed to be an international agreement as defined in that section; and
(bb) that controlled foreign company must for purposes of section 31 (3) (a) (i) and (ii)
be deemed to be a resident;

74 (j) for the purposes of determining any capital gain or capital loss of that controlled foreign
company from the disposal of any interest in any other foreign company (which is a
controlled foreign company in relation to the resident contemplated in subsection (2)), the
base cost of that interest shall be increased in terms of paragraph 20 (1) (h) (iii) of the
Eighth Schedule, by any amount derived by that other foreign company (or any other
company in which that foreign company holds a direct or indirect interest which is also a
controlled foreign company in relation to that resident), which was taken into account in
determining the amount to be included in the income of that resident in terms of this
section by virtue of that resident’s shareholding in the controlled foreign company,
reduced by the amount of any dividend distributed to that controlled foreign company by
any such other foreign company from such income so taken into account; and
(k) for the purposes of paragraph 43 of the Eighth Schedule, ‘local currency’ of a controlled
foreign company otherwise than in relation to a permanent establishment of that
controlled foreign company, means the currency used by that company for purposes of
financial reporting.
[Sub-s. (2A) amended by s. 22 (1) (d) of Act 45 of 2003 and by s. 13 (1) of Act 32 of 2004.] (3) and (4) ……
(4A) ……
(5) ……
(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-
(a) 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) 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, 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.
(7) and (8) ……
(9) The provisions of subsection (2) shall not apply to the extent that the net income of the
controlled foreign company-
(a) ……
[Para. (a) deleted by s. 22 (1) (g) of Act 45 of 2003.] (b) is attributable to any business establishment of that controlled foreign company in any
country other than the Republic: Provided that the provisions of this paragraph shall not
apply to any net income that is attributable to-
(i) any amounts derived from any transaction relating to the supply of goods or
services by or to that controlled foreign company with any connected person (in
relation to that controlled foreign company), who is a resident, unless the
consideration in respect of that transaction reflects an arm’s length price that is
consistent with the provisions of section 31; or
[Sub-para. (i) substituted by s. 22 (1) (i) of Act 45 of 2003.] (ii) any amounts derived from-
(aa) any sale of goods by that controlled foreign company to any connected
person (in relation to that controlled foreign company) who is a resident,
unless-
(A) that controlled foreign company purchased those goods within the
country of residence of that controlled foreign company from any
person who is not a connected person in relation to that controlled
foreign company;

75 (B) the creation, extraction, production, assembly, repair or
improvement of goods undertaken by that controlled foreign
company amount to more than minor assembly or adjustment,
packaging, repackaging and labelling; or
(C) that controlled foreign company sells a significant quantity of
goods of the same or a similar nature to persons who are not
connected persons in relation to that controlled foreign company,
at comparable prices (after accounting for the level of the market,
volume discounts and costs of delivery); or
(D) that controlled foreign company purchases the same or similar
goods mainly within the country of residence of that controlled
foreign company from persons who are not connected persons in
relation to that controlled foreign company;
[Subitem (D) added by s. 22 (1) (k) of Act 45 of 2003.] (bb) any sale of goods by that controlled foreign company to a person, other
than a connected person (in relation to that controlled foreign company)
who is a resident, where that controlled foreign company initially
purchased those goods or any tangible intermediary inputs thereof from
one or more connected persons (in relation to that controlled foreign
company) who are residents, unless-
(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 tangible intermediary inputs of those goods;
(B) the creation, extraction, production, assembly, repair or
improvement of goods undertaken by that controlled foreign
company amount to more than minor assembly or adjustment,
packaging, repackaging and labelling; or
(C) the products are sold by that controlled foreign company to
persons who are not connected persons in relation to that
controlled foreign company, for delivery within the country of
residence of that controlled foreign company; or
(D) products of the same or similar nature are sold by that controlled
foreign company mainly to persons who are not connected
persons in relation to that controlled foreign company for delivery
within the country of residence of that controlled foreign
company;
[Subitem (D) added by s. 22 (1) (l) of Act 45 of 2003.] (cc) any service performed by that controlled foreign company to a connected
person (in relation to such controlled foreign company) who is a resident,
unless the service is performed outside the Republic and-
(A) such service relates directly to the creation, extraction, production,
assembly, repair or improvement of goods utilised within one or
more countries outside the Republic; or
(B) such services relate directly to the sale or marketing of goods of a
connected person (in relation to that controlled foreign company)
who is a resident and those goods are sold to persons who are not
connected persons in relation to that controlled foreign company
for delivery within the country of residence of that controlled
foreign company;
[Sub-para. (ii) amended by s. 22 (1) (j) of Act 45 of 2003.] (iii) 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 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,

76 except-
(aa) to the extent that any income and capital gains attributable to those
amounts (other than income or capital gains in respect of which any of the
provisions contained in paragraphs (e) to (fB) apply) do not in total exceed
ten per cent of the income and capital gains of the controlled foreign
company attributable to that business establishment other than income or
capital gains-
(A) attributable to those amounts; or
(B) in respect of which any of the provisions contained in paragraphs
(e) to (fB) apply; or
(bb) where those amounts arise from the principal trading activities of any
banking or financial services, insurance or rental business, excluding any
such amounts derived-
(A) by a company which is a foreign financial instrument holding
company at the time that the amounts are so derived;
(B) from any connected person (in relation to that controlled foreign
company) who is a resident or any resident who directly or
indirectly holds at least five per cent of the participation rights in-
(i) that controlled foreign company; or
(ii) any other company in the same group of companies which
holds shares in that controlled foreign company; or
(C) to the extent that those amounts form part of any transaction,
operation or scheme in terms of which any amount received by or
accrued to any person is exempt from tax while any
corresponding expenditure (other than expenditure for the
delivery of any goods including electricity) is deductible by that
person or by any connected person in relation to that person in
determining the liability for tax of that person or connected
person, as the case may be, in terms of this Act;
[Sub-para. (iii) substituted by s. 22 (1) (m) of Act 45 of 2003.] [Para. (b) amended by s. 22 (1) (h) of Act 45 of 2003.] (c) and (d) ……
(e) is included in the taxable income of the company and has not been or will not be exempt
or taxed at a reduced rate in the Republic, as a result of the application of any agreement
for the avoidance of double taxation;
(f) is attributable to any foreign dividend declared to that controlled foreign company, by
any other controlled foreign company in relation to the resident, to the extent that the
foreign dividend does not exceed the aggregate of all amounts which have been or will be
included in the income of the resident in terms of this section in any year of assessment,
which relate to the net income of-
(i) the company declaring the dividend; or
(ii) any other company which has been included in the income of that resident by
virtue of that resident’s participation rights in that other company held indirectly
through the company declaring the dividend,
reduced by-
(aa) the amount of any foreign tax payable, in respect of the amounts so included in
that resident’s income; and
(bb) so much of all foreign dividends received by or accrued to that controlled foreign
company as was-
(A) excluded from the application of this section in terms of this paragraph or
section 10 (1) (k) (ii) (dd);
(B) previously not included in the income of that resident by virtue of any prior
inclusion in terms of section 9D.
[Para. (f) substituted by s. 22 (1) (n) of Act 45 of 2003.] (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 foreign

77 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 other foreign company are parties, where that
controlled foreign company and that other foreign company form part of the same group
of companies;
(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 foreign company, where that controlled foreign company and that
other foreign company form part of the same group of companies; or
(h) ……
[Para. (h) deleted by s. 22 (1) (o) of Act 45 of 2003.] [Sub-s. (9) amended by s. 22 (1) (f) of Act 45 of 2003.] (10) For the purposes of subsection (9) (b) (ii) the Minister may-
(a) by notice in the Gazette determine that one or more foreign countries be treated as one if
such foreign countries comprise a single economic market and such treatment will not
lead to an unacceptable erosion of the tax base; or
(b) in consultation with the Commissioner grant exemption to any person from the
application of subsection (9) (b) (ii), to the extent that its application will unreasonably
prejudice national economic policies or South African international trade and such
exemption will not lead to an unacceptable erosion of the tax base.
(11) ……
[Sub-s. (11) deleted by s. 22 (1) (p) of Act 45 of 2003.] (12) A resident who, together with any connected person in relation to that resident, holds at least
10 per cent but not more than 25 per cent of the participation 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.
[Sub-s. (12) added by s. 22 (1) (q) of Act 45 of 2003.] (13) Any resident who, together with any connected person in relation to that resident, holds at
least 10 per cent but not more than 25 per cent of the participation 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.
[Sub-s. (13) added by s. 22 (1) (q) of Act 45 of 2003.] [S. 9D inserted by s. 9 (1) of Act 28 of 1997, amended by s. 10 (1) (p) of Act 59 of 2000 and substituted by
s. 14 (1) of Act 74 of 2002.] 9E ……
[S. 9E inserted by s. 20 (1) of Act 30 of 2000, amended by s. 11 (1) of Act 59 of 2000, substituted by s. 15
(1) of Act 74 of 2002 and repealed by s. 23 (1) of Act 45 of 2003.] 9F ……
[S. 9F inserted by s. 12 of Act 59 of 2000, amended by s. 24 (1) of Act 60 of 2001 and by s. 16 of Act 74 of
2002 and repealed by s. 24 (1) of Act 45 of 2003.] 9G Taxable income in respect of foreign equity instruments
(1) For the purposes of this section ‘foreign currency’ means any currency other than currency of
the Republic.
[Sub-s. (1) substituted by s. 25 (1) (a) of Act 45 of 2003.] (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 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.
[Sub-s. (2) substituted by s. 17 (1) of Act 74 of 2002 and by s. 25 (1) (a) of Act 45 of 2003.] (3) Any-
(a) expenditure incurred by a person in any foreign currency in respect of any foreign equity
instrument which is allowable as a deduction in terms of the provisions of this Act; or

78 (b) amount in any foreign currency which is taken into account in the determination of the
taxable income of any person in respect of any foreign equity instrument,
shall, for the year of assessment in which that foreign equity instrument is disposed of, be translated into
the currency of the Republic-
(i) in the case of a foreign equity instrument acquired before 1 October 2001, at the ruling
exchange rate on 1 October 2001; or
(ii) in any other case, at the average exchange rate for the year of assessment during which-
(aa) in the case of paragraph (a), that expenditure was actually incurred by that person;
or
(bb) in the case of paragraph (b), the expenditure which relates to the amount so taken
into account was actually incurred by that person.
[Sub-s. (3) substituted by s. 17 (1) of Act 74 of 2002 and by s. 25 (1) (b) of Act 45 of 2003.] [S. 9G inserted by s. 25 (1) of Act 60 of 2001.] 10 Exemptions
Cases
(1) There shall be exempt from the tax-
(a) the receipts and accruals of the Government, any provincial administration or of any
other state;
[Para. (a) substituted by s. 13 (1) (a) of Act 89 of 1969, amended by s. 10 (1) (a) of Act 121 of 1984 and by
s. 36 (6) of Act 9 of 1989 and substituted by s. 10 (1) (a) of Act 141 of 1992 and by s. 26 (1) (a) of Act 45
of 2003.] (b) the receipts and accruals of local authorities;
[Para. (b) substituted by s. 26 (1) (a) of Act 45 of 2003.] (c) (i) ……
[Sub-para. (i) substituted by s. 8 (1) (a) of Act 96 of 1981, by s. 10 (1) (b) of Act 121 of 1984 and by s. 6
(1) (a) of Act 96 of 1985 and deleted by s. 9 (1) (a) of Act 21 of 1994.] (ii) any pension payable to any person or his surviving spouse by reason of such
person having occupied the office of State President or Vice State President:
Provided that the provisions of this subparagraph shall not apply to any amount
payable to any person or his surviving spouse by reason of such person having
occupied the office of President as elected in terms of section 77 of the
Constitution;
[Sub-para. (ii) substituted by s. 8 (1) (a) of Act 96 of 1975, by s. 8 (1) (b) of Act 96 of 1981 and by s. 6 (1)
(a) of Act 96 of 1985 and amended by s. 9 (1) (b) of Act 21 of 1994.] (iii) the salary and emoluments payable to any person who holds office in the Republic
as an official of any government, other than the Government of the Republic,
provided such person is stationed in the Republic for that purpose and is not
ordinarily resident in the Republic;
[Sub-para. (iii) substituted by s. 10 (1) (b) of Act 141 of 1992.] (iv) any salary and emoluments payable to any domestic or private servant of any
person referred to in subparagraph (iii) in respect of domestic or private services
rendered or to be rendered by such servant to such person if such servant is not a
South African citizen and is not ordinarily resident in the Republic;
(v) any salary and emoluments payable to any subject of a foreign state who is
temporarily employed in the Republic, provided the exemption of such salary and
emoluments is authorized by an agreement entered into by the governments of
such foreign state and the Republic;
[Para. (c) amended by s. 8 (a) of Act 90 of 1962 and by s. 10 (a) of Act 88 of 1965 and substituted by s. 10
(1) (a) of Act 85 of 1974.] (cA) the receipts and accruals of-
(i) any institution, board or body (other than a company registered or deemed to be
registered under the Companies Act, 1973 (Act 61 of 1973), or under any law
repealed by that Act and any co-operative formed and incorporated or deemed to
be formed and incorporated under the Co-operatives Act, 1981 (Act 91 of 1981),
and any close corporation and any trust) established by or under any law and

79 which, in the furtherance of its sole or principal object-
(aa) conducts scientific, technical or industrial research;
(bb) provides necessary or useful commodities, amenities or services to the
State (including any provincial administration) or members of the general
public; or
(cc) carries on activities (including the rendering of financial assistance by way
of loans or otherwise) designed to promote commerce, industry or
agriculture or any branch thereof;
(ii) any association, corporation or company contemplated in paragraph (a) of the
definition of ‘company’ in section 1, all the shares of which are held by any such
institution, board or body, if the operations of such association, corporation or
company are ancillary or complementary to the object of such institution, board or
body:
[Sub-para. (ii) substituted by s. 13 (1) (a) of Act 59 of 2000.] Provided that such institution, board, body or company-
(a) has been approved by the Commissioner subject to such conditions as he may
deem necessary to ensure that the activities of such institution, board, body or
company are wholly or mainly directed to the furtherance of its sole or principal
object;
(b) is by law or under its constitution-
(i) not permitted to distribute any of its profits or gains to any person, other
than, in the case of such company, to its shareholders;
(ii) required to utilise its funds solely for investment or the object for which it
has been established; and
(iii) required on dissolution-
(aa) where the institution, board, body or company is established under
any law, to transfer its assets to some other institution, board or
body which has been granted exemption from tax in terms of this
paragraph and which has objects similar to those of such
institution, board, body or company; or
(bb) where the institution, board or body is established by law, to
transfer its assets to-
(A) some other institution, board or body which has been
granted exemption from tax in terms of this
paragraph and which has objects similar to those of
such institution, board, body or company; or
(B) to the State:
Provided further that-
(a) where the Commissioner is satisfied that any such institution, board, body or
company has during any year of assessment failed to comply with the provisions
of this paragraph, he may withdraw his approval of the institution, board, body or
company with effect from the commencement of that year of assessment;
(b) where the institution, board, body or company fails to transfer, or take reasonable
steps to transfer, its assets as contemplated in paragraph (b) (iii) of the first
proviso, the accumulated net revenue which has not been distributed shall be
deemed for the purposes of this Act to be an amount of taxable income which
accrued to such institution, board, body or company during the year of assessment
contemplated in paragraph (a); and
(c) any decision of the Commissioner in the exercise of his discretion under this
paragraph shall be subject to objection and appeal;
[Para. (cA) inserted by s. 11 (a) of Act 55 of 1966, substituted by s. 13 (1) (b) of Act 89 of 1969 and by s.
10 (1) (b) of Act 85 of 1974, amended s. 9 (1) (a) of Act 94 of 1983, by s 36 (6) of Act 9 of 1989 and by s.
10 (1) (c) of Act 141 of 1992 and substituted by s. 10 (1) (a) of Act 28 of 1997.] (cB) ……
[Para. (cB) inserted by s. 10 (1) (c) of Act 85 of 1974, amended by s. 9 (1) (b) of Act 94 of 1983, by s. 10
(1) (d) of Act 141 of 1992 and by s. 8 (1) (a) of Act 36 of 1996 and deleted by s. 21 (1) (a) of Act 30 of

80 2000.] (cC) ……
[Para. (cC) inserted by s. 10 (1) (c) of Act 85 of 1974, amended by s. 8 (1) (b) of Act 69 of 1975, by s. 7 (a)
of Act 65 of 1986, by s. 9 (1) (a) of Act 85 of 1987, by s. 10 (1) (e) of Act 141 of 1992, by s. 7 (1) (a) of
Act 113 of 1993 and by s. 9 (1) (c) of Act 21 of 1994 and deleted by s. 21 (1) (a) of Act 30 of 2000.] (cD) …….
[Para. (cD) inserted by s. 10 (1) (c) of Act 85 of 1974, substituted by s. 7 (1) (b) of Act 113 of 1993 and
deleted by s. 21 (1) (a) of Act 30 of 2000.] (cE) the receipts and accruals of any political party registered under the provisions of section
36 of the Electoral Act, 1979 (Act 45 of 1979);
[Para. (cE) inserted by s. 8 (1) (c) of Act 96 of 1981.] (cF) ……
[Par. (cF) inserted by s. 9 (1) (b) of Act 85 of 1987, amended by s. 10 (1) (f), (g) and (h) of Act 141 of 1992
and deleted by s. 21 (1) (a) of Act 30 of 2000.] [ (cG) the receipts and accruals of any person who is not a resident, which are derived by such
person from carrying on business as the owner or charterer of any ship or aircraft, if a
similar exemption or equivalent relief is granted by the country of which such person is a
resident, to any resident in respect of any tax imposed in that country on income which
may be derived by such person from carrying on in such country any business as owner
or charterer of any ship or aircraft;
[Para. (cG) inserted by s. 9 (1) (c) of Act 85 of 1987 and substituted by s. 10 (1) (i) of Act 141 of 1992 and
by s. 13 (1) (b) of Act 59 of 2000.] (cH) the receipts and accruals of any company, society or other association of persons or any
trust, whether or not registered under any law (other than a co-operative formed and
incorporated or deemed to be formed and incorporated under the Co-operatives Act, 1981
(Act 91 of 1981)), if-
(i) the sole object of that company, society, association or trust in terms of-
(aa) the constitution of the company, society or association; or
(bb) the instrument establishing the trust,
which has been approved by the Commissioner, is to receive, hold and apply
amounts contributed by any taxpayer contemplated in section 11 (hA) to that
company, society, association or trust in accordance with that section in order to
discharge, at the time of or after discontinuation of operations on a mine or part of
a mine, any of the following or like obligations imposed upon any person in terms
of any law which regulates mining operations (other than costs which are required
in terms of any law to be incurred on an ongoing basis during the life of a mine or
part of a mine), namely-
(A) the rehabilitation of disturbances of the surface of land and the prevention
and combating of pollution of the air, land, sea or other water where such
disturbances and pollution are due to mining, prospecting, quarrying or
similar operations;
(B) the protection of the surface of land and water sources and the making safe
of undermined ground and of dangerous excavations, tailings, waste dumps
and structures, of whatsoever nature, made in the course of mining,
prospecting, quarrying or similar operations; and
(C) the demolition or removal of any building, structure or other thing erected
or constructed in connection with mining, prospecting, quarrying or similar
operations, the removal of any debris or other objects and the restoration,
as far as is practicable, of the surface to its natural state;
(iA) a person designated by the Minister of Minerals and Energy certifies that any
distribution by that company, society, association or trust is or was made solely
for its object as contemplated in subparagraph (i);
(ii) that company, society or association is under its constitution, or that trust is under
the instrument establishing it not permitted to distribute any of its profits or gains
to any person and is required to utilise its funds solely for the object for which it
has been established: Provided that such company, society, association or trust

81 shall be permitted to invest its funds, until such time as those funds are required-
(aa) with a financial institution as defined in section 1 of the Financial Services
Board Act, 1990 (Act 97 of 1990);
(bb) in any financial instrument-
(i) of a company contemplated in paragraph (a) of the definition of
‘listed company’ in section 1 (other than shares in the taxpayer
contemplated in subparagraph (i) or any connected person in
relation to that taxpayer); or
(ii) issued by any sphere of government in the Republic; or
(cc) in any other investments which were made by that company, society,
association or trust before 18 November 2003;
(iii) in terms of the constitution of such company, society or association or the
instrument establishing such trust it will upon its winding-up or liquidation be
obliged to give or transfer its assets remaining after the satisfaction of its liabilities
to some other company, society, association or trust approved by the
Commissioner in terms of this paragraph; and
(iv) the Commissioner has approved such company, society, association or trust on
such conditions as the Commissioner may deem necessary to ensure that the
activities of such company, society, association or trust are wholly directed to the
furtherance of its sole object:
Provided that-
(a) where the Commissioner is-
(i) satisfied that such company, society, association or trust has during any
year of assessment in any material respect; or
(ii) during any year of assessment satisfied that such company, society,
association or trust has on a continuous or repetitive basis,
failed to comply with the provisions of this section, or the constitution or
instrument under which it is established to the extent that it relates to the
provisions of this section, the Commissioner shall after due notice withdraw
approval of that company, society, association or trust with effect from the
commencement of that year of assessment, unless corrective steps are taken by
that company, society, association or trust within a period stated by the
Commissioner in that notice;
(b) where the Commissioner has withdrawn approval of a company, society,
association or trust as contemplated in paragraph (a), that company, society,
association or trust must, within three months or such longer period as the
Commissioner may allow after the date of such withdrawal, transfer, or take
reasonable steps to transfer, its remaining assets to any other company, society,
association or trust which is-
(i) approved in terms of this section; and
(ii) not a connected person in relation to such company, society, association or
trust;
(c) where a company, society, association or trust during any year of assessment fails
to transfer, or to take reasonable steps to transfer, any assets as contemplated in
subparagraph (iii) or paragraph (b) of this proviso, the accumulated profits or
reserves shall for the purposes of this Act be deemed to be an amount of taxable
income which accrued to that company, society, association or trust during that
year of assessment.
[Para. (cH) inserted by s. 12 (1) (a) of Act 129 of 1991, amended by s. 10 (1) (j) of Act 141 of 1992 and by
s. 10 of Act 28 of 1997 and substituted by s. 26 (1) (b) of Act 45 of 2003.] (cI) …….
[Para. (cI) inserted by s. 10 (1) (k) of Act 141 of 1992, amended by s. 7 (1) (c) of act 113 of 1993, by s. 9
(1) (a) of Act 21 of 1994, by s. by s. 8 (1) (b) of Act 36 of 1996, by s. 10 (1) (a) of Act 28 of 1997 and by s.
18 (1) (a) of Act 53 of 1999 and deleted by s. 21 (1) (a) of Act 30 of 2000.] (cJ) ……
[Para. (cJ) inserted by s. 10 (1) (k) of Act 141 of 1992, amended by s. 7 (1) (d) and (e) of Act 113 of 1993

82 and by s. 18 (1) (b) of Act 53 of 1999 and deleted by s. 21 (1) (a) of Act 30 of 2000.] (cK) ……
[Para. (cK) inserted by s. 7 (1) (g) of Act 113 of 1993, amended by s. 8 (1) of Act 36 of 1996 and deleted
by s. 21 (1) (b) of Act 30 of 2000.] (cL) ……
[Para. (cL) inserted by s. 7 (1) (g) of Act 113 of 1993 and deleted by s. 8 (1) (e) of Act 36 of 1996.] (cM) the receipts and accruals of any company formed and incorporated under section 21 of
the Companies Act, 1973 (Act 61 of 1973), or deemed by the said section to be so formed
and incorporated, which has been approved by the Commissioner, if-
(i) the sole or principal object of the company is to promote and facilitate the
distribution of agricultural and related commodities;
(ii) such sole or principal object is actively pursued;
(iii) the company is or was not knowingly a party to, or does not knowingly permit, or
has not knowingly permitted, itself to be used as part of any transaction, operation
or scheme of which the sole or main purpose is or was the reduction,
postponement or avoidance of liability for any tax, duty or levy which, but for
such transaction, operation or scheme, would have been or would have become
payable by any person under this Act or any other Act administered by the
Commissioner;
(iv) the company does not carry on any business other than business which is directly
connected with the said sole or principal object;
(v) the business directly connected with the sole or principal object was previously
carried on by a municipal council and the control of the company is exercised by
such municipal council; and
[Sub-para. (v) substituted by s. 18 (1) (c) of Act 53 of 1999.] (vi) in terms of the memorandum or articles of association of the company, it is upon
its deregistration, winding-up or liquidation obliged to give or transfer its assets
remaining after the satisfaction of its liabilities to-
(aa) some other company which is exempt from tax under this paragraph; or
(bb) a local authority to utilize such assets for the same objects as the aforesaid
company:
Provided that-
(a) where the Commissioner is satisfied that any such company has during any year of
assessment failed to comply with the provisions of this paragraph, he may
withdraw his approval of the company with effect from the commencement of that
year of assessment;
(b) where the Commissioner has withdrawn his approval of such company, it shall,
within two months from the date of such withdrawal, transfer, or take reasonable
steps to transfer, its remaining assets to any company which is exempt from tax
under this paragraph or to a local authority to utilize such assets for the same
objects as the aforesaid company;
(c) where a company fails to transfer, or take reasonable steps to transfer, its
remaining assets as contemplated in paragraph (b) of this proviso, the accumulated
net revenue which has not been distributed shall be deemed for the purposes of
this Act to be an amount of taxable income which accrued to such company
during the year of assessment referred to in paragraph (a) of this proviso; and
(d) any decision of the Commissioner in the exercise of his discretion under this
paragraph shall be subject to objection and appeal;
[Para. (cM) inserted by s. 9 (1) (e) of Act 21 of 1994.] (cN) the receipts and accruals of any public benefit organisation which has been approved by
the Commissioner in terms of section 30 (3);
[Para. (cN) inserted by s. 21 (1) (c) of Act 30 of 2000.] (d) the receipts and accruals of any-
(i) pension fund, provident fund, retirement annuity fund; or
(ii) benefit fund, mutual loan association, fidelity or indemnity fund, trade union,
chamber of commerce or industries (or an association of such chambers), local

83 publicity association or non-proprietary stock exchange approved by the
Commissioner subject to such conditions as the Minister may prescribe by
regulation; or
(iii) company, society or other association of persons established to-
(aa) provide social and recreational amenities or facilities for the members of
such company, society or other association; or
(bb) promote the common interests of persons (being members of such
company, society or association of persons) carrying on any particular kind
of business, profession or occupation,
approved by the Commissioner subject to such conditions as the Minister may
prescribe by regulation;
[NB: Sub-para. (iii) has been substituted by s. 14 (1) (a) of the Revenue Laws Amendment Act 32 of 2004,
a provision which will be put into operation by proclamation. See PENDLEX.] [Para. (d) substituted by s. 10 (1) (d) of Act 85 of 1974, by s. 10 (1) (l) of Act 141 of 1992 and by s. 21 (1)
(d) of Act 30 of 2000.] (dA) ……
[Para. (dA) inserted by s. 6 (1) (a) of Act 91 of 1982, amended by s. 7 (b) of Act 65 of 1986, substituted by
s. 10 (1) (a) of Act 101 of 1990, amended by s. 10 (1) (m) of Act 141 of 1992 and deleted by s. 13 (1) (c) of
Act 59 of 2000.] (e) any levy received by or accrued to-
(i) any body corporate established in terms of the Sectional Titles Act, 1986 (Act 95
of 1986), from its members;
(ii) a share block company established in terms of the Share Blocks Control Act, 1980
(Act 59 of 1980), from its shareholders; or
(iii) any other association of persons (other than a company registered or deemed to be
registered under the Companies Act, 1973 (Act 61 of 1973), and any co-operative
formed and incorporated or deemed to be formed and incorporated under the Co-
operatives Act, 1981 (Act 91 of 1981), and any close corporation and any trust,
but including a company incorporated under section 21 of the Companies Act,
1973), from its members, where the Commissioner is satisfied that, subject to such
conditions as he may deem necessary, such association of persons-
(aa) has been formed solely for the purposes of managing the collective
interests common to all its members, which includes expenditure
applicable to the common immovable property of such members and the
collection of levies for which such members are liable; and
[Item (aa) substituted by s. 26 (1) (a) of Act 60 of 2001.] (bb) is not permitted to distribute any of its funds to any person other than a
similar association of persons:
Provided that such body, company or association is or was not knowingly a party to, or
does not knowingly permit or has not knowingly permitted, itself to be used as part of
any transaction, operation or scheme of which the sole or main purpose is or was the
reduction, postponement or avoidance of liability for any tax, duty or levy which, but for
such transaction, operation or scheme, would have been or would become payable by any
person under this Act or any other law administered by the Commissioner;
[Para. (e) substituted by s. 13 (1) (c) of Act 89 of 1969 and by s. 10 (1) (e) of Act 85 of 1974, amended by
s. 8 (1) (c) of Act 69 of 1975 and by s. 9 (1) (c) of Act 94 of 1983 and substituted by s. 18 (1) (d) of Act 53
of 1999.] (f) ……
[Para. (f) substituted by s. 6 (1) (b) of Act 96 of 1985, by s. 7 (1) (h) of Act 113 of 1993 and by s. 29 (1) (a)
of Act 30 of 1998 and deleted by s. 21 (1) (a) of Act 30 of 2000.] (fA) ……
[Para. (fA) inserted by s. 7 (1) (i) of Act 113 of 1993, amended by s. 8 (1) (f), (g), (h) and (i) of Act 36 of
1996 and by s. 18 (1) (e) of Act 53 of 1999 and deleted by s. 21 (1) (a) of Act 30 of 2000.] (g) any amount received as a war pension, or as an award or a benefit under any law relating
to the payment of compensation in respect of diseases contracted by persons employed in
mining operations;

84 (gA) any disability pension paid under section 2 of the Social Assistance Act, 1992 (Act 59 of
1992);
[Para. (gA) inserted by s. 7 (1) (a) of Act 104 of 1980 and substituted by s. 29 (1) (b) of Act 30 of 1998.] (gB) any compensation paid in terms of the Workmen’s Compensation Act, 1941 (Act 30 of
1941), or the Compensation for Occupational Injuries and Diseases Act, 1993 (Act 130 of
1993);
[Para. (gB) inserted by s. 8 (1) (d) of Act 96 of 1981 and substituted by s. 8 (1) (j) of Act 36 of 1996.] (gC) any-
(i) amount received by or accrued to any resident under the social security system of
any other country; or
(ii) pension received by or accrued to any resident from a source outside the Republic,
which is not deemed to be from a source in the Republic in terms of section 9 (1)
(g), in consideration of past employment outside the Republic;
[Sub-para. (ii) substituted by s. 9 (a) of Act 19 of 2001.] [Para. (gC) inserted by s. 13 (1) (d) of Act 59 of 2000.] (h) interest which is received or accrued during any year of assessment by or to any person
who is not a resident, unless that person-
(i) is a natural person who was physically present in the Republic for a period
exceeding 183 days in aggregate during that year; or
(ii) at any time during that year carried on business through a permanent
establishment in the Republic,
and for purposes of this paragraph, so much of any dividend distributed to that person by a portfolio of a
collective investment scheme referred to in paragraph (e) (i) of the definition of ‘company’ in section 1 out
of income derived by that portfolio which is exempt from tax in the hands of that portfolio under paragraph
(iA), is deemed to be interest;
[Para. (h) substituted by s. 9 (a) of Act 103 of 1976, amended by s. 10 (1) (c) of Act 121 of 1984, by s. 9
(1) (d) of Act 85 of 1987, by s. 7 (1) (a) of Act 90 of 1988, by s. 7 (1) of Act 70 of 1989, by s. 10 (1) (a) of
Act 21 of 1995 and by s. 13 (1) of Act 59 of 2000 and substituted by s. 14 (1) (b) of Act 32 of 2004.] [NB: (1) A further proviso has been added to para. (h) by s. 10 (1) (b) of the Income Tax Act 101 of 1990,
a provision which will come into operation on a date to be fixed by the Minister of Finance. See
PENDLEX. (2) In terms of s. 36 (2) of the Legal Succession to the South African Transport Services Act 9
of 1989, the reference in para. (h) to ‘the South African Transport Services’ is to be construed as including
the Company (Transnet Limited) and the Corporation (the South African Rail Commuter Corporation
Limited).] (hA) ……
[Para. (hA) inserted by s. 10 (1) (n) of Act 141 of 1992, amended by s. 7 (1) (l) of Act 113 of 1993, by s. 10
(1) (d) of Act 21 of 1995, by s. 8 (1) (m) of Act 36 of 1996, by s. 21 (1) (e) of Act 30 of 2000, by s. 13 (1)
of Act 59 of 2000 and by s. 18 (1) (a) of Act 74 of 2002 and deleted by s. 14 (1) (c) of Act 32 of 2004.] (i) ……
(i) ……
[Sub-para. (i) substituted by s. 8 (1) (e) of Act 96 of 1981, amended by s. 6 (1) (b) of Act 91 of 1982 and
deleted by s. 8 (1) (n) of Act 36 of 1996.] (ii) ……
[Sub-para. (ii) substituted by s. 10 (1) (f) of Act 85 of 1974, by s. 9 (b) of Act 103 of 1976, by s. 7 (1) (a) of
Act 104 of 1979, by s. 8 (1) (f) of Act 96 of 1981, by s. 6 (1) (c) of Act 91 of 1982, by s. 9 (1) (d) of Act 94
of 1983 and by s. 6 (1) (c) of Act 96 of 1985 and deleted by s. 8 (1) (n) of Act 36 of 1996.] (iii) so much of the interest on Tax Redemption Certificates held by any one person as
does not exceed the sum of fifty rand;
(iv) ……
[Sub-para. (iv) substituted by s. 6 (1) (d) of Act 91 of 1982 and deleted by s. 10 (1) (d) of Act 101 of 1990.] (v) interest on any loan portion of the normal or super tax imposed under the Income
Tax Act, 1953, or any subsequent Act of Parliament;
(vi) ……
[Sub-para. (vi) deleted by s. 7 (1) (b) of Act 104 of 1979, inserted by s. 10 (1) (e) of Act 101 of 1990 and
deleted by s. 8 (1) (n) of Act 36 of 1996.] (vii) to (x) inclusive ……

85 [Sub-paras. (vii) to (x) inclusive deleted by s. 7 (1) (a) of Act 65 of 1973.] (xi) ……
[Sub-para. (xi) substituted by s. 13 (1) (d) of Act 89 of 1969 and by s. 9 (1) (a) of Act 52 of 1970 and
deleted by s. 7 (1) (c) of Act 104 of 1979.] (xiA) ……
[Sub-para. (xiA) inserted by s. 9 (a) of Act 88 of 1971 and deleted by s. 10 (1) (f) of Act 101 of 1990.] (xiB) ……
[Sub-para. (xiB) inserted by s. 7 (1) (b) of Act 65 of 1973 and deleted by s. 7 (1) (d) of Act 104 of 1979.] (xiC) ……
[Sub-para. (xiC) inserted by s. 10 (1) (g) of Act 85 of 1974 and deleted by s. 10 (1) (f) of Act 101 of 1990.] (xiD) ……
[Sub-para. (xiD) inserted by s. 4 (1) (a) of Act 101 of 1978 and deleted by s. 10 (1) (f) of Act 101 0f
1990.] (xiDA) ……
[Sub-para. (xiDA) inserted by s. 7 (1) (e) of Act 104 of 1979 and deleted by s. 10 (1) (f) of Act 101 of
1990.] (xiDB) ……
[Sub-para. (xiDB) inserted by s. 8 (1) (g) of Act 96 of 1981 and deleted by s. 10 (1) (f) of Act 101 of 1990.] (xiDC) ……
[Sub-para. (xiDC) inserted by s. 8 (1) (g) of Act 96 of 1981 and deleted by s. 10 (1) (f) of Act 101 of 1990.] (xiE) ……
[Sub-para. (xiE) inserted by s. 4 (1) (a) of Act 101 of 1978 and deleted by s. 10 (1) (f) of Act 101 of 1990.] (xii) ……
[Sub-para. (xii) substituted by s. 7 (1) (b) of Act 104 of 1980, amended by s. 8 (1) (h) of Act 96 of 1981
and by s. 6 (1) (e) of Act 91 of 1982, substituted by s. 3 (1) (a) of Act 108 of 1986 and deleted by s. 8 (1)
(n) of Act 36 of 1996.] (xiiA) ……
[Sub-para. (xiiA) inserted by s. 7 (1) (a) of Act 90 of 1972, substituted by s. 3 (1) (b) of Act 108 of 1986
and by s. 10 (1) (g) of Act 101 of 1990 and deleted by s. 8 (1) (n) of Act 36 of 1996.] (xiii) ……
[Sub-para. (xiii) substituted by s. 13 (1) (e) of Act 89 of 1969, by s. 9 (1) (b) of Act 52 of 1970 and by s. 10
(1) (h) of Act 85 of 1974, amended by s. 8 (1) of Act 113 of 1977, substituted by s. 7 (1) (f) of Act 104 of
1979, amended by s. 7 (1) (c) of Act 104 of 1980, substituted by s. 8 (1) (i) of Act 96 of 1981, amended by
s. 6 (1) (f) of Act 91 of 1982, substituted by s. 3 (1) (c) of Act 108 of 1986 and deleted by s. 8 (1) (n) of Act
36 of 1996.] (xiv) ……
[Sub-para. (xiv) added by s. 13 (1) (f) of Act 89 of 1969, amended by s. 4 (1) (b) of Act 101 of 1978 and
deleted by s. 8 (1) (n) of Act 36 of 1996.] (xv) in the case of any taxpayer who is a natural person-
(aa) so much of the aggregate of any foreign dividends and interest received by
or accrued to him or her from a source outside the Republic, which are not
otherwise exempt from tax, as does not during the year of assessment
exceed R1 000: Provided that the amount of the exemption in terms of this
paragraph shall-
(A) first apply in respect of any such foreign dividends; and
(B) in so far as such amount exceeds the amount of such foreign
dividends, apply in respect of any such interest; and
[Item (aa) amended by s. 26 (1) (c) of Act 45 of 2003.] (bb) so much of the aggregate of any interest received by or accrued to him or
her from a source in the Republic and any dividends (other than foreign
dividends, which are not otherwise exempt from tax, as does not during the
year of assessment exceed-
(A) in the case of any person who was or, had he or she lived, would
have been at least 65 years of age on the last day of the year of
assessment, the amount of R16 000; or
[Sub-item (A) substituted by s. 36 of Act 12 of 2003 and by s. 8 of Act 16 of 2004.]

86 (B) in any other case, the amount of R11 000,
[Sub-item (B) substituted by s. 36 of Act 12 of 2003 and by s. 8 of Act 16 of 2004.] reduced by the amount of any exemption allowable in terms of paragraph
(aa);
[Item (bb) amended by s. 26 (1) (d) of Act 45 of 2003.] [Sub-para. (xv) added by s. 6 (1) (g) of Act 91 of 1982, amended by s. 6 (1) (d) of Act 96 of 1985, by s. 7
(c) of Act 65 of 1986, by s. 9 (1) (e) of Act 85 of 1987 and by s. 10 (1) (h) of Act 101 of 1990, substituted
by s. 21 (1) (f) of Act 30 of 2000, amended by s 9 (b) and (c) of Act 19 of 2001 and substituted by s. 13 (1)
(a) of Act 30 of 2002.] (xvi) ……
[Sub-para. (xvi) added by s. 6 (1) (g) of Act 91 of 1982, amended by s. 6 (1) (e) of Act 96 of 1985, by s. 7
(d) of Act 65 of 1986, by s. 9 (1) (f) of Act 85 of 1987 and by s. 10 (1) (i) of Act 101 of 1990 and deleted
by s. 21 (1) (g) of Act 30 of 2000.] [Para. (i) amended by s. 7 (a) of Act 72 of 1963, substituted by s. 8 (a) of Act 90 of 1964, by s. 10 (b) of
Act 88 of 1965, by s. 11 (b) of Act 55 of 1966 and by s. 8 (1) (a) of Act 76 of 1968 and amended by s. 10
(1) (c) of Act 101 of 1990 and by s. 8 (1) (n) of Act 36 of 1996.] (iA) in the case of any portfolio of a collective investment scheme referred to in paragraph (e)
(i) of the definition of ‘company’ in section 1, so much of the income received by or
accrued to such portfolio as has been distributed, or as the Commissioner is satisfied will
be distributed, by way of a dividend or a portion of a dividend, to persons who have
become entitled to such dividend by virtue of their being holders of participatory interest
in such portfolio;
[Para. (iA) inserted by s. 7 (1) (b) of Act 90 of 1972 and substituted by s. 21 (1) (h) of Act 30 of 2000, by s.
13 (1) (j) of Act 59 of 2000 and by s. 18 (1) (b) of Act 74 of 2002.] (j) the receipts and accruals of any bank, if the Commissioner is satisfied that such bank is
not resident in the Republic and is entrusted by the Government of a territory outside the
Republic with the custody of the principal foreign exchange reserves of that territory, and
the Minister of Finance decides to apply the provisions of this paragraph to that bank in
respect of the year of assessment under charge;
(k) (i) dividends (other than foreign dividends) received by or accrued to or in favour of
any person: Provided that this exemption shall not apply-
(aa) to dividends (other than those distributed out of profits of a capital nature
and those received by or accrued to or in favour of any person who is
neither a resident, nor carrying on business in the Republic) distributed by
a company the shares of which are ‘property shares’ as defined in section
47 of the Collective Investment Schemes Control Act, 2002, on shares
included in a portfolio comprised in any collective investment scheme in
property managed or carried on by any company registered as a manager
under section 42 of that Act for purposes of Part V of that Act; or
[Para. (aa) substituted by s. 12 (1) (b) of Act 129 of 1991, by s. 13 (1) (k) of Act 59 of 2000 and by s. 18
(1) (c) of Act 74 of 2002.] (bb) to so much of any dividend as has been distributed by any portfolio of any
collective investment scheme constituting a company in terms of paragraph
(e) (i) of the definition of ‘company’ in section 1-
(A) out of income derived by such portfolio which is exempt from tax
in the hands of such portfolio under the provision of paragraph
(iA); and
(B) out of amounts received by or accrued to such portfolio by way of
dividends referred to in section 11 (s); or
[Para. (bb) amended by s. 13 (1) (l) of Act 59 of 2000 and substituted by s. 7 (1) (m) of Act 113 of 1993
and by s. 18 (1) (c) of Act 74 of 2002.] (cc) to any dividend received by or accrued to or in favour of any person where
such dividend constitutes or forms part of any consideration paid or
payable to such person in respect of the disposal of shares (other than
affected shares in respect of which the taxpayer has, in terms of the
provisions of section 9B, elected the amount received or accrued on

87 disposal to be deemed to be of a capital nature), which were held as trading
stock by such person in a company and such shares were acquired by such
company in terms of section 85 of the Companies Act, 1973 (Act 61 of
1973);
[Para. (cc) added by s. 18 (1) (g) of Act 53 of 1999.] (dd) ……
[Para. (dd) added by s. 21 (1) (j) of Act 30 of 2000, substituted by s. 13 (1) (n) of Act 59 of 2000 and by s.
26 (1) (b) of Act 60 of 2001 and deleted by s. 26 (1) (g) of Act 45 of 2003.] [Sub-para. (i) substituted by s. 13 (1) (g) of Act 89 of 1969, by s. 9 (b) of Act 88 of 1971 and by s. 7 (1) (c)
of Act 90 of 1972, amended by s. 8 (1) (j) of Act 96 of 1981, by s. 9 (1) (e) of Act 94 of 1983 and by s. 10
(1) (d) of Act 121 of 1984, substituted by s. 10 (1) (j) of Act 101 of 1990 and amended by s. 26 (1) (e) of
Act 45 of 2003.] (iA) ……
[Sub-para. (iA) inserted by s. 7 (1) (d) of Act 90 of 1972 and deleted by s. 18 (1) (d) of Act 74 of 2002.] (ii) any foreign dividend received by or accrued to a person-
(aa) to the extent that the profits from which the foreign dividend is distributed-
(A) relate to any amount which has been or will be subject to tax in
the Republic in terms of this Act, unless those profits have been or
will be exempt or taxed at a reduced rate in the Republic as a
result of the application of any agreement for the avoidance of
double taxation; or
(B) arose directly or indirectly from any dividends declared by any
company which is a resident;
(bb) to the extent that the foreign dividend relates to any amount which was
declared by a listed company which complies with paragraphs (a) and (b)
of the definition of ‘listed company’ in section 1 and more than 10 per cent
of the equity share capital in that listed company is at the time of the
declaration of that foreign dividend held collectively by residents;
(cc) who is a resident to the extent that the foreign dividend does not exceed the
aggregate of all amounts which have been or will be included in the
income of that resident in terms of section 9D in any year of assessment,
which relate to the net income of-
(A) the company declaring the dividend; or
(B) any other company which has been included in the income of that
resident in terms of section 9D by virtue of that resident’s
participation rights in that other company held indirectly through
the company declaring the dividend,
reduced by-
(AA) the amount of any foreign tax payable in respect of the amounts
so included in that resident’s income; and
(BB) so much of all foreign dividends received by or accrued to that
resident at any time from any company contemplated in subitems
(A) or (B), as was-
(AAA) exempt from tax in terms of this item or item (dd); or
(BBB) was previously not included in the income of that
resident by virtue of any prior inclusion in terms of
section 9D;
(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 per cent of the total equity share capital in the company declaring the
dividend: Provided that-
(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 instrument, as contemplated in section 8E,
but for the three year period requirement contained in that section;
and

88 (B) this exemption does not apply in respect of any foreign dividend
which forms part of any transaction, operation or scheme in terms
of which any amount received by or accrued to any person is
exempt from tax while any corresponding expenditure (other than
expenditure for the delivery of any goods, including electricity) is
deductible by that person or by any connected person in relation
to that person in determining the liability for tax of that person or
connected person, as the case may be, in terms of this Act;
[Sub-paras. (ii) deleted by s. 10 (1) (k) of Act 101 of 1990 and inserted by s. 26 (1) (h) of Act 45 of 2003.] (iii) ……
[Sub-paras. (iii) deleted by s. 10 (1) (k) of Act 101 of 1990.] (iv) ……
[Sub-para. (iv) deleted by s. 13 (1) (h) of Act 89 of 1969.] (v) ……
[Sub-para. (v) amended by s. 10 (1) (i) and (j) of Act 85 of 1974 and by s. 9 (c) and (d) of Act 103 of 1976
and deleted by s. 10 (1) (k) of Act 101 of 1990.] (vi) ……
[Sub-para. (vi) deleted by s. 13 (1) (i) of Act 89 of 1969.] (kA) ……
[Para. (kA) inserted by s. 10 (1) (e) of Act 121 of 1984, deleted by s. 10 (1) (l) of Act 101 of 1990, inserted
by s. 13 (1) (o) of Act 59 of 2000 and deleted by s. 26 (1) (i) of Act 45 of 2003.] (l) any amount received by or accrued to any person which amount has been subject to
withholding tax in terms of the provisions of section 35;
[Para. (l) deleted by s. 10 (1) (m) of Act 101 of 1990 and inserted by s. 13 (1) (o) of Act 59 of 2000.] (m) any amount received by or accrued to an author of a work in respect of the assignment of
or grant of an interest in a copyright in such work, if such amount is chargeable with
income tax in a country other than the Republic: Provided that this exemption shall not
apply to any person who is not the first owner of a copyright under the Copyright Act,
1978 (Act 98 of 1978), or to a company;
[Para. (m) substituted by s. 13 (1) (j) of Act 89 of 1969 and amended by s. 12 (1) (c) of Act 129 of 1991.] (mA) ……
[Para. (mA) inserted by s. 9 (e) of Act 103 of 1976 and deleted by s. 10 (1) (e) of Act 28 of 1997.] (mB) any benefit or allowance payable in terms of the Unemployment Insurance Act, 2001
(Act 63 of 2001).
[Para. (mB) inserted by s. 7 (1) (b) of Act 90 of 1988 and substituted by s. 13 (1) (b) of Act 30 of 2002.] (n) ……
[Para. (n) substituted by s. 9 (f) of Act 103 of 1976 and deleted by s. 12 (1) (d) of Act 129 of 1991.] (nA) where an employee is as a condition of his employment required while on duty to wear a
special uniform which is clearly distinguishable from ordinary clothing, the value of any
such uniform given to the employee by his employer, or so much of any allowance made
by the employer to the employee in lieu of any such uniform as is reasonable;
[Para. (nA) inserted by s. 13 (1) (k) of Act 89 of 1969 and substituted by s. 10 (1) (o) of Act 141 of 1992.] (nB) any benefit or advantage accruing to any employee (as defined in paragraph 1 of the
Seventh Schedule) by reason of the fact that his employer (as defined in the said
paragraph), has, in consequence of the transfer of the employee from one place of
employment to another place of employment or the appointment of the employee as an
employee of the employer or the termination of the employee’s employment, borne the
expense-
(i) of transporting such employee, members of his household and the personal goods
and possessions of himself and the members of his household from his previous
place of residence to his new place of residence; or
(ii) of such costs as the Commissioner may allow which have been incurred by the
employee in respect of the sale of his previous residence and in settling in
permanent residential accommodation at his new place of residence; or
[Sub-para. (ii) substituted by s. 7 (e) of Act 65 of 1986.] (iii) of hiring residential accommodation in an hotel or elsewhere for the employee or

89 members of his household during the period ending 183 days after his transfer
took effect or after he took up his appointment, as the case may be, if such
residential accommodation was occupied temporarily pending the obtaining of
permanent residential accommodation;
[Para. (nB) inserted by s. 10 (1) (f) of Act 121 of 1984.] (nC) any amount received by or accrued to that person in the form of a qualifying equity share
contemplated in section 8B;
[Para. (nC) inserted by s. 10 (1) (f) of Act 121 of 1984, deleted by s.12 (1) (e) of Act 129 of 1991 and
inserted by s. 14 (1) (d) of Act 32 of 2004.] (nD) any amount received by or accrued to that person which constitutes-
(i) an equity instrument contemplated in section 8C acquired by that person and in
respect of which that section applies; or
(ii) consideration for the disposal of an equity instrument contemplated in
subparagraph (i),
which had not yet vested as contemplated in that section at the time of that acquisition or disposal;
[Para. (nD) inserted by s. 10 (1) (f) of Act 121 of 1984, amended by s. 6 (1) (f) of Act 96 of 1985, deleted
by s. 12 (1) (f) of Act 129 of 1991 and inserted by s. 14 (1) (e) of Act 32 of 2004.] (nE) any amount (including any taxable benefit determined under the provisions of the
Seventh Schedule) 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 scheme, and in respect of which section 8A applies; or
[Sub-para. (i) substituted by s. 14 (1) (f) of Act 32 of 2004.] (ii) upon the repurchase from the taxpayer, at a price not exceeding the selling price to
him, of shares purchased by him under such scheme, and in respect of which
section 8A applies,
[Sub-para. (ii) substituted by s. 14 (1) (f) of Act 32 of 2004.] if in consequence of such cancellation or repurchase the taxpayer has not received or
become entitled to receive any compensation or consideration other than the repayment
of any portion of the purchase price actually paid by him;
[Para. (nE) inserted by s. 10 (1) (f) of Act 121 of 1984.] (nF) ……
[Para. (nF) inserted by s. 6 (1) (g) of Act 96 of 1985 and deleted by s. 12 (1) (g) of Act 129 of 1991.] (nG) the value of any benefit or advantage contemplated in paragraph 2 of the Seventh
Schedule derived by an employee who, after having retired from full-time service with
the employer by whom such benefit or advantage was granted, has been re-employed by
such employer on a part-time basis, if-
(i) the cash remuneration received by or accrued to the employee in respect of such
part-time employment was payable at a rate not exceeding R5 000 per annum;
(ii) the employee retired from such full-time service on or after attaining the age of 60
years or as a result of ill-health or other infirmity; and
(iii) such benefit or advantage was granted before the employee so retired:
Provided that the provisions of this paragraph shall not apply to any benefit or advantage
granted to an employee who is re-employed on or after 1 March 1992;
[Para. (nG) inserted by s. 7 (f) of Act 65 of 1986 and amended by s. 12 (1) (h) of Act 129 of 1991.] (nH) 50 per cent of so much of any taxable benefit derived by the taxpayer during any year of
assessment ending not later than 28 February 1995 in consequence of the granting of any
loan in the circumstances contemplated in paragraph 2 (f) of the Seventh Schedule as-
(i) was determined in relation to any portion of such loan which was before 15 March
1990 utilized by the taxpayer for the purpose of acquiring shares under a share
incentive scheme operated by his employer and which relates to so many of such
shares as the taxpayer was or is, under the conditions of such scheme as they
applied immediately before the said date, prohibited from disposing of; and
(ii) relates to a period in the year of assessment during which the taxpayer was so
prohibited from disposing of the relevant shares;

90 [Para. (nH) inserted by s. 10 (1) (n) of Act 101 of 1990.] (o) any remuneration as defined in paragraph 1 of the Fourth Schedule-
(i) derived by any person as an officer or crew member of a ship engaged-
(aa) in the international transportation for reward of passengers or goods; or
(bb) in the prospecting (including surveys and other exploratory work) for, or
the mining of, any minerals (including natural oils) from the seabed outside
the continental shelf of the Republic as contemplated in section 8 of the
Maritime Zones Act, 1994 (Act 15 of 1994), where such officer or crew
member is employed on board such ship solely for the purposes of the
‘passage’ of such ship, as defined in the Marine Traffic Act, 1981 (Act 2 of
1981),
if such person was outside the Republic for a period or periods exceeding 183 full
days in aggregate during the year of assessment; or
[Sub-para. (i) amended by s. 18 (1) (f) of Act 74 of 2002.] (ii) received by or accrued to any person during any year of assessment in respect of
services rendered outside the Republic by that person for or on behalf of any
employer, if that person was outside the Republic-
(aa) for a period or periods exceeding 183 full days in aggregate during any 12
months period commencing or ending during that year of assessment; and
(bb) for a continuous period exceeding 60 full days during that period of 12
months,
and those services were rendered during that period or periods: Provided that-
(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 as contemplated in
section 9 (1) of the Immigration Act, 2002 (Act 13 of 2002), or at any other
place in the case of a person authorised by the Minister in terms of section
31 (2) (c) of that Act, shall be deemed to be outside the Republic;
[Para. (A) substituted by s. 26 (1) (j) of Act 45 of 2003.] (B) the provisions of this subparagraph shall not apply in respect of any
remuneration derived in respect of the holding of any office or from
services rendered for or on behalf of any employer, as contemplated in
section 9 (1) (e);
[Sub-para. (ii) amended by s. 18 (1) (g) of Act 74 of 2002.] [Para. (o) substituted by s. 13 (1) (l) of Act 89 of 1969, deleted by s. 7 (1) (c) of Act 65 of 1973, inserted by
s. 4 (1) of Act 140 of 1993, substituted by s. 18 (1) (h) of Act 53 of 1999 and by s. 13 (1) (p) of Act 59 of
2000 and amended by s. 18 (1) (e) of Act 74 of 2002.] (p) any amount received by or accrued to any person who is not a resident, for services
rendered or work or labour done by him outside the Republic for or on behalf of any
employer in the national or provincial sphere of government or any local authority in the
Republic or any national or provincial public entity if not less than 80 per cent of the
expenditure of such entity is defrayed directly or indirectly from funds voted by
Parliament, if such amount is chargeable with income tax in the country in which he is
ordinarily resident and the income tax so chargeable is borne by himself and is not paid
on his behalf by the Government, the local authority concerned or such public entity;
[Para. (p) amended by s. 7 (b) of Act 72 of 1963 and substituted by s. 13 (1) (q) of Act 59 of 2000.] (q) any bona fide scholarship or bursary granted to enable or assist any person to study at a
recognized educational or research institution: Provided that if any such scholarship or
bursary has been so granted by an employer or an associated institution (as respectively
defined in paragraph 1 of the Seventh Schedule) to an employee (as defined in the said
paragraph) or to a relative of such employee in circumstances indicating that the
scholarship or bursary concerned would not have been granted had that employee not
been an employee of that employer, the exemption under this paragraph shall not apply-
(i) if any remuneration to which the employee was entitled or might in the future
have become entitled was in any manner whatsoever reduced or forfeited as a
result of the grant of such scholarship or bursary;

91 (ii) in the case of a scholarship or bursary granted to enable or assist any such relative
of an employee so to study, if the remuneration derived by the employee during
the year of assessment exceeded R60 000; and
[Sub-para. (ii) amended by s. 10 (1) (f) of Act 28 of 1997 and by s. 13 (1) (c) of Act 30 of 2002.] (iii) to so much of any scholarship or bursary contemplated in paragraph (ii) as in the
case of any such relative exceeds R2 000 during the year of assessment;
[Sub-para. (ii) amended by s. 10 (1) (f) of Act 28 of 1997 and by s. 13 (1) (d) of Act 30 of 2002.] [Para. (q) deleted by s. 12 (1) (i) of Act 129 of 1991 and inserted by s. 10 (1) (p) of Act 141 of 1992.] (qA) ……
[Para. (qA) inserted by s. 11 (c) Act 55 of 1966, substituted by s.10(1)(g) of Act 121 of 1984 and deleted by
s. 12 (1) (j) of Act 129 of 1991.] (r) any gratuity (other than a leave gratuity) received by or accrued to any person from
public funds upon his retirement from any office or employment under the Government,
including the Railway Administration and any provincial administration, or from the
funds of the Land and Agricultural Bank of South Africa upon his retirement as a
member of the board of the said Bank, which the Treasury declares to be free of tax;
[Para. (r) substituted by s. 8 (1) (b) of Act 76 of 1968.] [NB: In terms of s. 36 (2) of the Legal Succession to the South African Transport Services Act 9 of 1989,
the reference in para. (r) to ‘the Railway Administration’ is to be construed as including the Company
(Transnet Limited) and the Corporation (the South African Rail Commuter Corporation Limited).] (s) ……
[Para. (s) deleted by s. 26 (1) (k) of Act 45 of 2003.] (t) the receipts and accruals-
(i) of the Council for Scientific and Industrial Research;
(ii) of the South African Inventions Development Corporation;
(iii) of the South African National Roads Agency Limited incorporated in terms of
section 3 of the South African National Roads Agency Limited and National
Roads Act, 1998 (Act 7 of 1998);
[Sub-para. (iii) deleted by s. 29 (1) (c) of Act 30 of 1998 and inserted by s. 26 (1) (l) of Act 45 of 2003.] (iv) ……
[Sub-para. (iv) added by s. 13 (1) (m) of Act 89 of 1969 and deleted by s. 10 (1) (g) of Act 28 of 1997.] (v) of the Armaments Development and Production Corporation of South Africa
Limited, established under section 2 of the Armaments Development and
Production Act, 1968 (Act 57 of 1968);
[Sub-para. (v) added by s. 9 (c) of Act 88 of 1971.] (vi) of any company during any period during which all the issued shares of such
company are held by the Corporation referred to in subparagraph (v), if the
operations of such company are conducted in pursuance of, or are ancillary or
complementary to, the objects of the said Corporation;
[Sub-para. (vi) added by s. 9 (c) of Act 88 of 1971 and substituted by s. 10 (1) (q) of Act 141 of 1992.] (vii) ……
[Sub-para. (vii) added by s. 10 (1) (k) of Act 85 of 1974 and deleted by s. 1 of Act 49 of 1996.] (viii) ……
[Sub-para. (viii) added by s. 10 (1) (l) of Act 85 of 1974 and deleted by s. 9 (1) (a) of Act 46 of 1996.] (ix) ……
[Sub-para. (ix) added by s. 7 (1) (g) of Act 104 of 1979 and deleted by s. 9 (1) (b) of Act 46 of 1996.] (x) of the Development Bank of Southern Africa established on 30 June 1983;
[Sub-para. (x) added by s. 10 (1) (h) of Act 121 of 1984.] (xi) ……
[Sub-para. (xi) added by s. 7 (1) (c) of Act 90 of 1988 and deleted by s. 18 (1) (i) of Act 53 of 1999.] (xii) ……
[Sub-para. (xii) added by s. 12 (1) (k) of Act 129 of 1991 and deleted by s. 21 (1) (k) of Act 30 of 2000.] (xiii) ……
[Sub-para. (xiii) added by s. 10 (1) (r) of Act 141 of 1992 and deleted by s. 9 (1) (f) of Act 21 of 1994.] (xiv) ……
[Sub-para. (xiv) added by s. 10 (1) (r) of Act 141 of 1992 and deleted by s. 8 (1) (o) of Act 36 of 1996.]

92 (xv) ……
[Sub-para. (xv) added by s. 7 (1) (n) of Act 113 of 1993 and deleted by s. 18 (1) (h) of Act 74 of 2002.] [Para. (t) amended by s. 8 (b) of Act 90 of 1964 and substituted by s. 8 (1) (c) of Act 76 of 1968.] (tA) the receipts and accruals of any company which qualifies for exemption under section 2
of the Company Tax Amendment Decree, 1994 (Decree 2 of 1994 of Ciskei), which are
derived from a source within the territory of the former Republic of Ciskei;
[Para. (tA) inserted by s. 29 (1) (d) of Act 30 of 1998.] (u) any amount received by or accrued to any person from such person’s spouse or former
spouse by way of alimony or allowance or maintenance of such person or any children
under an order of judicial separation or divorce granted in consequence of proceedings
instituted after the twenty-first day of March, 1962, or under any agreement of separation
entered into after that date;
[Para. (u) added by s. 8 (b) of Act 90 of 1962.] (v) ……
[Para. (v) added by s. 8 (b) of Act 90 of 1962, substituted by s. 13 (1) (n) of Act 89 of 1969 and by s. 3 (1)
(d) of Act 108 of 1986 and deleted by s. 10 (1) (s) of Act 141 of 1992.] (vA) ……
[Para. (vA) inserted by s. 7 (1) (e) of Act 90 of 1972, substituted by s. 3 (1) (e) of Act 108 of 1986 and
deleted by s. 10 (1) (s) of Act 141 of 1992.] (w) ……
[Para. (w) added by s. 8 (b) of Act 90 of 1962, amended by s. 10 of Act 95 of 1967, by s. 13 (1) (o) of Act
89 of 1969 and by s. 10 (1) (m) of Act 85 of 1974, substituted by s. 10 (1) (t) of Act 141 of 1992, amended
by s. 7 (1) (o) of Act 113 of 1993 and deleted by s. 29 (1) (e) of Act 30 of 1998.] (x) so much of any amount (being a lump sum) referred to in paragraph (d) of the definition
of ‘gross income’ in section 1 or in section 7A (4A) as does not exceed R30 000 less the
sum of any other amounts which have been excluded from the taxpayer’s income by
virtue of the exemption conferred by this paragraph, whether in the current or any
previous year of assessment: Provided that the exemption under this paragraph shall not
apply in respect of any amount received by or accrued to any person upon or because of
the termination or because of the impending termination of the services required to be
rendered by him as the holder of any office or employment or in respect of the
relinquishment, termination, loss, repudiation, cancellation or variation of his office or
employment or in respect of his appointment (or right or claim to be appointed) to any
office or employment, unless-
(i) such person has attained the age of 55 years; or
[Para. (i) substituted by s. 10 (1) (e) of Act 21 of 1995.] (ii) the termination or impending termination of such person’s services or the
relinquishment, termination, loss, repudiation, cancellation or variation of his
office or employment or of his appointment (or right or claim to be appointed) to
any office or employment is due to superannuation, ill-health or other infirmity; or
[Sub-para. (ii) substituted by s. 12 (1) (l) of Act 129 of 1991.] (iii) ……
[Sub-para. (iii) substituted by s. 12 (1) (l) of Act 129 of 1991 and deleted by s. 10 (1) (f) of Act 21 of 1995.] (iv) the termination or impending termination of such person’s services is due to his
employer having ceased to carry on or intending to cease carrying on the trade in
respect of which such person was employed or to such person having become
redundant in consequence of his employer having effected a general reduction in
personnel or a reduction in personnel of a particular class and, where such person’s
employer is a company, such person was not at any time a director of such
company and did not at any time hold more than five per cent of the issued share
capital or members’ interest in such company:
[Sub-para. (iv) added by s. 7 (1) (q) of Act 113 of 1993.] Provided further that, notwithstanding the provisions of section 37D, any such amount
which was received by or accrued to a married woman and which was in whole or in part
excluded from her husband’s taxable income under the provisions of this paragraph, shall
for the purposes of determining the exemption under this paragraph in respect of any such

93 amount subsequently received by or accrued to either spouse be deemed to be an amount
which was received by or accrued to the husband;
[Para. (x) added by s. 8 (b) of Act 90 of 1962, substituted by s. 10 (c) of Act 88 of 1965, by s. 11 (d) of Act
55 of 1966 and by s. 8 (1) (d) of Act 76 of 1968, amended by s. 9 (d) of Act 88 of 1971, substituted by s. 8
(1) (d) of Act 69 of 1975 and amended by s. 7 (1) (h) of Act 104 of 1979, by s. 8 (1) (k) of Act 96 of 1981,
by s. 9 (1) (f) of Act 94 of 1983, by s. 10 (1) (o) of Act 101 of 1990, by s. 10 (1) (u) of Act 141 of 1992 and
by s. 26 (1) (m) of Act 45 of 2003.] (y) ……
[Para. (y) added by s. 8 (1) (e) of Act 76 of 1968 and deleted by s. 10 (1) (p) of Act 101 of 1990.] (z) any amount received by or accrued to or in favour of any person from the State by way of
a subsidy on interest payable by him on any amount owing by him on any loan or
advance utilised by him for the purposes of pastoral, agricultural or other farming
operations carried on by him;
[Para. (z) added by s. 9 (e) of Act 88 of 1971.] (zA) any amount by way of rebate or other assistance received by or accrued to or in favour of
any person under any scheme for the promotion or financing of exports which is for the
purposes of this paragraph approved by the Minister of Trade and Industry with the
concurrence of the Minister of Finance: Provided that where the person entitled to claim
such amount from the State has, under an agreement directly connected with the export
trade carried on by him, agreed to pay the whole or any portion of such amount to any
other person, the exemption under this paragraph shall also apply to the whole or such
portion of such amount received by or accrued to such other person under the said
agreement;
[Para. (zA) added by s. 7 (1) (f) of Act 90 of 1972, substituted by s. 10 (1) (n) of Act 85 of 1974 and by s.
10 (1) (q) of Act 101 of 1990, amended by s. 12 (1) (m) of Act 129 of 1991, substituted by s. 9 (1) (g) of
Act 21 of 1994 and amended by s. 18 (1) (i) of Act 74 of 2002.] (zB) any amount received by or accrued to any employer from a fund which has under an
industrial council agreement been established as contemplated in section 48 (1) (d) of the
Labour Relations Act, 1956 (Act 28 of 1956) or section 39 (4) of the Manpower Training
Act, 1981 (Act 56 of 1981), for the training of employees for skilled work, if such
employer has undertaken such training in respect of his employees;
[Para. (zB) added by s. 7 (1) (d) of Act 65 of 1973 and substituted by s. 10 (1) (o) of Act 85 of 1974 and by
s. 6 (1) (h) of Act 91 of 1982.] (zC) any amount received by or accrued to or in favour of any person from the State by way of
a subsidy under any scheme designed to encourage the establishment, expansion or
carrying on of industrial or commercial undertakings in an economic development area, if
such subsidy was granted in respect of-
(i) wages paid by such person in carrying on any such undertaking; or
(ii) the expenses incurred by such person in training employees employed by him in
such undertaking;
[Para. (zC) added by s. 6 (1) (i) of Act 91 of 1982.] (zD) any amount received by or accrued to or in favour of any person by way of a
reimbursement by the State of expenditure incurred by him in relocating in an economic
development area any industrial or commercial undertaking, or part of such an
undertaking, carried on by him elsewhere than in such area, except to the extent that the
said amount relates to any expenditure claimed by and allowed to such person as a
deduction from his income under the provisions of this Act or has been taken into
account in the determination under this Act of the value of any machinery or plant for the
purposes of determining any allowance in respect of such machinery or plant;
[Para. (zD) added by s. 6 (1) (i) of Act 91 of 1982.] (zE) any amount received by or accrued to the Small Business Development Corporation,
Limited, by way of any subsidy or assistance payable by the State;
[Para. (zE) added by s. 9 (1) (g) of Act 94 of 1983.] (zF) ……
[Para. (zF) added by s. 6 (1) (h) of Act 96 of 1985 and deleted by s. 18 (1) (j) of Act 74 of 2002.] (zG) any amount which on or after 15 May 1989 was received by or accrued to a film owner

94 (as defined in section 24F) 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);
[Para. (zG) added by s. 10 (1) (r) of Act 101 of 1990.] (zH) any amount received by or accrued to or in favour of any person from the State in terms
of-
(i) the Regional Industrial Development Programme, which came into operation on 1
May 1991;
(ii) the Simplified Regional Industrial Development Programme, which came into
operation on 1 October 1993 by way of a grant;
(iii) the Small/Medium Manufacturing Development Programme, which came into
operation on 1 October 1996 by way of a grant;
(iv) the Tax Holiday Scheme contemplated in section 37H, which came into operation
on 1 October 1996 by way of a grant;
(v) the Small, Medium Enterprise Development Programme, which came into
operation on 1 September 2000; and
[Sub-para. (v) added by s. 13 (1) (s) of Act 59 of 2000.] (vi) the Critical Infrastructure Programme, which came into operation on 1 September
2000.
[Sub-para. (vi) added by s. 13 (1) (s) of Act 59 of 2000.] [Para. (zH) added by s. 10 (1) (v) of Act 141 of 1992 and substituted by s. 10 (1) (h) of Act 28 of 1997.] (zI) any amount received by or accrued to or in favour of any person from the
Government, where-
(i) that amount is granted for the performance by that person of its obligations
pursuant to a Public Private Partnership;
[Sub-para. (i) substituted by s. 14 (1) (g) of Act 32 of 2004.] (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
buildings owned by any sphere of government; and
[Sub-para. (ii) substituted by s. 14 (1) (g) of Act 32 of 2004.] (iii) ……
[Para. (zI) added by s. 26 (1) (n) of Act 45 of 2003 and deleted by s. 14 (1) (h) of Act 32 of 2004.] (2) Notwithstanding the exemptions provided for in paragraphs (h) and (k) of subsection (1)-
(a) all amounts falling within the scope of the said paragraphs shall be set out by the taxpayer
in the return rendered by him; and
(b) the said exemptions shall not apply in respect of any portion of an annuity.
(3) The exemptions from tax provided by any paragraph of subsection (1) shall not extend to-
(a) any payments out of the receipts, accruals, amounts or profits mentioned in such
paragraph; or
(b) any tax leviable under this Act in respect of any taxable capital gain determined in
accordance with the Eighth Schedule.
[Sub-s. (3) substituted by s. 26 (1) (o) of Act 45 of 2003.] (4) ……
[Sub-s. (4) substituted by s. 13 (1) (p) of Act 89 of 1969, amended by s. 9 (1) (c) and (d) of Act 52 of 1970,
deleted by s. 9 (f) of Act 88 of 1971, added by s. 10 (1) (s) of Act 101 of 1990 and deleted by s. 8 (1) (p) of
Act 36 of 1996.] 10A Exemption of capital element of purchased annuities
(1) For the purposes of this section-
‘annuity amount’ means an amount payable by way of annuity under an annuity contract and any
amount payable in consequence of the commutation or termination of any such annuity contract;
[Definition of ‘annuity amount’ substituted by s. 8 (a) of Act 113 of 1993.] ‘annuity contract’ means an agreement concluded between an insurer in the course of his insurance
business and a purchaser, in terms of which-
(a) the insurer agrees to pay to the purchaser or the purchaser’s spouse or surviving spouse an
annuity or annuities (whether to one such person or to each of them) until the death of the
annuitant or the expiry of a specified term;
(b) the purchaser agrees to pay to the insurer a lump sum cash consideration for such annuity

95 or annuities; and
(c) no amounts are or will be payable by the insurer to the purchaser or any other person
other than amounts payable by way of such annuity or annuities or, where an annuity is
payable for a minimum term and such annuity is in the event of the death of the annuitant
before the end of such term to continue to be payable to some third person for the balance
of that term, amounts which may be so payable to such third person by way of such
annuity,
but does not include any agreement for the payment by any insurer of any annuity which is under the rules
of a pension fund or of a provident fund or of a retirement annuity fund payable to a member of such fund
or to any other person;
[Definition of ‘annuity contract’ substituted by s. 11 (1) (a) of Act 85 of 1974 and amended by s. 11 (1) (a)
of Act 21 of 1995 and by s. 19 (1) (a) of Act 53 of 1999.] ‘commencement’, in relation to an annuity contract, means the date on which the annuity contract
is concluded;
[Definition of ‘commencement’ substituted by s. 11 (1) (b) of any Act 85 of 1974.] ‘expected return’, in relation to an annuity under an annuity contract, means an amount determined
in a manner contemplated in this section as representing the sum of all the annuity amounts which may, as
at the commencement of the annuity contract, be expected to become payable by way of the annuity from
the said commencement;
[Definition of ‘expected return’ substituted by s. 11 (1) (c) of Act 85 of 1974.] ‘purchaser’, in relation to an annuity contract means-
(a) any natural person and includes such person’s deceased or insolvent estate; or
(b) a curator bonis of, or a trust created solely for the benefit of, any natural person where the
High Court has declared such person to be of unsound mind and incapable of managing
his own affairs and such Court has ordered the appointment of such curator or creation of
such trust, as the case may be;
[Definition of ‘purchaser’ inserted by s. 19 (1) (b) of Act 53 of 1999.] ‘statutory actuary’ means an actuary appointed in accordance with section 20 (1) or 21 (1) (b) of
the Long-Term Insurance Act, 1998 (Act 52 of 1998);
[Definition of ‘statutory actuary’ inserted by s. 19 (1) (b) of Act 53 of 1999.] ‘valuator’ ……
[Definition of ‘valuator’ substituted by s. 11 (1) (a) of Act 28 of 1997 and deleted by s. 19 (1) (c) of Act 53
of 1999.] (2) There shall be exempt from normal tax so much of any annuity amount payable to a purchaser
or his spouse or surviving spouse (as contemplated in paragraph (a) of the definition of ‘annuity contract’ in
subsection (1)), or to the deceased or insolvent estate of such spouse or surviving spouse as is determined in
accordance with subsection (3) to represent the capital element of such amount.
[Sub-s. (2) substituted by s. 11 (1) (b) of Act 21 of 1995, by s. 11 (1) (b) of Act 28 of 1997 and by s. 19 (1)
(d) of Act 53 of 1999.] (3) The capital element of an annuity amount shall be-
(a) a sum determined in accordance with the formula

in which formula-
(i) ‘Y’ represents the sum to be determined;
(ii) ‘A’ represents the amount of the total cash consideration given by the purchaser
under the annuity contract in question as contemplated in paragraph (b) of the
definition of ‘annuity contract’ in subsection (1);
(iii) ‘B’ represents the total expected returns of all the annuities provided for in the
annuity contract in question; and
(iv) ‘C’ represents the aforesaid annuity amount; or
(b) where, by reason of any unpredictable contingency (other than the death or survival of
any person), any amount payable by way of any annuity under the annuity contract in

96 question is uncertain at the date on which the first payment by way of an annuity
becomes due under that contract, such sum as may on the basis of a fair and reasonable
calculation be taken to be the capital element of the aforesaid annuity amount: Provided
that the said sum shall be determined in such manner that the capital element of all the
annuity amounts becoming due during any year of assessment in respect of all the
annuities under the said contract does not in total exceed an amount determined in
accordance with the formula

in which formula-
(i) ‘Z’ represents the amount to be determined;
(ii) ‘N’ represents the probable number of years during which annuity amounts will be
payable under the said annuity contract from the date on which the first of such
amounts becomes due, due regard being had to the manner in which and the
frequency with which such amounts are payable; and
(iii) ‘A’ represents the amount of the total cash consideration given by the purchaser
under the said annuity contract as contemplated in paragraph (b) of the definition
of ‘annuity contract’ in subsection (1); or
(c) where such annuity amount is payable in consequence of the commutation or termination
of the annuity contract concerned, an amount determined in accordance with the formula
X = A – D
in which formula-
(i) ‘X’ represents the amount to be determined;
(ii) ‘A’ represents the amount of the total cash consideration given by the purchaser
under the annuity contract concerned as contemplated in paragraph (b) of the
definition of ‘annuity contract’ in subsection (1); and
(iii) ‘D’ represents the sum of the amounts determined in accordance with paragraphs
(a) and (b) as representing the capital element of all annuity amounts payable
under the annuity contract prior to the commutation or termination thereof.
[Para. (c) added by s. 8 (c) of Act 113 of 1993.] (4) The statutory actuary of an insurer who is a party to an annuity contract shall, before payment
of the first annuity amount is made under such contract, or within such period as the Commissioner may
allow, make a calculation (with due regard to the provisions of subsection (5)) in the manner prescribed in
paragraph (a) of subsection (3) or, if the provisions of paragraph (b) of that subsection are applicable, in
accordance with that paragraph, of the capital element of all the annuity amounts to be paid under the said
contract: Provided that-
(i) where the capital element is calculated under the said paragraph (a), it shall be sufficient
if the capital element is calculated as a percentage to be applied to each of the said
annuity amounts; or
(ii) where the capital element is calculated under the said paragraph (b), it shall be sufficient
if a calculation is made of the amount to be determined in accordance with the formula in
the proviso to that paragraph.
[Sub-s. (4) amended by s. 11 (1) (c) of Act 28 of 1997, by s. 19 (1) (e) of Act 53 of 1999 and by s. 14 of
Act 59 of 2000.] (5) A statutory actuary who makes any calculation as provided in subsection (4) or any
recalculation as provided in subsection (6) (b), shall do so in accordance with generally accepted actuarial
principles or practice, and where a determination has to be made of the life expectancy of any person for
the purpose of a calculation of the expected return of any annuity or the probable number of years during
which annuity amounts will be paid under any annuity contract, the mortality tables to be used for such
determination shall be the select tables in the volume of tables published in 1953 at the University Press,
Cambridge, for the Institute of Actuaries and the Faculty of Actuaries, entitled ‘The a (55) Tables for
Annuitants’, and the age of the person concerned shall for the purposes of such determination be taken to be
his age on his birthday immediately preceding the commencement of the annuity contract in question.

97 [Sub-s. (5) substituted by s. 11 (1) (d) of Act 85 of 1974 and amended by s. 19 (1) (e) of Act 53 of 1999.] (6) (a) Where any annuity contract is varied so that it no longer conforms with the requirements
prescribed in the definition of ‘annuity contract’ in subsection (1), the exemption conferred by subsection
(2) in respect of the capital element of annuity amounts under that contract shall not apply in respect of
such amounts under that contract which become due on or after the date of such variation.
(b) Subject to the provisions of paragraph (a), where any annuity contract is varied as to the
payment of any annuity or consideration payable thereunder, the capital element of annuity amounts
becoming due thereunder after such variation is effected shall, with due regard to the provisions of
subsection (5), be re-calculated by the statutory actuary of the insurer concerned.
[Para. (b) amended by s. 19 (1) (e) of Act 53 of 1999.] (7) (a) Where the capital element of annuity amounts has been calculated as provided in
subsection (4) or has been recalculated as provided in subsection (6) (b), the insurer concerned shall furnish
each annuitant under the annuity contract in question, within one month after the date on which the
calculation or recalculation is made, as the case may be, or within such further period as the Commissioner
may allow, with two copies of such calculation or recalculation, as the case may be.
[Para. (a) substituted by s. 11 (1) (e) of Act 85 of 1974.] (b) An annuitant who has received the two copies referred to in paragraph (a) shall submit one of
them to the Commissioner as and when required by the Commissioner.
(8) The Commissioner shall, when making an assessment upon the taxpayer concerned for the
year of assessment during which there has become payable the first annuity amount affected by a
calculation referred to in subsection (4) or a re-calculation referred to in subsection (6) (b), determine the
capital element of annuity amounts received or accrued during such year and affected by such calculation
or re-calculation, as the case may be, in accordance with such calculation or re-calculation or, if the
Commissioner is dissatisfied with such calculation or re-calculation or is in doubt as to the correctness
thereof, or if no such calculation or re-calculation has been made, he may, having regard to any calculation
or re-calculation of the capital element made by a practising actuary at his request or at the request of the
taxpayer, calculate or re-calculate the capital element and determine the capital element of the said annuity
amounts accordingly.
(9) Any decision of the Commissioner in the exercise of his discretion under the provisions of
subsection (8) shall, in respect of a year of assessment referred to in that subsection, be subject to objection
and appeal.
(10) Subject to the provisions of section 79, the final calculation or re-calculation of the capital
element as made in relation to the year of assessment referred to in subsection (8) shall, subject to the
provisions of subsection (6) (b), be final and conclusive and shall apply in respect of all relevant annuity
amounts which become due to any person under the annuity contract in question in any succeeding years of
assessment.
(11) Any cash consideration given by the purchaser under the annuity contract shall be converted
to the currency of the Republic by applying the average exchange rate for the year of assessment during
which the consideration is actually paid.
[Sub-s. (11) added by s. 11 of Act 5 of 2001 and substituted by s. 15 of Act 32 of 2004.] [S. 10A inserted by s. 8 (1) of Act 65 of 1973.] 11 General deductions allowed in determination of taxable income
Cases
For the purpose of determining the taxable income derived by any person from carrying on any
trade , there shall be allowed as deductions from the income of such person so derived-
(a) expenditure and losses actually incurred in the production of the income, provided such
expenditure and losses are not of a capital nature;
[Para. (a) substituted by s. 15 (a) of Act 59 of 2000.] (b) ……
[Para. (b) substituted by s. 13 (a) of Act 129 of 1991 and deleted by s. 15 (b) of Act 59 of 2000.] (bA) any interest (including related finance charges) which is not otherwise allowable as a
deduction under this Act, which has been actually incurred by the taxpayer on any loan,
advance or credit utilized by him for the acquisition, installation, erection or construction
of any machinery, plant, building, or any improvements to a building, or any pipeline,
transmission line or cable or railway line as contemplated in section 12D, or any aircraft

98 hangar, apron, runway or taxiway as contemplated in section 12F, to be used by him for
the purposes of his trade, and which has been so incurred in respect of a period prior to
such machinery, plant, building, improvements, pipeline, transmission line or cable,
railway line, aircraft hangar, apron, runway or taxiway, being brought into use for the
purposes of the taxpayer’s trade, such deduction to be allowed in the year of assessment
during which such machinery, plant, building, improvements, pipeline, transmission line
or cable, railway line, aircraft hangar, apron, runway or taxiway is or are brought into use
for the said purposes;
[Para. (bA) inserted by s. 9 (1) (a) of Act 96 of 1981 and substituted by s. 10 (1) (a) of Act 19 of 2001.] (bB) any finance charge incurred by the taxpayer in respect of the purchase or contract price
owing under an agreement for the acquisition, installation, erection or construction of any
machinery, plant, aircraft, implement, utensil, article or livestock used by him for the
purposes of his trade, including (but not limited to) mining, shipping or farming, which
deduction shall be in lieu of any deduction or allowance in respect of such finance charge
which may be allowable under any other provision of this Act: Provided that any such
finance charge (other than a finance charge which falls to be dealt with in terms of the
provisions of section 24J) which is calculated or payable in respect of a period of more
than 12 months extending beyond the end of the year of assessment shall for the purposes
of this paragraph be deemed to have been incurred from day to day during the said
period;
[Para. (bB) inserted by s. 11 (1) (a) of Act 121 of 1984 and amended by s 8 (1) (a) of Act 90 of 1988, by s.
8 (1) (a) of Act 70 of 1989 and by s. 12 (1) (a) of Act 21 of 1995.] (bC) ……
[Para. (bC) inserted by s. 27 (1) (a) of Act 45 of 2003 and deleted by s. 16 (1) (a) of Act 32 of 2004.] (c) any legal expenses (being fees for the services of legal practitioners, expenses incurred in
procuring evidence or expert advice, court fees, witness fees and expenses, taxing fees,
the fees and expenses of sheriffs or messengers of court and other expenses of litigation
which are of an essentially similar nature to any of the said fees or expenses) actually
incurred by the taxpayer during the year of assessment in respect of any claim, dispute or
action at law arising in the course of or by reason of the ordinary operations undertaken
by him in the carrying on of his trade: Provided that the amount to be allowed under this
paragraph in respect of any such expenses shall be limited to so much thereof as-
(i) is not of a capital nature; and
(ii) is not incurred in respect of any claim made against the taxpayer for the payment
of damages or compensation if by reason of the nature of the claim or the
circumstances any payment which is or might be made in satisfaction or
settlement of the claim does not or would not rank for deduction from his income
under paragraph (a) or (b); and
(iii) is not incurred in respect of any claim made by the taxpayer for the payment to
him of any amount which does not or would not constitute income of the taxpayer;
and
(iv) is not incurred in respect of any dispute or action at law relating to any such claim
as is referred to in paragraph (ii) or (iii) of this proviso;
[Para. (c) substituted by s. 10 (1) (a) of Act 88 of 1971.] (cA) an allowance in respect of any amount actually incurred by such person in the course of
the carrying on of his trade, as compensation in respect of any restraint of trade imposed
on any other person who-
(i) is a natural person;
(ii) is or was a labour broker as defined in the Fourth Schedule (other than a labour
broker in respect of which a certificate of exemption has been issued in terms of
such Schedule);
(iii) is or was a personal service company as defined in the Fourth Schedule; or
(iv) is or was a personal service trust as defined in the Fourth Schedule,
to the extent that such amount constitutes or will constitute income of the person to
whom it is paid: Provided that the amount allowed to be deducted under this paragraph
shall not exceed for any one year the lesser of-

99 (aa) so much of such amount so incurred as is equal to such amount divided by the
number of years, or part thereof, during which the restraint of trade shall apply; or
(bb) one-third of such amount so incurred;
[Para. (cA) inserted by s. 22 (1) (a) of Act 30 of 2000.] (d) expenditure actually incurred during the year of assessment on repairs of property
occupied for the purpose of trade or in respect of which income is receivable, including
any expenditure so incurred on the treatment against attack by beetles of any timber
forming part of such property and sums expended for the repair of machinery,
implements, utensils and other articles employed by the taxpayer for the purposes of his
trade;
(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 or 12C) used by the taxpayer for the purpose of his trade has been
diminished by reason of wear and tear or depreciation during the year of assessment:
Provided that-
(i) where a deduction has been allowed under paragraph (d), the Commissioner shall
take into consideration the sum allowed under that paragraph in determining the
sum to be allowed under this paragraph;
(ii) in no case shall any allowance be made for the depreciation of buildings or other
structures or works of a permanent nature;
(iiA) where any machinery, implement, utensil or article qualifying for an allowance
under this paragraph is mounted on or affixed to any concrete or other foundation
or supporting structure and the Commissioner is satisfied-
(aa) that the foundation or supporting structure is designed for such machinery,
implement, utensil or article and constructed in such manner that it is or
should be regarded as being integrated with the machinery, implement,
utensil or article;
(bb) that the useful life of the foundation or supporting structure is or will be
limited to the useful life of the machinery, implement, utensil or article
mounted thereon or affixed thereto,
the said foundation or supporting structure shall for the purposes of this paragraph
not be deemed to be a structure or work of a permanent nature but shall for the
purposes of this Act be deemed to be a part of the machinery, implement, utensil
or article mounted thereon or affixed thereto;
[Para. (iiA) inserted by s. 12 (1) (a) of Act 85 of 1974.] (iii) no allowance shall be made under this paragraph in respect of any ship to which
the provisions of section 14 (1) (a) or (b) apply or in respect of any aircraft to
which the provisions of section 14bis (1) (a), (b) or (c) apply;
[Para. (iii) substituted by s. 12 (1) (a) of Act 55 of 1966 and by s. 10 (a) of Act 21 of 1994.] (iiiA) no allowance shall be made under this paragraph in respect of any machinery,
implement, utensil or article of which the cost has been allowed as a deduction
from the taxpayer’s income under the provisions of section 24D;
[Para. (iiiA) inserted by s. 9 (1) (b) of Act 96 of 1981.] (iv) the value of new or unused machinery, implements, utensils or articles which-
(aa) were used by the taxpayer directly in a process of manufacture or, if
brought into use on or after 15 March 1961, in any other process which in
the opinion of the Commissioner is of a similar nature or, where the
taxpayer is an agricultural co-operative (as defined in section 27 (9)), for
storing or packing pastoral, agricultural or other farm products or for
subjecting such products to a primary process as defined in the said section
27 (9); and
(bb) were acquired to replace machinery, implements, utensils or articles which
were damaged or destroyed,
shall be reduced by any amount which has been recovered or recouped as

100 contemplated in paragraph (a) of subsection (4) of section 8 or the corresponding
provisions of any previous Income Tax Act in respect of the damaged or destroyed
machinery, implements, utensils or articles and has been excluded from the
taxpayer’s income in terms of paragraph (e) of the said subsection or the
corresponding provisions of any previous Income Tax Act, and not included in the
taxpayer’s income in terms of the proviso to the said paragraph or the
corresponding provisions of any previous Income Tax Act in the current or any
previous year of assessment;
[Para. (iv) substituted by s. 9 (1) (a) of Act 113 of 1977.] (v) the value of any machinery, implements, utensils or articles used by the taxpayer
for the purposes of his trade shall be increased by the amount of any expenditure
(other than expenditure referred to in paragraph (a)) which is proved to the
satisfaction of the Commissioner to have been incurred by the taxpayer in moving
such machinery, implements, utensils or articles from one location to another;
(vi) the value of any machinery, implements, utensils or articles used by the taxpayer
for the purposes of his trade shall be reduced by the amount of any deduction
which may be made under subsection (1) of section 12 or under that subsection as
applied by subsection (3) of the said section, or under the corresponding
provisions of any previous Income Tax Act or under section 12A (2) or under
section 27 (2) (d);
[Para. (vi) substituted by s. 12 (1) (b) of Act 55 of 1966, by s. 9 (1) (b) of Act 113 of 1977 and by s. 11 (1)
(b) of Act 121 of 1984.] (vii) where the value of any such machinery, implements, utensils and articles acquired
by the taxpayer on or after 15 March 1984 is for the purposes of this paragraph to
be determined having regard to the cost of such machinery, implements, utensils
and articles, such cost shall be deemed to be the cost which, in the opinion of the
Commissioner, a person would, if he had acquired such machinery, implements,
utensils and articles under a cash transaction concluded at arm’s length on the date
on which the transaction for the acquisition of such machinery, implements,
utensils and articles was in fact concluded, have incurred in respect of the direct
cost of the acquisition of such machinery, implements, utensils and articles,
including the direct cost of the installation or erection thereof;
[Para. (vii) added by s. 11 (1) (c) of Act 121 of 1984.] (viii) where in respect of any machinery, implement, utensil or article acquired by the
taxpayer on or after 21 June 1993, a deduction or allowance was previously
granted to a connected person in relation to the taxpayer under this paragraph or
section 12B (1) or 12C (1), or under section 27 (2) (d) prior to the deletion thereof
by section 28 (b) of the Income Tax Act, 1991 (Act 129 of 1991), the allowance
under this paragraph shall be calculated on an amount not exceeding the lesser of
the cost of such machinery, implement, utensil or article to such connected person
or the market value thereof as determined on the date upon which it was acquired
by the taxpayer;
[Para. (viii) added by s. 9 (1) (a) of Act 113 of 1993 and substituted by s. 5 (1) (a) of Act 140 of 1993.] (ix) where any such machinery, plant, implement, utensil or article was used by the
taxpayer during any previous financial year or years for the purposes of any trade
carried on by such taxpayer, the receipts and accruals of which were not included
in the income of such taxpayer during such year or years, the Commissioner shall
take into account the period of use of such asset during such previous year or
years in determining the amount by which the value of such machinery, plant,
implement, utensil or article has been diminished;
[Sub-para. (ix) added by s. 15 (c) of Act 59 of 2000.] [Para. (e) amended by s. 9 (a) of Act 90 of 1962 and by s. 9 (a) of Act 90 of 1964, substituted by s. 11 (1)
(a) of Act 88 of 1965 and amended by s. 8 (1) (b) of Act 90 of 1988 and by s. 11 (1) (a) of Act 101 of
1990.] (f) an allowance in respect of any premium or consideration in the nature of a premium paid
by a taxpayer for-

101 (i) the right of use or occupation of land or buildings used or occupied for the
production of income or from which income is derived; or
(ii) the right of use of any plant or machinery used for the production of income or
from which income is derived; or
(ii)bis the right of use of any motion picture film or any sound recording or advertising
matter connected with such film, if such film, sound recording or advertising
matter is used for the production of income or income is derived therefrom; or
[Sub-para. (ii)bis inserted by s. 9 (b) of Act 90 of 1962.] (iii) the right of use of any patent as defined in the Patents Act, 1978 (Act 57 of 1978),
or any design as defined in the Designs Act, 1993 (Act 195 of 1993), or any trade
mark as defined in the Trade Marks Act, 1993 (Act 194 of 1993), or any copyright
as defined in the Copyright Act, 1978 (Act 98 of 1978), or of any other property
which is of a similar nature, if such patent, design, trade mark, copyright or other
property is used for the production of income or income is derived therefrom; or
[Sub-para. (iii) substituted by s. 14 (1) (a) of Act 89 of 1969, by s. 13 (b) of Act 129 of 1991 and by s. 20
(a) of Act 53 of 1999.] (iv) the imparting of or the undertaking to impart any knowledge directly or indirectly
connected with the use of such film, sound recording, advertising matter, patent,
design, trade mark, copyright or other property as aforesaid:
[Sub-para. (iv) amended by s. 9 (c) of Act 90 of 1962.] Provided that-
(aa) the allowance under subparagraph (i), (ii), (ii)bis or (iii) shall not exceed for any
one year such portion of the amount of the premium or consideration so paid as is
equal to the said amount divided by the number of years for which the taxpayer is
entitled to the use or occupation, or one twenty-fifth of the said amount,
whichever is the greater;
[Para. (aa) amended by s. 9 (d) of Act 90 of 1962.] (bb) if the taxpayer is entitled to such use or occupation for an indefinite period, or if,
in the case of any such right of use or occupation granted under an agreement
concluded on or after 1 July 1983, the taxpayer or the person by whom such right
of use or occupation was granted holds a right or option to extend or renew the
original period of such use or occupation, he shall be deemed, for the purposes of
this paragraph, to be entitled to such use or occupation for such period as in the
opinion of the Commissioner represents the probable duration of such use or
occupation; and
[Para. (bb) substituted by s. 10 (1) (a) of Act 94 of 1983.] (cc) the allowance under subparagraph (iv) shall not exceed for any one year such
portion (not being less than one twenty-fifth) of the amount of the premium or
consideration so paid as the Commissioner may allow having regard to the period
during which the taxpayer will enjoy the right to use such film, sound recording,
advertising matter, patent, design, trade mark, copyright or other property as
aforesaid and any other circumstances which in the opinion of the Commissioner
are relevant;
[Para. (cc) amended by s. 9 (e) of Act 90 of 1962.] (dd) the provisions of this paragraph shall not apply in relation to any such premium or
consideration paid by the taxpayer which does not for the purposes of this Act
constitute income of the person to whom it is paid, unless such premium or
consideration is paid under a written agreement formally and finally signed before
10 April 1984 by every party to the agreement;
[Para. (dd) added by s. 11 (1) (d) of Act 121 of 1984.] (g) an allowance in respect of any expenditure actually incurred by the taxpayer, in
pursuance of an obligation to effect improvements on land or to buildings, incurred under
an agreement whereby the right of use or occupation of the land or buildings is granted
by any other person, where the land or buildings are used or occupied for the production
of income or income is derived therefrom: Provided that-
(i) the aggregate of the allowances under this paragraph shall not exceed the amount

102 stipulated in the agreement as the value of the improvements or as the amount to
be expended on the improvements or, if no amount is so stipulated, an amount
representing in the opinion of the Commissioner the fair and reasonable value of
the improvements;
(ii) any such allowance shall not exceed for any one year such portion of the
aggregate of the allowances under this paragraph as is equal to the said aggregate
divided by the number of years (calculated from the date on which the
improvements are completed, but not more than 25 years) for which the taxpayer
is entitled to the use or occupation;
[Para. (ii) substituted by s. 10 (1) (b) of Act 94 of 1983.] (iii) if the taxpayer is entitled to such use or occupation for an indefinite period, he
shall for the purposes of this paragraph be deemed to be entitled to such use or
occupation for such period as in the opinion of the Commissioner represents the
probable duration of such use or occupation;
(iv) the aggregate of the allowances under this paragraph in respect of any building or
improvements referred to in section 13 (1) or (4) or 27 (2) (b) shall not exceed the
cost (after the deduction of any amount which has been set off against the cost of
such building or improvements under section 13 (3) or section 27 (4)) to the
taxpayer of such building or improvements less the aggregate of the allowances in
respect of such building or improvements made to the taxpayer under the said
section 13 (1) or (4) or 27 (2) (b) or the corresponding provisions of any previous
Income Tax Act;
[Para. (iv) added by s. 9 (f) of Act 90 of 1962 and substituted by s. 9 (1) (c) of Act 113 of 1977.] (v) where expenditure has been incurred by the taxpayer in respect of the cost of any
improvements to land or buildings (other than improvements consisting of any
building or improvements referred to in paragraph (iv) of this proviso or in section
13bis and other than any residential unit referred to in section 13ter) and such
expenditure or a portion thereof has qualified or will qualify for deduction from
the taxpayer’s income by way of a deduction of expenditure or an allowance in
respect of expenditure under any other provision of this Act, the aggregate of the
allowances under this paragraph in respect of such improvements shall not exceed
the amount or value referred to in paragraph (i) of this proviso less an amount
equal to the aggregate of the amounts which have so qualified or will so qualify
for deduction from the taxpayer’s income under the said other provision, whether
in the current or any preceding or subsequent year of assessment;
[Para. (v) added by s. 7 (1) (a) of Act 91 of 1982.] (vi) the provisions of this paragraph shall not apply in relation to any such expenditure
incurred under an agreement concluded on or after 1 July 1983, if the value of
such improvements or the amount to be expended on such improvements, as
contemplated in paragraph (h) of the definition of ‘gross income’ in section 1, does
not for the purposes of this Act constitute income of the person to whom the right
to have such improvements effected has accrued, unless the expenditure was
incurred pursuant to an obligation to effect improvements in terms of a Public
Private Partnership;
[Para. (vi) added by s. 10 (1) (c) of Act 94 of 1983 and substituted by s. 16 (1) (b) of Act 32 of 2004.] (vii) if during any year of assessment the agreement whereby the right of use or
occupation of the land or buildings is granted is terminated before expiry of the
period to which that taxpayer was initially entitled to the use or occupation, as
contemplated in paragraph (ii), so much of the allowance which may be allowed
under this paragraph, which has not yet been allowed in that year or any previous
year of assessment, shall be allowable as a deduction in that year of assessment.
[Para. (vii) added by s. 16 (1) (c) of Act 32 of 2004.] (gA) an allowance in respect of any expenditure (other than expenditure which has qualified in
whole or part for deduction or allowance under any of the other provisions of this section
or the corresponding provisions of any previous Income Tax Act) actually incurred by the
taxpayer-

103 (i) in devising or developing any invention as defined in the Patents Act, 1978 (Act
57 of 1978), or in creating or producing any design as defined in the Designs Act,
1993 (Act 195 of 1993), or any trade mark as defined in the Trade Marks Act,
1993 (Act 194 of 1993), or any copyright as defined in the Copyright Act, 1978
(Act 98 of 1978), or any other property which is of a similar nature; or
[Sub-para. (i) substituted by s. 13 (c) of Act 129 of 1991 and by s. 20 (b) of Act 53 of 1999.] (ii) in obtaining any patent or the restoration of any patent under the Patents Act,
1978, or the registration of any design under the Designs Act, 1993, or the
registration of any trade mark under the Trade Marks Act, 1993, or under similar
laws of any other country; or
[Sub-para. (ii) substituted by s. 20 (b) of Act 53 of 1999 and by s. 15 (d) of Act 59 of 2000.] (iii) in acquiring by assignment from any other person any such patent, design, trade
mark or copyright or in acquiring any other property of a similar nature or any
knowledge connected with the use of such patent, design, trade mark, copyright or
other property or the right to have such knowledge imparted,
[Sub-para. (iii) substituted by s. 9 (1) (b) of Act 113 of 1993.] if such invention, patent, design, trade mark, copyright, other property or knowledge, as
the case may be, is used by the taxpayer in the production of his income or income is
derived by him therefrom: Provided that-
(aa) where such expenditure exceeds R5 000, and was incurred-
(A) before 29 October 1999, the allowance shall not exceed for any one year
such portion of the amount of the expenditure as is equal to such amount
divided by the number of years, which in the opinion of the Commissioner,
represents the probable duration of use of the invention, patent, design,
trade mark, copyright, other property or knowledge, or four per cent of the
said amount, whichever is the greater;
(B) on or after 29 October 1999, the allowance shall not for any one year
exceed an amount equal to-
(AA) five per cent of the amount of the expenditure in the case of any
invention, patent, trade mark, copyright or other property of a
similar nature or any knowledge connected with the use of such
invention, patent, trade mark, copyright or other property or the
right to have such knowledge imparted; or
(BB) 10 per cent of the amount of the expenditure in the case of any
design or other property of a similar nature or any knowledge
connected with the use of such design or other property or the
right to have such knowledge imparted;
[Para. (aa) amended by s. 9 (1) of Act 36 of 1996, substituted by s. 20 (c) of Act 53 of 1999 and amended
by s. 14 (1) (a) of Act 30 of 2002.] (bb) where such expenditure was incurred before the commencement of the year of
assessment in question the allowance shall be calculated on the amount of such
expenditure, less an amount equivalent to the sum of the allowances to which the
taxpayer was entitled under this paragraph and the allowances to which, in the
opinion of the Commissioner, the taxpayer would have been entitled under this
paragraph if this paragraph had been applicable, in respect of such expenditure in
respect of previous years of assessment, including any year of assessment under
any previous Income Tax Act;
[Para. (bb) substituted by s. 10 (1) (e) of Act 94 of 1983.] (cc) no allowance shall be made in respect of any such invention, patent, design, trade
mark, copyright or other property or knowledge so acquired or obtained by the
taxpayer on or after 24 June 1988, but prior to 1 July 1993 from any other person
who is a resident of the Republic or who is ordinarily resident in a neighbouring
country (or, in the case of a company, is incorporated or has its place of effective
management in a neighbouring country), if-
(A) the taxpayer or such other person is a company and such other person or
the taxpayer, as the case may be, is interested in more than 50 per cent of

104 any class of shares issued by such company, whether directly as a
shareholder in that company or indirectly as a shareholder in any other
company; or
(B) both the taxpayer and such other person are companies and any third
person is interested in more than 50 per cent of any class of shares issued
by one of those companies and in more than 50 per cent of any class of
shares issued by the other company, whether directly as a shareholder in
the company by which the shares in question were issued or indirectly as a
shareholder in any other company;
[Para. (cc) added by s. 8 (1) (c) of Act 90 of 1988 and amended by s. 9 (1) (c) of Act 113 of 1993 and by s.
15 (e) of Act 59 of 2000.] (dd) where any such invention, patent, design, trade mark, copyright or other property
or knowledge was so acquired or obtained by the taxpayer on or after 1 July 1993
from any other person who is a resident of the Republic or who is ordinarily
resident in a neighbouring country (or, in the case of a company, is incorporated
or has its place of effective management in a neighbouring country), and who is a
connected person in relation to the taxpayer, the allowance under this paragraph
shall be calculated on an amount not exceeding the lesser of the cost of such
invention, patent, design, trade mark, copyright or other property or knowledge to
such connected person or the market value thereof as determined on the date upon
which such invention, patent, design, trade mark, copyright or other property or
knowledge was acquired or obtained by the taxpayer;
[Para. (dd) added by s. 9 (1) (d) of Act 113 of 1993 and substituted by s. 5 (1) (b) of Act 140 of 1993 and
by s. 15 (f) of Act 59 of 2000.] (ee) no allowance shall be made in respect of any expenditure incurred by such
taxpayer on or after 29 October 1999, in respect of the acquisition from any other
person of any trade mark or other property of a similar nature or any knowledge
connected with the use of such trade mark or the right to have such knowledge
imparted;
[Para. (ee) added by s. 20 (d) of Act 53 of 1999.] (ff) no deduction shall be allowed under this paragraph in respect of any expenditure
incurred by the taxpayer during any year of assessment commencing on or after 1
January 2004;
[Para. (ff) added by s. 27 (1) (b) of Act 45 of 2003.] [Para. (gA) inserted by s. 12 (1) (c) of Act 55 of 1966, substituted by s. 14 (1) (b) of Act 89 of 1969 and
amended by s. 10 (1) (d) of Act 94 of 1983.] (gB) expenditure (other than expenditure which has qualified in whole or part for deduction or
allowance under any of the other provisions of this section) actually incurred by the
taxpayer during the year of assessment in obtaining the extension of the term of any
patent under the Patents Act, 1978 (Act 57 of 1978), or the extension of the registration
period of any design under the Designs Act, 1993 (Act 195 of 1993), or the renewal of
the registration of any trade mark under the Trade Marks Act, 1993 (Act 194 of 1993), or
under similar laws of any other country, if such patent, design or trade mark is used by
the taxpayer in the production of his income or income is derived by him therefrom:
Provided that no deduction shall be allowed under this paragraph in respect of any
expenditure incurred during any year of assessment commencing on or after 1 January
2004;
[Para. (gB) inserted by s. 12 (1) (c) of Act 55 of 1966, amended by s. 14 (1) (c) of Act 89 of 1969,
substituted by s. 13 (d) of Act 129 of 1991, by s. 20 (e) of Act 53 of 1999 and by s. 15 (g) of Act 59 of
2000 and amended by s. 27 (1) (c) of Act 45 of 2003.] (gC) an allowance in respect of any expenditure actually incurred by the taxpayer during any
year of assessment commencing on or after 1 January 2004 to acquire (otherwise than by
way of devising, developing or creating) any-
(i) invention or patent as defined in the Patents Act, 1978 (Act 57 of 1978);
(ii) design as defined in the Designs Act, 1993 (Act 195 of 1993);
(iii) copyright as defined in the Copyright Act, 1978 (Act 98 of 1978);

105 (iv) other property which is of a similar nature (other than Trade Marks as defined in
the Trade Marks Act, 1993 (Act 194 of 1993); or
(v) knowledge connected with the use of such patent, design, copyright or other
property or the right to have such knowledge imparted,
which shall be allowed during the year of assessment in which that invention, patent,
design, copyright, other property or knowledge is brought into use for the first time by
the taxpayer for the purposes of the taxpayer’s trade: Provided that-
(aa) where that expenditure actually incurred by the taxpayer exceeds R5 000, that
allowance shall not exceed in any year of assessment-
(A) five per cent of the amount of the expenditure in respect of any invention, patent,
copyright or other property of a similar nature or any knowledge connected with
the use of such invention, patent, copyright or other property or the right to have
such knowledge imparted; or
(B) 10 per cent of the amount of the expenditure in respect of any design or other
property of a similar nature or any knowledge connected with the use of
such design or other property or the right to have such knowledge
imparted;
[Para. (aa) substituted by s. 16 (1) (e) of Act 32 of 2004.] (bb) where any such invention, patent, design, copyright or other property or
knowledge was acquired from any person who is a connected person in relation to
the taxpayer, the allowance under this paragraph shall be calculated on an amount
not exceeding the lesser of the cost to that connected person of acquiring,
devising, developing or creating that invention, patent, design, copyright or other
property or knowledge or the market value of that invention, patent, design,
copyright or other property or knowledge as determined on the date upon which it
was acquired by the taxpayer;
[Para. (bb) substituted by s. 16 (1) (e) of Act 32 of 2004.] [Para. (gC) inserted by s. 9 (1) (d) of Act 113 of 1977, deleted by s. 15 (h) of Act 59 of 2000, inserted by s.
27 (1) (d) of Act 45 of 2003 and amended by s. 16 (1) (d) of Act 32 of 2004.] (h) such allowance in respect of amounts included in the taxpayer’s gross income under
paragraph (g) or paragraph (h) of the definition of ‘gross income’ in section 1 as the
Commissioner may deem reasonable having regard to any special circumstances of the
case and, in the case of an amount so included under the said paragraph (h), to the
original period for which the right of use or occupation was granted or, in the case of any
amount so included under the said paragraph (h) in consequence of an agreement
concluded on or after 1 July 1983, to the number of years taken into account in the
determination of the relevant allowance granted to any other person under the provisions
of paragraph (g) of this section: Provided that where there has on or after the twenty-
ninth day of March, 1972, accrued to the taxpayer the right to have improvements
effected on land or to buildings by any other person and an amount is required to be
included in the taxpayer’s gross income under the said paragraph (h) with respect to such
improvements, no allowance shall be made to the taxpayer under this paragraph in
respect of such amount, if-
(i) the taxpayer or such other person is a company and such other person or the
taxpayer, as the case may be, is interested in more than fifty per cent of any class
of shares issued by such company, whether directly as a shareholder in that
company or indirectly as a shareholder in any other company; or
(ii) both the taxpayer and such other person are companies and any third person is
interested in more than fifty per cent of any class of shares issued by one of those
companies and in more than fifty per cent of any class of shares issued by the
other company, whether directly as a shareholder in the company by which the
shares in question were issued or indirectly as a shareholder in any other
company;
[Para. (h) substituted by s. 8 (1) (a) of Act 90 of 1972 and amended by s. 10 (1) (f) of Act 94 of 1983.] (hA) so much of any amount (other than an amount in respect of which any deduction or
allowance has been or will be granted under any other provision of this Act) paid in cash

106 during any year of assessment by a taxpayer engaged in mining, prospecting, quarrying
or similar operations to a company, society, association of persons or trust referred to in
section 10 (1) (cH) to be used for the purposes contemplated in that section as does not
exceed an amount determined in accordance with the formula:
A – B + C
D,
in which formula in respect of each mine-
‘A’ represents the amount determined by a person designated by the Minister of
Minerals and Energy of the estimated costs to be incurred at the time that or after
operations on the mine or part of the mine are discontinued in order to discharge
the obligations imposed in terms of any law which regulates mining operations
(other than costs which were required in terms of any law to be incurred on an
ongoing basis during the life of that mine or part of that mine;
‘B’ means the market value of the assets held by the company, society, association or
trust in respect of that mine on the date of the determination of the estimated costs
in symbol ‘A’;
‘C’ means the amount paid in cash by that taxpayer to such company, such association
company, society or trust at any time before the date contemplated in symbol ‘B’
which has not been allowed as a deduction in terms of this paragraph in any year
of assesment; and
‘D’ represents the estimated remaining life of that mine in number of years as
determined by a person contemplated in symbol ‘A’:
Provided that so much of the amount so paid in cash by that taxpayer as exceeds the
deduction allowable in terms of this paragraph shall, for the purposes of this paragraph,
be deemed to be an amount paid by the taxpayer in cash to that company, society,
association or trust in the immediately succeeding year of assessment to be used for the
purpose contemplated in section 10 (1) (cH);
[Para. (hA) inserted by s. 13 (e) of Act 129 of 1991 and substituted by s. 12 (a) of Act 28 of 1997 and by s.
27 (1) (e) of Act 45 of 2003.] (i) the amount of any debts due to the taxpayer which have during the year of assessment
become bad, provided such amount is included in the current year of assessment or was
included in previous years of assessment in the taxpayer’s income;
[Para. (i) substituted by s. 14 (1) (d) of Act 89 of 1969, by s. 10 (1) (g) of Act 94 of 1983 and by s. 9 (1) (e)
of Act 113 of 1993.] (j) such an allowance as may be made each year by the Commissioner in respect of such
debts due to the taxpayer as he considers to be doubtful: Provided that such allowance
shall be included in the income of the taxpayer in the following year of assessment;
[Para. (j) substituted by s. 14 (1) (e) of Act 89 of 1969 and amended by s. 10 (1) (h) of Act 94 of 1983.] (k) (i) any sum contributed during the year of assessment to any pension fund by way of
current contribution by any person who holds any office or employment, where
such contribution is made by reason of the holding of such office or employment,
or by any person who is a partner referred to in paragraph (ii) (ee) of the proviso
to paragraph (c) of the definition of ‘pension fund’ in section 1: Provided that the
total deduction to be allowed in respect of the total contributions by such person to
any one or more pension fund or funds shall not in the year of assessment exceed
the greater of R1 750 or 7,5 per cent of the remuneration (being the income or part
thereof referred to in the definition of ‘retirement-funding employment’ in section
1) derived by such person during such year in respect of his retirement-funding
employment;
[Sub-para. (i) substituted by s. 5 (a) of Act 101 of 1978, amended by s. 8 (1) (a) of Act 104 of 1979 and by
s. 9 (1) (c) of Act 96 of 1981, substituted by s. 10 (1) (i) of Act 94 of 1983 and amended by s. 30 (1) of Act
30 of 1998.] (ii) any sum paid during the year of assessment to any pension fund by any person
who, as a member of such fund, has in terms of the rules governing such fund
undertaken to pay such sum in respect of any past period which is to be reckoned
as pensionable service of that member:

107 Provided that-
(aa) the deduction to be allowed in respect of any sums so paid shall not in the year of
assessment exceed the sum of R1 800;
[Para. (aa) amended by s. 11 (1) (e) of Act 121 of 1984.] (bb) any amount, being a portion of a sum so paid, which has been disallowed solely
by reason of the fact that it exceeds the amount of the deduction allowable in
respect of the year of assessment shall be carried forward and be deemed for the
purposes of this paragraph to be a sum so paid in the next succeeding year of
assessment;
[Para. (bb) added by s. 9 (1) (e) of Act 96 of 1981.] (cc) the provisions of this subparagraph shall apply for the purpose of determining the
taxpayer’s total taxable income for any year of assessment ended or ending on or
after 28 February 1981 whether such taxable income is derived from the carrying
on of any trade or otherwise;
[Para. (cc) added by s. 10 (1) (j) of Act 94 of 1983.] (dd) no deduction shall be made under this paragraph in respect of so much of any
amount carried forward in terms of paragraph (bb) of this proviso as has been
accounted for under paragraph (d) of the definition of ‘formula B’ in paragraph 1
of the Second Schedule or the first proviso to paragraph 6 of that Schedule;
[Para. (dd) added by s. 10 (1) (j) of Act 94 of 1983.] [Para. (k) amended by s. 8 (a) of Act 72 of 1963 and substituted by s. 12 (1) (d) of Act 55 of 1966, by s. 9
(a) of Act 65 of 1973, by s. 9 (a) of Act 69 of 1975 and by s. 9 (1) (e) of Act 113 of 1977 and amended by
s. 9 (1) (d) of Act 96 of 1981.] (l) any sum contributed by an employer during the year of assessment for the benefit of his
employees to any pension fund, provident fund or benefit fund (other than a fund
contemplated in paragraph (a) of the definition of ‘benefit fund’): Provided that-
(i) in respect of any lump sum contribution, the Commissioner may determine that
the said sum shall be deducted in a series of annual instalments, so that only a
portion thereof is deducted in the year of assessment in which it is contributed,
and the residue in such subsequent years of assessment and in such proportions as
the Commissioner may determine, until the contribution is extinguished;
(ii) if the contributions (including any lump sum payments) made by the employer in
respect of any employee during any year of assessment to such funds exceed an
amount equal to ten per cent of the approved remuneration of such employee for
such year of assessment, and the Commissioner is satisfied that the aggregate of
such contributions and the total remuneration accrued during such year of
assessment to such employee in respect of his employment by the employer is
excessive or unjustifiable in relation to the value of the services rendered by such
employee to the employer, and having regard to other benefits, if any, derived by
him from his employment by the employer, only so much of such contribution as
appears to the Commissioner to be reasonable, but not less than an amount equal
to ten per cent of the approved remuneration of such employee for such year of
assessment, shall be allowed to be deducted under this paragraph;
(iii) for the purposes of paragraph (ii) of this proviso ‘approved remuneration’, in
relation to any employee for any year of assessment, means so much of the total
remuneration accrued to such employee during such year of assessment in respect
of his employment by the employer concerned as the Commissioner considers to
be fair and reasonable in relation to the value of the services rendered by such
employee during such year of assessment to the employer and having regard to
other benefits, if any, derived by him from his employment by the employer;
(iv) where any contributions are made to any such fund by the members of a
partnership in their capacity as employers, the references in paragraph (ii) of this
proviso to an employer shall be construed as applying to the partnership as though
its members were one person;
(v) the references in this paragraph to employees or any employee shall, where the
employer is a partnership and contributions are made by the employer to a pension

108 fund, be construed as including references to any member of such partnership who
was previously an employee in the undertaking carried on by the partnership and
who has been permitted to retain his membership of such pension fund as
contemplated in paragraph (ii) (ee) of the proviso to paragraph (c) of the definition
of ‘pension fund’ in section 1, and, for the purposes of paragraphs (ii) and (iii) of
this proviso ‘approved remuneration’, in relation to such member, shall be
construed as including the amount of his pensionable emoluments referred to in
the said paragraph (ii) (ee);
[Para. (v) substituted by s. 10 (1) (k) of Act 94 of 1983.] (vi) any decision of the Commissioner under this paragraph, not being a decision
under paragraph (i) of this proviso, shall be subject to objection and appeal;
[Para. (l) substituted by s. 8 (1) (b) of Act 104 of 1979 and amended by s. 30 (1) (b) of Act 30 of 1998.] (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, 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: Provided that the deduction under this paragraph may not during any year of
assessment in aggregate exceed R3 000 in respect of all qualifying equity shares granted
to a single employee and so much as exceeds R3 000 may be carried forward to the
immediately succeeding year of assessment and that excess is deemed to be the market
value of qualifying equity shares granted to the relevant employee during that
immediately succeeding year for purposes of this paragraph;
[Para. (lA) inserted by s. 16 (1) (f) of Act 32 of 2004.] (m) any amount paid by way of annuity during the year of assessment by any taxpayer-
(i) to a former employee who has retired from the taxpayer’s employ on grounds of
old age, ill health or infirmity; or
(ii) to a person who was for a period 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 that the
amount so paid to such person is reasonable, having regard to the services
rendered by such person as a partner in such undertaking prior 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
[Sub-para. (ii) substituted by s. 9 (1) (f) of Act 113 of 1993.] (iii) to any person who is dependent for his maintenance upon a former employee or a
former partner in an undertaking carried on by the taxpayer or (where such former
employee or former partner is deceased) was so dependent immediately prior to
his death:
Provided that the deduction under subparagraph (iii) shall not exceed in respect of the
persons so dependent on any one retired or deceased employee or former partner, the sum
of R2 500;
[Para. (m) substituted by s. 14 (1) (f) of Act 89 of 1969 and by s. 5 (b) of Act 101 of 1978 and amended by
s. 9 (1) (f) of Act 96 of 1981 and by s. 11 (1) (f) of Act 121 of 1984.] (n) (aa) so much of the total current contributions to any retirement annuity fund or funds
made during the year of assessment by any person as a member of such fund or
funds as does not in the case of the taxpayer exceed the greatest of-
(A) 15 per cent of an amount equal to the amount remaining after deducting
from, or setting off against, the income derived by the taxpayer during the
year of assessment (excluding income derived from any retirement-funding
employment (being the income or part thereof referred to in the definition
of ‘retirement-funding employment’ in section 1)) the deductions or
assessed losses admissible against such income under this Act (excluding
this paragraph, sections 17A, 18, 18A and 19 (3) of this Act and paragraph
12 (1) (c) to (i), inclusive, of the First Schedule); or
[Item (A) substituted by s. 8 (1) (d) of Act 90 of 1988, by s. 11 (1) (b) of Act 101 of 1990, by s. 9 (1) (g) of

109 Act 113 of 1993 and by s. 20 (f) of Act 53 of 1999.] (B) the amount, if any, by which the amount of R3 500 exceeds the amount of
any deduction to which the taxpayer is entitled under paragraph (k) (i) in
respect of the said year; or
(C) the amount of R1 750;
[Sub-para. (aa) amended by s. 5 (c) of Act 101 of 1978, substituted by s. 8 (1) (c) of Act 104 of 1979 and
amended by s. 10 (1) (l) and (m) of Act 94 of 1983.] (bb) so much of the total of any contributions to any retirement annuity fund or funds
made during the year of assessment by any person as a member of such fund or
funds as does not exceed R1 800 in the case of the taxpayer, where such
contributions are made under conditions prescribed in the rules of the fund
whereby a member who has discontinued his contributions prematurely is entitled
to be reinstated as a full member thereof and the current contributions to the fund
have been paid in full:
[Sub-para. (bb) substituted by s. 5 (d) of Act 101 of 1978 and amended by s. 7 (1) (b) and (c) of Act 91 of
1982, by s. 10 (1) (n) and (o) of Act 94 of 1983 and by s. 11 (1) (g) of Act 121 of 1984.] Provided that-
(i) no deduction shall be made under subparagraph (aa) in respect of any amount
paid into a retirement annuity fund for the benefit of a member of such fund where
such amount is a lump sum benefit derived by the member from a pension fund, a
provident fund or a retirement annuity fund and that amount has under the
provisions of paragraph 6 (a), (b) or (c) of the Second Schedule qualified for
deduction from any amount to be included in the member’s gross income;
(ii) the deductions in terms of subparagraph (aa) shall not exceed an amount equal to
the amount remaining after deducting from or setting off against the income
derived by the taxpayer during the year of assessment the deductions and assessed
losses admissible against such income under this Act (excluding the said
subparagraph, sections 17A and 19 (3) of this Act and paragraph 12 (1) (c) to (i),
inclusive, of the First Schedule);
[Para. (ii) substituted by s. 9 (1) (h) of Act 113 of 1993 and by s. 20 (g) of Act 53 of 1999.] (iii) any current contributions (excluding any amount referred to in paragraph (i) of
this proviso) to any retirement annuity fund or funds which are made by such
person as a member of such fund or funds during a year of assessment and do not
qualify for deduction from his income for that year under subparagraph (aa) shall
be carried forward and, except to the extent that such contributions have been
accounted for under paragraph (d) of the definition of ‘formula B’ in paragraph 1
of the Second Schedule or the first proviso to paragraph 6 of that Schedule, be
deemed for the purposes of the said subparagraph to be current contributions made
to the fund or funds in question during the next succeeding year of assessment;
(iv) no deduction shall be made under subparagraph (bb) in respect of any contribution
relating to any year of assessment which, if such contribution had been made
during that year, would not have qualified for deduction under this paragraph, as
applicable in relation to the said year;
(v) any amount being a portion of a contribution made as contemplated in
subparagraph (bb) and which has been disallowed solely by reason of the fact that
it exceeds the amount of the deduction allowable in respect of the year of
assessment, shall be carried forward and be deemed for the purposes of the said
paragraph to be a contribution so made in the next succeeding year of assessment;
(vi) the provisions of this paragraph shall apply for the purpose of determining the
taxpayer’s total taxable income whether derived from the carrying on of any trade
or otherwise;
(vii) ……
[Para. (vii) added by s. 8 (1) (e) of Act 90 of 1988, substituted by s. 8 (1) (b) of Act 70 of 1989 and deleted
by s. 12 (1) (b) of Act 21 of 1995.] (viii) where any such contribution was allowed as a deduction to a person, no deduction
in respect of such contribution shall be allowed to such person’s spouse;

110 [Para. (viii) added by s. 11 (1) (d) of Act 101 of 1990 and substituted by s. 12 (1) (c) of Act 21 of 1995.] (ix) any such contribution which has been made by a married woman to any such fund
of which she became a member before 1 March 1992 shall, at the option of such
married woman, be deemed for the purposes of this paragraph as applicable in any
year of assessment ending not later than 28 February 1997 to be a contribution
made by such married woman’s husband as a member of such fund;
[Para. (ix) added by s. 11 (1) of Act 141 of 1992.] [Para. (n) amended by s. 8 (b) of Act 72 of 1963, substituted by s. 12 (1) (e) of Act 55 of 1966 and by s. 9
(a) of Act 76 of 1968, amended by s. 9 (b) of Act 65 of 1973 and by s. 9 (b) of Act 69 of 1975, substituted
by s. 9 (1) (f) of Act 113 of 1977 and amended by s. 10 (1) (p) of Act 94 of 1983.] (o) at the election of the taxpayer, an amount by which the cost to that taxpayer of any
depreciable asset-
(i) which qualified for a capital allowance or deduction in terms of section 11 (e),
12B, 12C, 12E, 14 or 14bis; and
(ii) the expected useful life of which for tax purposes did not exceed ten years as
determined on the date of original acquisition,
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: Provided
that for the purposes of this paragraph-
(aa) the cost of any plant, machinery, implements, utensils or articles shall be deemed
to be the actual cost plus the amount by which the value of such plant, machinery,
implements, utensils or articles has been increased in terms of paragraph (v) of the
proviso to paragraph (e) less the amount by which such value has been reduced in
terms of paragraph (iv) of that proviso;
[Para. (aa) substituted by s. 9 (1) (a) of Act 16 of 2004.] (bb) the actual cost of any plant, machinery, implement, utensil or article acquired by
the taxpayer on or after 15 March 1984 shall be deemed to be the cost of that
plant, machinery, implement, utensil or article as determined under paragraph (vii)
of the proviso to paragraph (e);
[Para. (bb) substituted by s. 9 (1) (a) of Act 16 of 2004.] (cc) the cost of any aircraft in respect of which any allowance has been made to the
taxpayer under section 14bis shall be deemed to be the actual cost less any amount
(not being an amount which has been included in the income of the taxpayer for
any year of assessment in terms of section 8 (4) (i)) by which the cost or estimated
cost price of such aircraft has in the calculation of such allowance been reduced in
terms of section 14bis (2) (a);
(dd) the cost of any ship in respect of which any allowance has been made to the
taxpayer under the provisions of section 14 shall be deemed to be the actual cost
less any amount (not being an amount which has been included in the income of
the taxpayer for any year of assessment in terms of section 8 (4) (d)) by which the
cost or estimated cost price of such ship has in the calculation of such allowance
been reduced in terms of the definition of ‘adjustable cost’ or ‘adjustable cost price’
in section 14 (2);
[Para. (o) substituted by s. 11 (1) (b) of Act 88 of 1965, by s. 12 (1) (f) of Act 55 of 1966 and by s. 14 (1)
(g) of Act 89 of 1969 and amended by s. 12 (1) (b) of Act 85 of 1974, by s. 9 (1) (g) of Act 113 of 1977, by
s. 9 (1) (g) of act 96 of 1981, by s. 7 (1) (d) of Act 91 of 1982, by s. 10 (1) (q) of Act 94 of 1983, by s. 11
(1) (h) of Act 121 of 1984, by s. 10 of Act 85 of 1987, by s. 8 (1) (f) of Act 90 of 1988, by s. 11 (1) (e) of
Act 101 of 1990, by s. 10 (b) of Act 21 of 1994, by s. 22 (1) (b) and (c) of Act 30 of 2000, by s. 15 (i) of
Act 59 of 2000, by s. 10 (1) (b), (c), (d) and (e) of Act 19 of 2001 and by s. 27 (1) of Act 60 of 2001 and
substituted by s. 27 (1) (f) of Act 45 of 2003.] (p) expenditure (other than expenditure in respect of which any deduction or allowance has
been or will be granted under any other provision of this Act) incurred during the year of
assessment by any taxpayer-
(i) for the purpose of scientific research undertaken by him for the development of
his business, if such expenditure is not of a capital nature; or

111 (ii) by way of contributions to any association, institute, college or university, to be
used in scientific research relating to the taxpayer’s own business, if the Council
for Scientific and Industrial Research certifies to the Commissioner that it
approves the proposals of such association, institute, college or university in
regard to such research and that it is satisfied that such contributions will be used
in such research:
Provided that no deduction shall be allowed under this paragraph in respect of any
expenditure incurred during any year of assessment commencing on or after 1 January
2004;
[Para. (p) amended by s. 8 (1) (g) of Act 90 of 1988 and by s. 27 (1) (g) of Act 45 of 2003.] (q) save as provided in paragraph 12 (2) of the First Schedule, if expenditure of a capital
nature (other than expenditure in respect of which any deduction or allowance has been
or will be granted under any other provision of this Act) has been incurred by a taxpayer
for the purpose of scientific research undertaken by him for the development of his
business, and the Council for Scientific and Industrial Research certifies to the
Commissioner that during the year of assessment in question such research was carried
on and was financed by such expenditure, an amount in respect of the year of assessment
in which such research commenced and of any succeeding year of assessment calculated
at the rate of 25 per cent of such expenditure: Provided that-
(i) the total deduction under this paragraph shall not exceed the amount of such
expenditure; and
(ii) if in any year of assessment the taxpayer discontinues such research or if the
Council for Scientific and Industrial Research is unable, in respect of any year of
assessment, to certify as provided in the foregoing provisions of this paragraph,
there shall be included in the taxpayer’s income for that year of assessment the
total of the deductions under this paragraph or the corresponding provisions of any
previous Income Tax Act, whether in the current or any previous year of
assessment, less one-tenth of the amount of such expenditure in respect of each
completed period of one year, not exceeding ten, contained in the period during
which such research was carried on;
(iii) no deduction shall be allowed under this paragraph in respect of any expenditure
incurred during any year of assessment commencing on or after 1 January 2004;
[Sub-para. (iii) added by s. 27 (1) (h) of Act 45 of 2003.] [Para. (q) amended by s. 10 (1) (r) of Act 94 of 1983 and by s. 9 (1) (i) of Act 113 of 1993.] (r) ……
[Para. (r) amended by s. 9 (g) of Act 90 of 1962 and by s. 8 (c) of Act 72 of 1963, substituted by s. 11 (a)
of Act 95 of 1967, deleted by s. 10 (a) of Act 52 of 1970, inserted by s. 27 (1) (i) of Act 45 of 2003 and
deleted by s. 16 (1) (a) of Act 32 of 2004.] (r)bis ……
[Para. (r)bis inserted by s. 9 (b) of Act 90 of 1964 and deleted by s. 11 (b) of Act 95 of 1967.] (s) in the case of a company the shares of which are ‘property shares’ as defined in section 47
of the Collective Investment Schemes Control Act, 2002, the dividends (other than those
distributed out of profits of a capital nature) distributed by such company during the year
of assessment on shares included in a portfolio comprised in any collective investment
scheme in property managed or carried on by any company registered as a manager under
section 42 of that Act for the purposes of Part V of that Act;.
[Para. (s) substituted by s. 14 (1) (h) of Act 89 of 1969, by s. 12 (b) of Act 28 of 1997 and by s. 19 (1) (a)
of Act 74 of 2002.] (t) in the case of any taxpayer (excluding any taxpayer who derives income from the sale of
immovable property to persons who are not employed by him) who during any year of
assessment incurs expenditure in connection with the erection of any dwelling or who, for
the purpose of financing in whole or in part the erection by any person during the said
period of any dwelling, advances or donates to any person any amount during any such
year of assessment, and who satisfies the Commissioner that that dwelling will be
occupied exclusively by persons or the households of persons who are his employees and
are employed by him for the purposes of his trade (other than mining or farming), an

112 allowance in respect of the said year of assessment equal to 50 per cent of the expenditure
so incurred or of the amount so advanced or donated: Provided that-
(i) where any company is mainly engaged in the provision of housing facilities for
the employees of its sole or principal shareholder or for the employees of any
other company the shares in which are held wholly by the sole or principal
shareholder in such firstmentioned company, the employees of such shareholder
or such other company, as the case may be, shall for the purposes of this
paragraph be deemed to be the employees also of such firstmentioned company;
[Para. (i) substituted by s. 10 (1) (s) of Act 94 of 1983.] (ii) the aggregate of all the allowances made under this paragraph or the
corresponding provisions of any previous Income Tax Act in respect of the
erection of any one dwelling shall not exceed the sum of R6 000;
[Para. (ii) substituted by s. 9 (c) of Act 69 of 1975 and by s. 9 (1) (h) of Act 113 of 1977 and amended by s.
8 of Act 104 of 1980 and by s. 7 (1) (e) of Act 91 of 1982.] (iii) if in any year of assessment any dwelling in relation to the erection of which an
allowance has been made to any taxpayer under this paragraph or the
corresponding provisions of any previous Income Tax Act, whether in the current
or any previous year of assessment, is occupied by any person or by the household
of any person who is not an employee of that taxpayer, there shall be included in
the income of the said taxpayer for the current year of assessment the amount of
such allowance less an amount equal to one-tenth of the said allowance in respect
of each completed period of one year, but not exceeding ten years, during which
such dwelling was occupied by an employee or the household of an employee of
that taxpayer,
and for the purposes of this paragraph ’employee’ in relation to any taxpayer does not
include any person who is a relative of that taxpayer or who, if the taxpayer is a
company, is a shareholder (or a relative of a shareholder) in that company or in any
company which is associated with that company by virtue of shareholding, not being a
shareholder who holds all his shares in that company solely because he is employed by
that company and who will, in terms of the articles of association of that company, not be
entitled to continue to hold those shares after he ceases to be so employed;
[Para. (t) amended by s. 8 (d) of Act 72 of 1963, substituted by s. 9 (b) of Act 76 of 1968 and amended by
s. 8 (1) (b) of Act 90 of 1972, by s. 12 (1) (c) of Act 85 of 1974 and by s. 8 of Act 104 of 1980.] (u) ……
[Para. (ii) amended by s. 9 (1) (j) of Act 113 of 1993 and substituted by s. 14 (1) (b) of Act 30 of 2002.] [Paras. (iii) and (iv) deleted by s. 14 (1) (c) of Act 30 of 2002.] [Para. (u) substituted by s. 10 (1) (b) of Act 88 of 1971 and by s. 11 (1) (i) of Act 121 of 1984, amended by
s. 9 (1) (j) of Act 113 of 1993 and by s. 14 (1) (b) and (c) of Act 30 of 2002 and deleted by s. 9 (1) (b) of
Act 45 of 2003.] (uA) ……
[Para. (uA) inserted by s. 11 (1) (j) of Act 121 of 1984 and deleted by s. 10 (c) of Act 21 of 1994.] (v) ……
[Para. (v) substituted by s. 12 (1) (g) of Act 55 of 1966 and by s. 10 (1) (c) of Act 88 of 1971 and deleted by
s. 9 (c) of Act 65 of 1973.] (w) an allowance in respect of any premium which was actually paid by the taxpayer under
any policy of insurance taken out upon the life of an employee of the taxpayer or, in the
case of a company, upon the life of a director or an employee of that company, the
amount of such allowance to be as follows, namely-
(i) where the life of the employee or director is insured for a period of not more than
one year or where the only premiums payable under the said policy are premiums
of equal amount payable at regular intervals of not more than one year until
benefits (other than interim or temporary benefits) become payable or commence
to become payable under that policy, an amount equal to the amount of the
premium which became payable under such policy during the year of assessment;
or
(ii) in any other case, an amount equal to such portion of the premium paid under the

113 said policy as, in the opinion of the Commissioner (having regard inter alia to the
terms of the policy and, in the appropriate circumstances, to the expectation of life
of the employee or director) should be regarded as relating to the year of
assessment; or
(iii) if, during the year of assessment, any sum (being a lump sum included in the
taxpayer’s gross income under paragraph (m) of the definition of ‘gross income’ in
section 1) has been received by or has accrued to the taxpayer under or upon the
surrender or disposal of the said policy, an amount (not exceeding such lump sum)
equal to so much of the premiums paid by the taxpayer under the said policy as
has not qualified for deduction (whether by way of an allowance under this
paragraph or otherwise) from the taxpayer’s income in the said year of assessment
and preceding years of assessment under this Act and any previous Income Tax
Act:
Provided that-
(aa) no allowance shall be made under this paragraph in respect of any premium under
any policy which was at the time of the payment of such premium the property of
any person other than the taxpayer;
(bb) no allowance in respect of any premium under any policy of insurance shall be
made under this paragraph (except, in the appropriate circumstances, an allowance
under subparagraph (iii)) in respect of any year of assessment-
(A) if during such year any person other than the taxpayer was entitled, or
would have been entitled, to any benefits that were or could have become
payable under the said policy; or
(B) if any loan or advance (other than a loan or advance referred to in
paragraph (m) of the definition of ‘gross income’ in section 1) was made to
any person on the security or strength of such policy and any amount was
during the said year owing in respect of such loan or advance or in respect
of interest or other charges relating thereto, unless the Commissioner is
satisfied that the loan or advance was obtained in order to obtain funds
required by the taxpayer for the purposes of his trade in consequence of the
employee’s or director’s ill-health, infirmity, incapacity, retirement or
cessation of services occurring after the said policy was acquired by the
taxpayer; or
[Sub-para. (B) substituted by s. 10 (1) (d) of Act 88 of 1971 and by s. 7 (1) (f) of Act 91 of 1982.] (C) if the said premium fell due before the commencement of the year of
assessment ending the twenty-eighth day of February, 1971;
(cc) the sum of the allowances made under this paragraph in respect of any insurance
premium shall not exceed the amount of such premium;
(dd) no allowance shall be made under this paragraph in respect of any premium paid
under any insurance policy unless-
(A) such policy was effected in terms of a written proposal accepted by the
insurer before 1 June 1982 or the proposal for such policy was made before
25 May 1982 and accepted by the insurer not later than 21 June 1982; or
[Sub-para. (A) substituted by s. 10 (1) (t) of Act 94 of 1983.] (B) the only benefit payable under the policy is a benefit payable within a
period fixed in such policy upon or by reason of the death or disablement
of the employee or director whose life is insured under the policy or the
policy is a disability policy as defined in section 1 of the Long-term
Insurance Act, 1998 (Act 52 of 1998); or
[Sub-para. (B) substituted by s. 10 (1) (t) of Act 94 of 1983 and by s. 22 (1) (d) of Act 30 of 2000.] (C) the Minister of Finance has by regulation prescribed requirements in regard
to terms and conditions with which insurance policies shall conform for the
purposes of this subparagraph and the policy conforms with such
requirements;
[Sub-para. (C) amended by s. 46 of Act 97 of 1986.] [Para. (dd) added by s. 7 (1) (g) of Act 91 of 1982.]

114 (ee) the allowance under this paragraph in respect of premiums paid by the taxpayer
during any year of assessment shall, except as provided in subparagraph (iii), be
limited-
(A) in the case of premiums paid under a policy referred to in subparagraph (A)
of paragraph (dd) of this proviso, to so much of such premiums as were
payable in terms of the conditions contained in that policy on 31 May
1982; or
(B) in the case of premiums paid under one or more policies referred to in
subparagraph (c) of the said paragraph (dd) upon the life of a particular
employee or director, to an amount equal to 10 per cent of the
remuneration (as defined in the definition of ‘remuneration’ in paragraph 1
of the Fourth Schedule) derived by such employee or director from the
taxpayer during the said year of assessment;
[Sub-para. (B) substituted by s. 19 (1) (b) of Act 74 of 2002.] [Para. (ee) added by s. 7 (1) (g) of Act 91 of 1982.] (ff) no deduction shall be made from the income of any taxpayer in respect of
premiums paid by him under any policy of insurance of which he is the owner on
the life of an employee of that taxpayer or, where the taxpayer is a company, of a
director or employee of that company, except in so far as an allowance may be
made under this paragraph or, in the case of a policy which is not a life policy or a
disability policy as defined in section 1 of theLong-term Insurance Act, 1998, a
deduction which may, in appropriate circumstances, be made under paragraph (a)
or (b) of this section;
[Para. (ff) added by s. 7 (1) (g) of Act 91 of 1982 and substituted by s. 10 (1) (u) of Act 94 of 1983 and by
s. 22 (1) (e) of Act 30 of 2000.] [Para. (w) substituted by s. 14 (1) (i) of Act 89 of 1969 and by s. 10 (b) of Act 52 of 1970.] (x) any amounts which in terms of any other provision in this Part, are allowed to be
deducted from the income of the taxpayer.
[S. 11 amended by s. 15 (a) of Act 59 of 2000.] 11A Deductions in respect of expenditure and losses incurred prior to commencement of trade
(1) For purposes of determining the taxable income derived during any year of assessment by a
person from carrying on any trade, there shall be allowed as a deduction from the income so derived, any
expenditure and losses-
(a) actually incurred by that person prior to the commencement of and in preparation for
carrying on that trade;
(b) which would have been allowed as a deduction in terms of section 11 (other than section
11 (x)) or section 11B, had the expenditure or losses been incurred after that person
commenced carrying on that trade; and
(c) which were not allowed as a deduction in that year or any previous year of assessment.
(2) So much of the expenditure and losses contemplated in subsection (1) as exceeds the income
derived during the year of assessment from carrying on that trade after deduction of any amounts allowable
in that year of assessment in terms of any other provision of this Act, shall not be set off against any
income of that person which is derived otherwise than from carrying on that trade, notwithstanding section
20 (1) (b).
[S. 11A inserted by s. 28 (1) of Act 45 of 2003.] 11B Deductions in respect of research and development
(1) For purposes of this section-
‘cost’ in relation to any building, machinery, plant, implement, utensil or article means the lesser
of-
(a) the actual cost to the taxpayer of the erection, addition, improvement to or acquisition of
any building or actual cost of that machinery, plant, implement, utensil or article; or
(b) the cost which a taxpayer would have incurred in respect of the direct cost of acquisition
of that building, machinery, plant, implement, utensil or article (including the direct cost
of the installation or erection thereof), if that taxpayer had acquired that building,
machinery, plant, implement, utensil or article under a cash transaction concluded at
arm’s length on the date on which the transaction for the acquisition was in fact

115 concluded; or
(c) where that building, machinery, plant, implement, utensil or article was acquired from
any person who is a connected person in relation to the taxpayer, the cost to that
connected person of that building, machinery, plant, implement, utensil or article.
[Para. (c) added by s. 17 (1) (b) of Act 32 of 2004.] ‘copyright’ means copyright as defined in the Copyright Act, 1978 (Act 98 of 1978);
‘design’ means a design as defined in the Designs Act, 1993 (Act 195 of 1993);
‘invention’ means an invention as defined in the Patents Act, 1978 (Act 57 of 1978);
‘patent’ means a patent as defined in the Patents Act, 1978 (Act 57 of 1978);
‘research and development’ means research and development conducted in the Republic that will
result or potentially may result in an identifiable intangible asset as contemplated under generally accepted
accounting practice, but does not include research and development relating to-
(a) the social sciences, arts, humanities or management; or
(b) market research, sales or marketing promotion;
‘trade mark’ means trade mark as defined in the Trade Marks Act, 1993 (Act 194 of 1993), and any
other property of a similar nature.
[Definition of ‘trade mark’ substituted by s. 17 (1) (c) of Act 32 of 2004.] (2) There shall be allowed as a deduction during any year of assessment commencing on or after 1
January 2004-
(a) any expenditure actually incurred by a taxpayer in that year of assessment (other than
costs contemplated in subsection (3))-
(i) in respect of research and development undertaken directly by that taxpayer; or
(ii) by way of payment to any other person for research and development undertaken
by that other person on behalf of that taxpayer,
for purposes of devising, developing or creating any invention, patent, design, copyright
or other property which is of a similar nature (other than any trade mark);
(b) any expenditure actually incurred by a taxpayer in that year of assessment (other than
costs contemplated in subsection (3)), for purposes of-
(i) registration of any invention, patent, design, copyright or other property; and
(ii) obtaining the extension of the period of legal protection, the extension of the
registration period, or the renewal of the registration of any such invention, patent,
design, copyright or other property.
(3) There shall be allowed as a deduction by a taxpayer in respect of any building, machinery,
plant, implement, utensil and article of a capital nature used by that taxpayer for purposes of research and
development, an allowance equal to 40 per cent of the cost of that building, machinery, plant, implement,
utensil and article in the year of assessment that it is brought into use for the first time by that taxpayer and
20 per cent in each of the three immediately succeeding years of assessment: Provided that where any
building was used partly for research and development and partly for other purposes in the same year of
assessment, the allowance for that year of assessment shall be limited to an amount which bears to the full
amount of the allowance for that year, the same ratio as the use of that building for research and
development bears to the total use of that building in that year of assessment.
(4) No deduction shall be allowed under subsection (2) (a) (ii) in respect of any expenditure,
unless-
(a) that expenditure relates to the devising, developing or creating of any such invention,
patent, design, copyright or other property;
(b) the payments are for discovery of new information; and
(c) full ownership and control by the taxpayer exists over the results of such research and
development including any such invention, patent, design, copyright or other property.
(5) No allowance shall be allowed in terms of this section in respect of any machinery, plant,
implement, utensil and article of a person which was used during the year of assessment for purposes other
than research and development.
(6) The allowance contemplated in this section shall apply in lieu of any other deduction or
allowance granted under any other provision of this Act, unless the taxpayer elects in the year of
assessment that the building, machinery, plant, implement, utensil or article is brought into use for the first
time by that taxpayer that the deduction or allowance granted under that other provision shall apply, in
which case subsection (3) shall not apply in respect of that building, machinery, plant, implement, utensil

116 or article, as the case may be.
[S. 11B inserted by s. 29 of Act 45 of 2003.] 11C Deductions in respect of foreign dividends
(1) In determining the taxable income of a person for a year of assessment which is derived from
any foreign dividends received by or accrued to that person during that year, there shall be allowed as a
deduction any interest actually incurred by that person during that year in the production of income in the
form of foreign dividends.
(2) The amount of the deduction under subsection (1) is limited to the amount of foreign dividends
which are included in the income of the person during the year of assessment.
(3) The amount by which the interest referred to in subsection (1) exceeds the amount of the
foreign dividends referred to in subsection (2) (if any), must be reduced by the amount of any foreign
dividends received by or accrued to that person during the year of assessment which are exempt from tax
and the balance must-
(a) be carried forward to the immediately succeeding year of assessment; and
(b) be deemed to be an amount of interest actually incurred by that person during that
succeeding year of assessment in the production of income in the form of foreign
dividends.
(4) Notwithstanding section 23 (g), a person may elect that there shall be allowed to be deducted
from any income of that person in the form of foreign dividends, the amount of withholding tax on
dividends proved to be payable in respect of any foreign dividend which is included in the income of that
person.
(5) An election made by a person in terms of subsection (4) applies in respect of all foreign
dividends received by or accrued to that person during the year of assessment for which the election was
made.
[S. 11C inserted by s. 18 (1) of Act 32 of 2004.] 11bis ……
Cases
[S. 11bis inserted by s. 10 (1) of Act 90 of 1962 and repealed by s. 20 of Act 74 of 2002.] 11ter ……
[S. 11ter inserted by s. 10 of Act 90 of 1964, substituted by s. 12 of Act 88 of 1965 and by s. 14 of Act 55
of 1966 and repealed by s. 12 of Act 141 of 1992.] 11quat ……
[S. 11quat inserted by s. 10 of Act 90 of 1964, substituted by s. 12 of Act 88 of 1965 and repealed by s. 13
of Act 141 of 1992.] 11quin ……
[S. 11quin inserted by s. 10 of Act 90 of 1964, substituted by s. 12 of Act 88 of 1965, amended by s. 11 of
Act 113 of 1977 and repealed by s. 14 of Act 141 of 1992.] 11sex Deduction of compensation for railway operating losses
For the purpose of determining the taxable income derived by any taxpayer from carrying on any
trade within the Republic, there shall be allowed as a deduction from the income of the taxpayer so derived
the amount of any compensation due to Transnet Limited and paid by the taxpayer (whether directly or
through any trade association of which the taxpayer is a member) in respect of any loss incurred by
Transnet Limited in operating any railway line, if-
(a) such railway line was constructed under or in pursuance of a written agreement with
Transnet Limited in terms of which Transnet Limited undertook to operate the railway
line;
[Para. (a) substituted by s. 11 (1) of Act 65 of 1973 and by s. 31 of Act 30 of 1998.] (b) the compensation so paid was paid in order to discharge an obligation under the said
agreement to pay such compensation; and
(c) the taxpayer’s liability to pay such compensation was incurred in connection with his
trade.
[S. 11sex inserted by s. 10 of Act 90 of 1972 and amended by s. 31 of Act 30 of 1998.] 11sept ……
[S. 11sept inserted by s. 14 (1) of Act 85 of 1974, amended by s. 11 (1) of Act 103 of 1976 and by s. 12 (1)
of Act 113 of 1977, substituted by s. 9 (1) of Act 104 of 1979, amended by s. 11 (1) of Act 96 of 1981, by

117 s. 9 (1) of Act 91 of 1982, by s. 13 (1) of Act 121 of 1984, by s. 8 (1) of Act 96 of 1985 and by s. 12 of Act
101 of 1990 and repealed by s. 15 of Act 129 of 1991.] 11oct ……
[S. 11oct inserted by s. 10 (1) of Act 91 of 1982 and repealed by s. 21 (1) of Act 53 of 1999.] 12 ……
Cases
[S. 12 amended by s. 11 of Act 90 of 1962, by s. 4 of Act 6 of 1963 and by s. 10 (1) of Act 72 of 1963,
substituted by s. 11 (1) of Act 90 of 1964, amended by s. 13 (1) of Act 88 of 1965, substituted by s. 15 (1)
of Act 55 of 1966, amended by s. 12 (1) of Act 52 of 1970, by s. 11 (1) of Act 88 of 1971, by s. 11 of Act
90 of 1972, by s. 12 (1) of Act 65 of 1973, by s. 15 (1) of Act 85 of 1974, by s. 11 (1) of Act 69 of 1975, by
s. 13 of Act 113 of 1977, by s. 6 (1) of Act 101 of 1978, by s. 10 of Act 104 of 1979, by s. 9 of Act 104 of
1980, by s. 12 (1) of Act 96 of 1981, by s. 11 (1) of Act 91 of 1982, by s. 14 (1) of Act 121 of 1984, by s. 9
(1) of Act 96 of 1985, by s. 8 (1) of Act 65 of 1986 and by s. 11 of Act 85 of 1987 and repealed by s. 16 of
Act 129 of 1991.] 12A ……
[S. 12A inserted by s. 16 of Act 55 of 1966, amended by s. 13 (1) of Act 95 of 1967, by s. 12 (1) of Act 88
of 1971, by s. 12 of Act 69 of 1975, by s. 13 (1) of Act 96 of 1981, by s. 12 (1) of Act 91 of 1982, by s. 12
(1) of Act 94 of 1983, by s. 9 (1) of Act 65 of 1986 and by s. 10 of Act 90 of 1988 and repealed by s. 17 of
Act 129 of 1991.] 12B Deduction in respect of certain machinery, plant, implements, utensils and articles
Cases
(1) In respect of any-
(a) machinery or plant (other than machinery or plant in respect of which an allowance has
been granted to the taxpayer under paragraph (b)) which is on or after 1 January 1989
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)) which is let by any taxpayer and is on
or after 1 January 1989 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)) which is on or after 1 January 1989
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 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 item (e))
which was or is on or after 4 June 1988 brought into use for the first time by any taxpayer
for the purposes of his trade as hotelkeeper and 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)) which was or is let by any taxpayer and was or is on or after 4 June 1988 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) machinery, implement, utensil or article (other than livestock) which is on or after 1 July
1988 brought into use for the first time by any taxpayer and used by him in the carrying

118 on of his 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
[Para. (f) substituted by s. 13 of Act 28 of 1997.] (g) machinery, plant, implement, utensil or article 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,
[Para. (g) added by s. 11 (1) of Act 16 of 2004.] a deduction calculated in terms of subsection (2) shall be allowed in respect of the year of assessment
during which such machinery, plant, implement, utensil or article (hereinafter referred to as an asset) is so
brought into use and each of the two succeeding years of assessment, such succeeding years of assessment
hereinafter in this section referred to as the second and third years, in chronological order.
(2) The deduction contemplated in subsection (1) shall be calculated on the cost to the taxpayer of
the asset, as referred to in subsection (3), and the rate of the allowance shall be-
(a) in respect of the year of assessment during which the asset is so brought into use, 50 per
cent of such cost;
(b) in respect of the second year, 30 per cent of such cost; and
(c) in respect of the third year, 20 per cent of such cost.
(3) For the purposes of this section the cost to a taxpayer of any asset shall be deemed to be the
cost which a person would, if he 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.
(4) No deduction shall be allowed under this section in respect of-
(a) any asset which has been let by the taxpayer under a lease other than an operating lease
as defined in section 23A (1), unless-
(i) the lessee under such lease derives in the carrying on of his trade amounts
constituting income for the purposes of this Act; and
(ii) the period for which the asset is let under such lease is at least 5 years or such
shorter period as is shown by the taxpayer to be the useful life of the asset;
(b) any asset contained in or forming part of any ship, if the cost of such asset has been
included in the adjustable cost of such ship as defined in section 14 (2);
(c) any asset brought into use by any company during any year of assessment if such asset
was previously brought into use by any other company during such year and both such
companies are managed, controlled or owned by substantially the same persons, and a
deduction under this section, section 12 (1) or section 27 (2) (d) was previously granted
to such other company;
(d) any asset which has been disposed of by the taxpayer during any previous year of
assessment; and
(e) any asset referred to in subsection (1) (a) to (e), inclusive, which is brought into use after
15 December 1989, except such an asset acquired by the taxpayer under an agreement
formally and finally signed by every party to the agreement on or before that date.
[Para. (e) added by s. 13 (1) (a) of Act 101 of 1990.] (4A) Where-
(a) any asset was brought into use by any person as contemplated in subsection (1) during
any year of assessment;
(b) such asset was previously brought into use by any connected person in relation to such
person; and
[Para. (b) substituted by s. 10 (1) of Act 113 of 1993.] (c) a deduction under this section, section 12 (1) or section 27 (2) (d) was previously granted
to such connected person, whether in the current or any previous year of assessment,
the deduction in terms of this section shall be calculated on an amount not exceeding the lesser of the cost

119 of such asset to such connected person or the market value thereof as determined on the date upon which
the asset was brought into use by such person.
[Sub-s. (4A) inserted by s. 13 (1) (b) of Act 101 of 1990 and amended by s. 6 (1) of Act 140 of 1993.] (4B) Where any asset in respect of which any deduction is claimed in terms of this section was
during any previous financial year brought into use for the first time by the taxpayer for the purposes of any
trade carried on by such taxpayer, the receipts and accruals of which were not included in the income of
such taxpayer during such year, any deduction which could have been allowed in terms of this section
during such previous year or any subsequent year that such asset was used by such taxpayer shall for the
purposes of this section be deemed to have been allowed during such previous year or years as if the
receipts and accruals of such trade had been included in the income of such taxpayer.
[Sub-s. (4B) inserted by s. 17 of Act 59 of 2000.] (5) The deductions which may be allowed in terms of this section in respect of any asset shall not
in the aggregate exceed the cost to the taxpayer of such asset.
(6) Where a lessor of any asset under a lease contemplated in paragraph (a) of subsection (4) has
within the period contemplated in subparagraph (ii) of that paragraph, reckoned from the commencement of
the period for which the asset is let under such lease, disposed of the whole or a portion of his interest in the
lease or of his right to receive rent under the lease, there shall be included in his income for the year of
assessment during which the disposal is made a sum equal to the aggregate of any deductions allowed to
him 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 interest or right which has not
been disposed of by the lessor.
[S. 12B inserted by s. 11 of Act 90 of 1988.] 12C Deduction in respect of certain machinery, plant, implements, utensils and articles
Cases
(1) In respect of any-
(a) machinery or plant (other than machinery or plant in respect of which an allowance has
been granted to the taxpayer under paragraph (b) or section 12E) 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
[Para. (a) substituted by s. 11 (1) of Act 19 of 2001.] (b) machinery or plant (other than machinery or plant in respect of which an allowance has
been granted to the taxpayer under paragraph (a)) which was or is let by any 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)) 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 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)) which was or is brought into use for the first time by any 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)) which was or is let by any 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

120 hotel, except any vehicle or equipment for offices or managers’ or servants’ rooms; or
(f) aircraft 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 trade (other than an aircraft in respect of which an
allowance has been granted to the taxpayer under section 12B or 14bis); or
[Para. (f) added by s. 13 (1) (b) of Act 21 of 1995.] (g) ship 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 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)),
[Para. (g) added by s. 13 (1) (b) of Act 21 of 1995.] a deduction equal to 20 per cent of the cost of such machinery, plant, implement, utensil, article, ship or
aircraft (hereinafter referred to as an 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: Provided that where-
(a) such asset is a ship or aircraft, the deduction shall be calculated on the adjustable cost as
determined in terms of section 14 or 14bis, as the case may be; and
(b) any new or unused machinery or plant referred to in paragraph (a) or (b), as the case may
be, of this subsection was or is-
(i) (aa) acquired by the taxpayer under an agreement (whether conditional or not)
concluded during the period commencing on 1 July 1996 and ending on 30
September 1999; and
(bb) brought into use by the taxpayer or the lessee, as the case may be, during
such period; or
(ii) (aa) acquired by the taxpayer under an agreement formally and finally signed
by every party to the agreement during the period commencing on 1 July
1996 and ending on 30 September 1999; and
(bb) brought into use by the taxpayer or the lessee, as the case may be, during
the period commencing on 1 October 1999 and ending on 31 March 2000;
(c) any new or unused machinery or plant referred to in paragraph (a) of this subsection, is or
was-
(i) acquired by the taxpayer under an agreement formally and finally signed by every
party to the agreement on or after 1 March 2002; and
[Sub-para. (i) substituted by s. 30 of Act 45 of 2003.] (ii) brought into use by the taxpayer on or after that date in a process of manufacture
or process which in the opinion of the Commissioner is of a similar nature, carried
on by that taxpayer in the course of its business (other than banking, financial
services, insurance or rental business),
[Sub-para. (ii) substituted by s. 30 of Act 45 of 2003.] the deduction under this subsection shall be increased to 40 per cent of the cost of such
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.
[Para. (c) substituted by s. 15 of Act 30 of 2002.] [Sub-s. (1) amended by s. 13 (1) (c) of Act 21 of 1995 and by s. 10 (1) of Act 46 of 1996.] (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 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.
(3) No deduction shall be allowed under this section in respect of-
(a) any asset which has been let by the taxpayer under a lease other than an operating lease
as defined in section 23A (1), unless the lessee under such lease derives in the carrying
on of his trade amounts constituting income for the purposes of this Act;
(b) any asset contained in, or forming part of, any ship, if the cost of such asset has been

121 included in the adjustable cost of such ship as defined in section 14 (2);
(c) any asset which has been disposed of by the taxpayer during any previous year of
assessment.
(4) Where-
(a) any asset was brought into use by any person as contemplated in subsection (1) during
any year of assessment;
(b) such asset was previously brought into use by any connected person in relation to such
person; and
(c) a deduction under this section, section 12 (1), section 12B, section 14 (1) (a) or (b),
section 14bis or section 27 (2) (d) was previously granted to such connected person,
whether in the current or any previous year of assessment,
[Para. (c) substituted by s. 13 (1) (d) of Act 21 of 1995.] the deduction in terms of this section shall be calculated on an amount not exceeding the lesser of the cost
of such asset to such connected person or the market value thereof as determined on the date upon which
the asset was brought into use by such person.
[Sub-s. (4) amended by s. 7 (1) of Act 140 of 1993.] (4A) Where any asset in respect of which any deduction is claimed in terms of this section was
during any previous financial year brought into use for the first time by the taxpayer for the purposes of any
trade carried on by such taxpayer, the receipts and accruals of which were not included in the income of
such taxpayer during such year, any deduction which could have been allowed in terms of this section
during such previous year or any subsequent year that such asset was used by such taxpayer shall for the
purposes of this section be deemed to have been allowed during such previous year or years as if the
receipts and accruals of such trade had been included in the income of such taxpayer.
[Sub-s. (4A) inserted by s. 18 (a) of Act 59 of 2000.] (5) The deductions which may be allowed or deemed to have been allowed in terms of this section
and section 11 (o) in respect of any asset shall not in the aggregate exceed the cost to the taxpayer of such
asset.
[Sub-s. (5) substituted by s. 18 (b) of Act 59 of 2000.] (6) Any expenditure (other than expenditure referred to in section 11 (a)) incurred by a taxpayer
during any year of assessment in moving an asset in respect of which a deduction was allowed or is
allowable under this section or section 12B from one location to another shall-
(a) where the taxpayer is entitled to a deduction in respect of such asset under subsection (1)
in that year and one or more succeeding years, be allowed to be deducted from his
income in equal instalments in each year in which such a deduction is allowable; or
(b) in any other case, be allowed to be deducted from his income in that year.
[Sub-s. (6) deleted by s. 11 (1) of Act 113 of 1993 and added by s. 11 of Act 21 of 1994.] [S. 12C inserted by s. 14 (1) of Act 101 of 1990.] 12D Deduction in respect of certain pipelines, transmission lines and railway lines
(1) For the purposes of this section-
‘affected asset’ means any-
(a) pipeline used for the transportation of natural oil;
(b) line or cable used for the transmission of electricity;
(c) telephone line or cable used for the transmission of any signal for the purposes of
telecommunication; and
(d) railway line used for the transportation of persons, goods or things,
contracted for on or after the effective date, and the construction, erection or installation of which
commenced on or after such date, and includes any earthworks or supporting structures forming part of
such pipeline, transmission line or cable or railway line;
‘effective date’ means 23 February 2000; and
‘natural oil’ means any liquid or solid hydrocarbon or combustible gas existing in a natural
condition in the earth’s crust and includes any refined by-products of such liquid or solid hydrocarbon or
combustible gas.
(2) There shall be allowed to be deducted an allowance in respect of the cost actually incurred by
the taxpayer in respect of the acquisition of any new and unused affected asset which-
(a) is owned by the taxpayer and is brought into use for the first time by such taxpayer on or
after the effective date; and

122 (b) is used directly by such taxpayer for-
(i) the transportation of persons, goods, things or natural oil; or
(ii) the transmission of electricity or any telecommunication signal,
to the extent that such affected asset is used in the production of his income: Provided that such
transportation or transmission is not carried on by that taxpayer in the course of carrying on any banking,
financial services, insurance or rental business.
[Sub-s. (2) substituted by s. 19 (1) (a) of Act 59 of 2000 and by s. 28 (1) of Act 60 of 2001 and amended by
s. 16 (1) of Act 30 of 2002.] (3) The allowance contemplated in subsection (2) shall not for any one year exceed-
(a) 10 per cent of the cost incurred in respect of any asset contemplated in paragraph (a) of
the definition of ‘affected asset’; or
(b) 5 per cent of the cost incurred in respect of any asset contemplated in paragraph (b), (c)
or (d) of the definition of ‘affected asset’.
(3A) Where any affected asset in respect of which any deduction is claimed in terms of this
section was during any previous financial year brought into use for the first time by the taxpayer for the
purposes of any trade carried on by such taxpayer, the receipts and accruals of which were not included in
the income of such taxpayer during such year, any deduction which could have been allowed in terms of
this section during such previous year or any subsequent year in which such asset was used by such
taxpayer shall for the purposes of this section be deemed to have been allowed during such previous year or
years as if the receipts and accruals of such trade had been included in the income of such taxpayer.
[Sub-s. (3A) inserted by s. 19 (b) of Act 59 of 2000.] (4) For the purposes of this section the cost to a taxpayer of any affected asset shall be deemed to
be-
(a) where such asset has been acquired to replace any asset which has been damaged or
destroyed, the actual cost of such asset, less any amount which has been recovered or
recouped in respect of the damaged or destroyed asset which 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; or
(b) in any other case, the lesser of-
(i) the actual cost of acquisition of the asset incurred by the taxpayer; or
(ii) 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).
(5) No deduction shall be allowed under this section in respect of any affected asset which has
been disposed of by the taxpayer during any previous year of assessment.
(6) The deductions which may be allowed or deemed to have been allowed in terms of this section
and any other provision of this Act in respect of the cost of any affected asset shall not in the aggregate
exceed the amount of such cost.
[Sub-s. (6) substituted by s. 19 (c) of Act 59 of 2000.] [S. 12D inserted by s. 23 (1) of Act 30 of 2000.] 12E Deductions in respect of small business corporations
(1) Where any plant or machinery (hereinafter referred to as an asset) of a taxpayer which qualifies
as a small business corporation-
(a) is brought into use for the first time by that taxpayer on or after 1 April 2001 for the
purpose of that taxpayer’s trade (other than mining or farming); and
(b) is used by that taxpayer directly in a process of manufacture (or any other process which
in the opinion of the Commissioner is of a similar nature) carried on by that taxpayer,
a deduction equal to the cost of such asset shall be allowed in the year that such asset is so brought into use.
(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 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

123 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.
(3) Any expenditure (other than expenditure referred to in section 11 (a)) incurred by a taxpayer
during any year of assessment in moving an asset in respect of which a deduction was allowed or is
allowable under this section from one location to another shall be allowed to be deducted from that
taxpayer’s income in that year.
(3A) Any expenditure and losses actually incurred by a small business corporation in the year of
assessment during which that small business corporation commences trading shall be increased by an
amount equal to such expenditure and losses, but limited to R20 000.
[Sub-s. (3A) inserted by s. 31 (1) (d) of Act 45 of 2003.] (4) For the purposes of this section-
(a) small business corporation’ means any close corporation or any company registered as a
private company in terms of the Companies Act, 1973 (Act 61 of 1973), the entire
shareholding of which is at all times during the year of assessment held by shareholders
or members that are natural persons, where-
(i) the gross income for the year of assessment does not exceed R5 million: Provided
that where the close corporation or company during the relevant year of
assessment carries on any trade, for purposes of which any asset contemplated in
this section is used, for a period which is less than 12 months, the amount of R5
million shall be reduced to an amount which bears to R5 million, the same ratio as
the number of months (in the determination of which a part of a month shall be
reckoned as a full month), during which that company or close corporation carried
on that trade bears to 12 months;
[Sub-para. (i) amended by s. 17 (1) of Act 30 of 2002 and by s. 37 (1) of Act 12 of 2003.] (ii) none of the shareholders or members at any time during the year of assessment of
the company or close corporation holds any shares or has any interest in the equity
of any other company as defined in section 1, other than-
(aa) a company contemplated in paragraph (a) of the definition of ‘listed
company’;
(bb) any portfolio in a collective investment scheme contemplated in paragraph
(e) of the definition of ‘company’; or
(cc) a company contemplated in section 10 (1) (e) (i), (ii) or (iii);
[Sub-para. (ii) substituted by s. 21 of Act 74 of 2002 and by s. 31 (1) (b) of Act 45 of 2003.] (iii) not more than 20 per cent of the total of all receipts and accruals (other than those
of a capital nature) and all the capital gains of the company or close corporation
consists collectively of investment income and income from the rendering of a
personal service; and
[Sub-para. (iii) substituted by s. 31 (1) (c) of Act 45 of 2003.] (iv) such company is not an employment company;
(b) ’employment company’ means any company-
(i) which is a labour broker as defined in the Fourth Schedule to the Act, other than a
labour broker in respect of which a certificate of exemption has been issued in
terms of paragraph 2 (5) of the said Schedule; or
(ii) which is a personal service company as defined in the Fourth Schedule;
(c) ‘investment income’ means-
(i) any income in the form of dividends, royalties, rental, annuities or income of a
similar nature;
(ii) any interest as contemplated in section 24J, any amount contemplated in section
24K and any other income which, by the laws of the Republic administered
by the Commissioner, is subject to the same treatment as income from
money lent; and
(iii) any proceeds derived from investment or trading in financial instruments
(including futures, options and other derivatives), marketable securities or
immovable property;
(d) ‘personal service’ means any service in the field of accounting, actuarial science,
architecture, auctioneering, auditing, broadcasting, broking, commercial arts, consulting,

124 draftsmanship, education, engineering, entertainment, health, information technology,
journalism, law, management, performing arts, real estate, research, secretarial services,
sport, surveying, translation, valuation or veterinary science, which is performed
personally by any person who holds an interest in the company or close corporation.
[S. 12E inserted by s. 12 of Act 19 of 2001 and amended by s. 31 (1) (a) of Act 45 of 2003.] 12F Deduction in respect of certain aircraft hangars, aprons, runways and taxiways
(1) For the purposes of this section-
‘affected asset’ means any new and unused aircraft hangar, apron, runway or taxiway on any
designated airport, contracted for on or after the effective date, and the construction, erection or installation
of which commenced on or after such date, and includes any earthworks or supporting structures forming
part of such hangar, apron, runway or taxiway;
‘designated airport’ means an airport approved by the Minister, in consultation with the Minister of
Transport, as a designated airport by notice in the Gazette for purposes of this section; and
‘effective date’ means 1 April 2001.
(2) In respect of any affected asset which-
(a) is brought into use for the first time by such taxpayer on or after the effective date; and
(b) is used directly by such taxpayer in carrying on his sole business as airport operator,
there shall be allowed to be deducted an allowance in respect of the cost actually incurred by the taxpayer
in respect of the acquisition (including the construction, erection or installation) of such asset to the extent
that such affected asset is used in the production of the taxpayer’s income.
(3) The allowance contemplated in subsection (2) in respect of an affected asset shall, in respect of
any one year of assessment, be five per cent of the cost incurred in respect of that asset.
(4) 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 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.
(5) No deduction shall be allowed under this section in respect of any affected asset which has
been disposed of by the taxpayer during any previous year of assessment.
(6) The deductions which may be allowed or deemed to have been allowed in terms of this section
and any other provision of this Act in respect of the cost of any affected asset shall not in the aggregate
exceed the amount of such cost.
[S. 12F inserted by s. 12 of Act 19 of 2001.] 12G Additional industrial investment allowance in respect of industrial assets used for qualifying
strategic industrial projects
(1) For the purposes of this section-
‘cost of an industrial asset’ means the direct expenditure actually incurred by a company to acquire,
erect, construct or install an industrial asset, excluding-
(a) so much of the expenditure-
(i) as exceeds the fair market value of that asset; or
(ii) paid to any connected person in relation to that company, as exceeds the lesser of-
(aa) the fair market value of that asset; or
(bb) the costs incurred by that connected person (or any other connected person
in relation to the company) in respect of that asset;
(b) any borrowing or finance costs, including interest as contemplated in section 24J or
raising fees; and
(c) any amount of the expenditure which is or was directly or indirectly received in the form
of any subsidy, rebate, refund or other assistance granted by the national sphere of
government pursuant to any investment incentive;
‘industrial asset’ means-
(a) any plant or machinery acquired, contracted for or brought into the Republic by a
company after the date of approval in terms of subsection (5), which-
(i) has not been used before by any person;

125 (ii) will be brought into use for the first time by that company within four years from
the date of approval in terms of subsection (5);
[Sub-para. (ii) substituted by s. 22 (1) (b) of Act 74 of 2002.] (iii) will be used by that company in the Republic for purposes of carrying on an
industrial project of that company; and
(iv) will qualify for a deduction in terms of section 11 (e) or 12 C (1) (a); or
[Para. (a) amended by s. 22 (1) (a) of Act 74 of 2002.] (b) any building or any improvements effected to a building situated in the Republic,
acquired or contracted for by a company after the date of approval in terms of subsection
(5), where such building or such improvements-
(i) have not been used before by any person;
(ii) will be brought into use by that company within four years from the date of
approval in terms of subsection (5);
[Sub-para. (ii) substituted by s. 22 (1) (c) of Act 74 of 2002.] (iii) will be wholly or mainly used for the purposes of carrying on therein any process
requiring plant and machinery contemplated in paragraph (a); and
(iv) will qualify for a deduction in terms of section 13 (1) (b), (dA) or (f), other than
where the company would qualify for such deduction as a lessor;
‘industrial project’ means-
(a) any manufacturing of products, goods, articles or other things (excluding any tobacco and
tobacco related products) within the Republic that-
(i) is classified under ‘Major Division 3: Manufacturing’ in the most recent Standard
Industrial Classification issued by Statistics South Africa; or
(ii) in the case of products, goods, articles or things which are not yet classified, the
adjudication committee is of the view will be classified as contemplated in
subparagraph (i);
[Para. (a) substituted by s. 22 (1) (d) of Act 74 of 2002.] (b) any computer and computer related activities; or
(c) any research and development activities.
(2) In addition to any other deductions allowable in terms of this Act, a company may, subject to
subsection (3), deduct an amount (hereinafter referred to as an additional industrial investment allowance)
equal to-
(a) 100 per cent of the cost of any industrial asset used in a qualifying strategic industrial
project determined to have preferred status; or
(b) 50 per cent of the cost of any industrial asset used in any other qualifying strategic
industrial project,
in the year of assessment during which that asset is first brought into use by the company as owner thereof
for such project carried on by that company.
(3) The additional industrial investment allowance contemplated in subsection (2)-
(a) will be allowed only against income received by or accrued to the company from carrying
on any industrial project: Provided that the amount whereby such allowance exceeds such
income, shall be carried forward to the immediately succeeding year of assessment and
be deemed to be a deduction or allowance which may be allowed in terms of subsection
(2) in that succeeding year; and
(b) may not exceed the lesser of the amount reflected in the application for approval as being
the cost of the industrial assets to be acquired by the company, as contemplated in
subsection (4) (a), or-
(i) R600 million in the case of any qualifying strategic industrial project with
preferred status; or
(ii) R300 million in the case of any other qualifying strategic industrial project.
(4) An industrial project of a company constitutes a strategic industrial project where, the Minister
of Trade and Industry, after taking into account the recommendations of the adjudication committee, is
satisfied that-
(a) the cost of all industrial assets to be acquired by the company, which will be brought into
use for that industrial project within four years after the date of approval in terms of
subsection (5), will exceed R50 million;

126 [Para. (a) substituted by s. 22 (1) (f) of Act 74 of 2002.] (b) the industrial project will increase production of, and employment in, the relevant
industrial sector within the Republic, after taking into account the displacement within
that sector;
[Para. (b) substituted by s. 29 (1) (a) of Act 60 of 2001.] (c) in the case of an industrial project that represents an expansion of an existing industrial
project, the expansion will significantly increase production in respect of that existing
project;
(d) the company will not receive any concurrent benefit in terms of section 37E or section
37H of this Act;
(e) the industrial project will not constitute an industrial participation project as
contemplated in subsection (7) (e) and will not receive any concurrent investment
incentive provided by any national sphere of government;
(f) the industrial project will have long-term commercial viability after the deduction
provided by this section has been allowed and has been set off against the income of that
company;
(g) the company and any person which is a connected person in relation to that company in
terms of-
(i) paragraph (d) (i), (ii) or (iii) of the definition of ‘connected person’ in section 1; or
(ii) paragraph (d) (iv) or (v) of that definition, taking into account only holdings of 50
per cent or more,
are taxpayers in good standing and must in this regard submit-
(aa) a declaration of good standing stating that all their tax affairs are in order and that
they have complied with all the relevant provisions of the laws administered by
the Commissioner; and
(bb) a certificate obtained from the Commissioner confirming that the company and all
connected persons are registered for tax purposes, that all returns required to be
rendered by that company and connected persons in terms of this Act, or any other
Act administered by the Commissioner, have been timeously rendered and that
any tax, duties or levies due to the Commissioner have been paid, or that
arrangements acceptable to the Commissioner have been made for the submission
of any outstanding returns or the payment of any outstanding taxes, duties or
levies: Provided that where the company submits a request to the Commissioner
for a certificate and the Commissioner fails to respond within 60 days, the
company shall, in the absence of any proof to the contrary, be deemed to have
complied with the provisions of this subparagraph; and
(h) the application for approval of the project by the company is received by the Minister of
Trade and Industry after 31 July 2001, but not later than 31 July 2005, in such form and
containing such information as the Minister of Trade and Industry may prescribe.
(5) The Minister of Trade and Industry must, after taking into account the recommendations of the
adjudication committee, approve a strategic industrial project as a qualifying strategic industrial project,
either with or without preferred status, where that Minister is satisfied that the strategic industrial project
will significantly increase growth or employment within the Republic having regard to-
(a) the extent to which the strategic industrial project will upgrade an industry within the
Republic by-
(i) utilising processes or supplying products that are new to the Republic;
(ii) acting as a key component to related existing industrial projects within the
Republic so as to improve their competitiveness as a whole; or
(iii) engaging in any value-added process;
(b) the extent to which the strategic industrial project will provide general business linkages
within the Republic by-
(i) acquiring goods or services from small, medium and micro enterprises; or
(ii) adding to the physical infrastructure of the Republic that will be available to the
general public; and
(c) the extent to which the strategic industrial project will create either direct or indirect
employment within the Republic.

127 (6) Notwithstanding subsection (5), the Minister of Trade and Industry may not approve any
project where the potential additional industrial investment allowances in respect of that project and all
other approved qualifying strategic industrial projects (other than those projects where the approval thereof
has been withdrawn under subsection (9)), will in the aggregate exceed R10 billion.
(7) The Minister of Finance, in consultation with the Minister of Trade and Industry, must make
regulations-
(a) prescribing the types of projects that will constitute computer activities, computer related
activities and research and development for purposes of paragraphs (b) and (c) of the
definition of ‘industrial project’ in subsection (1);
(b) prescribing the criteria for determining the extent of the increase of production of, and
employment in, an industrial sector required and the extent of the displacement to be
taken into account for purposes of subsection (4) (b);
[Para. (b) substituted by s. 29 (1) (b) of Act 60 of 2001.] (c) prescribing the criteria for purposes of determining whether there is an increase in
production in respect of an existing industrial project and the extent of the increase
required for purposes of subsection (4) (c);
(d) prescribing to what extent a company may have benefited from section 37E or section
37H of this Act for purposes of subsection (4) (d);
(e) prescribing what constitutes an industrial participation project and a concurrent
investment incentive for the purposes of subsection (4) (e);
[Para. (e) substituted by s. 29 (1) (c) of Act 60 of 2001.] (f) prescribing the factors to be taken into account in determining whether the industrial
project will have long-term commercial viability for the purposes of subsection (4) (f);
(g) prescribing what factors need to be taken into account for purposes of subsection (5) (a)
in determining whether-
(i) a process or product will be new to the Republic;
(ii) a company will be acting as a key component to related existing industrial projects
within the Republic; or
(iii) a process will constitute a value-added process;
(h) prescribing what factors need to be taken into account for purposes of subsection (5) (b)
in determining whether-
(i) goods or services will be acquired from small, medium and micro enterprises; or
(ii) the project will add to the physical infrastructure of the Republic; and
(i) prescribing the extent to which the strategic industrial project must create either direct or
indirect employment within the Republic for purposes of subsection (5) (c).
(8) Within six months after the close of each year of assessment (or such longer period as the
Minister of Trade and Industry may allow) starting with the year in which approval is granted in terms of
subsection (5), a company with a qualifying strategic industrial project must annually report to that
Minister with respect to the progress of the project in terms of the requirements of subsections (4) and (5)
in such form and in such manner as that Minister may prescribe.
(9) Where-
(a) in respect of any company carrying on a qualifying strategic industrial project, any
material fact changes during any year of assessment or the company during any year fails
to comply with any requirement contemplated in subsection (4) or (5), which would have
had the effect that approval in terms of subsection (5) would not have been granted had
such change in fact or such failure been known to the Minister of Trade and Industry at
the time of granting approval; or
(b) any company carrying on a qualifying strategic industrial project during any year of
assessments fails to submit a report to the Minister of Trade and Industry, as required in
terms of subsection (8); or
(c) the approval granted in terms of this section to a company carrying on a qualifying
strategic industrial project, was based on any fraudulent information, material
misrepresentation or material omission,
the Minister of Trade and Industry must, after taking into account the recommendations of the adjudication
committee, withdraw the approval granted in respect of that project with immediate effect and direct that
the Commissioner must disallow all additional industrial investment allowances (including any additional

128 industrial investment allowance allowed during that year or any previous year of assessment) in respect of
any asset used in that project: Provided that where the change in material facts or failure to meet any
requirement, as contemplated in paragraph (a), takes place as a result of any event which is outside the
control of the company, that Minister may, taking into account the circumstances of that event,-
(i) disregard that change in material facts; or
(ii) withdraw the approval granted in terms of this section with immediate effect and may
direct that the Commissioner must disallow any additional industrial investment
allowance in respect of that year of assessment or any subsequent year of assessment.
(10) The Commissioner must-
(a) promptly notify the Minister of Trade and Industry whenever the Commissioner
discovers information that may cause a full or part withdrawal of deductions in terms of
subsection (9);
(b) disallow all deductions otherwise provided under this section starting with the date of
approval in terms of subsection (5) where the company has provided any fraudulent
information, material misrepresentation or material omission with respect to any tax, duty
or levy administered by the Commissioner and must notify the Minister of Trade and
Industry accordingly; and
(c) inform the Minister of Trade and Industry where any company has requested the
Commissioner to issue a certificate contemplated in subsection (4) (g) (bb) and that
certificate was denied.
(11) For purposes of subsections (9) and (10), the Commissioner may, notwithstanding the
provisions of sections 79, 81 (5) and 83 (18), raise an additional assessment for any year of assessment
where an additional industrial investment allowance which has been allowed in any previous year must be
disallowed in terms of subsection (9) or (10).
(12) Where the approval of a project has been withdrawn as contemplated in subsection (9), a
company shall in addition to any normal tax, be liable for an amount of additional tax not exceeding twice
the difference between the tax as calculated in respect of its taxable income returned by it and the tax
properly chargeable in respect of its taxable income as determined after disallowing the additional
industrial investment allowance provided by this section.
(13) There shall for the purposes of this section be an adjudication committee which must consist
of at least-
(a) three persons employed by the Department of Trade and Industry, appointed by the
Minister of Trade and Industry; and
(b) three persons employed by either the National Treasury or the South African Revenue
Service, appointed by the Minister of Finance:
Provided that the Minister of Trade and Industry or the Minister of Finance, as the case may be, may
appoint alternative persons so employed if any person appointed in terms of paragraph (a) of (b) is not
available to perform any function as a member of the committee.
(14) The adjudication committee contemplated in subsection (13) is an independent committee
which performs its functions impartially and without fear, favour or prejudice and for the purpose of this
section, the committee may-
(a) evaluate any application and make recommendations to the Minister of Trade and
Industry for purposes of the approval of any strategic industrial project in terms of
subsection (5);
(b) investigate or cause to be investigated any project for the purposes of this section;
(c) monitor all qualifying strategic industrial projects-
(i) to determine whether the objectives of this section are being achieved; and
(ii) to advise the Minister of Finance and the Minister of Trade and Industry on any
future proposed amendment or adjustment thereof;
(d) require any company applying for approval of any project as a qualifying strategic
industrial project in terms of this section, to furnish such information or documents as are
necessary for the committee and Minister of Trade and Industry to perform their
functions in terms of this section;
(e) for a specific purpose and on such conditions and for such period as it may determine
obtain the assistance of any person to advise the committee relating to any function
assigned to the committee in terms of this section; and

129 (f) appoint its own chairperson and determine the procedures for its meetings provided that
all procedures must be properly recorded and minuted.
(15) The adjudication committee and any person whose assistance has been obtained by that
committee may not-
(a) act in any way that is inconsistent with the provisions of subsection (14) or expose
themselves to any situation involving the risk of a conflict between their responsibilities
and private interests; or
(b) use their position or any information entrusted to them, to enrich themselves or
improperly benefit any other person.
(16) The Minister of Trade and Industry-
(a) may, after taking into account the recommendations of the adjudication committee,
extend the four year period contemplated in the definition of ‘industrial asset’ in
subsection (1) by a period not exceeding one year, where an industrial project consists of
industrial assets exceeding R1 billion;
[Para. (a) substituted by s. 22 (1) (g) of Act 74 of 2002.] (b) must provide written reasons for any decision to grant or deny any application for
approval of a strategic industrial project as a qualifying strategic industrial project in
terms of subsection (5), or any withdrawal of approval as contemplated in subsection (9);
(c) must inform the Commissioner of the approval of any project in terms of subsection (5)
as a qualifying strategic industrial project, setting out such particulars required by the
Commissioner to determine the amount of the additional industrial investment allowance
allowable in terms of this section;
(d) must publish the particulars of any application received from a company for approval of a
qualifying strategic industrial project in the Gazette not later than 30 days after providing
to that company the written reasons for any decision as contemplated in paragraph (b);
(e) must submit an annual report to Parliament, and must provide a copy of that report to the
Auditor-General, setting out the following information in respect of each company that
received approval in terms of subsection (5)-
(i) the name of each company;
(ii) the description of each project;
(iii) the potential national revenue forgone by virtue of the deductions allowable in
respect of that project in terms of this section;
(iv) the annual progress relating to the direct benefits of the project in terms of
economic growth or employment, setting out the details of the factors
contemplated in subsections (4) and (5) on which approval for the strategic
industrial project was granted;
(v) any decision to withdraw the approval of a project in terms of subsection (9); and
(vi) any decisions not to withdraw the approval of a project, despite any material
change in facts, as contemplated in paragraph (i) of the proviso to subsection (9).
(17) The Commissioner must submit an annual report to the Auditor-General containing a list of
all-
(a) certificates issued under subsection (4) (g); and
(b) failures to respond within 60 days as provided in subsection (4) (g).
(18) Notwithstanding the provisions of section 4, the Commissioner must disclose to the Minister
of Trade and Industry and the adjudication committee, including any person whose assistance has been
obtained by that committee, such information relating to the affairs of any company carrying on a
qualifying strategic industrial project as is necessary to enable the Minister of Trade and Industry and the
adjudication committee to perform its functions in terms of this section.
(19) Every employee of the Department of Trade and Industry and every member of the
adjudication committee, including any person whose assistance has been obtained by that committee, must
preserve and aid in preserving secrecy with regard to all matters that may come to their knowledge in the
performance of their functions in terms of this section, and may not communicate any such matter to any
person whatsoever other than to the company concerned or its legal representative, nor allow any such
person to have access to any records in the possession or custody of that Department or committee, except
in terms of the law or an order of court.
(20) Any person who contravenes the provisions of subsections (15) and (19), shall be guilty of an

130 offence and liable on conviction to a fine or to imprisonment for a period not exceeding two years.
[S. 12G inserted by s. 12 of Act 19 of 2001.] 12H Deduction in respect of learnership agreements
(1) Notwithstanding section 23B, but subject to subsection (3), there shall be allowed to be
deducted from the income derived by any employer during any year of assessment, an allowance
determined in accordance with subsection (2), where-
(a) that employer during that year of assessment entered into a registered learnership
agreement with a learner in the course of any trade carried on by that employer; or
(b) a learner during that year of assessment completed any registered learnership agreement
entered into by 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.
[Sub-s. (1) amended by s. 32 (1) (a) of Act 45 of 2003.] (2) For purposes of subsection (1), the amount of the allowance in respect of-
(a) a registered learnership agreement entered into by that employer, as contemplated in
subsection (1) (a), with a learner who at the time of entering into that agreement-
(i) was employed by that employer or associated institution in relation to that
employer, is an amount equal to the lesser of-
(aa) 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
(bb) R17 500; or
(ii) was not employed by that employer or any associated institution in relation to that
employer, is an amount equal to the lesser of-
(aa) the annual equivalent of the remuneration of that learner stipulated in the
agreement of employment between that learner and employer; or
(bb) R25 000; and
(b) the completion of any registered learnership agreement as contemplated in subsection (1)
(b), is an amount equal to the lesser of-
(i) the annual equivalent of the remuneration of that learner stipulated in the
agreement of employment between that learner and employer; or
(ii) R25 000.
(3) No deduction shall made by an employer under this section, unless that employer has provided
to the Commissioner-
(a) the name of the SETA with which the learnership agreement is registered;
(b) the title and code of the learnership allocated and issued by the Director-General:
Department of Labour in terms of regulation 2 (3) of the Learnership Regulations, 2001;
(c) the full names and identification number of the learner contemplated in the registered
learnership agreement; and
(d) proof that the employer has complied with all the requirements of the Skills Development
Levies Act, 1999 (Act 9 of 1999).
(4) The provisions of this section shall not apply-
(a) in respect of the substitution of any employer which is party to an existing registered
learnership agreement by any other employer, as contemplated in regulation 5 (1) of the
Learnership Regulations, 2001;
(b) where an employer enters into a registered learnership agreement with a learner as a
result of the substitution of an existing registered learnership agreement, as contemplated
in regulation 5 (2) of the Learnership Regulations, 2001; or
(c) where an employer enters into a registered learnership agreement with a learner, and a
deduction is or was allowable to that employer during any year of assessment in respect
of any other registered learnership agreement entered into by that employer with that
learner in respect of the same learnership registered by the Director General of Labour, as
contemplated in regulation 3 (3) of the Learnership Regulations.
(5) Where-
(a) in the determination of the taxable income of an employer for any year of assessment an
amount is or was allowed as a deduction in respect of any registered learnership
agreement entered into by that employer with any learner, as contemplated in subsection

131 (1) (a); and
(b) that registered learnership agreement is terminated prior to the completion thereof for any
reason other than the death of that learner or the dismissal of that learner due to his or her
incapacity as a result of ill-health or injury,
that amount so allowed as a deduction shall, for the purposes of section 8 (4) (a), be deemed to have been
recovered or recouped by that employer.
(6) For purposes of this section-
‘associated institution’ in relation to an employer means an associated institution as defined in
paragraph 1 of the Seventh Schedule;
’employer’ means-
(a) in the case where a group of employers is party to a registered learnership agreement, the
employer which is identified in that agreement as the lead employer; or
(b) in any other case, the employer which is party to a registered learnership agreement;
‘learner’ means-
(a) a learner who is party to a registered learnership agreement; or
(b) an apprentice in a contract of apprenticeship contemplated in paragraph (b) of the
definition of ‘registered learnership agreement’;
‘Learnership Regulations, 2001’ means the Regulations concerning the Registration of Intended
Learnerships and Learnership Agreements (Government Notice R330 published in Gazette 22197 of 3
April 2001), made by the Minister of Labour in terms of section 36, read with sections 16 (d) and 17 (3)
and (6) of the Skills Development Act, 1998;
‘registered learnership agreement’ means-
(a) a learnership agreement entered into between a learner and an employer before 1 October
2006, which has been registered with a SETA, as contemplated in section 17 (3) of the
Skills Development Act, 1998; or
(b) a contract of apprenticeship registered with the Department of Labour in terms of section
18 of the Manpower Training Act, 1981 (Act 56 of 1981);
‘remuneration’ means remuneration as defined in the Fourth Schedule;
‘SETA’ means a sector education and training authority established in terms of the Skills
Development Act, 1998;
‘Skills Development Act, 1998’ means the Skills Development Act, 1998 (Act 97 of 1998).
[S. 12H inserted by s. 18 (1) of Act 30 of 2002.] 13 Deductions in respect of buildings used in a process of manufacture
Cases
(1) Notwithstanding anything to the contrary contained in paragraph (ii) of the proviso to section
11 (e), there shall be allowed to be deducted from the income of the taxpayer an allowance equal to two per
cent of the cost (after the deduction of any amount referred to in subsection (3) or (7) or the corresponding
provisions of any previous Income Tax Act) to the taxpayer of-
(a) any building the erection of which was commenced by the taxpayer on or after the
twenty-fifth day of March, 1959, but not later than the fourteenth day of March, 1961, if
such building was wholly or mainly used by him during the year of assessment for the
purpose of carrying on therein any process of manufacture in the course of his trade
(other than mining or farming); or
(b) any building the erection of which was commenced by the taxpayer on or after the
fifteenth day of March, 1961, if such building was wholly or mainly used by the taxpayer
during the year of assessment for the purpose of carrying on therein in the course of his
trade (other than mining or farming) any process of manufacture or any other process
which in the opinion of the Commissioner is of a similar nature, or such building was let
by the taxpayer and was wholly or mainly used by a tenant or subtenant for the purpose
of carrying on therein any process as aforesaid in the course of any trade (other than
mining or farming); or
(c) any building the erection of which was commenced on or after the twenty-fifth day of
March, 1959, but not later than the fourteenth day of March, 1961, if such building has
been acquired by the taxpayer by purchase from any other person who was entitled to an
allowance in respect thereof under paragraph (a) or this paragraph or the corresponding

132 provisions of any previous Income Tax Act, and such building was wholly or mainly
used during the year of assessment by the taxpayer for the purpose of carrying on therein
any process of manufacture in the course of his trade (other than mining or farming); or
(d) any building the erection of which was commenced on or after the fifteenth day of
March, 1961, if such building has been acquired by the taxpayer by purchase from any
other person who was entitled to an allowance in respect thereof under paragraph (b) or
this paragraph or the corresponding provisions of any previous Income Tax Act, and such
building was wholly or mainly used during the year of assessment by the taxpayer for the
purpose of carrying on therein in the course of his trade (other than mining or farming) a
process of manufacture or any other process which in the opinion of the Commissioner is
of a similar nature, or such building was let by the taxpayer and was wholly or mainly
used by a tenant or subtenant for the purpose of carrying on therein in the course of any
trade (other than mining or farming) any process as aforesaid; or
(dA) any building that has never been used, if such building has been acquired by the taxpayer
by purchase from any other person and such building was wholly or mainly used during
the year of assessment by the taxpayer for the purpose of carrying on therein in the course
of his trade (other than mining or farming) a process of manufacture or any other process
which in the opinion of the Commissioner is of a similar nature, or such building was let
by the taxpayer and was wholly or mainly used by a tenant or subtenant for the purpose
of carrying on therein in the course of any trade (other than mining or farming) any
process as aforesaid; or
[Para. (dA) inserted by s. 13 of Act 19 of 2001.] (e) any improvements (other than repairs) to any building referred to in paragraph (a), (b),
(c) or (d) which is during the year of assessment used as contemplated in that paragraph,
if such improvements were commenced not later than the thirty-first day of March, 1971;
or
(f) any improvements (other than repairs) to any building, if such improvements were
commenced on or after the first day of April, 1971, and such building was wholly or
mainly used by the taxpayer during the year of assessment for the purpose of carrying on
therein in the course of his trade (other than mining or farming) any process of
manufacture or any other process which in the opinion of the Commissioner is of a
similar nature, or such building was let by the taxpayer and was wholly or mainly used by
a tenant or subtenant for the purpose of carrying on therein any process as aforesaid in the
course of any trade (other than mining or farming):
Provided that-
(a) no allowance shall be made under this subsection in respect of such portion of the cost of
any building the erection of which was commenced on or after 1 July 1961, or any
improvements effected thereto as has been taken into account in the calculation of any
allowance to the taxpayer under section 11 (g) whether in the current or any previous
year of assessment;
(b) in the case of any such building the erection of which has or is commenced on or after 1
January 1989 and any such improvements which have or are commenced on or after that
date, other than any building or improvements in respect of which the increased
allowance contemplated in paragraph (c) of this proviso applies, the allowance under this
subsection shall be increased to 5 per cent of the cost (after the deduction of any amount
as provided in subsection (3)) to the taxpayer of such building or improvements; and
[Para. (b) substituted by s. 22 (a) of Act 53 of 1999.] (c) in the case of any such-
(i) building the erection of which has or is commenced during the period
commencing on 1 July 1996 and ending on 30 September 1999; or
(ii) improvements which have or are commenced during such period; and,
where such building has or is or such improvements have been or are brought into use by
the taxpayer on or before 31 March 2000, the allowance under this subsection shall be
increased to 10 per cent of the cost (after the deduction of any amount as provided for in
subsection (3)) to the taxpayer of such building or improvements.
[Sub-s. (1) amended by s. 12 (a) of Act 90 of 1962 and by s. 17 (1) (a) of Act 55 of 1966, substituted by s.

133 13 (1) (a) of Act 88 of 1971 and amended by s. 10 (1) (a) of Act 96 of 1985, by s. 12 of Act 90 of 1988, by
s. 11 (1) of Act 46 of 1996 and by s. 22 (b) of Act 53 of 1999.] (1A) Where any building in respect of which any deduction of an allowance is claimed in terms of
this section was during any previous financial year or years used by the taxpayer for the purposes of any
trade carried on by such taxpayer, the receipts and accruals of which were not included in the income of
such taxpayer during such year or years, any deduction which could have been allowed during such
previous year or years in terms of this section shall for the purposes of this section be deemed to have been
allowed during such previous year or years as if the receipts and accruals of such trade had been included in
the income of such taxpayer.
[Sub-s. (1A) inserted by s. 20 (a) of Act 59 of 2000.] (2) The aggregate of the allowances allowed under subsection (1) or the corresponding provisions
of any previous Income Tax Act, or deemed to have been allowed in terms of subsection (1A), in respect of
any building or improvements shall not exceed the cost (after the deduction of any amount referred to in
subsection (3) or the corresponding provisions of any previous Income Tax Act) of such building or
improvements, as the case may be, less the aggregate of any allowances made to the taxpayer in respect of
such building or improvements, as the case may be, under subsection (7) or section 11 (g) or the
corresponding provisions of any previous Income Tax Act.
[Sub-s. (2) amended by s. 12 (b) of Act 90 of 1962 and substituted by s. 13 (1) (a) of Act 88 of 1971, by s.
10 (1) (b) of Act 96 of 1985 and by s. 20 (b) of Act 59 of 2000.] (3) If in any year of assessment there falls to be included in a taxpayer’s income in terms of
paragraph (a) of section 8 (4) an amount which has been recovered or recouped in respect of any allowance
made under subsection (1) or the corresponding provisions of any previous Income Tax Act in respect of
any building or improvements, such portion of the amount so recovered or recouped as is set off against the
cost of a further building as hereinafter provided shall, notwithstanding the provisions of the said
paragraph, at the option of the taxpayer to be notified by him in writing to the Commissioner when
submitting his return of income for the year of assessment during which the recovery or recoupment
occurred, and provided he purchases or erects within twelve months or such further period as the
Commissioner may allow from the date on which the event giving rise to the recovery or recoupment
occurred, any other building to which the provisions of subsection (1) apply, not be included in his income
for such year of assessment, but shall be set off against so much of the cost to him of such further building
purchased or erected by him as remains after the deduction of any portion of such cost in respect of which
an allowance has been granted to the taxpayer under section 11 (g), whether in the current or any previous
year of assessment.
[Sub-s. (3) amended by s. 12 (c) and (d) of Act 90 of 1962 and substituted by s. 17 (1) (b) of Act 55 of
1966 and by s. 13 (1) (a) of Act 88 of 1971.] (4) ……
[Sub-s. (4) deleted by s. 12 of Act 113 of 1993.] (4)bis ……
[Sub-s. (4)bis inserted by s. 14 (1) (a) of Act 88 of 1965 and deleted by s. 12 of Act 113 of 1993.] (5) ……
[Sub-s. (5) amended by s. 12 of Act 90 of 1962 and by s. 11 of Act 72 of 1963, substituted by s. 14 (1) of
Act 88 of 1965, by s. 17 (1) of Act 55 of 1966 and by s. 13 (1) of Act 52 of 1970, amended by s. 12 of Act
90 of 1972, by s. 13 (1) of Act 65 of 1973, by s. 16 of Act 85 of 1974, by s. 13 (1) of Act 69 of 1975, by s.
7 of Act 101 of 1978, by s. 10 of Act 104 of 1980 and by s. 14 of Act 96 of 1981 and deleted by s. 12 of
Act 113 of 1993.] (6) ……
[Sub-s. (6) amended by s. 12 of Act 90 of 1962 and by s. 5 of Act 6 of 1963, substituted by s. 12 of Act 90
of 1964, by s. 14 (1) of Act 88 of 1965, by s. 17 (1) of Act 55 of 1966 and by s. 13 (1) of Act 52 of 1970,
amended by s. 12 of Act 90 of 1972, by s. 13 (1) of Act 65 of 1973, by s. 16 of Act 85 of 1974, by s. 13 (1)
of Act 69 of 1975, by s. 7 of Act 101 of 1978, by s. 10 of Act 104 of 1980, by s. 14 of Act 96 of 1981 and
by s. 10 (1) of Act 96 of 1985 and deleted by s. 12 of Act 113 of 1993.] (6A) ……
[Sub-s. (6A) inserted by s. 17 (1) of Act 55 of 1966, substituted by s. 13 (1) of Act 52 of 1970, amended by
s. 13 (1) of Act 88 of 1971, by s. 13 (1) of Act 65 of 1973, by s. 16 of Act 85 of 1974, by s. 13 (1) of Act 69
of 1975, by s. 7 of Act 101 of 1978, by s. 10 of Act 104 of 1980 and by s. 14 of Act 96 of 1981 and deleted
by s. 12 of Act 113 of 1993.]

134 (7) ……
[Sub-s. (7) added by s. 14 (1) of Act 88 of 1965, deleted by s. 17 (1) of Act 55 of 1966, inserted by s. 10 (1)
of Act 96 of 1985, amended by s. 12 of Act 85 of 1987 and deleted by s. 12 of Act 113 of 1993.] (7A) ……
[Sub-s. (7A) inserted by s. 10 (1) (d) of Act 96 of 1985 and deleted by s. 12 of Act 113 of 1993.] (8) The provisions of this section shall mutatis mutandis apply with reference to any permanent
shipbuilding structure the erection of which was commenced by the taxpayer on or after the first day of
January, 1966, and the cost of improvements (other than repairs) effected thereto if such structure was
wholly or mainly used during the year of assessment for the purposes of the shipbuilding trade, and for the
purposes of this subsection any reference in the said provisions to a building shall be construed as a
reference to a shipbuilding structure and any reference therein to improvements to a building shall be
construed as a reference to improvements to a shipbuilding structure.
[Sub-s. (8) added by s. 17 (1) (f) of Act 55 of 1966.] (9) For the purposes of this section-
‘improvements’, in relation to any improvements commenced on or after the first day of April,
1971, means any extension, addition or improvements (other than repairs) to a building which is or are
effected for the purpose of increasing or improving the industrial capacity of the building;
‘shipbuilding structure’ means any launching way, fitting-out quay or craneway which is not part
of a building.
[Sub-s. (9) added by s. 17 (1) (f) of Act 55 of 1966 and substituted by s. 13 (1) (c) of Act 88 of 1971.] [S. 13 amended by s. 30 of Act 60 of 2001.] 13bis Deductions in respect of buildings used by hotel keepers
Cases
(1) Notwithstanding anything to the contrary contained in paragraph (ii) of the proviso to
paragraph (e) of section eleven, there shall be allowed to be deducted from the income of any taxpayer for
any year of assessment ending on or after the first day of January, 1964, an allowance equal to two per cent,
of the cost (after the set-off of any amount as provided in subsection (6)) to the taxpayer-
(a) of any building the erection of which was commenced by the taxpayer on or after the
second day of March, 1960, but not later than the thirty-first day of December, 1963, and
of any improvements (other than repairs) thereto commenced not later than the thirty-first
day of December, 1963, if such building was wholly or mainly used by him during the
year of assessment for the purpose of carrying on therein his trade of hotel keeper; or
(b) of any building the erection of which was commenced by the taxpayer on or after the
fifteenth day of March, 1961, but not later than the thirty-first day of December, 1963,
and of any improvements (other than repairs) thereto commenced not later than the thirty-
first day of December, 1963, if such building was during the year of assessment let by the
taxpayer and wholly or mainly used for the purpose of carrying on therein the trade of
hotel keeper; or
(c) of any building the erection of which was commenced by the taxpayer on or after the first
day of January, 1964, and of any improvements (other than repairs) thereto commenced
not later than the thirtieth day of June, 1965, if such building-
(i) was brought into use not later than the thirtieth day of June, 1965; and
(ii) was during the year of assessment wholly or mainly used by the taxpayer for the
purpose of carrying on therein his trade of hotel keeper or was during such year let
by the taxpayer and wholly or mainly used by the lessee for the purpose of
carrying on therein the lessee’s trade of hotel keeper; or
(d) of such portion-
(i) of any building (other than a building in respect of the cost of which an allowance
under the preceding provisions of this subsection is or was deductible from the
income of the taxpayer for the current or any previous year of assessment) the
erection of which was commenced by the taxpayer on or after the first day of
January, 1964; or
(ii) of any improvements (other than repairs) to any building referred to in this
paragraph or paragraph (a) or (b), if such improvements were commenced on or
after the first day of January, 1964; or

135 (iii) of any improvements (other than repairs) to any building referred to in paragraph
(c), if such improvements were commenced on or after the first day of July, 1965,
as-
(aa) was during the year of assessment used by the taxpayer for the purpose of carrying
on therein his trade of hotel keeper; or
(bb) was during such year let by the taxpayer and used by the lessee for the purpose of
carrying on therein the lessee’s trade of hotel keeper; or
[Para. (d) amended by s. 13 (1) (a) of Act 113 of 1993.] (e) of such portion of any building improvements (other than repairs and other than
improvements in respect of the cost of which, or of any portion thereof, an allowance
under the preceding provisions of this subsection is or was deductible from the income of
the taxpayer for the current or any previous year of assessment) commenced on or after 1
January 1964, as was during the year of assessment in question used by the taxpayer for
the purposes of his trade of hotelkeeper or was during the year of assessment in question
let by the taxpayer and used by the lessee for the purposes of the lessee’s trade of
hotelkeeper:
[Para. (e) substituted by s. 13 (1) (b) of Act 113 of 1993 and by s. 12 (a) of Act 21 of 1994.] Provided that no allowance shall be made under this subsection in respect of such portion of the cost of any
building the erection of which was commenced on or after the first day of July, 1961, or any improvements
effected thereto, as has been taken into account in the calculation of any allowance to the taxpayer under
paragraph (g) of section eleven, whether in the current or any previous year of assessment: Provided further
that in the case of any such building the erection of which has or is commenced on or after 4 June 1988 and
any such improvements which have or are commenced on or after that date the allowance under this
subsection shall be increased to 5% of the cost (after the set-off of any amount as provided in subsection
(6)) to the taxpayer of such building or improvements: Provided further that to the extent to which any
portion of any such improvements which have or are commenced on or after 17 March 1993 does not
extend the existing exterior framework of the building, the allowance under this subsection shall be
increased to 20 per cent of the cost of such portion.
[Sub-s. (1) amended by s. 13 (a) of Act 90 of 1988 and by s. 13 (1) (c) of Act 113 of 1993.] (2) In addition to any allowance under subsection (1), there shall be allowed to be deducted from
the income of the taxpayer an allowance in respect of the cost (after the set-off of any amount as provided
in subsection (6)) of any building or improvements referred to in paragraph (c) of subsection (1) or of any
portion of any building or improvements referred to in paragraph (d) or (e) of subsection (1), provided such
building (or a portion thereof), or the building (or a portion thereof) to which such improvements were
effected, as the case may be, was during the year of assessment in question registered as an hotel under the
Hotels Act, 1965, and such hotel was on the last day of such year graded by the board established under
that Act: Provided that no allowance shall be made under this subsection in respect of such portion of the
cost of any building or any improvements as has been taken into account in the calculation of any
allowance to the taxpayer under paragraph (g) of section eleven, whether in the current or any previous year
of assessment.
(3) The allowance under subsection (2) in respect of the cost (as reduced in terms of that
subsection) of any building (or portion thereof) or of any improvements (or a portion thereof) shall be such
percentage of such cost as may be fixed by the Minister of Finance by regulation under subsection (4) for
the grade of hotel which is, in terms of a determination of the board referred to in subsection (2), applicable
in respect of the hotel in question on the last day of the year of assessment: Provided that where such hotel
is graded by the said board for the first time during any year of assessment (hereinafter referred to as the
subsequent year) subsequent to any year of assessment (hereinafter referred to as the earlier year) during
which such building (or the relevant portion thereof) or such improvements (or the relevant portion thereof)
was or were used in carrying on the trade of hotelkeeper, and the taxpayer is entitled to the said allowance
in respect of the subsequent year, the allowance for the subsequent year (as determined in accordance with
the said regulation) shall, if-
(a) such building (or the relevant portion thereof) or such improvements (or the relevant
portion thereof), as the case may be, is or are completed not later than the thirty-first day
of December, 1969; and
(b) where such hotel was not during the earlier year registered under the Hotels Act, 1965, it
became so registered during the period ending on the thirty-first day of December, 1969,

136 or the period of twelve months reckoned from the date of completion of such building (or
the relevant portion thereof) or of such improvements (or the relevant portion thereof), as
the case may be, whatever period ends later,
be increased by an amount equal to the allowance to which the taxpayer would have been entitled under the
said regulation in respect of the said cost if such regulation had at all relevant times been in force and the
grading of such hotel by the said board which was applicable on the last day of the subsequent year had
also applied on the last day of the earlier year.
[Sub-s. (3) amended by s. 18 (1) (a) of Act 55 of 1966, substituted by s. 14 (1) of Act 95 of 1967 and
amended by s. 46 of Act 97 of 1986.] (3A) Where any building in respect of which any deduction of an allowance is claimed in terms of
this section was during any previous financial year or years used by the taxpayer for the purposes of any
trade carried on by such taxpayer, the receipts and accruals of which were not included in the income of
such taxpayer during such year or years, any deduction which could have been allowed during such
previous year or years in terms of this section shall for the purposes of this section be deemed to have been
allowed during such previous year or years as if the receipts and accruals of such trade had been included in
the income of such taxpayer.
[Sub-s. (3A) inserted by s. 21 (a) of Act 59 of 2000.] (4) The Minister of Finance may make regulations prescribing the rates of the allowances under
subsection (2) in respect of the various grades of hotels determined under the provisions of subsection (1)
of section fifteen of the Hotels Act, 1965, and may in such regulations prescribe rates which vary according
to the grade of hotel or the year of assessment for which any such allowance may be made: Provided that
any rate so prescribed in respect of any year of assessment in respect of any grade of hotel shall not exceed
eight per cent, of the cost or portion thereof on which the relevant allowance is to be calculated.
[Sub-s. (4) amended by s. 46 of Act 97 of 1986.] (5) The aggregate of the allowances under the preceding provisions of this section and subsection
(1) of section thirteen, as applied by subsection (4) of that section, and the corresponding provisions of any
previous Income Tax Act, or any amount deemed to have been allowed in terms of subsection (3A), in
respect of the cost of any building or portion thereof or any improvements or portion thereof shall not
exceed such cost or, if such allowances have been calculated on a portion of such cost, such portion.
[Sub-s. (5) substituted by s. 21 (b) of Act 59 of 2000.] (6) (a) If in any year of assessment there falls to be included in a taxpayer’s income in terms of
paragraph (a) of subsection (4) of subsection eight an amount which has been recovered or recouped in
respect of any allowance made under the preceding provisions of this section or the provisions of
subsection (1) of section thirteen, as applied by subsection (4) of that section, or the corresponding
provisions of any previous Income Tax Act, in respect of any building or portion thereof or any
improvements or portion thereof, so much of the amount so recovered or recouped as is set off against the
cost of a further building as hereinafter provided shall, notwithstanding the provisions of the said
paragraph, at the option of the taxpayer to be notified by him in writing to the Commissioner when
submitting his return of income for the year of assessment during which the recovery or recoupment
occurred, and provided he erects within twelve months or such further period as the Commissioner may
allow from the date on which the event giving rise to the recovery or recoupment occurred, any other
building in respect of the cost of which an allowance is made under the preceding provisions of this section,
not be included in his income for such year of assessment, but shall be set off against so much of the cost to
him of such further building erected by him as remains after the deduction of any portion of such cost in
respect of which an allowance has been granted to the taxpayer under paragraph (g) of section eleven,
whether in the current or any previous year of assessment.
(b) Where any allowance has been made under the provisions of subsection (1) of section thirteen,
as applied by subsection (4) of that section, in respect of the cost of any building, any amount which has in
terms of subsection (3) of that section been set off against such cost, shall be set off against such cost in the
calculation of any allowance made in respect thereof under the preceding provisions of this section.
(7) ……
[Sub-s. (7) substituted by s. 18 (1) (b) of Act 55 of 1966 and deleted by s. 12 (b) of Act 21 of 1994.] (7A) and (7B) ……
[Sub-ss. (7A) and (7B) inserted by s. 18 (1) (c) of Act 55 of 1966 and deleted by s. 12 (b) of Act 21 of
1994.] (8) ……

137 [Sub-s. (8) substituted by s. 18 (1) (d) of Act 55 of 1966 and deleted by s. 12 (b) of Act 21 of 1994.] (9) The allowance under subsection (2) shall not be granted in respect of-
(a) any building the erection of which has or is commenced on or after 4 June 1988; and
(b) any improvements which have or are commenced on or after that date.
[Sub-s. (9) added by s. 14 (1) of Act 88 of 1971, amended by s. 14 (a) of Act 69 of 1975, deleted by s. 13
of Act 94 of 1983, added by s. 13 (b) of Act 90 of 1988 and amended by s. 12 (c) of Act 21 of 1994.] (10) ……
[Sub-s (10) added by s. 14 (1) of Act 88 of 1971, amended by s. 14 (b) of Act 69 of 1975 and deleted by s.
13 of Act 94 of 1983.] (11) ……
[Sub-s. (11) added by s. 14 (1) of Act 88 of 1971, amended by s. 14 (c) of Act 69 of 1975 and deleted by s.
13 of Act 94 of 1983.] [S. 13bis inserted by s. 15 (1) of Act 88 of 1965.] 13ter Deductions in respect of residential buildings
(1) For the purposes of this section-
‘housing project’ means any project for the erection of a building or buildings in the Republic
consisting of or including at least five residential units;
‘residential unit’ means any self-contained residential accommodation consisting of more than one
room (but excluding any hostel, hotel or similar accommodation), the erection of which was commenced by
the taxpayer on or after 1 April 1982 and which was erected under a housing project of the taxpayer-
(a) in order to be let to a tenant for the purpose of deriving a profit for the taxpayer; or
(b) in order to be occupied by a bona fide full-time employee of the taxpayer.
(2) Notwithstanding anything to the contrary contained in paragraph (ii) of the proviso to section
11 (e), there shall, subject to the provisions of this section, be allowed to be deducted from the income of
the taxpayer for the year of assessment referred to in subsection (6) of this section and each succeeding
year of assessment, an allowance, to be known as the residential building annual allowance, equal to two
per cent of the cost to the taxpayer of any residential unit erected by the taxpayer under a housing project of
the taxpayer.
(3) In addition to the deduction provided for in subsection (2), there shall, subject to the provisions
of this section, be allowed to be deducted from the income of the taxpayer for the year of assessment
referred to in subsection (5), an allowance, to be known as the residential building initial allowance, equal
to ten per cent of the cost to the taxpayer of the residential unit referred to in subsection (2).
(4) The allowances under this section shall not be made in respect of any portion of the cost of any
residential unit on any premises not owned by the taxpayer, unless the taxpayer, at the date on which the
erection of such residential unit is commenced, is entitled to the occupation of such premises for a period
ending not less than ten years after such date.
(5) The residential building initial allowance in relation to any residential unit shall be made for
the year of assessment during which such residential unit is for the first time let or occupied as
contemplated in the definition of ‘residential unit’ in subsection (1): Provided that if at the end of such year
of assessment less than five of the residential units of the relevant housing project have for the first time
been let or occupied as contemplated in the definition of ‘residential unit’ in subsection (1), the residential
building initial allowance relating to such residential unit shall not be made for that year of assessment but
shall be made for the first succeeding year of assessment in which at least five of the residential units in
that housing project have been so let or occupied for the first time.
(6) The residential building annual allowance relating to any residential unit shall be made for the
first time for the year of assessment in which the residential building initial allowance is made in respect of
that residential unit.
(6A) Where any building in respect of which any deduction of an allowance is claimed in terms of
this section was during any previous financial year or years used by the taxpayer for the purposes of any
trade carried on by him the receipts and accruals of which were not included in the income of such taxpayer
during such year or years, any deduction which could have been allowed during such previous year or years
in terms of this section shall for the purposes of this section (excluding the provisions of subsection (7) (a))
be deemed to have been allowed during such previous year or years as if the receipts and accruals of such
trade had been included in the income of such taxpayer.
[Sub-s. (6A) inserted by s. 22 (a) of Act 59 of 2000.] (7) If in any year of assessment any residential unit in respect of the cost of which any allowance

138 has been made to the taxpayer under the provisions of this section, whether in the current or any previous
year of assessment, is so used or dealt with by the taxpayer that it ceases to be available either for letting to
a tenant or for occupation by an employee as contemplated in the definition of ‘residential unit’ in
subsection (1)-
(a) there shall be included in the income of the taxpayer for the year of assessment in which
such residential unit is so used or dealt with, the amount of the residential building initial
allowance made to him in respect of the cost of such residential unit, less one-tenth of
such amount for each completed period of one year, but not exceeding ten years, from the
date on which such residential unit was first let or occupied as contemplated in the
definition of ‘residential unit’ in subsection (1) until the date on which such residential
unit was used or dealt with as aforesaid; and
(b) the residential building annual allowance shall not be made in respect of the cost of the
said residential unit for the year of assessment during which such residential unit was
used or dealt with as aforesaid nor in respect of any succeeding year of assessment during
which it continued to be unavailable for the letting or occupation contemplated in the
definition of ‘residential unit’ in subsection (1).
(8) The provisions of sections 8 (4) (a) and 11 (o) shall not apply to so much of the amount of any
residential building initial allowance as has been included in the taxpayer’s income under the provisions of
subsection (7) (a) of this section, whether in the current or any previous year of assessment.
(9) No allowance shall be made under this section in respect of so much of the cost of any
residential unit as has qualified or will qualify for deduction from the taxpayer’s income by way of a
deduction of expenditure or an allowance in respect of expenditure under any other provision of this Act,
whether for the current or any preceding or subsequent year of assessment.
(10) The aggregate of the allowances allowed or deemed to have been allowed under the
preceding provisions of this section in respect of the cost of any residential unit shall not exceed such cost
or, if such allowances have been calculated on a portion of such cost, such portion.
[Sub-s. (10) substituted by s. 22 (b) of Act 59 of 2000.] (11) Where any company is mainly engaged in the provision of housing facilities for the
employees of its sole or principal shareholder or for the employees of any other company the shares in
which are held wholly by the sole or principal shareholder in such firstmentioned company, the employees
of such shareholder or such other company, as the case may be, shall for the purposes of this section be
deemed to be the employees also of such firstmentioned company.
[Sub-s. (11) added by s. 14 of Act 94 of 1983.] [S. 13ter inserted by s. 13 (1) of Act 91 of 1982.] 13quat Deductions in respect of erection or improvement of buildings in urban development zones
(1) For the purposes of this section-
‘certificate of occupancy’ means a certificate contemplated in section 14 (1) of the National
Building Regulations and Building Standards Act, 1977 (Act 103 of 1977);
‘cost’ means the costs (other than borrowing or finance costs) actually incurred in erecting or
extending, adding to or improving a building and includes any costs incurred-
(a) in demolishing any existing building or part thereof;
(b) in excavating the land for purposes of that erection, extension, addition or improvement;
and
(c) in respect of structures or works directly adjoining the building so erected, extended,
added to or improved, for purposes of providing-
(i) water, power or parking with respect to that building;
(ii) drainage or security for that building;
(iii) means of waste disposal for that building; or
(iv) access to that building, including the frontage thereof;
‘urban development zone’ means an area demarcated by a municipality in terms of subsection (6),
the particulars of which were published in the Gazette in terms of subsection (8).
(2) There shall 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 to be used solely
for purposes of that taxpayer’s trade-
(a) which was commenced by the taxpayer on or after the date of publication of the notice

139 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
(b) in respect of which a certificate of occupancy has been granted.
(3) The amount of the allowance contemplated in subsection (2)-
(a) in the case of the erection of any new building or the extension of or addition to any
building (other than a building in respect of which paragraph (b) applies), is equal to-
(i) 20 per cent of the cost to the taxpayer of the erection or extension of or addition to
that building, which is deductible in the year of assessment during which that
building is brought into use by that taxpayer solely for the purposes of that
taxpayer’s trade; and
(ii) five per cent of that cost in each of the 16 succeeding years of assessment; or
(b) in the case of the improvement of any existing building or part of a building (including
any extension or addition which is incidental to that improvement) where the existing
structural or exterior framework thereof is preserved, is equal to-
(i) 20 per cent of the cost to the taxpayer of the improvement, extension or addition
which is deductible in the year of assessment during which the part of the building
so improved, extended or added is brought into use by the taxpayer solely for the
purposes of that taxpayer’s trade; and
(ii) 20 per cent of that cost in each of the four succeeding years of assessment.
(4) No deduction shall be allowed under this section, unless the taxpayer has together with the tax
return for the year of assessment in which the deduction is claimed under subsection (3) (a) (i) or (b) (i),
provided to the Commissioner-
(a) a certificate from the municipality confirming that the building is located within an urban
development zone within that municipality;
(b) the total amount of the costs to the taxpayer 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 were incurred in respect of the erection of a building as
contemplated in subsection (3) (a) or the extension, addition or improvement of a
building as contemplated in subsection (3) (b).
(5) No deduction shall be allowed under this section in respect of any building-
(a) where that taxpayer ceased to use that building solely for purposes of that taxpayer’s trade
during any previous year of assessment; or
(b) which has been disposed of by the taxpayer during any previous year of assessment.
(6) For the purposes of this section, one area may be demarcated by a municipality where-
(a) that area is a developed urban location with the municipality of Buffalo City, Cape Town,
Ekurhuleni, Emalahleni, Emfuleni, eThekwini, Johannesburg, Mafikeng, Mangaung,
Matjhabeng, Mbombela, Msunduzi, Nelson Mandela, Polokwane, Sol Plaatje or
Tshwane;
(b) that area is demarcated through formal resolution by the relevant municipal council;
[Para. (b) substituted by s. 12 of Act 16 of 2004.] (c) that area is prioritised in that municipality’s integrated development plan adopted and
undertaken in terms of Chapter 5 of the Local Government: Municipal Systems Act, 2000
(Act 32 of 2000) as a priority area for further investments to promote business or
industrial activity or residential settlements to support such activity;
[Para. (c) substituted by s. 19 (1) (a) of Act 32 of 2004.] (d) that area proportionately contributes or previously contributed a significant portion of the
total revenue collections for all areas located within the current boundaries of that
municipality, as measured in the form of-
(i) property rates; or
(ii) assessed property values,
and where the contribution from that area is undergoing a sustained real or nominal decline;
[Para. (d) substituted by s. 19 (1) (b) of Act 32 of 2004.] (e) significant fiscal measures have been implemented by that municipality to support the
regeneration of that area, including-
(i) the appropriation of significant funds for developing the area in the annual budget

140 of the municipality;
(ii) special tariffs for categories of residential, commercial or industrial users; or
(iii) partnership arrangements with the business community for the promotion of urban
development within that area; and
(f) ……
[Para. (f) deleted by s. 19 (1) (c) of Act 32 of 2004.] (7) (a) Subject to paragraph (d), the area demarcated in terms of subsection (6) may not exceed-
(i) where that municipality has a population of not more than 500 000 persons, a total area of
150 hectares; or
(ii) where that municipality has a population of more than 500 000 persons, 150 hectares plus
20 hectares for each additional 100 000 persons included in that population.
(b) Where that municipality has a population of 2 million persons or more, the municipal council
may demarcate two areas in lieu of the one area demarcated in terms of subsection (6) provided that-
(i) the two areas do not in total exceed the one area contemplated in paragraph (a) (ii); and
(ii) each area otherwise satisfies the requirements of subsection (6).
(c) For purposes of this subsection, the population of a municipality shall be the population figures
as determined by Statistics South Africa in the Census for 2001 and the total population of that
municipality must be rounded to the nearest multiple of 100 000.
(d) The area demarcated in terms of subsection (6) may exceed the limits contemplated in
paragraph (a) where-
(i) the municipality proves to the Minister that the excess area is integrally related to the area
within the limitation contemplated in paragraph (a);
(ii) the municipality can prove to the Minister that sound economic reasons exist for
demarcating a larger area;
(iii) the municipality has not demarcated two areas as contemplated in subparagraph (b); and
(iv) the Minister is satisfied that the demarcation of the excess area would fall within
Government’s affordability constraints.
(8) The Minister must publish by notice in the Gazette particulars of an area demarcated by a
municipality after that municipality has proved to the Minister that the area so demarcated complies with
the provisions of subsection (6).
(9) Every municipality must provide a report annually to the Commissioner and the Minister for
each urban development zone located within that municipality within such time as is prescribed by the
Minister, listing-
(a) each taxpayer to which a certificate contemplated in subsection 4 (a) has been issued;
(b) the location of each building for which that certificate was issued;
(c) the estimated costs incurred by the taxpayer in respect of each building;
[Para. (c) substituted by s. 19 (1) (e) of Act 32 of 2004.] (d) the estimated total jobs created as a result of this section;
[Para. (d) substituted by s. 19 (1) (e) of Act 32 of 2004.] (e) the additional property rates collected as a result of this section; and
(f) the total applications for a certificate contemplated in subsection 4 (a);
(g) the average turnover time for all planning and building approvals.
[Para. (g) added by s. 19 (1) (f) of Act 32 of 2004.] [Sub-s. (9) amended by s. 19 (1) (d) of Act 32 of 2004.] (10) Where-
(a) a municipality does not provide an annual report as contemplated in subsection (9) or a
quarterly report as contemplated in subsection (6) (f) or the Commissioner reports to the
Minister that the municipality has issued a certificate contemplated in subsection (4) (a)
in respect of a building that is located outside an urban development zone; and
(b) corrective steps are not taken by that municipality within a period specified by the
Minister,
the Minister may withdraw the notice contemplated in subsection (8) for that municipality in respect of
contracts formally and finally signed by all parties thereto on or after the date of withdrawal.
(11) The Commissioner must on an annual basis submit a report to the Minister containing
information relating to-
(a) the number of taxpayers which have during the relevant year claimed an allowance in

141 terms of this section;
(b) the total amount of the deductions by taxpayers allowed in that year in terms of this
section; and
(c) the total amount of the costs to those taxpayers which are or will be allowable as a
deduction in terms of this section.
[S. 13quat inserted by s. 33 of Act 45 of 2003.] 14 Deductions in respect of ships
(1) There shall be allowed to be deducted from the income of any resident who carries on any
business as owner or charterer of any ship-
(a) in respect of any ship used by such person for the purposes of his trade during the year of
assessment an allowance equal to ten per cent of the adjustable cost to him of such ship:
Provided that-
(i) where an allowance under paragraph (b) or the corresponding provisions of any
previous Income Tax Act has been made to any person in respect of any ship, no
allowance shall be made under this paragraph to such person in respect of that
ship for the year of assessment in which the ship is for the first time used by him
for the purposes of his trade; and
(ii) the aggregate of all the allowances made to any person in respect of any ship
under this paragraph, (b) of this subsection and section 11 (e) or the corresponding
provisions of any previous Income Tax Act shall not exceed the cost to such
person of such ship or, if such ship was acquired by such person to replace a ship
and the cost of the ship so acquired has in terms of the definition of ‘adjustable
cost’ or ‘adjustable cost price’ in subsection (2) been reduced by an amount which
has not in terms of section 8 (4) (d) been included in the income of the taxpayer
for the current or any previous year of assessment, the adjustable cost to such
person of the ship so acquired;
[Para. (ii) amended by s. 12 (b) of Act 103 of 1976.] (b) in the case of a person who during any year of assessment concludes a contract for the
acquisition by him of a new ship (whether built or still to be built), or of a ship which is
not new and is proved to the satisfaction of the Secretary for Transport at all times since
its construction to have been maintained in the highest class applicable to a ship of its
type, and who satisfies the Commissioner that the ship in question is or will be a South
African ship and is or will be used by him for the purposes of his trade for prospecting for
minerals (including natural oil) or for mining operations or as a foreign-going ship, an
allowance in respect of that year of assessment equal to forty per cent of the adjustable
cost to the said person of that ship, or, if at the time at which the allowance under this
paragraph has to be made, the cost price of the ship has not yet been determined, of the
adjustable estimated cost price of that ship, provided the said person satisfies the
Commissioner that not less than forty per cent of the cost price or of the estimated cost
price, as the case may be, of the ship will be paid by him within a period of two years or,
if the Commissioner agrees, three years after the end of that year of assessment, or, if the
said person does not so satisfy the Commissioner, an allowance in respect of any year of
assessment equal to forty per cent of the portion, if any, of the adjustable cost price or the
adjustable estimated cost price of the ship paid by him during that year of assessment:
Provided that-
(i) the provisions of this paragraph shall not apply in respect of any ship in respect of
which an allowance has in any year of assessment under this Act or any previous
Income Tax Act been granted to any other person under this subsection or the
corresponding provisions of any previous Income Tax Act;
(ii) if any taxpayer to whom an allowance equal to forty per cent of the adjustable cost
price or adjustable estimated cost price, as the case may be, of any ship has been
made under this paragraph or the corresponding provisions of any previous
Income Tax Act, fails to pay at least forty per cent of such cost price or estimated
cost price, as the case may be, within the said period of two or (as the case may
be) three years after the end of the year of assessment in respect of which the said
allowance has been made, the said allowance shall be included in the income of

142 the said taxpayer for the year of assessment ending on the same day as the said
period, and there shall be deducted from the income of the said taxpayer for that
year of assessment an allowance equal to forty per cent of the portion, if any, of
the adjustable cost price of such ship paid by him during the said period, and from
the income of the said taxpayer for any year of assessment thereafter an allowance
equal to forty per cent of the portion, if any, of the adjustable cost price of such
ship paid by him during that year of assessment; and
(iii) if in respect of any year of assessment the Commissioner is no longer satisfied that
a ship in respect of which an allowance has been made under the preceding
provisions of this paragraph or the corresponding provisions of any previous
Income Tax Act (whether in the current or any previous year of assessment) will
be a South African ship or will be used by the taxpayer as aforesaid, or if in any
year of assessment any such ship which has become a South African ship or has
been used by the taxpayer as aforesaid, ceases to be a South African ship or to be
used by the taxpayer as aforesaid or if in any year of assessment the taxpayer
ceases to be a person referred to in section 9 (1) (c), so much of the amount of the
said allowance as is not in terms of section 8 (4) required to be included in the
taxpayer’s income for the current or any other year of assessment and is not in
terms of ‘adjustable cost’ or ‘adjustable cost price’ in subsection (2) of this section
required to be deducted from the cost or estimated cost price of a further ship
acquired to replace such ship, less such amount as would, if this paragraph had not
been enacted, have been allowed to the taxpayer by way of deductions (in addition
to those actually allowed) under paragraph (a) of this subsection or section 11 (o)
or the corresponding provisions of any previous Income Tax Act, either in the
current or any previous year of assessment, shall in terms of this proviso be
included in the income of the taxpayer for the current year of assessment;
[Para. (b) substituted by s. 17 (a) of Act 85 of 1974 and amended by s. 12 (a) of Act 103 of 1976. Para. (iii)
amended by s. 12 (c) of Act 103 of 1976.] (c) in respect of any expenditure which such person satisfies the Commissioner he is likely to
incur within five years from the end of the year of assessment in question on repairs to
any ship used by him for the purposes of his trade, such an allowance as, notwithstanding
the provisions of section 23 (e), the Commissioner, having regard to the estimated cost of
such repairs and the date on which they are likely to be incurred, may make each year:
Provided that any such allowance in respect of any year of assessment shall be included
in the income of the taxpayer for the following year of assessment.
[Para. (c) amended by s. 14 (a) of Act 21 of 1995.] [Sub-s. (1) amended by s. 23 (a) of Act 59 of 2000.] (1A) Where during any year of assessment a subsidiary company referred to in paragraph (b) of
the definition of ‘South African ship’ in subsection (2) has carried on business as the owner of one or more
ships which are by virtue of the said paragraph South African ships and has not ceased to carry on such
business, there shall be deducted from the income derived during that year of assessment by the parent
company (being a parent company referred to in the said paragraph) of the subsidiary company an
allowance equal to so much of any assessed loss which is in terms of section 20 available to be carried
forward by the subsidiary company to the following year of assessment, as is attributable to any assessed
loss (as determined under section 20) incurred by the subsidiary company in carrying on the aforesaid
business:
Provided that the allowance granted under this subsection to the parent company in respect of any year of
assessment shall be included in the income of that company for the following year of assessment.
[Sub-s. (1A) inserted by s. 17 (b) of Act 85 of 1974 and amended by s. 14 (b) of Act 21 of 1995.] (1B) Where a subsidiary company referred to in paragraph (b) of the definition of ‘South African
ship’ in subsection (2) has on or after 1 January 1974 purchased from its parent company (being a parent
company referred to in the said paragraph), a ship (being a South African ship by virtue of the provisions of
the said paragraph and not being a ship acquired to replace a ship) which is used by the subsidiary company
for the purposes of its trade for prospecting for minerals (including natural oil) or for mining operations or
as a foreign-going ship and in respect of which any allowance has in respect of any year of assessment been
granted to the parent company under subsection (1) (a) or (b) or section 12C-

143 (a) any allowances in respect of such ship granted to the subsidiary company under the
provisions of subsection (1) (a) or section 12C, as the case may be, shall be equal in
amount to the allowances to which the parent company would have been entitled under
those provisions if the parent company had continued to use the ship for the purposes of
its trade;
(b) an allowance in respect of such ship shall not be granted to the subsidiary company under
the provisions of subsection (1) (a) or section 12C in respect of the year of assessment
during which the ship was purchased by the subsidiary company if any allowance in
respect of the ship has been granted to the parent company under the provisions of
subsection (1) (a) or (b) or section 12C in respect of the same year of assessment;
(c) the cost to the subsidiary company of such ship shall, for the purposes of this section, 8
(4), section 11 (o) and section 12C, be deemed to be the adjustable cost to the parent
company of the ship;
(d) the allowances in respect of such ship granted to the parent company under subsection (1)
(a) or (b) of this section or section 12C shall, for the purposes of this section, section 8
(4), section 11 (o) and section 12C, be deemed to be allowances granted to the subsidiary
company in respect of such ship and the provisions of paragraph (iii) of the proviso to
subsection (1) (b) of this section or the proviso to section 8 (4) (e), as the case may be,
shall, as respects such ship apply to the subsidiary company as though it were the
taxpayer referred to in those provisions;
(e) the parent company shall, for the purposes of section 8 (4), not be deemed to have
recovered or recouped out of the purchase consideration payable by the subsidiary
company any of the allowances granted in respect of such ship to the parent company
under subsection (1) (a) or (b) of this section or section 12C and no allowance shall be
made to the parent company under section 11 (o) in respect of such ship and, for the
purposes of paragraph (iii) of the proviso to subsection (1) (b) of this section as
applicable to the parent company, the parent company shall not by reason of the sale of
the ship to the subsidiary company be deemed to have ceased to use the ship; and
(f) in the event of such ship ceasing to be a South African ship or to be used by the
subsidiary as aforesaid, the Commissioner may direct that any amount falling to be
included in the income of the subsidiary company for any year of assessment under
paragraph (iii) of the proviso to subsection (1) (b) or the proviso to section 8 (4) (e), as
the case may be, be included in the income of the parent company for such year of
assessment and not in the income of the subsidiary company.
[Sub-s. (1B) inserted by s. 17 (b) of Act 85 of 1974 and substituted by s. 14 (c) of Act 21 of 1995.] (1C) Where on or after 1 January 1974 any association, corporation or company contemplated in
paragraph (a) of the definition of ‘company’ in section 1 (being a resident who carries on any business as
owner or charterer of any ship) has concluded a contract for the acquisition by it of a ship and such
company (hereinafter referred to as the taxpayer company) satisfies the Commissioner that-
(a) the ship will be sold by the taxpayer company to a subsidiary company of the taxpayer
company for a consideration not exceeding the cost to the taxpayer company of such
ship;
(b) the subsidiary company will qualify for an allowance in respect of the ship under the
provisions of subsection (1) (b); and
(c) not less than forty per cent of the cost price or, if at the time the allowance under this
subsection has to be made, the cost price has not yet been determined, of the estimated
cost price which is payable by the taxpayer company in respect of its acquisition of the
ship will be paid by the taxpayer company within a period of two years or, if the
Commissioner agrees, three years after the end of the year of assessment during which
the said contract was concluded,
there shall be deducted from the income of the taxpayer company for the said year of assessment an
allowance equal to forty per cent of the said cost price or estimated cost price, as the case may be: Provided
that the allowance granted to the taxpayer company under this subsection shall be included in the income of
that company for the year of assessment during which the subsidiary company has qualified for an
allowance in respect of the ship under the provisions of subsection (1) (b) or, if in respect of any earlier
year of assessment the Commissioner is no longer satisfied as to any of the matters in respect of which he is

144 required to be satisfied under this subsection, such earlier year of assessment.
[Sub-s. (1C) inserted by s. 17 (b) of Act 85 of 1974 and amended by s. 23 (b) of Act 59 of 2000.] (1D) (a) Where any subsidiary company (as contemplated in paragraph (b) of the definition of
‘South African ship’ in subsection (2)) carries on business as the owner of any South African ship and does
not carry on any other type of business, the parent company (as contemplated in the said paragraph) in
relation to such subsidiary company may elect that such parent company and such subsidiary company
shall for the purposes of this Act be deemed to be and to have been one and the same company.
(b) Any election made under paragraph (a) shall, unless the Commissioner otherwise directs, be
binding upon the companies concerned in the year of assessment in respect of which it is made and in all
subsequent years of assessment.
(c) The provisions of subsections (1A) and (1B) shall not apply in any year of assessment in which
the provisions of this subsection are applicable.
[Sub-s. (1D) inserted by s. 10 of Act 65 of 1986.] (2) For the purposes of this section-
‘adjustable cost’ or ‘adjustable cost price’, in relation to any ship, means the cost to the taxpayer of
such ship, or, if such ship was acquired by the taxpayer to replace a ship and the ship so acquired is a ship
in relation to which the Commissioner is satisfied in regard to the matters in regard to which he is required
to be satisfied in terms of section 8 (4) (b), the cost to the taxpayer of the ship so acquired, less so much of
any amount referred to in section 8 (4) (a) which has on or after 17 August 1966 been recovered or
recouped in respect of the ship so replaced as does not exceed such cost, and ‘adjustable estimated cost
price’ shall be construed accordingly;
‘foreign-going ship’ means-
(a) a ship plying between a port in one country and a port in another country; or
(b) a ship of not less than two hundred gross register tons plying between ports in the same
country; or
(c) a ship of not less than two hundred gross register tons exclusively employed in sea
fishing or seal catching; or
[Para. (c) substituted by s. 11 of Act 104 of 1979.] (d) a whaling boat other than a shore-based whaling boat of less than two hundred gross
register tons;
‘South African ship’ means-
(a) a ship which is owned by a resident who carries on any business as owner or charterer of
any ship, if such ship is a South African ship as defined in section 2 of the Merchant
Shipping Act, 1951 (Act 57 of 1951); or
(b) if the Minister , having regard to the circumstances of the case, so directs, a ship which is
owned by a company (in this section referred to as a subsidiary company) which is
managed and controlled in the Republic if the sole beneficial shareholder in that company
is an association, corporation or company contemplated in paragraph (a) of the definition
of ‘company’ in section 1 (in this section referred to as a parent company) which is
managed and controlled in the Republic.
[Definition of ‘South African’ ship substituted by s. 23 (c) of Act 59 of 2000.] [Sub-s. (2) substituted by s. 17 (c) of Act 85 of 1974.] (3) Where any allowance under this section is determinable on a portion of the adjustable cost
price paid in respect of any ship, such portion shall for the purposes of this section be deemed to be an
amount which bears to the portion of the cost price paid the same ratio as the adjustable cost price bears to
the full cost price, or, if at the time at which the allowance has to be made the cost price of the ship has not
yet been determined, the estimated cost price payable in respect of such ship.
[Sub-s. (3) added by s. 17 (c) of Act 85 of 1974.] (4) Where any person is entitled to an allowance under this section in respect of any ship acquired
by him on or after 21 June 1993 from a connected person, and a deduction under this section was
previously granted to such connected person in respect of the ship concerned, whether in the current or any
previous year of assessment, the deduction under this section shall be calculated on an amount not
exceeding the lesser of the adjustable cost of the ship concerned to such connected person or the market
value thereof as determined on the date upon which the ship was acquired by such person.
[Sub-s. (4) added by s. 14 (1) of Act 113 of 1993 and substituted by s. 8 (1) of Act 140 of 1993.] (5) The provisions of subsections (1) (a) and (b) and (1C) shall not apply to any ship acquired on

145 or after 1 April 1995 unless such ship was acquired by the taxpayer under an agreement formally and
finally signed by every party to the agreement before that date.
[Sub-s. (5) added by s. 14 (d) of Act 21 of 1995.] (6) (a) The provisions of subsection (1A) shall only apply to any parent company as contemplated
in that subsection in relation to any allowance arising from any assessed loss incurred by the subsidiary
company as contemplated in that subsection in so far as such assessed loss arises from the business carried
on by such subsidiary company as the owner of any ship acquired in terms of an agreement formally and
finally signed by all parties to the agreement on or before 12 March 1997.
(b) Where a parent company as contemplated in subsection (1D) made an election as contemplated
in that subsection, such parent company and a subsidiary company as contemplated in that subsection in
relation to such parent company, shall, notwithstanding the provisions of that subsection, for the purposes
of this Act only be deemed to be or to have been one and the same company in so far as it relates to any
business carried on by such subsidiary company as the owner of any ship acquired in terms of an agreement
formally and finally signed by all parties to the agreement on or before 12 March 1997.
[Sub-s. (6) added by s. 14 of Act 28 of 1997.] [S. 14 amended by s. 13 of Act 90 of 1962 and substituted by s. 19 (1) of Act 55 of 1966.] 14bis Deductions in respect of aircraft
(1) There shall, subject to the provisions of subsection (2), be allowed to be deducted from the
income of any person-
(a) in respect of any aircraft acquired by such person on or after the first day of April, 1965,
and used by him for the purposes of his trade during the year of assessment, an allowance
equal to twenty-five per cent of the adjustable cost to him of such aircraft: Provided that-
(i) where an allowance under paragraph (b) or (c) has been made to any person in
respect of any aircraft, no allowance shall be made to such person under this
paragraph in respect of that aircraft for the year of assessment in which the aircraft
is for the first time used by him for the purposes of his trade;
[Sub-para. (i) amended by s. 15 (a) of Act 141 of 1992.] (ii) the aggregate of all the allowances made to any person in respect of any aircraft
under this paragraph and paragraph (b) or (c) shall not exceed the cost to such
person of such aircraft or, if such aircraft was acquired by such person to replace
an aircraft and the cost of the aircraft so acquired has in terms of paragraph (a) of
subsection (2) been reduced by an amount which has not in terms of paragraph (i)
of subsection (4) of section eight been included in the income of the taxpayer for
the current or any previous year of assessment, the adjustable cost to such person
of the aircraft so acquired;
[Sub-para. (ii) amended by s. 15 (a) of Act 141 of 1992.] (b) if such person is a resident who carries on any business as owner or charterer of any
aircraft and such resident on or after the first day of April, 1965, concludes a contract for
the acquisition by him of a new aircraft (whether built or still to be built), or of an aircraft
which is not new and is proved to the satisfaction of the Secretary for Transport at all
times since its construction to have been maintained in the highest class applicable to an
aircraft of its type, and such resident satisfies the Commissioner that the aircraft in
question is or will be registered by him in the Republic and is or will be used by him in
his business of transporting by air and for reward persons, livestock, goods or mail, an
allowance in respect of the year of assessment during which such contract is concluded
equal to forty per cent of the adjustable cost to such resident of that aircraft, or, if at the
time at which the allowance under this paragraph has to be made, the cost price of the
aircraft has not yet been determined, of the adjustable estimated cost price of that aircraft,
provided the said resident satisfies the Commissioner that not less than forty per cent of
the cost price or of the estimated cost price, as the case may be, of the aircraft will be
paid by him within a period of two years, or, if the Commissioner agrees, three years
after the end of that year of assessment or, if the said resident does not so satisfy the
Commissioner, an allowance in respect of any year of assessment equal to forty per cent
of the portion, if any, of the adjustable cost price of the aircraft paid by him during that
year of assessment: Provided that-
(i) the provisions of this paragraph shall not apply in respect of any aircraft the

146 registration of which in the Republic in the name of the taxpayer concerned does
not or will not constitute its first registration in the Republic;
(ii) if any taxpayer to whom an allowance equal to forty per cent of the adjustable cost
price or adjustable estimated cost price, as the case may be, of any aircraft has
been made under this paragraph, fails to pay at least forty per cent of the cost price
or estimated cost price, as the case may be, of such aircraft within the said period
of two or (as the case may be) three years after the end of the year of assessment
in respect of which the said allowance has been made, the said allowance shall be
included in the income of the said taxpayer for the year of assessment ending on
the same day as the said period, and there shall be deducted from the income of
the said taxpayer for that year of assessment an allowance equal to forty per cent
of the portion, if any, of the adjustable cost price of such aircraft paid by him
during the said period, and from the income of the said taxpayer for any year of
assessment thereafter an allowance equal to forty per cent of the portion, if any, of
the adjustable cost price of such aircraft paid by him during that year of
assessment;
(iii) if in respect of any year of assessment the Commissioner is no longer satisfied that
an aircraft in respect of which an allowance has been made under the preceding
provisions of this paragraph (whether in the current or any previous year of
assessment) will be registered in the Republic or will be used by the taxpayer as
aforesaid, or if in any year of assessment any such aircraft which has been
registered in the Republic or has been used by the taxpayer as aforesaid, ceases to
be so registered or used, or if in any year of assessment the taxpayer ceases to be a
resident, so much of the amount of the said allowance as is not in terms of
subsection (4) of section eight required to be included in the taxpayer’s income for
the current or any other year of assessment and is not in terms of paragraph (a) of
subsection (2) of this section required to be deducted from the cost or estimated
cost price of a further aircraft acquired to replace such aircraft, less such amount
as would, if this paragraph had not been enacted, have been allowed to the
taxpayer by way of deductions (in addition to those actually allowed) under
paragraph (a) of this section or paragraph (o) of section eleven, either in the
current or any previous year of assessment, shall in terms of this proviso be
included in the income of the taxpayer for the current year of assessment;
[Para. (iii) substituted by s. 24 (b) of Act 59 of 2000.] (iv) the provisions of this paragraph shall not apply in any case where such contract
for the acquisition of an aircraft is concluded by the taxpayer on or after 1 August
1992;
[Para. (iv) added by s. 15 (b) of Act 141 of 1992.] [Para. (b) amended by s. 24 (a) of Act 59 of 2000.] (c) if-
(i) the person is a resident who carries on any business as owner or charterer of any
aircraft, who has acquired a new or used aircraft under a contract concluded by
him on or after 1 August 1992;
[Sub-para. (i) substituted by s. 24 (c) of Act 59 of 2000.] (ii) such aircraft was registered by him in the Republic and such registration
constituted the first registration of the aircraft in the Republic; and
(iii) such aircraft was for the first time brought into use by him in his business of
transporting by air and for reward persons, livestock, goods or mail,
an allowance, in respect of the year of assessment during which such aircraft was so
brought into use by him, equal to 40 per cent of the adjustable cost to him of such
aircraft.
[Para. (c) added by s. 15 (c) of Act 141 of 1992.] (2) For the purposes of this section-
(a) ‘adjustable cost’ or ‘adjustable cost price’, in relation to any aircraft, means the cost to the
taxpayer of such aircraft or, if such aircraft was acquired by the taxpayer to replace an
aircraft and the aircraft so acquired is an aircraft in relation to which the Commissioner is

147 satisfied in regard to the matters in regard to which he is required to be satisfied in terms
of paragraph (g) of subsection (4) of section eight, the cost to the taxpayer of the aircraft
so acquired, less so much of any amount referred to in paragraph (a) of that subsection
which has been recovered or recouped in respect of the aircraft so replaced as does not
exceed such cost, and ‘adjustable estimated cost price’ shall be construed accordingly;
(b) where any allowance under this section is determinable on a portion of the adjustable cost
price paid in respect of any aircraft, such portion shall be deemed to be an amount which
bears to the portion of the cost price paid the same ratio as the adjustable cost price bears
to the full cost price or, if at the time at which the allowance has to be made the cost price
of the aircraft has not yet been determined, the estimated cost price payable in respect of
such aircraft.
(3) If during any year of assessment any aircraft in respect of which an allowance has been granted
to the taxpayer under subsection (1) (c) (whether in the current or any previous year of assessment) ceases
to be registered by him in the Republic or ceases to be used by him in his business of transporting by air
and for reward persons, livestock, goods or mail, or if the taxpayer to whom such allowance was granted
ceases to be a resident, there shall be included in the taxpayer’s income in such first-mentioned year of
assessment the amount (if any) by which the said allowance exceeds the sum of-
(a) so much of such allowance as is required to be included in the taxpayer’s income under
section 8 (4) (a); and
(b) such amount as would, had subsection (1) (c) not been enacted, have been allowed to the
taxpayer as deductions (in addition to the deductions actually allowed) under subsection
(1) (a) or section 11 (o), either in the current or any previous year of assessment.
[Sub-s. (3) added by s. 15 (d) of Act 141 of 1992 and amended by s. 24 (d) of Act 59 of 2000.] (4) For the purposes of this section the cost to a person of any aircraft shall be deemed to be the
lesser of the actual cost to such person or the cost which a person would have incurred in respect of the
direct cost of acquisition of the aircraft if he had acquired the aircraft under a cash transaction concluded at
arm’s length on the date on which the transaction for the acquisition of the aircraft concerned was in fact
concluded.
[Sub-s. (4) added by s. 15 (d) of Act 141 of 1992.] (5) Where any person is entitled to an allowance under this section in respect of any aircraft
acquired by him from a connected person, and a deduction under this section was previously granted to
such connected person in respect of such aircraft, whether in the current or any previous year of
assessment, the deduction under this section shall be calculated on an amount not exceeding the lesser of
the cost of the aircraft concerned to such connected person or the market value thereof as determined on the
date upon which the aircraft was brought into use by such person.
[Sub-s. (5) added by s. 15 (d) of Act 141 of 1992 and substituted by s. 15 (1) of Act 113 of 1993 and by s. 9
(1) of Act 140 of 1993.] (6) The provisions of this section shall not apply to any aircraft acquired on or after 1 April 1995
unless such aircraft was acquired by the taxpayer under an agreement formally and finally signed by every
party to the agreement before that date.
[Sub-s. (6) added by s. 15 of Act 21 of 1995.] [S. 14bis inserted by s. 16 (1) of Act 88 of 1965.] 15 Deductions from income derived from mining operations
Cases
There shall be allowed to be deducted from the income derived by the taxpayer from mining
operations-
(a) an amount to be ascertained under the provisions of section 36, in lieu of the allowances
in section 11 (e), (f), (gA) and (o);
[Para. (a) substituted by s. 20 of Act 55 of 1966 and by s. 18 of Act 129 of 1991.] (b) any expenditure incurred by the taxpayer during the year of assessment on prospecting
operations (including surveys, boreholes, trenches, pits and other exploratory work
preliminary to the establishment of a mine) in respect of any area within the Republic
together with any other expenditure which is incidental to such operations: Provided that-
(i) except in the case of any person who derives income from mining for diamonds in
the Republic, the Commissioner may determine that any expenditure referred to in

148 this paragraph shall be deducted in a series of annual instalments, so that only a
portion of such expenditure is deducted in the year of assessment in which it is
incurred, and the residue in such subsequent years of assessment and in such
proportions as the Commissioner may determine, until the expenditure is
extinguished;
(ii) in the case of any company which derives income from different classes of mining
operations, the deduction under this paragraph shall be made from the income
derived from such class or classes of mining operations and in such proportions as
the Commissioner may determine;
(iii) any expenditure which has been allowed to be deducted from the income of any
person in terms of this paragraph shall not be included in such person’s capital
expenditure as defined in subsection (11) of section thirty-six.
[Para. (b) amended by s. 16 of Act 141 of 1992.] 15A ……
[S. 15A inserted by s. 15 (1) of Act 69 of 1975, amended by s. 11 of Act 104 of 1980 and repealed by s. 15
of Act 101 of 1990.] 16 ……
[S. 16 substituted by s. 16 (1) of Act 89 of 1969, amended by s. 15 of Act 94 of 1983 and repealed by s. 13
of Act 21 of 1994.] 16A ……
[S. 16A inserted by s. 10 of Act 70 of 1989, amended by s. 10 of Act 37 of 1996 and repealed by s. 32 (1)
of Act 30 of 1998.] 17 ……
[S. 17 substituted by s. 14 of Act 90 of 1962 and by s. 14 (1) of Act 113 of 1977 and repealed by s. 25 of
Act 59 of 2000.] 17A Expenditure incurred by a lessor of land let for farming purposes, in respect of soil erosion
works
(1) Subject to the provisions of subsection (2), there shall be allowed to be deducted from the
income derived by any taxpayer from letting any land on which bona fide pastoral, agricultural or other
farming operations were carried on during the year of assessment, the expenditure incurred by him during
such year in respect of the construction of soil erosion works, provided a certificate by the Executive
Officer designated under section 4 of the Conservation of Agricultural Resources Act, 1983 (Act 43 of
1983), or his assignee is produced to the effect that such works have been approved under the provisions of
the said Act.
[Sub-s. (1) amended by s. 13 of Act 103 of 1976 and substituted by s. 17 of Act 141 of 1992.] (2) Where expenditure incurred by the taxpayer during any year of assessment and ranking for
deduction from income under subsection (1) exceeds the taxable income (as calculated before allowing any
deduction under that subsection) derived by the taxpayer from letting land on which bona fide pastoral,
agricultural or other farming operations were carried on during such year, the amount allowed to be
deducted under subsection (1) in respect of the said year shall be limited to an amount equal to such taxable
income (calculated as aforesaid), and the excess shall be carried forward and be deemed for the purposes of
this section to be expenditure incurred by the taxpayer during the next succeeding year of assessment in
respect of the construction of soil erosion works.
[S. 17A inserted by s. 11 of Act 76 of 1968.] 18 Deduction in respect of medical and dental expenses
(1) Notwithstanding the provisions of section 23, there shall 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 during the year of assessment to any medical scheme
registered under the provisions of the Medical Schemes Act, 1998 (Act 131 of 1998), or
any fund which is registered under any similar provision contained in the laws of any
other country where the medical scheme is registered; and
[Para. (a) substituted by s. 23 of Act 53 of 1999 and by s. 26 of Act 59 of 2000.] (b) any amounts (other than amounts recoverable by the taxpayer or his spouse) which were
paid by the taxpayer during the year of assessment to any duly registered-
(i) medical practitioner, dentist, optometrist, homeopath, naturopath, osteopath,
herbalist, physiotherapist, chiropractor or orthoptist for professional services

149 rendered or medicines supplied to; or
[Sub-para. (i) substituted by s. 15 (a) of Act 96 of 1981 and by s. 19 (a) of Act 129 of 1991.] (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; or
(iii) pharmacist for medicines supplied on the prescription of any person mentioned in
subparagraph (i) for,
[Sub-para. (iii) substituted by s. 19 (b) of Act 129 of 1991.] the taxpayer or his spouse or his children or stepchildren; and
[Para. (b) amended by s. 19 (a) and (b) of Act 129 of 1991 and by s. 16 (a) of Act 21 of 1995.] (c) any amounts (other than amounts recoverable by the taxpayer or his 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
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
[Para. (c) inserted by s. 15 (b) of Act 96 of 1981 and substituted by s. 19 (c) of Act 129 of 1991 and by s.
16 (b) of Act 21 of 1995.] (d) any expenditure (other than expenditure recoverable by the taxpayer or his spouse)
necessarily incurred and paid by the taxpayer in consequence of any physical disability
suffered by the taxpayer, his spouse or child or stepchild:
[Para. (d) inserted by s. 14 (b) of Act 90 of 1988 and substituted by s. 19 (c) of Act 129 of 1991 and by s.
16 (b) of Act 21 of 1995.] 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.
[Sub-s. (1) amended by s. 14 (c) of Act 90 of 1988, by s. 11 of Act 70 of 1989, by s. 16 (a) of Act 101 of
1990 and by s. 19 (d) of Act 129 of 1991.] (2) The allowance under subsection (1) shall be-
(a) where the taxpayer is entitled to a rebate under section 6 (2) (b), the sum of the amounts
referred to in that subsection; or
(b) where the taxpayer or his spouse, 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 to in subsection (1) as exceeds R500; or
(c) in any other case, so much of the sum of such amounts as exceeds 5 per cent of the
taxpayer’s taxable income as determined before granting an allowance under this section;
[Para. (c) substituted by s. 19 of Act 30 of 2002.] [Sub-s. (2) amended by s. 15 of Act 121 of 1984, by s. 11 of Act 96 of 1985, by s. 14 of Act 90 of 1988, by
s. 16 of Act 101 of 1990, by s. 18 (a) of Act 141 of 1992 and by s. 16 (c) of Act 21 of 1995.] (3) For the purposes of this section ‘handicapped person’ means-
(a) a blind person as contemplated in the Blind Persons Act, 1968 (Act 26 of 1968);
(b) a deaf person, being a person whose hearing is impaired to such an extent that he cannot
use it as a primary means of communication;
(c) a person who as a result of a permanent disability requires a wheelchair, calliper or crutch
to assist him to move from one place to another;
(d) a person who requires an artificial limb; or
(e) a person who suffers from a mental illness as defined in section 1 of the Mental Health
Act, 1973 (Act 18 of 1973).
[Para. (e) added by s. 16 (f) of Act 21 of 1995.] [Sub-s. (3) added by s. 18 (b) of Act 141 of 1992.] (4) For the purposes of this section the expression ‘child or stepchild’ means the taxpayer’s child or
stepchild who was alive during any portion of the year of assessment, and who on the last day of the year of
assessment-
(a) was unmarried and was not or would not, had he lived, have been-
(i) over the age of 18 years;
(ii) over the age of 21 years and was wholly or partially dependent for his

150 maintenance upon the taxpayer and has not become liable for the payment of
normal tax in respect of such year; or
(iii) over the age of 26 years 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 such year and was a full-time student at an educational
institution of a public character; or
(b) in the case of any other child or stepchild, was incapacitated by physical or mental
infirmity from maintaining himself 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:
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.
[Sub-s. (4) added by s. 16 (g) of Act 21 of 1995.] [S. 18 substituted by s. 15 of Act 95 of 1967, by s. 12 of Act 76 of 1968, by s. 17 (1) of Act 89 of 1969 and
by s. 14 (1) of Act 52 of 1970, repealed by s. 15 of Act 88 of 1971 and inserted by s. 12 of Act 104 of
1980.] 18A Deduction of donations to certain public benefit organisations
(1) Notwithstanding the provisions of section 23, there shall be allowed to be deducted from the
taxable income of any taxpayer so much of the sum of any bona fide donations by that taxpayer in cash or
of property made in kind, which was actually paid or transferred during the year of assessment to-
(a) any-
(i) public benefit organisation approved by the Commissioner under section 30; or
(ii) institution, board or body contemplated in section 10 (1) (cA) (i),
which-
(aa) carries on in the Republic any public benefit activity contemplated in Part II of the
Ninth Schedule, or any other activity determined from time to time by the
Minister by notice in the Gazette for the purposes of this section; and
(bb) complies with the requirements contemplated in subsection (1C), if applicable,
and any additional requirements prescribed by the Minister in terms of subsection
(1A);
[Subitem (bb) substituted by s. 34 (1) (c) of Act 45 of 2003.] [Para. (a) amended by s. 20 (b) of Act 30 of 2002.] (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);
[Sub-para. (i) substituted by s. 20 (c) of Act 30 of 2002 and by s. 34 (1) (d) of Act 45 of 2003.] (ii) during the year of assessment preceding the year of assessment of such public
benefit organisation during which the donation is received, distributed or incurred
the obligation to so distribute at least 75 per cent of the funds received by such
organisation by way of donations which qualified for a deduction in terms of this
section: 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,
[Sub-para. (ii) substituted by s. 34 (1) (e) of Act 45 of 2003.] as does not exceed five per cent of the taxable income of the taxpayer as calculated
before allowing any deduction under this section or section 18;
[Para. (b) amended by s. 34 (1) (e) of Act 45 of 2003.] (c) the Government, any provincial administration or local authority as contemplated in
section 10 (1) (a) or (b) to be used for purposes of any activity contemplated in Part II of
the Ninth Schedule;
[Para. (c) inserted by s. 34 (1) (b) of Act 45 of 2003.] [Sub-s. (1) amended by s. 20 (a) and (d) of Act 30 of 2002 and by s. 34 (1) (a) of Act 45 of 2003.] (1A) The Minister may, by regulation, prescribe additional requirements with which a public

151 benefit organisation, institution, board or body or the government, provincial administration or local
authority carrying on any specific public benefit activity identified by the Minister in the regulations, must
comply before any donation made to that public benefit organisation, institution, board or body or the
government, provincial administration or local authority shall be allowed as a deduction under subsection
(1).
[Sub-s. (1A) inserted by s. 20 (e) of Act 30 of 2002 and substituted by s. 34 (1) (f) of Act 45 of 2003.] (1B) Any activity determined by the Minister in terms of subsection (1) (a) or any requirements
prescribed by the Minister in terms of subsection (1A), must be tabled in Parliament within a period of 12
months after the date of publication by the Minister of that activity or those requirements, as the case may
be, in the Gazette, for incorporation into this Act.
[Sub-s. (1B) inserted by s. 20 (e) of Act 30 of 2002.] (1C) The constitution or founding document of a public benefit organisation carrying on the
activity contemplated in paragraph 4 of Part II of the Ninth Schedule, must expressly provide that the
organisation-
(a) may not issue any receipt contemplated in subsection (2) in respect of any donation made
by a person to that public benefit organisation, unless-
(i) that donation is made by that person on or after 1 August 2002, but before 1
August 2005; and
(ii) that person (in the case of a company, together with any other company in the
same group of companies as that company) has during the relevant year of
assessment of that person donated an amount of at least R1 million to that
organisation;
(b) must ensure that every donation contemplated in paragraph (a), in respect of which such
a receipt has been issued, will be matched by a donation to that organisation of the same
amount made by a person who is not a resident and which is made from funds generated
and held outside the Republic; and
(c) must utilise the amount of-
(i) all donations contemplated in paragraph (a), in respect of which such a receipt has
been issued, and all income derived therefrom, in the Republic in carrying on that
activity; and
(ii) all donations contemplated in paragraph (b), either in the Republic in carrying on
that activity, or in respect of a transfrontier conservation area of which the
Republic forms part.
[Sub-s. (1C) inserted by s. 34 (1) (g) of Act 45 of 2003.] (2) Any claim for a deduction in respect of any donation under subsection (1) shall not be allowed
unless supported by a receipt issued by the public benefit organisation, institution, board or body or the
government, provincial administration or local authority concerned, on which the following details are
given, namely-
(a) the reference number of the public benefit organisation, institution, board or body issued
by the Commissioner for the purposes of this section;
(b) the date of the receipt of the donation;
(c) the name of the public benefit organisation, institution, board or body or the government,
provincial administration or local authority which received the donation, together with an
address to which enquiries may be directed in connection therewith;
[Para. (c) substituted by s. 34 (1) (i) of Act 45 of 2003.] (d) the name and address of the donor;
(e) the amount of the donation or the nature of the donation (if not made in cash);
(f) a certification to the effect that the receipt is issued for the purposes of section 18A of the
Income Tax Act, 1962, and that the donation has been or will be used exclusively for the
object of the public benefit organisation, institution, board or body concerned or, in the
case of the government, provincial administration or local authority in carrying on the
relevant public benefit activity.
[Para. (f) substituted by s. 34 (1) (j) of Act 45 of 2003.] [Sub-s. (2) amended by s. 34 (1) (h) of Act 45 of 2003.] (2A) A public benefit organisation, institution, board, body, government, provincial administration
or local authority may only issue a receipt contemplated in subsection (2) in respect of any donation to the

152 extent that-
(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 I of the Ninth
Schedule, that donation will be utilised solely in carrying on activities contemplated in
Part II of the Ninth Schedule;
(b) in the case of a public benefit organisation contemplated in subsection (1) (b) which
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
(c) in the case of the government, provincial administration or local authority, that donation
will be utilised solely in carrying on activities contemplated in Part II of the Ninth
Schedule.
[Sub-s. (2A) inserted by s. 34 (1) (k) of Act 45 of 2003.] (2B) A public benefit organisation, institution, board or body contemplated in subsection (2A),
must together with its annual return for a year of assessment submit to the Commissioner an audit
certificate confirming that all donations received or accrued in that year in respect of which receipts were
issued in terms of subsection (2), were utilised in the manner contemplated in subsection (2A).
[Sub-s. (2B) inserted by s. 34 (1) (k) of Act 45 of 2003.] (2C) The Accounting Authority contemplated in the Public Finance Management Act, 1997 (Act 1
of 1999) for the government, provincial administration or local authority which issued any receipts in terms
of subsection (2), must on an annual basis submit an audit certificate to the Commissioner confirming that
all donations received or accrued in the year in respect of which receipts were so issued were utilised in the
manner contemplated in subsection (2A).
[Sub-s. (2C) inserted by s. 34 (1) (k) of Act 45 of 2003.] (3) If any deduction is claimed by any taxpayer under the provisions of subsection (1) in respect of
any donation of property in kind, the amount of such deduction shall be deemed to be an amount equal to-
(a) where such property constitutes-
(i) a financial instrument which is trading stock of the taxpayer, the lower of fair
market value of that financial instrument on the date of that donation or the
amount which has been taken into account for the purposes of section 22 (8); or
(ii) any other trading stock of the taxpayer (including any livestock or produce in
respect of which the provisions of paragraph 11 of the First Schedule are
applicable), the amount which has been taken into account for the purposes of
section 22 (8) or, in the case of such livestock or produce, the said paragraph 11,
in relation to the donation of such property; or
[Para. (a) substituted by s. 34 (1) (l) of Act 45 of 2003.] (b) where such property (other than trading stock) constitutes an asset used by the taxpayer
for the purposes of his trade, the lower of-
(i) the fair market value of that property on the date of that donation; or
(ii) the cost to the taxpayer of such property less any allowance (other than any
investment allowance) allowed to be deducted from the income of the taxpayer
under the provisions of this Act in respect of that asset; or
[Para. (b) substituted by s. 34 (1) (l) of Act 45 of 2003.] (c) where such property does not constitute trading stock of the taxpayer or an asset used by
him for the purposes of his trade, the lower of-
(i) the fair market value of that property on the date of that donation; or
(ii) the cost to the taxpayer of such asset, less, in the case of a movable asset which
has deteriorated in condition by reason of use or other causes, a depreciation
allowance calculated in the manner contemplated in section 8 (5) (bB) (i); or
[Para. (c) substituted by s. 34 (1) (l) of Act 45 of 2003.] (d) where such property is purchased, manufactured, erected, assembled, installed or
constructed by or on behalf of the taxpayer in order to form the subject of the said
donation, the lower of-

153 (i) the fair market value of that property on the date of that donation; or
(ii) the cost to the taxpayer of such property.
[Para. (d) substituted by s. 34 (1) (l) of Act 45 of 2003.] (3A) No deduction shall be allowed under this section in respect of the donation of any property in
kind which constitutes, or is subject to any fiduciary right, usufruct or other similar right, or which
constitutes an intangible asset or financial instrument, unless that financial instrument is-
(a) a share in a listed company; or
(b) issued by a financial institution as defined in section 1 of the Financial Services Board
Act, 1990 (Act 97 of 1990).
[Sub-s. (3A) inserted by s. 34 (1) (m) of Act 45 of 2003.] (4) The provisions of subsections (9) and (10) of section 30 shall apply mutatis mutandis in
respect of any institution, board or body contemplated in subsection (1) (a).
(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-
(a) in any material way failed to ensure that the objects for which the public benefit
organisation, institution, board or body was established 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 organisation, institution, board
or body by such taxpayer,
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 any year of assessment specified
in such notice, and any claim by any taxpayer for such deduction shall accordingly be disallowed.
(5A) If the Commissioner has reasonable grounds for believing that any regulating or co-
ordinating body of a group of public benefit organisations, contemplated in section 30 (3A) or subsection
(6)-
(a) with intent or negligently fails to take any steps contemplated in that section or
subsection, to exercise control over any public benefit organisation in that group; or
(b) fails to notify the Commissioner where it becomes aware of any material failure by any
public benefit organisation over which it exercises control to comply with any provision
of this section,
the Commissioner may by notice in writing addressed to that regulating or co-ordinating body direct that
donations to public benefit organisations, institutions, boards or bodies in that group 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.
[Sub-s. (5A) added by s. 20 (f) of Act 30 of 2002.] (6) The Commissioner may, for the purposes of this section, approve a group of institutions,
boards or bodies contemplated in subsection (1) (a) (ii), sharing a common purpose which carry on any
public benefit activity under the direction or supervision of a regulating or co-ordinating body, where that
body takes such steps, as prescribed by the Commissioner, to exercise control over those institutions,
boards or bodies in order to ensure that they comply with the provisions of this section.
[Sub-s. (6) added by s. 20 (f) of Act 30 of 2002.] [S. 18A inserted by s. 15 of Act 52 of 1970, amended by s. 16 (1) of Act 88 of 1971, by s. 13 of Act 90 of
1972, by s. 14 of Act 65 of 1973, by s. 16 of Act 69 of 1975 and by s. 13 (1) of Act 104 of 1980, substituted
by s. 16 (1) of Act 96 of 1981, amended by s. 14 (1) of Act 91 of 1982, by s. 16 (1) of Act 94 of 1983 by s.
16 (1) of Act 121 of 1984, by s. 15 of Act 90 of 1998, by s. 17 of Act 101 of 1990, by s. 20 of Act 129 of
1991 and by s. 11 (1) of Act 36 of 1996 and substituted by s. 24 (1) of Act 30 of 2000.] 18B ……
[S. 18B inserted by s. 11 (1) of Act 65 of 1986, amended by s. 19 of Act 141 of 1992 and repealed by s. 14
of Act 21 of 1994.] 19 ……
Cases
[S. 19 amended by s. 15 of Act 90 of 1962, by s. 6 of Act 6 of 1963, by s. 17 of Act 88 of 1965, by s. 17 (1)

154 of Act 88 of 1971, by s. 14 (1) of Act 90 of 1972, by s. 18 of Act 85 of 1974, by s. 14 of Act 104 of 1980,
by s. 17 of Act 96 of 1981, by s. 15 (1) of Act 91 of 1982, by s. 17 (1) of Act 94 of 1983, by s. 17 of Act
121 of 1984, by s. 12 (1) of Act 96 of 1985, by s. 12 of Act 65 of 1986, by s. 4 (1) of Act 108 of 1986, by s.
13 of Act 85 of 1987, by s. 18 (1) of Act 101 of 1990, by s. 21 of Act 129 of 1991 and by s. 33 of Act 30 of
1998 and repealed by s. 25 (1) of Act 30 of 2000.] 20 Set-off of assessed losses
Cases
(1) For the purpose of determining the taxable income derived by any person from carrying on any
trade, there shall, subject to section 20A, be set off against the income so derived by such person-
(a) any balance of assessed loss incurred by the taxpayer in any previous year which has
been carried forward from the preceding year of assessment: Provided that-
(i) no person whose estate has been voluntarily or compulsorily sequestrated shall be
entitled to carry forward any assessed loss incurred prior to the date of
sequestration, unless the order of sequestration has been set aside, in which case
the amount to be so carried forward shall be reduced by an amount which was
allowed to be set off against the income of the insolvent estate of such person
from the carrying on of any trade in the Republic;
[Sub-para. (i) substituted by s. 15 of Act 28 of 1997.] (ii) the balance of assessed loss shall be reduced by the amount or value of any benefit
received by or accruing to a person resulting from a concession granted by or a
compromise made with his creditors whereby his liabilities to them have been
reduced or extinguished, provided such liabilities arose in the ordinary course of
trade;
(iii) ……
[Para. (iii) added by s. 19 (a) of Act 101 of 1990 and deleted by s. 17 of Act 21 of 1995.] (b) any assessed loss incurred by the taxpayer during the same year of assessment in carrying
on any other trade either alone or in partnership with others, otherwise than as a member
of a company the capital whereof is divided into shares:
[Para. (b) substituted by s. 20 (b) of Act 59 of 2000.] Provided that there shall not be set off against any amount-
(a) distributed to such person by any pension fund or provident fund which is included in the
gross income of such person in terms of paragraph (eB) of the definition of ‘gross income’
in section 1, any-
(i) balance of assessed loss; or
(ii) ‘assessed loss’ as defined in subsection (2) incurred in such year before taking into
account any amount of such distribution; or
(b) derived by any person from the carrying on within the Republic of any trade, any-
(i) assessed loss incurred by such person during such year; or
(ii) any balance of assessed loss incurred in any previous year of assessment,
[Para. (b) substituted by s. 35 (1) (b) of Act 45 of 2003.] in carrying on any trade outside the Republic.
[Sub-s. (1) amended by s. 26 of Act 30 of 2000, by s. 20 (a) and (c) of Act 59 of 2000 and by s. 35 (1) (a)
and (b) of Act 45 of 2003.] (1)bis ……
[Sub-s. (1)bis inserted by s. 13 of Act 90 of 1964 and deleted by s. 18 of Act 88 of 1965.] (2) For the purposes of this section ‘assessed loss’ means any amount by which the deductions
admissible under sections 11 to 19, inclusive, exceeded the income in respect of which they are so
admissible.
[Sub-s. (2) substituted by s. 16 of Act 113 of 1993 and by s. 23 of Act 74 of 2002.] (2A) In the case of any taxpayer other than a company-
(a) the provisions of subsections (1) and (2) shall mutatis mutandis apply for the purpose of
determining the taxable income derived by such taxpayer otherwise than from carrying
on any trade, the reference in subsection (1) to ‘taxable income derived by any person
from carrying on any trade in the Republic’ and the reference in that subsection to ‘the
income so derived’ being respectively construed as including a reference to taxable

155 income derived by the taxpayer otherwise than from carrying on any trade and a
reference to income so derived; and
(b) the said taxpayer shall, subject to the provisos to subsection (1), not be prevented from
carrying forward a balance of assessed loss merely by reason of the fact that he has not
derived any income during any year of assessment.
[Sub-s. (2A) inserted by s. 15 (1) of Act 65 of 1973.] (3) ……
[Sub-s. (3) added by s. 13 (1) of Act 76 of 1968 and deleted by s. 19 (b) of Act 101 of 1990.] (4) ……
[Sub-s. (4) added by s. 18 of Act 89 of 1969 and deleted by s. 18 of Act 94 of 1983.] (5) ……
[Sub-s. (5) added by s. 18 of Act 89 of 1969, amended by s. 8 (1) of Act 101 of 1978 and deleted by s. 18
of Act 94 of 1983.] 20A Ring-fencing of assessed losses of certain trades
(1) Subject to subsection (3), where the circumstances in subsection (2) apply during any year of
assessment in respect of any trade carried on by a natural person, any assessed loss incurred during that
year in carrying on that trade may not be set off against any income of that person derived during that year
otherwise than from carrying on that trade, notwithstanding section 20 (1) (b).
(2) Subsection (1) applies where the taxable income of a person for a year of assessment (before
taking into account the set-off of any assessed losses incurred in carrying on any trade during that year and
the balance of assessed loss carried forward from the preceding year) 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-
(a) that person has, during the five year period ending on the last day of that year of
assessment, incurred an assessed loss in at least three years of assessment in carrying on
the trade contemplated in subsection (1) (before taking into account any balance of
assessed loss carried forward); or
(b) the trade contemplated in subsection (1), in respect of which the assessed loss was
incurred constitutes-
(i) any sport practised by that person or any relative;
(ii) any dealing in collectibles by that person or any relative;
(iii) the rental of residential accommodation, unless at least 80 per cent of the
residential accommodation is used by persons who are not relatives of that person
for at least half of the year of assessment;
(iv) the rental of vehicles, aircraft or boats as defined in the Eighth Schedule, unless at
least 80 per cent of the vehicles, aircraft or boats are used by persons who are not
relatives of that person for at least half of the year of assessment;
(v) animal showing by that person or any relative;
(vi) farming or animal breeding, unless that person carries on farming, animal
breeding or activities of a similar nature on a full-time basis;
(vii) any form of performing or creative arts practised by that person or any relative; or
(viii) any form of gambling or betting practised by that person or any relative.
(3) The provisions of subsection (1) do not apply in respect of an assessed loss incurred by a
person during any year of assessment from carrying on any trade contemplated in subsection (2) (a) or (b),
where that trade constitutes a business in respect of which there is a reasonable prospect of deriving taxable
income (other than taxable capital gain) within a reasonable period having special regard to-
(a) the proportion of the gross income derived from that trade in that year of assessment in
relation to the amount of the allowable deductions incurred in carrying on that trade
during that year;
(b) the level of activities carried on by that person or the amount of expenses incurred by that
person in respect of advertising, promoting or selling in carrying on that trade;
(c) whether that trade is carried on in a commercial manner, taking into account-
(i) the number of full-time employees appointed for purposes of that trade (other than
persons partly or wholly employed to provide services of a domestic or private
nature);
(ii) the commercial setting of the premises where the trade is carried on;

156 (iii) the extent of the equipment used exclusively for purposes of carrying on that
trade; and
(iv) the time that the person spends at the premises conducting that business;
(d) the number of years of assessment during which assessed losses were incurred in carrying
on that trade in relation to the period from the date when that person commenced carrying
on that trade and taking into account-
(i) any unexpected events giving rise to any of those assessed losses; and
(ii) the nature of the business involved;
(e) the business plans of that person and any changes thereto to ensure that taxable income is
derived in future from carrying on that trade; and
(f) the extent to which any asset attributable to that trade is used, or is available for use, by
that person or any relative of that person for recreational purposes or personal
consumption.
(4) Subsection (3) does not apply in respect of a trade contemplated in subsection (2) (b) (other
than farming) carried on by a person during any year of assessment where that person has, during the ten
year period ending on the last day of that year of the assessment, incurred an assessed loss in at least six
years of assessment in carrying on that trade (before taking into account any balance of assessed loss
carried forward).
(5) Notwithstanding section 20 (1) (a), any balance of assessed loss carried forward from the
preceding year of assessment, which is attributable to an assessed loss in respect of which subsection (1)
applied in that preceding year or any prior year of assessment, may not be set off against any income
derived by that person otherwise than from carrying on the trade contemplated in subsection (1).
(6) For the purposes of this section and section 20, the income derived from any trade referred to
in subsections (1) or (5), includes any amount-
(a) which is included in the income of that person in terms of section 8 (4) in respect of an
amount deducted in any year of assessment in carrying on that trade; or
(b) derived from the disposal after cessation of that trade of any assets used in carrying on
that trade.
(7) Notwithstanding anything to the contrary contained in this Act, all farming activities carried on
by a person shall be deemed to constitute a single trade carried on by that person for the purposes of this
section.
(8) Where the provisions of subsection (2) apply during any year of assessment in respect of any
trade carried on by a person, that person must indicate the nature of the business in his or her return
contemplated in section 66 for that year of assessment.
(9) For the purposes of subsections (2) (a) and (4), any assessed loss incurred in any year of
assessment ending on or before 29 February 2004 shall not be taken into account.
(10) For the purposes of this section-
(a) ‘assessed loss’ means ‘assessed loss’ as defined in section 20 (2); and
(b) ‘relative’ in relation to a person means a spouse, parent, child, stepchild, brother, sister,
grandchild or grandparent of that person.
[S. 20A inserted by s. 19 of Act 89 of 1969, amended by s. 16 (1) of Act 52 of 1970, by s. 15 of Act 90 of
1972, by s. 19 (1) of Act 85 of 1974, by s. 17 of Act 69 of 1975, by s. 15 of Act 113 of 1977, by s. 12 of
Act 104 of 1979, by s. 15 of Act 104 of 1980, by s. 18 of Act 96 of 1981, by s. 16 of Act 91 of 1982, by s.
13 of Act 65 of 1986, by s. 14 of Act 85 of 1987 and by s. 16 (1) of Act 90 of 1988, repealed by s. 20 of
Act 101 of 1990 and inserted by s. 36 (1) of Act 45 of 2003.] 20B Limitation of losses from disposal of certain assets
(1) Any deduction which is allowable during any year of assessment under section 11 (o) in
respect of the disposal by a person during that year of any asset the full consideration of which will not
accrue to that person during that year, must be disregarded in that year.
(2) So much of any amount disregarded in terms of subsection (1), which has not otherwise been
allowed as a deduction, may be deducted from the income of that person in any subsequent year of
assessment to the extent that any consideration which is received by or accrued to that person in that
subsequent year from that disposal is included in the income of that person.
(3) If during any year of assessment a person contemplated in subsection (1) proves that no further
consideration will accrue to him or her in that year and any subsequent year as contemplated in subsection
(2), so much of the amount which was disregarded in terms of subsection (1) as has not been allowed as a

157 deduction in any year, must be allowed as a deduction from the income of that person in that year of
assessment.
[S. 20B inserted by s. 20 (1) of Act 32 of 2004.] 21 Deduction of alimony, allowance or maintenance
The taxpayer shall have his taxable income reduced by so much of any amount payable by him to
or on behalf of his spouse or former spouse under any order of divorce or judicial separation granted in
consequence of proceedings instituted not later than the twenty-first day of March, 1962, or under any
written agreement of separation entered into not later than that date, by way of alimony or allowance or
maintenance of his spouse or former spouse and any children, as the Commissioner is satisfied has been or
will in respect of the year or period of assessment in question be paid out of the taxable income of the
taxpayer: Provided that for the purposes of this section any order of divorce or judicial separation
(hereinafter referred to as the subsequent order) which in effect supersedes any such first-mentioned order
of judicial separation or written agreement of separation and does not vary the amount of alimony,
allowance or maintenance payable thereunder, shall not affect the rights which any person may have under
this section, and in the case of any such person and the spouse or former spouse of such person the
subsequent order shall, for the purposes of this section and the provisions of section 10 (1) (u), be deemed
to have been granted in consequence of proceedings instituted on or before the said date.
[S. 21 substituted by s. 16 of Act 90 of 1962 and by s. 16 (1) of Act 90 of 1972 and amended by s. 16 of
Act 104 of 1980 and by s. 18 of Act 21 of 1995.] 21bis ……
Cases
[S. 21bis inserted by s. 7 of Act 6 of 1963, substituted by s. 20(1) of Act 85 of 1974, amended by s. 18 of
Act 69 of 1975 and repealed by s. 19 of Act 94 of 1983.] 21ter ……
[S. 21ter inserted by s. 20 (1) of Act 89 of 1969, amended by s. 17 of Act 52 of 1970, by s. 18 (1) of Act 88
of 1971 and amended by s. 18 (1) of Act 88 of 1971, by s. 17 of Act 90 of 1972, by s. 16 (1) of Act 65 of
1973, by s. 21 (1) of Act 85 of 1974, by s. 19 of Act 69 of 1975, by s. 14 (1) of Act 103 of 1976, by s. 16
(1) of Act 113 of 1977, by s. 17 (1) of Act 91 of 1982 and by s. 1 of Act 49 of 1996 and repealed by s. 24
(1) of Act 53 of 1999.] 21quat ……
[S. 21quat inserted by s. 17 of Act 65 of 1973, amended by s. 22 (1) of Act 85 of 1974, by s. 17 of Act 104
of 1980, by s. 19 of Act 96 of 1981 and by s. 18 of Act 121 of 1984 and repealed by s. 17 of Act 90 of
1988.] 22 Amounts to be taken into account in respect of values of trading stocks
Cases
(1) The amount which shall, in the determination of the taxable income derived by any person
during any year of assessment from carrying on any trade (other than farming), be taken into account in
respect of the value of any trading stock held and not disposed of by him at the end of such year of
assessment, shall be-
(a) in the case of trading stock other than trading stock contemplated in paragraph (b), the
cost price to such person of such trading stock, less such amount as the Commissioner
may think just and reasonable as representing the amount by which the value of such
trading stock, not being shares held by any company in any other company, has been
diminished by reason of damage, deterioration, change in fashion, decrease in the market
value or for any other reason satisfactory to the Commissioner; and
(b) in the case of any trading stock which consists of any instrument, interest rate agreement
or option contract in respect of which a company has made an election which has taken
effect as contemplated in section 24J (9), the market value of such trading stock as
contemplated in such section; and
[Para. (b) substituted by s. 25 (1) (a) of Act 53 of 1999.] [Sub-s. (1) substituted by s. 19 (1) (a) of Act 21 of 1995.] (1A) Where in respect of any year of assessment ending after the commencement date defined in
section 1 of the Value-Added Tax Act, 1991, any amount of sales tax referred to in section 23C (2) which
was included in the cost price to the taxpayer of any trading stock is deemed by that section to have been
recovered or recouped for the purposes of section 8 (4) (a), the cost of such trading stock held and not

158 disposed of by the taxpayer at the end of such year shall be deemed to have been reduced by the said
amount.
[Sub-s. (1A) inserted by s. 22 of Act 129 of 1991.] (2) The amounts which shall in the determination of the taxable income derived by any person
during any year of assessment from carrying on any trade (other than farming), be taken into account in
respect of the value of any trading stock held and not disposed of by him at the beginning of any year of
assessment, shall-
(a) if such trading stock formed part of the trading stock of such person at the end of the
immediately preceding year of assessment be the amount which was, in the determination
of the taxable income of such person for such preceding year of assessment, taken into
account in respect of the value of such trading stock at the end of such preceding year of
assessment; or
(b) if such trading stock did not form part of the trading stock of such person at the end of the
immediately preceding year of assessment, be the cost price to such person of such
trading stock.
(2A) (a) Where any person carries on any construction, building, engineering or other trade in the
course of which improvements are effected by him to fixed property owned by any other person, any such
improvements effected by him and any materials delivered by him to such fixed property which are no
longer owned by him shall, until the contract under which such improvements are effected has been
completed, be deemed for the purposes of this section to be trading stock held and not disposed of by him.
(b) For the purposes of paragraph (a), a contract shall be deemed to have been completed when the
taxpayer has carried out all the obligations imposed upon him under the contract and has become entitled to
claim payment of all amounts due to him under the contract.
[Sub-s. (2A) inserted by s. 21 (a) of Act 101 of 1990.] (3) (a) For the purposes of this section the cost price at any date of any trading stock in relation to
any person shall-
(i) subject to subparagraph (ii), be the cost incurred by such person, whether in the current or
any previous year of assessment in acquiring such trading stock plus, subject to the
provisions of paragraph (b), any further costs incurred by him up to and including the
said date in getting such trading stock into its then existing condition and location, but
excluding any exchange difference as defined in section 24I (1) relating to the acquisition
of such trading stock; or
(ii) in the case of any trading stock which is in terms of paragraph 12 (2) (c) of the Eighth
Schedule treated as having been acquired at a cost equal to the market value, be that
market value.
[Para. (a) substituted by s. 17 (1) (a) of Act 113 of 1993 and by s. 12 (a) of Act 5 of 2001.] (b) The further costs which in terms of paragraph (a) (i) are required to be included in the cost
price of any trading stock shall be such costs as in terms of any generally accepted accounting practice
approved by the Commissioner should be included in the valuation of such trading stock.
[Para. (b) substituted by s. 12 (a) of Act 5 of 2001.] (c) ……
[Para. (c) deleted by s. 17 (1) (b) of Act 113 of 1993.] (d) ……
[Para. (d) amended by s. 14 (1) (a) of Act 65 of 1986 and deleted by s. 17 (1) (b) of Act 113 of 1993.] [Sub-s. (3) substituted by s. 19 (1) (a) of Act 121 of 1984.] (3A) For the purposes of this section the cost price of trading stock referred to in subsection (2A)
shall be the sum of the cost to the taxpayer of material used by him in effecting the relevant improvements,
and such further costs incurred by him as in accordance with generally accepted accounting practice are to
be regarded as having been incurred directly in connection with the relevant contract, and such portion of
any other costs incurred by him in connection with the relevant contract and other contracts as in
accordance with generally accepted accounting practice are to be regarded as having been incurred in
connection with the relevant contract, less a deduction of so much of-
(a) any income received by or accrued to the taxpayer in respect of the relevant contract;
(b) any portion of an amount payable to the taxpayer under the relevant contract (but not
exceeding 15 per cent of the total amount payable to him under such contract) the
payment of which has been withheld as a retention; and

159 (c) any of the said costs included under this subsection as exceed that portion of the contract
price which relates to the improvements actually effected by him,
as does not exceed the said sum.
[Sub-s. (3A) inserted by s. 20 (a) of Act 94 of 1983, deleted by s. 19 (1) (b) of Act 121 of 1984 and inserted
by s. 21 (b) of Act 101 of 1990.] (3B) Where in consequence of the amendment effected to the definition of ‘trading stock’ in
section 1 of this Act by section 2 (1) (a) of the Income Tax Act, 1990, or the insertion of subsection (2A) in
this section by section 21 (a) of that Act, the value of trading stock held and not disposed of by any person
at the end of his first year of assessment ending on or after 1 January 1991, includes the value of any
trading stock (hereinafter referred to as new trading stock) of any class of trading stock which was not
included by such person in the trading stock held and not disposed of by him at the end of the latest year of
assessment in respect of which he had not later than the date of promulgation of the said Act submitted a
return of income to the Commissioner, there shall, at the option of such person, be deducted from the value
of the trading stock held and not disposed of by him at the end of the said first year and at the end of the
eight succeeding years of assessment (hereinafter referred to as the second to ninth years, in chronological
order), an amount (not exceeding the value of the trading stock held and not disposed of by such person at
the end of the year of assessment in question) equal to-
(a) as respects trading stock held and not disposed of at the end of the said first year, 97,5 per
cent of the value of such new trading stock;
(b) as respects trading stock held and not disposed of at the end of the second year, 95 per
cent of the value of such new trading stock;
(c) as respects trading stock held and not disposed of at the end of the third year, 90 per cent
of the value of such new trading stock;
(d) as respects trading stock held and not disposed of at the end of the fourth year, 85 per
cent of the value of such new trading stock;
(e) as respects trading stock held and not disposed of at the end of the fifth year, 75 per cent
of the value of such new trading stock;
(f) as respects trading stock held and not disposed of at the end of the sixth year, 65 per cent
of the value of such new trading stock;
(g) as respects trading stock held and not disposed of at the end of the seventh year, 50 per
cent of the value of such new trading stock;
(h) as respects trading stock held and not disposed of at the end of the eighth year, 35 per
cent of the value of such new trading stock; and
(i) as respects trading stock held and not disposed of at the end of the ninth year, 20 per cent
of the value of such new trading stock:
Provided that no deduction shall be made under this subsection in respect of trading stock held on any date
on which such person has ceased to carry on the trade in relation to which such trading stock was held.
[Sub-s. (3B) inserted by s. 21 (b) of Act 101 of 1990.] (4) If any trading stock has been acquired by any person for no consideration or for a
consideration which is not measurable in terms of money, such person shall for the purposes of subsection
(3) be deemed to have acquired such trading stock at a cost equal to the current market price of such trading
stock on the date on which it was acquired by such person: Provided that any capitalization shares awarded
by any company to shareholders of that company on or after 1 July 1957 shall have no value as trading
stock in the hands of such shareholders: Provided further that options or any other rights to acquire shares
in any company which have been acquired as aforesaid shall have no value.
[Sub-s. (4) amended by s. 14 of Act 90 of 1964, by s. 23 of Act 85 of 1974 and by s. 17 (1) (c) of Act 113
of 1993.] (4A) For the purposes of subsection (4), where-
(a) any security has been lent by a lender to a borrower in terms of a securities lending
arrangement, such security shall be deemed not have been acquired by such borrower; or
[Para. (a) substituted by s. 37 (1) (a) of Act 45 of 2003.] (b) another security of the same kind and of the same or equivalent quantity or quality has
been returned by such borrower to such lender, such other security shall be deemed not to
have been acquired by such lender.
[Para. (b) substituted by s. 37 (1) (a) of Act 45 of 2003.] [Sub-s. (4A) inserted by s. 12 (1) (a) of Act 36 of 1996.]

160 (5) No person may for the purpose of determining the cost price of any trading stock, adopt the
basis of trading stock valuation whereunder the last item of any class of trading stock acquired by him on
any date is deemed to be the first item of that class of trading stock disposed of by him on or after that date.
[Sub-s. (5) amended by s. 19 (1) of Act 121 of 1984, by s. 14 (1) of Act 65 of 1986, by s. 5 (1) of Act 108
of 1986, by s. 1 (1) of Act 168 of 1993 and by s. 19 (1) of Act 21 of 1995 and substituted by s. 27 (1) (a) of
Act 30 of 2000.] (5A) Where-
(a) any commercial or industrial undertaking has been acquired by one company from
another company;
(b) both such companies are managed, controlled or owned by substantially the same
persons; and
(c) the last-mentioned company contemplated in paragraph (a) is entitled to a deduction as
contemplated in subsection (3B),
[Para. (c) substituted by s. 27 (1) (b) of Act 30 of 2000.] the Commissioner may direct that, subject to such conditions as he may impose, the said two companies
shall for the purposes of subsection (3B) be regarded as being one company.
[Sub-s. (5A) inserted by s. 1 (1) (b) of Act 168 of 1993 and amended by s. 27 (1) (c) of Act 30 of 2000.] (6) Any reference in this section to the beginning or end of a year of assessment includes-
(a) where the period assessed is less than twelve months, a reference to the beginning or end,
as the case may be, of the period assessed;
(b) where accounts are accepted under section 66 (13A) to a date agreed to by the
Commissioner, a reference to the beginning or end, as the case may be, of the period
covered by the accounts.
[Sub-s. (6) substituted by s. 24 (1) (a) of Act 74 of 2002.] (7) ……
[Sub-s. (7) substituted by s. 21 of Act 89 of 1969 and deleted by s. 20 (b) of Act 94 of 1983.] (8) If during any year of assessment-
(a) any taxpayer has applied trading stock to his private or domestic use or consumption; or
(b) any-
(i) taxpayer has applied trading stock for the purpose of making any donation thereof;
(ii) taxpayer has disposed of trading stock, other than in the ordinary course of his
trade, for a consideration less than the market value thereof;
(iii) trading stock of any company has on or after 21 June 1993 been distributed in
specie (whether such distribution occurred by means of a dividend, including a
liquidation dividend, a total or partial reduction of capital (including any share
premium), a redemption of redeemable preference shares or an acquisition of
shares in terms of section 85 of the Companies Act, 1973 (Act 61 of 1973)), to
any shareholder of that company;
[Sub-para. (iii) substituted by s. 25 (1) (b) of Act 53 of 1999.] (iv) taxpayer has applied any trading stock for any other purpose other than the
disposal thereof in the ordinary course of his trade and under circumstances other
than those contemplated in paragraph (a) or subparagraph (i), (ii) or (iii) of this
paragraph; or
(v) assets which were held as trading stock by any taxpayer cease to be held as
trading stock by such taxpayer, and
[Sub-para. (v) added by s. 12 (d) of Act 5 of 2001.] and the cost price of such trading stock has been taken into account in the determination
of the taxable income of the taxpayer for any year of assessment, the taxpayer shall be
deemed to have recovered or recouped-
(A) where such trading stock has been applied in a manner contemplated in paragraph
(a), an amount equal to the cost price to him of such trading stock (less any sum
which has been deducted therefrom under the provisions of subsection (1)) or
where the cost price cannot be readily determined, the market value of such
trading stock; or
(B) where such trading stock has been applied, disposed of or distributed in a manner
contemplated in paragraph (b) (otherwise than in the manner contemplated in item

161 (C)) or ceases to be held as trading stock, an amount equal to the market value of
such trading stock;
[Item (B) substituted by s. 12 (e) of Act 5 of 2001 and by s. 37 (1) (b) of Act 45 of 2003.] (C) where such trading stock has been applied for the purpose of making a donation in
respect of which the provisions of section 18A apply, an amount equal to the
amount which was taken into account for that year of assessment in respect of the
value of that trading stock,
[Item (C) added by s. 37 (1) (c) of Act 45 of 2003.] and such amount shall be included in the income of the taxpayer for the year of
assessment during which such trading stock was so applied, disposed of, distributed or
ceased to be held as trading stock: Provided that where-
(a) an asset consisting of trading stock so applied is used or consumed by the taxpayer
in carrying on his trade, the amount included in his income under this subsection
shall for the purposes of this Act be deemed to be expenditure incurred in respect
of the acquisition by him of such asset;
(b) the provisions of paragraph (b) (ii) apply and any consideration contemplated in
that paragraph has been received by or accrued to the taxpayer, the amount
included in his income in terms of this subsection shall be reduced by such
consideration;
(c) such trading stock consists of livestock or produce in respect of which the
provisions of paragraph 11 of the First Schedule are applicable, the provisions of
this subsection shall not apply; or
(d) such trading stock consists of assets in respect of which any amount received or
accrued from the disposal thereof is or will be included in the gross income of the
taxpayer in terms of paragraph (jA) of the definition of ‘gross income’, the
provisions of paragraph (b) (iv) shall not apply.
[Para. (d) added by s. 24 (1) (d) of Act 74 of 2002.] [Sub-s. (8) added by s. 20 (c) of Act 94 of 1983, amended by s. 21 (d) of Act 101 of 1990, by s. 17 (1) (d)
of Act 113 of 1993 and by s. 19 (1) (c) of Act 21 of 1995 and substituted by s. 12 (1) (b) of Act 36 of
1996.] (9) Where-
(a) (i) the trading stock of any person during any year of assessment includes any
security;
(ii) such person has, during such year of assessment, lent such security to a borrower
in terms of a securities lending arrangement; and
(iii) a security of the same kind and of the same or equivalent quantity and quality has
not been returned by the borrower to such person at the end of such year of
assessment,
such security shall, for the purposes of this section, be deemed to be trading stock held
and not disposed of by such person at the end of such year of assessment; or
(b) (i) the trading stock of any other person during any year of assessment includes any
security;
(ii) such other person has during such year of assessment, borrowed such security
from a lender in terms of a securities lending arrangement; and
(iii) a security of the same kind and of the same or equivalent quantity and quality has
not been returned by such other person to such lender at the end of such year of
assessment,
such security shall, for the purposes of this section, be deemed not to be trading stock
held and not disposed of, by such other person at the end of such year of assessment.
[Sub-s. (9) added by s. 12 (1) (c) of Act 36 of 1996 and substituted by s. 37 (1) (d) of Act 45 of 2003.] 22A Schemes of arrangement involving trading stock
(1) If, under any scheme of arrangement or reconstruction of any company or its affairs (including
any scheme for the amalgamation of two or more companies and any other scheme) which is sanctioned by
any order of court on or after the first day of April, 1971, any company (hereinafter referred to as the
transferee company) has before 1 October 2001, acquired from any other company (hereinafter referred to
as the transferor company) any asset which was trading stock of the transferor company, and in respect of

162 such acquisition-
(a) no consideration measurable in terms of money accrued from the transferee company to
the transferor company; or
(b) a consideration accrued from the transferee company to the transferor company the
money value of which was less than the market value of such asset on the date on which
the transferee company acquired such asset,
such asset shall for the purposes of this Act be deemed to be trading stock of the transferee company, and,
where paragraph (a) is applicable-
(i) the transferee company shall be deemed to have acquired such asset at a price equal to the
cost price thereof to the transferor company; and
(ii) notwithstanding the provisions of section 22 (2), no deduction shall, in the determination
of the taxable income of the transferor company for the year of assessment of that
company during which the transferee company acquired such asset, be made in respect of
the value of such asset as trading stock.
[Sub-s. (1) amended by s. 31 of Act 60 of 2001.] (2) Any amount which is received by or accrues to the transferee company from the disposal of the
said asset (or of any interest therein) shall be included in that company’s income, whether such amount is
derived in carrying on any trade or otherwise or is derived from a source within or outside the Republic.
[S. 22A inserted by s. 19 (1) of Act 88 of 1971.] 23 Deductions not allowed in determination of taxable income
Cases
No deductions shall in any case be made in respect of the following matters, namely-
(a) the cost incurred in the maintenance of any taxpayer, his family or establishment;
(b) domestic or private expenses, including the rent of or cost of repairs of or expenses in
connection with any premises not occupied for the purposes of trade or of any dwelling-
house or domestic premises except in respect of such part as may be occupied for the
purposes of trade: Provided that-
(a) such part shall not be deemed to have been occupied for the purposes of trade,
unless such part is specifically equipped for purposes of the taxpayer’s trade and
regularly and exclusively used for such purposes; and
(b) no deduction shall in any event be granted where the taxpayer’s trade constitutes
any employment or office unless-
(i) his income from such employment or office is derived mainly from
commission or other variable payments which are based on the taxpayer’s
work performance and his duties are mainly performed otherwise than in
an office which is provided to him by his employer; or
[Sub-para. (i) substituted by s. 15 (a) of Act 21 of 1994.] (ii) his duties are mainly performed in such part;
[Sub-para. (ii) substituted by s. 15 (a) of Act 21 of 1994.] [Para. (b) amended by s. 23 of Act 129 of 1991 and by s. 18 (1) (a) of Act 113 of 1993.] (c) any loss or expense, the deduction of which would otherwise be allowable, to the extent
to which it is recoverable under any contract of insurance, guarantee, security or
indemnity;
(d) any tax, duty, levy, interest or penalty imposed under this Act, any additional tax imposed
under section 60 of the Value-Added Tax Act, 1991 (Act 89 of 1991), and any interest or
penalty payable in consequence of the late payment of any tax, duty, levy or contribution
payable under any Act administered by the Commissioner, the Regional Services
Councils Act, 1985 (Act 109 of 1985), the KwaZulu and Natal Joint Services Act, 1990
(Act 84 of 1990), the Skills Development Levies Act, 1999 (Act 9 of 1999), and the
Unemployment Insurance Contributions Act, 2002 (Act 4 of 2002);
[Para. (d) substituted by s. 20 (a) of Act 121 of 1984, by s. 20 (a) of Act 141 of 1992, by s. 28 (1) (a) of Act
30 of 2000 and by s. 13 of Act 16 of 2004.] (e) income carried to any reserve fund or capitalized in any way;
(f) any expenses incurred in respect of any amounts received or accrued which do not
constitute income as defined in section one;

163 (g) any moneys claimed as a deduction from income derived from trade, to the extent to
which such moneys were not laid out or expended for the purposes of trade;
[Para. (g) substituted by s. 20 (b) of Act 141 of 1992.] (h) interest which might have been made on any capital employed in trade;
(i) ……
[Para. (i) deleted by s. 18 of Act 65 of 1973, inserted by s. 20 (b) of Act 121 of 1984, amended by s. 18 (1)
(b) of Act 113 of 1993 and by s. 15 (b) of Act 21 of 1994 and deleted by s. 21 (1) (a) of Act 30 of 2002.] (j) where the taxpayer is an employer or associated institution (as respectively defined in
paragraph 1 of the Seventh Schedule), the cost to the taxpayer of any scholarship or
bursary granted to any employee (as so defined) of the taxpayer or of any employer in
relation to whom the taxpayer is an associated institution, or to any relative of any such
employee, if in consequence of the grant of such scholarship or bursary any remuneration
to which the employee was entitled or might in the future have become entitled was in
any manner reduced or forfeited;
[Para. (j) added by s. 20 (c) of Act 141 of 1992.] (k) any expense incurred by-
(i) a labour broker as defined in the Fourth Schedule, other than a labour broker in
respect of which a certificate of exemption has been issued in terms of paragraph
2 (5) of the said Schedule;
(ii) a personal service company as defined in the said Schedule; or
(iii) a personal service trust as defined in the said Schedule,
other than any expense which constitutes an amount paid or payable to any employee of
such labour broker, company or trust for services rendered by such employee, which is or
will be taken into account in the determination of the taxable income of such employee;
[Para. (k) added by s. 28 (1) (b) of Act 30 of 2000.] (l) any expense incurred in respect of the payment of any restraint of trade, except as
provided for in section 11 (cA).
[Para. (l) added by s. 28 (1) (b) of Act 30 of 2000.] (m) subject to paragraph (k), any expenditure, loss or allowance, contemplated in section 11,
which relates to any employment of, or office held by, any person (other than an agent or
representative whose remuneration is normally derived mainly in the form of
commissions based on his or her sales or the turnover attributable to him or her) in
respect of which he or she derives any remuneration, as defined in paragraph 1 of the
Fourth Schedule, other than-
(i) any contributions to a pension or retirement annuity fund as may be deducted
from the income of that person in terms of sections 11 (k) or (n);
(ii) any allowance or expense which may be deducted from the income of that person
in terms of section 11 (c), (e), (i) or (j); and
(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-
(aa) to the extent that it covers that person against the loss of income as a result
of illness, injury, disability or unemployment; and
[Item (aa) substituted by s. 38 (1) (a) of Act 45 of 2003.] (bb) in respect of which all amounts payable in terms of that policy constitutes
or will constitute income as defined;
[Para. (m) added by s. 21 (1) (b) of Act 30 of 2002.] (n) any deduction or allowance in respect of any asset to the extent that an amount is granted
to the taxpayer by the Government, which-
(i) is exempt from tax; and
(ii) is granted for purposes of the acquisition of that asset;
[Para. (n) added by s. 38 (1) (b) of Act 45 of 2003.] 23A Limitation of allowances granted to lessors of certain assets
(1) For the purposes of this section-
‘affected asset’ means-
(a) any machinery, plant or aircraft which has been let and in respect of which the lessor is or
was entitled to an allowance under section 12 or 14bis, whether in the current or a

164 previous year of assessment, other than any such machinery, plant or aircraft let by him
under an agreement of lease formally and finally signed by every party to the agreement
before 15 March 1984; or
(b) any machinery, plant, implement, utensil, article, aircraft or ship which has been let and
in respect of which the lessor is or was entitled to an allowance under section 11 (e), 12B
or 12C, whether in the current or a previous year of assessment, other than any such
machinery, plant, implement, utensil, article, aircraft or ship let by him under an
agreement of lease formally and finally signed by every party to the agreement before 19
November 1988,
[Para. (b) substituted by s. 22 (1) (a) of Act 101 of 1990, by s. 34 of Act 30 of 1998 and by s. 32 (1) (a) of
Act 60 of 2001.] but excluding any such asset let by the lessor under an operating lease or any such asset which was during
the year of assessment mainly used by him in the course of any trade carried on by him, other than the
letting of any such asset;
‘operating lease’ means a lease of movable property concluded by a lessor in the ordinary course of
a business (not being the business of a banker or financier) of letting such property, if-
(a) such property may be hired by members of the general public directly from that lessor in
terms of such a lease, for a period of less than one month;
[Para. (a) substituted by s. 32 (1) (b) of Act 60 of 2001.] (b) the cost of maintaining such property and of carrying out repairs thereto required in
consequence of normal wear and tear, is borne by the lessor; and
(c) subject to any claim that the lessor may have against the lessee by reason of the lessee’s
failure to take proper care of the property, the risk of destruction or loss of or other
disadvantage to such property is not assumed by the lessee;
‘rental income’ means income derived by way of rent from the letting of movable property or any
machinery or plant in respect of which an allowance has been granted to the lessor under section 11 (e), 12,
12B or 12C, whether in the current or any previous year of assessment.
[Definition of ‘rental income’ substituted by s. 22 (1) (b) of Act 101 of 1990 and by s. 32 (1) (c) of Act 60
of 2001.] (2) Notwithstanding the provisions of sections 11 (e) and (o), 12B, 12C and 14 bis, the sum of the
deductions which may be allowed to any taxpayer in any year of assessment under those provisions in
respect of any affected assets let by him shall not exceed the taxable income (as determined before making
the said deductions) derived by him during such year from rental income.
[Sub-s. (2) substituted by s. 22 (1) (c) of Act 101 of 1990 and by s. 24 of Act 129 of 1991.] (3) For the purposes of subsection (2), where the taxpayer is entitled to any deduction which
relates to rental income and other income derived by him, an appropriate portion of such deduction shall be
taken into account in the determination of the taxable income derived by him from rental income.
(4) Any deduction which is disallowed under the provisions of subsection (2) shall be carried
forward to the succeeding year of assessment and shall, subject to the provisions of this section as
applicable in relation to that year, be deemed to be a deduction to which the taxpayer is entitled in that year.
[S. 23A inserted by s. 21 (1) of Act 121 of 1984, amended by s. 13 (1) of Act 96 of 1985 and by s. 15 (1) of
Act 65 of 1986 and substituted by s. 12 of Act 70 of 1989.] 23B Prohibition of double deductions
Cases
(1) Where, but for the provisions of this subsection, an amount-
(a) qualifies or has qualified for a deduction or an allowance; or
(b) is otherwise taken into account in determining the taxable income of any person,
under more than one provision of this Act, such amount or any portion thereof, shall not be allowed or
taken into account more than once as a deduction or allowance in the determination of the taxable income
of any person.
[Sub-s. (1) substituted by s. 16 (1) (a) of Act 21 of 1994 and by s. 29 of Act 30 of 2000.] (2) The provisions of subsection (1) shall not apply to expenditure in respect of which a deduction
or an allowance has been determined, if any section under which such deduction or allowance is allowed,
expressly requires such expenditure to be deductible under any other section as a prerequisite for a
deduction under such section.

165 (3) No deduction shall be allowed under section 11 (a) in respect of any expenditure or loss of a
type for which a deduction or allowance may be granted under any other provision of this Act,
notwithstanding that such other provision may impose any limitation on the amount of such deduction or
allowance.
[Sub-s. (3) added by s. 16 (1) (b) of Act 21 of 1994 and substituted by s. 39 of Act 45 of 2003.] [S. 23B inserted by s. 25 (1) of Act 129 of 1991.] 23C Reduction of cost or market value of certain assets
(1) Where for the purposes of applying any provision of this Act regard is to be had to the cost to
the taxpayer or the market value of any asset acquired by him or to the amount of any expenditure incurred
by him, and-
(a) the taxpayer is a vendor as defined in section 1 of the Value-Added Tax Act, 1991 (Act
89 of 1991); and
(b) the taxpayer is or was in any previous year of assessment entitled under section 16 (3) of
the last-mentioned Act to a deduction of input tax as defined in section 1 of that Act,
the amount of such input tax shall be excluded from the cost or the market value of such asset or the
amount of such expenditure: Provided that in the case of any lease as contemplated in paragraph (b) of the
definition of ‘instalment credit agreement’ in section 1 of the Act, there shall be excluded by the lessee from
each rental payment made by him in respect of such lease, an amount which bears to such input tax the
same ratio as such rental payment bears to the sum of all rental payments in connection with such lease.
[Sub-s. (1) substituted by s. 21 of Act 141 of 1992 and amended by s. 33 (1) (b) and (c) of Act 60 of 2001.] (2) Where a taxpayer (being a vendor as defined in section 1 of the Value-Added Tax Act, 1991)
has in respect of any tax period applicable to him under that Act which has ended during his year of
assessment, included in input tax deducted by him under section 16 (3) of that Act an amount of sales tax,
as permitted by section 78 of that Act so to be included-
(a) that amount shall, if it was included in capital expenditure taken into account for the
purposes of any deduction in respect of any mine under section 15 (a) of this Act, be
deemed for the purposes of paragraph (j) of the definition of ‘gross income’ in section 1 of
this Act to be an amount received by or accrued to the taxpayer during the said year of
assessment in respect of a disposal of assets referred to in the said paragraph; or
(b) that amount (not being an amount accounted for under paragraph (a)), shall for the
purposes of section 8 (4) (a) of this Act be deemed to be an amount which has been
recovered or recouped by the taxpayer during the said year of assessment.
[S. 23C inserted by s. 25 (1) of Act 129 of 1991 and amended by s. 33 (1) (a) of Act 60 of 2001.] 23D Limitation of allowances granted in respect of certain assets
(1) For the purposes of this section, ‘asset’ means-
(a) any machinery, plant, implements, utensils or articles contemplated in section 11 (e);
(aA) any invention, patent, design, trade mark, copyright, or any other property which is of a
similar nature, contemplated in section 11 (gA);
[Para. (aA) inserted by s. 20 (1) (a) of Act 21 of 1995.] (b) any building or improvements contemplated in section 13;
(c) any ship contemplated in section 14; or
(d) any aircraft contemplated in section 14bis.
(2) Where any asset which has been let by a taxpayer to a lessee was acquired by the taxpayer,
whether directly or indirectly from-
(a) such lessee;
(b) a person who is a connected person in relation to such lessee;
(c) a sublessee in relation to such asset (being a person to whom the right of use of such asset
has been granted by a lessee or by any person to whom the right of use of such asset has
previously been granted); or
(d) a person who is a connected person in relation to such sublessee,
and a deduction was previously granted to such lessee, such connected person or such sublessee under
section 11 (e), 11 (gA), 12B, 12C, 13, 14 or 14bis or section 12 prior to the repeal thereof by section 16 of
the Income Tax Act, 1991 (Act 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) or (o), 12C, 13, 14 or 14bis
shall be calculated on an amount not exceeding the lesser of the cost or adjustable cost, as the case may be,

166 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.
[Sub-s. (2) substituted by s. 10 (1) of Act 140 of 1993 and by s. 20 (1) (b) of Act 21 of 1995.] (3) The provisions of subsection (2) shall apply to-
(a) any asset, excluding an asset contemplated in subsection (1) (aA), acquired from a lessee
or a connected person in relation to such lessee on or after 21 June 1993;
(b) any asset contemplated in subsection (1) (aA), acquired from a lessee or a connected
person in relation to such lessee on or after 1 July 1995; and
(c) any asset acquired from a sublessee or a connected person in relation to such sublessee on
or after 1 July 1995.
[Sub-s. (3) added by s. 20 (1) (c) of Act 21 of 1995.] [S. 23D inserted by s. 19 (1) of Act 113 of 1993.] 23E Provisions relating to leave pay
(1) For the purposes of this section-
’employee’ includes the holder of any office;
‘leave pay’ means any amount which a taxpayer has during any year of assessment become liable
to pay to his employee in consequence of the employee having during such year become entitled to any
period of leave which had not been taken by him during that year;
‘leave pay provision’ means an amount equal to the lesser of-
(a) the amount included in the taxpayer’s income in terms of the provisions of subsection (5);
and
(b) an amount determined in relation to all periods of leave to which the taxpayer’s
employees were entitled as at the end of the last year of assessment of the taxpayer
ending before 1 January 1994, and calculated by applying, in the case of each such
employee, the employee’s rate of earnings as at the end of such year to the period of leave
to which such employee was so entitled.
(2) For the purposes of this Act, where in consequence of any leave to which an employee of the
taxpayer became entitled during any year of assessment of the taxpayer ending on or after 1 January 1994,
the taxpayer has become liable to pay any amount of leave pay-
(a) the taxpayer shall be deemed not to have incurred expenditure in respect of such leave
pay until it is actually paid by him or becomes due and payable by him; and
(b) such leave pay shall be deemed to accrue to the employee concerned on the date upon
which such expenditure is deemed to have been incurred by the taxpayer.
(3) Where any taxpayer has in any return of income submitted by him to the Commissioner before
1 March 1993 claimed a deduction of an amount determined in accordance with a practice consistently
applied by him and in the bonafide belief that such amount constituted leave pay which was lawfully
allowable as a deduction in the determination of his taxable income (whether such amount exceeds or is
less than the amount which was lawfully deductible), there shall be allowed as a deduction in the
determination of his taxable income for such year and for each subsequent year of assessment ending
before 1 January 1994 an amount determined in accordance with the said practice: Provided that where in
his return of income for any year of assessment ending before 1 January 1994 the taxpayer has amended
such practice and the deduction determined in accordance with such amended practice is less than the
deduction which would have been determined in accordance with his previous practice, the amount to be
allowed as a deduction under this subsection in that year of assessment and in each subsequent year of
assessment ending before 1 January 1994 shall be determined in accordance with such amended practice.
(4) Where in respect of any year of assessment of a taxpayer ending before 1 January 1994, the
Commissioner has not prior to the date of commencement of the Income Tax Act, 1993, issued an
assessment, a deduction in respect of leave pay shall not be granted for such year otherwise than as may be
permitted under the provisions of subsection (3).
(5) There shall be included in the income of any taxpayer in his first year of assessment ending on
or after 1 January 1994 the sum of all amounts allowed to be deducted in the determination of his taxable
income in all years of assessment ending before that date in respect of leave pay relating to all periods of
leave to which his employees were entitled at the end of the last year of assessment ending before the said
date.
(6) Where an amount has under the provisions of subsection (5) been included in the income of
any taxpayer, any amount of leave pay which becomes due and payable by him to an employee in respect

167 of any period of leave taken into account in the determination of such amount shall, notwithstanding the
provisions of subsection (3), be allowed to be deducted from his income in the year of assessment during
which such leave pay becomes due and payable.
(7) There shall in the case of any taxpayer to whom the provisions of subsection (5) are applicable,
be allowed to be deducted in the determination of his taxable income for his first year of assessment ending
on or after 1 January 1994 and for each of the four succeeding years of assessment (such succeeding years
of assessment hereinafter being referred to as the second to fifth years, in chronological order) a deduction
equal to-
(a) in the said first year, 100 per cent;
(b) in the second year, 85 per cent;
(c) in the third year, 70 per cent;
(d) in the fourth year, 50 per cent; and
(e) in the fifth year, 25 per cent,
of the amount of the leave pay provision determined in relation to the taxpayer: Provided that-
(i) the deduction so allowed in any year of assessment shall be included in the taxpayer’s
taxable income in the following year of assessment; and
(ii) no deduction shall be allowed under this subsection if the taxpayer has during the current
or any previous year of assessment commencing on or after 1 January 1994 ceased to
carry on trade.
(8) Where-
(a) any commercial or industrial undertaking has been acquired by one company from
another company;
(b) both such companies are managed, controlled or owned by substantially the same
persons; and
(c) the last-mentioned company contemplated in paragraph (a) is entitled to a deduction as
contemplated in subsection (7),
the Commissioner may direct that, subject to such conditions as he may impose, the said two companies
shall for the purposes of subsections (1), (3), (4), (5), (6) and (7) be regarded as being one company.
[Sub-s. (8) added by s. 2 (1) of Act 168 of 1993.] [S. 23E inserted by s. 19 (1) of Act 113 of 1993.] [Date of commencement of s. 23E: 20 July 1993.] 23F Acquisition or disposal of trading stock
(1) Where any taxpayer has during any year of assessment incurred expenditure for the acquisition
of trading stock which was neither disposed of by him during such year nor held by him at the end of such
year, any deduction which may be allowed to him under the provisions of section 11 (a) in respect of such
expenditure shall not be allowed in such year, but such expenditure shall for the purposes of such
provisions be deemed to have been incurred by him in the first subsequent year of assessment in which-
(a) such trading stock is disposed of by him;
(b) the value of such trading stock falls to be included in his income under the provisions of
section 22 (1); or
(c) it is shown by him that by reason of the loss or destruction of such trading stock or the
termination of the agreement in terms of which such trading stock was acquired by him
or for any other reason, such trading stock will neither be disposed of nor held by him, to
the extent that such expenditure was actually paid.
[Para. (c) substituted by s. 28 (1) (a) of Act 59 of 2000.] [Sub-s. (1) amended by s. 28 (1) (b) of Act 59 of 2000 and by s. 40 (a) of Act 45 of 2003.] (2) Where a taxpayer has during any year of assessment disposed of any trading stock in the
ordinary course of his or her trade for any consideration the full amount of which will not accrue to him or
her during that year of assessment and any expenditure incurred in respect of the acquisition of that trading
stock was allowed as a deduction under the provisions of section 11 (a) during that year or any previous
year of assessment, any amount which would otherwise be deducted must, to the extent that it exceeds any
amount received or accrued from the disposal of that trading stock be disregarded during that year of
assessment.
[Sub-s. (2) amended by s. 40 (b) of Act 45 of 2003 and substituted by s. 21 (1) (a) of Act 32 of 2004.] (2A) So much of any amount disregarded in terms of subsection (2) may be deducted from the
income of that person in any subsequent year of assessment to the extent that any amount which is received

168 by or accrued to that person in that subsequent year from that disposal is included in the income of that
person.
[Sub-s. (2A) inserted by s. 21 (1) (b) of Act 32 of 2004.] (2B) If during any year of assessment a person contemplated in subsection (2) proves that no
further amounts will accrue to him or her in that year and any subsequent year as contemplated in
subsection (2A), so much of the amount which was disregarded in terms of subsection (2) as has not been
allowed as a deduction in any year, must be allowed as a deduction from the income of that person in that
year of assessment.
[Sub-s. (2B) inserted by s. 21 (1) (b) of Act 32 of 2004.] (3) Where-
(a) any taxpayer has during any year of assessment in the ordinary course of his trade
disposed of any right or interest in any asset which constitutes trading stock which has
the effect that the remaining right or interest in such asset held and not disposed of will
not be included in trading stock at the end of such year; and
(b) any expenditure incurred in respect of the acquisition of such asset was allowed as a
deduction under the provisions of section 11 (a) or was otherwise taken into account
during such year or any previous year of assessment,
[Para. (b) substituted by s. 40 (c) of Act 45 of 2003.] there shall be deemed to have been recovered or recouped by such taxpayer and be included in the income
of such taxpayer for such year of assessment, so much of such expenditure as relates to the remaining right
or interest contemplated in paragraph (a).
[S. 23F inserted by s. 17 of Act 21 of 1994 and substituted by s. 30 (1) of Act 30 of 2000.] 23G Sale and leaseback arrangements
(1) For the purposes of this section-
‘asset’ means any asset, whether movable or immovable, or corporeal or incorporeal;
‘sale and leaseback arrangement’ means any arrangement whereby-
(a) any person disposes of any asset (whether directly or indirectly) to any other person; and
(b) such person or any connected person in relation to such person leases (whether directly or
indirectly) such asset from such other person.
(2) Where the receipts or accruals of any person, who is a lessee or sublessee in relation to a sale
and leaseback arrangement, do not for the purposes of this Act constitute income of such person-
(a) any amount which is received by or accrues to any lessor in relation to such sale and
leaseback arrangement, shall be limited to an amount which constitutes interest as
contemplated in section 24J; and
(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), 12B, 12C or 13 in respect of an asset
which is the subject matter of such sale and leaseback arrangement.
(3) Where the receipts or accruals of any person, who is a lessor in relation to a sale and leaseback
arrangement, arising from such arrangement do not for the purposes of this Act constitute income of such
person, any deduction to which a lessee or sublessee in relation to such sale and leaseback arrangement is
entitled under the provisions of this Act shall, subject to the provisions of section 11 (f), be limited to an
amount which constitutes interest as contemplated in section 24J.
(4) The provisions of subsection (2) (a) shall not apply to any person who is both a lessor and a
lessee in relation to the same sale and leaseback arrangement during any year of assessment.
[S. 23G inserted by s. 16 (1) of Act 28 of 1997.] 23H Limitation of certain deductions
(1) Where any person has during any year of assessment actually incurred any expenditure (other
than expenditure incurred in respect of the acquisition of any trading stock)-
(a) which is allowable as a deduction in terms of the provisions of section 11 (a), (c) or (d) or
section 28 (2) (a) and (c); and
[Para. (a) substituted by s. 29 (1) of Act 59 of 2000.] (b) in respect of-
(i) goods or services, all of which will not be supplied or rendered to such person,
during such year of assessment; or
(ii) any other benefit, the period to which the expenditure relates extends beyond
such year of assessment,

169 [Para. (b) substituted by s. 34 (1) (a) of Act 60 of 2001.] the amount of the expenditure which shall be allowable as a deduction in terms of such section in the said
year and any subsequent year of assessment, shall be limited to, in the case of expenditure incurred in
respect of-
(i) goods to be supplied, so much of the expenditure as relates to the goods actually supplied
to such person in such year of assessment; or
(ii) services to be rendered, an amount which bears to the total amount of such expenditure
the same ratio as the number of months in such year during which such services are
rendered bears to the total number of months during which such services will be
rendered; or
(iii) any other benefit to which such expenditure relates, an amount which bears to the total
amount of such expenditure the same ratio as the number of months in such year during
which such person will enjoy such benefit bears to the total number of months during
which such person will enjoy such benefit or where the period of such benefit is not
determinable, such period over which the benefit is likely to be enjoyed:
[Para. (iii) substituted by s. 34 (1) (b) of Act 60 of 2001.] Provided that the provisions of this section shall not apply-
(aa) where all the goods or services are to be supplied or rendered within six months after the
end of the year of assessment during which the expenditure was incurred, or such person
will have the full enjoyment of such benefit in respect of which the expenditure was
incurred within such period; or
[Para. (aa) substituted by s. 34 (1) (c) of Act 60 of 2001.] (bb) where the aggregate of all amounts of expenditure incurred by such person, which would
otherwise be limited by this section, does not exceed R50 000; or
(cc) to any expenditure to which the provisions of section 24I, 24J, 24K or 24L apply; or
(dd) to any expenditure actually paid in respect of any unconditional liability to pay an amount
imposed by legislation.
(2) If the Commissioner is in any case satisfied that the apportionment of the expenditure in
accordance with subsection (1) does not reasonably represent a fair apportionment of such expenditure in
respect of the goods, services or benefits to which it relates, he may direct that such apportionment be made
in such other manner as to him appears fair and reasonable.
(3) Notwithstanding the provisions of subsections (1) and (2), where it is during any year of
assessment shown by any person that-
(a) the goods or services in respect of which the expenditure is incurred will never be
received by or be rendered to such person; or
(b) such person will never enjoy such other benefit in respect of which any expenditure is
incurred,
[Para. (b) substituted by s. 34 (1) (d) of Act 60 of 2001.] such expenditure shall be allowed in such year, to the extent that such expenditure has been actually paid
by such person.
(4) The exercise by the Commissioner of his discretion contemplated in subsection (2) shall be
subject to objection and appeal.
[S. 23H inserted by s. 31 (1) of Act 30 of 2000.] 24 Credit agreements and debtors allowance
Cases
(1) Subject to the provisions of section 24J, if any taxpayer has entered into any agreement with
any other person in respect of any property the effect of which is that, in the case of movable property, the
ownership shall pass or, in the case of immovable property, transfer shall be passed from the taxpayer to
that other person, upon or after the receipt by the taxpayer of the whole or a certain portion of the amount
payable to the taxpayer under the agreement, the whole of that amount shall for the purposes of this Act be
deemed to have accrued to the taxpayer on the day on which the agreement was entered into.
[Sub-s. (1) substituted by s. 17 (1) of Act 28 of 1997.] (2) In the case of such an agreement in terms of which at least 25 per cent of the said amount
payable only becomes due and payable on or after the expiry of a period of not less than 12 months after
the date of the said agreement, the Commissioner, taking into consideration any allowance he has made

170 under section 11 (j), may make such further allowance as under the special circumstances of the trade of the
taxpayer seems to him reasonable, in respect of all amounts which are deemed to have accrued under such
agreements but which have not been received at the close of the taxpayer’s accounting period: Provided that
any allowance so made shall be included as income in the taxpayer’s returns for the following year of
assessment and shall form part of his income.
(3) Where-
(a) any taxpayer has in respect of his latest year of assessment ended before 1 January 1986
in good faith claimed an allowance under this section as applicable in that year;
(b) such allowance was granted in accordance with the generally prevailing practice of the
Commissioner as applicable in that year; and
(c) in consequence of the amendment to this section effected by section 14 of the Income
Tax Act, 1985 (Act 96 of 1985), or section 16 of the Income Tax Act, 1986, such
allowance may not be granted in respect of the first year of assessment of the taxpayer
ended or ending on or after 1 January 1986,
there shall be allowed to be deducted from the income of the taxpayer for his said first year of assessment
and each of the three succeeding years of assessment (such succeeding years of assessment being referred
to in this section as the second, third and fourth years, in chronological order) an allowance calculated in
accordance with the provisions of subsection (4): Provided that any deduction so allowed shall be included
as income in the taxpayer’s return for the following year of assessment and shall form part of his income.
[Sub-s. (3) amended by s. 6 (1) of Act 108 of 1986.] (4) The allowance under subsection (3) shall be-
(a) in respect of the said first year, 80 per cent;
(b) in respect of the said second year, 60 per cent;
(c) in respect of the said third year, 40 per cent; and
(d) in respect of the said fourth year, 20 per cent,
of an amount equal to the lesser of the allowance contemplated in subsection (3) (b) and so much of any
allowance which, but for the amendment referred to in subsection (3) (c), would have been granted under
subsection (2) in respect of the relevant year but which may in consequence of such amendment not be
granted.
(5) Where any taxpayer was in respect of his last year of assessment ended on or before 6 May
1989 entitled to an allowance under subsection (2) in respect of any class of property sold by him in the
course of his trade but is in consequence of his compliance with any regulation promulgated in terms of
section 3 of the Credit Agreements Act, 1980 (Act 75 of 1980), no longer entitled to such allowance in
respect of that class of property, there shall be allowed to be deducted from the income of the taxpayer for
his first year of assessment immediately following such last year and each of the three succeeding years of
assessment (such succeeding years being referred to hereinafter as the second, third and fourth years, in
chronological order) an allowance calculated in accordance with the provisions of subsection (6): Provided
that-
(a) any deduction so allowed shall be included in the taxpayer’s income in the following year
of assessment; and
(b) no deduction shall be made under this subsection-
(i) if the taxpayer has during the current or any previous year of assessment ceased to
trade with that class of property; or
(ii) in any year of assessment during which the taxpayer is, in consequence of the
amendment or repeal of any such regulation, once again entitled to claim an
allowance under subsection (2) in respect of that class of property.
[Sub-s. (5) added by s. 23 of Act 101 of 1990.] (6) The allowance under subsection (5) shall be-
(a) in respect of the said first year, 80 per cent;
(b) in respect of the said second year, 60 per cent;
(c) in respect of the said third year, 40 per cent; and
(d) in respect of the said fourth year, 20 per cent,
of the allowance granted to the taxpayer under this section in respect of his last year of assessment referred
to in subsection (5): Provided that the allowance which may be granted in the said first year, shall be
reduced by any allowance to which the taxpayer is entitled in that year under the provisions of subsection
(2) in respect of that class of property.

171 [Sub-s. (6) added by s. 23 of Act 101 of 1990.] [S. 24 amended by s. 22 of Act 89 of 1969, by s. 21 of Act 94 of 1983 and by s. 14 of Act 96 of 1985 and
substituted by s. 16 (1) of Act 65 of 1986.] 24A Transactions whereby fixed property is or company shares are exchanged for shares
(1) If, under any transaction entered into before 1 October 2001 for the disposal by any person
(hereinafter referred to as the trader) of any trading stock consisting of fixed property or any shares in any
company, the consideration received by or accrued to the trader for such trading stock in effect consists of
or includes-
(a) shares in a public company; or
(b) company shares quoted by a recognized stock exchange at the time of such transaction or
within six months thereafter; or
(c) shares in any other company, if such shares are, under a scheme for the consolidation or
merger of the interests of two or more persons, issued or transferred to the trader,
the value of the shares which constitute or are included in such consideration shall, if the trader and the
Commissioner agree thereto, be excluded from the trader’s income for the year of assessment during which
such consideration is received by or accrues to him.
[Sub-s. (1) amended by s. 35 of Act 60 of 2001.] (2) For the purposes of this Act-
(a) the shares which constitute or are included in the said consideration and any
capitalization shares issued in respect of such shares (which shares and capitalization
shares are hereinafter referred to as new trading stock) shall be deemed to be trading
stock of the trader; and
[Para. (a) amended by s. 24 of Act 85 of 1974.] (b) the cost price to the trader of the shares which constitute or are included in the said
consideration shall be deemed to be the cost to him of the trading stock referred to in
subsection (1) or, if such last-mentioned trading stock was held by him and had not been
disposed of by him at the beginning of the year of assessment, the amount taken into
account under section 22 (2) as the value thereof, less an amount which bears to the said
cost or the amount so taken into account, as the case may be, the same ratio as the value
of such portion (if any) of the said consideration as does not consist of the said shares
bears to the total value of the said consideration (including the said shares).
(3) Any amount (including the value of any benefit or advantage) which is received by or accrues
to the trader from the disposal of new trading stock (or a portion thereof) shall be included in the trader’s
income, whether such amount is derived in carrying on any trade or otherwise or is derived from a source
within or outside the Republic: Provided that the provisions of this subsection shall not be construed so as
to prevent the provisions of subsection (1) being applied in respect of such amount.
[Sub-s. (3) amended by s. 15 (1) of Act 85 of 1987.] (4) If on or after the date of promulgation of the Income Tax Act, 1971, the trader disposes of or
ceases to be the owner of new trading stock for any reason other than his death or insolvency or, in the case
of a company, the winding-up or liquidation thereof and no consideration accrues to him in respect of such
new trading stock or a consideration accrues to him in respect of such new trading stock which in whole or
part is not measurable in terms of money (the part of the consideration which is so measurable being less in
value than the market value of such new trading stock at the date on which it was disposed of or on which
the trader ceased to be the owner thereof), he shall for the purposes of this Act be deemed to have disposed
of such new trading stock for a consideration equal to the market value thereof at the date on which it was
disposed of or on which the trader ceased to be the owner thereof or the market value thereof on the date of
the transaction referred to in subsection (1), whichever value is the lower, reduced by the amount (if any)
included in the trader’s income under subsection (3) in respect of the disposal, and such value, as so
reduced, shall be included in his income: Provided that the foregoing provisions of this subsection shall not
apply where the trader disposes of or ceases to be the owner of new trading stock by reason of the carrying
out of any scheme referred to in section 22A and the trader is a transferor company as contemplated in that
section.
(5) Where the trader has until his death or the prior sequestration of his estate or, in the case of a
company, the commencement of the winding-up or liquidation thereof, continued to hold new trading
stock, the trader shall for the purposes of this Act be deemed to have disposed of such new trading stock on
the day preceding the date of his death or the sequestration of his estate (whichever first occurs) or, in the

172 case of a company the date on which the winding-up or liquidation thereof commenced, for a consideration
equal to the market value on the said day of such new trading stock or the market value thereof on the date
of the transaction referred to in subsection (1), whichever value is the lower, and such value shall be
included in his income for the period of assessment within which the said day falls.
(6) For the purposes of this section-
(a) ‘fixed property’ means property as defined in section 1 of the Transfer Duty Act, 1949
(Act 40 of 1949); and
(b) a company which has not yet been recognized under the provisions of this Act as a public
company, may at the request of the taxpayer, be deemed to be a public company, if the
Commissioner is satisfied that such company will be so recognized.
[S. 24A inserted by s. 23 of Act 89 of 1969 and substituted by s. 20 (1) of Act 88 of 1971.] 24B Transactions where assets are acquired in exchange for shares issued
(1) Subject to subsection (2), if a company acquires any asset from any person in exchange for
shares issued by that company-
(a) that company is for purposes of this Act deemed to have actually incurred an amount of
expenditure in respect of the acquisition of that asset, which is equal to the market value
of that asset as determined at the time of acquisition; and
(b) that person is for purposes of this Act deemed to have disposed of that asset for an
amount equal to that market value.
(2) If a company acquires any share or debt instrument which is issued to that company directly or
indirectly in exchange for the issue of shares by that company or any connected person in relation to that
company, that company is for purposes of this Act deemed not to have incurred any expenditure in respect
of the acquisition of that share or debt instrument so acquired.
(3) If a company issues any debt instrument directly or indirectly in exchange for the issue of
shares or of a debt instrument which is issued to that company or to a connected person in relation to that
company, that company is for purposes of this Act deemed to have incurred expenditure in respect of the
acquisition of that share or debt instrument so acquired, only to the extent that the amounts are paid by that
company in terms of the debt instrument so issued.
[S. 24B inserted by s. 9 (1) of Act 101 of 1978, substituted by s. 13 (1) of Act 104 of 1979, repealed by s.
32 of Act 30 of 2000 and inserted by s. 22 (1) of Act 32 of 2004.] 24C Allowance in respect of future expenditure on contracts
(1) For the purposes of this section, ‘future expenditure’ in relation to any year of assessment
means an amount of expenditure which the Commissioner is satisfied will be incurred after the end of such
year-
(a) in such manner that such amount will be allowed as a deduction from income in a
subsequent year of assessment; or
(b) in respect of the acquisition of any asset in respect of which any deduction will be
admissible under the provisions of this Act.
(2) If the income of any taxpayer in any year of assessment includes or consists of an amount
received by or accrued to him in terms of any contract and the Commissioner is satisfied that such amount
will be utilized in whole or in part to finance future expenditure which will be incurred by the taxpayer in
the performance of his obligations under such contract, there shall be deducted in the determination of the
taxpayer’s taxable income for such year such allowance (not exceeding the said amount) as the
Commissioner may determine, in respect of so much of such future expenditure as in his opinion relates to
the said amount.
(3) The amount of any allowance deducted under subsection (2) in any year of assessment shall be
deemed to be income received by or accrued to the taxpayer in the following year of assessment.
[S. 24C inserted by s. 18 (1) of Act No. 104 of 1980.] 24D Deduction of certain expenditure incurred in respect of any National Key Point or specified
important place or area
(1) There shall be allowed to be deducted from the income of any taxpayer for any year of
assessment so much of any expenditure actually incurred by the taxpayer as the Commissioner is satisfied
was so incurred during such year-
(a) directly in the performance of any act ordered, performed or executed under the
provisions of the National Key Points Act, 1980 (Act No. 102 of 1980), in respect of any
National Key Point or Key Point as defined in section 1 of that Act; or

173 (b) directly in providing efficient security against loss, damage, disruption or immobilization
of any place or area as defined in section 1 of the said Act which, although not declared a
National Key Point under the provisions of the said Act, has been evaluated and approved
by the Minister of Defence or any person or committee appointed by him as such a place
or area in respect of which measures for the efficient security thereof ought to be taken by
such taxpayer.
[Para. (b) substituted by s. 22 of Act No. 121 of 1984.] (2) The amount of any expenditure allowed to be deducted under the provisions of subsection (1)
shall be restricted to expenditure-
(a) actually incurred by the taxpayer on or after 1 September 1978; and
(b) which was or is not otherwise allowable as a deduction under the provisions of this Act,
and no claim by the taxpayer for the deduction of any expenditure under the provisions of this section shall
be admitted by the Commissioner unless confirmation has been received by him from the Minister of
Defence or any person or committee appointed by that Minister to the effect that it was deemed necessary
or expedient that the expenditure in question be incurred by the taxpayer concerned.
(3) Where an amount has been paid by the State to a taxpayer in respect of expenditure incurred by
him prior to 1 July 1983 which has qualified for deduction from his income under subsection (1) and the
Minister, person or committee referred to in subsection (2) confirms that such amount was paid as a
supplement to the benefit which the taxpayer has enjoyed or will enjoy by way of the said deduction, the
provisions of section 8 (4) (a) shall not apply in respect of the said amount.
[Sub-s. (3) added by s. 16 (1) of Act No. 85 of 1987.] [S. 24D inserted by s. 20 (1) of Act No. 96 of 1981.] 24E ……
[S. 24E inserted by s. 18 of Act 91 of 1982 and deleted by s. 18 of Act 90 of 1988.] 24F Taxable income of film owners
Cases
(1) In this section-
‘completion date’, in relation to 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;
‘export’, in relation to a film, means sell and consign or sell and deliver to any purchaser at any
address in any export country, or the exploitation of the film by the film owner in an export country and
any derivative of ‘export’ shall be construed accordingly;
[Definition of ‘export’ inserted by s. 25 (a) of Act 74 of 2002.] ‘export country’ means any country other than the Republic or a neighbouring country;
[Definition of ‘export country’ inserted by s. 25 (b) of Act 74 of 2002.] ‘film’ means a recording of moving visual images and sound by means of cinematographic film,
video tape, video disc or otherwise, including any copy of the film and any right therein;
‘film manufacturer’ means any person who manufactures film and whose income is derived wholly
or mainly from the production, processing, distribution or exhibition of films in the Republic;
‘film owner’ means any person who owns, whether solely or jointly, a film;
‘marketing expenditure’ means so much of the expenditure incurred by the film owner during the
year of assessment to market a South African export film and allowed to be deducted from his or her
income under section 11 as is proved to the satisfaction of the Commissioner to have been incurred
directly-
(a) in research into or obtaining information (including the remuneration of consultants,
agents or representatives) in regard to the marketing of that film in any export country;
(b) in advertising or otherwise securing publicity for that film in an export country
(excluding expenditure incurred in sponsoring or promoting any sporting or any other
event in a country other than an export country) or in soliciting orders for that film in, or
participating in trade fairs in, export countries;
(c) in providing without charge samples or technical information in respect of that film to
prospective customers in any export country;
(d) in bringing prospective customers from any export country to the Republic;
(e) in connection with the preparation or submission of tenders or quotations in respect of

174 that film to be exported to any export country;
(f) in respect of commission or other remuneration for orders for that film exported to any
export country or the clearing or forwarding of that film in that country;
(g) by way of certification fees charged by any South African Certification Authority in
respect of that film which has been exported;
(h) by way of expenditure (including search and application fees) incurred in obtaining in
any export country the registration of any copyright or patent or the restoration of any
copyright or patent or the registration of any design or trade mark or the extension of the
term or registration period of, or the renewal of the registration of, any copyright, patent,
design or trade mark;
(i) in connection with the design of any special label or packaging used for that film, if the
Commissioner is satisfied that the requirements as to the labelling or packaging of that
film differ materially from, or are additional to, the requirements of the South African
market; and
(j) by way of membership fees of any institution or body which-
(i) is actively engaged in export promotion of films;
(ii) does not receive financial support from the State; and
(iii) is approved by the Director-General of Trade and Industry:;
[Definition of ‘marketing expenditure’ inserted by s. 25 (c) of Act 74 of 2002.] ‘post-production cost’, in relation to a film, means any expenditure of the nature referred to in the
definition of ‘production cost’ which is incurred after the completion date, but excluding any print cost in
relation to such film;
‘print cost’, in relation to a film, means any expenditure incurred by the film owner in the making
of copies of the film;
‘production cost’, in relation to a film, means the total expenditure incurred by a film owner in
respect of the acquisition or production of such film, excluding expenditure incurred in the erection,
construction or acquisition of any buildings or other structures or works of a permanent nature, but
including, without in any way limiting the scope of this definition-
(a) any remuneration, salary, legal, accounting or other fee, commission or other amount
paid or payable to any person for the purposes of or in connection with the production of
the film;
(b) the cost of acquiring the story rights, script, screenplay, copyright or other rights in
relation to the film;
(c) insurance premiums in respect of insurance against injury to or death of persons, or loss
or damage to property employed or used, as the case may be, in the production of the
film;
(d) premiums or commission payable in order to secure a guarantee that the cost of the film
will not exceed a specified amount;
(e) interest, finance charges and raising fees incurred for the purposes of or in connection
with the production of the film;
(f) the cost of acquiring or creating music, sound and other effects which will form part of
the film;
(g) any allowance which but for the provisions of this section would be allowed under
section 11 (e) or (o) or 12C in respect of any machinery, implements, utensils or articles
used in the production of a film: Provided that-
(i) any such allowance shall be deemed to be an amount of expenditure incurred;
(ii) an amount equal to the total amount of any such allowance which may be granted
in respect of any year of assessment divided by the number of days in that year
shall be deemed to have been incurred on each day of that year;
(iii) such expenditure shall be deemed to have been incurred in the country in which
the asset in respect of which the allowance may be granted was acquired; and
(iv) no deduction or allowance shall be granted in respect of the cost of acquisition of
any such machinery, implements, utensils or articles otherwise than as provided in
this paragraph or paragraph (h); and
[Para. (g) amended by s. 26 of Act 129 of 1991.] (h) expenditure incurred in respect of-

175 (i) the purchase, hire or construction of sets; and
(ii) the hire of any machinery, implements, utensils or articles used in the production
of the film,
but excluding any such expenditure incurred after the completion date and any
expenditure incurred in the marketing or promotion of, or soliciting of orders for, the
film;
‘South African export film’ means a film in respect of which-
(a) at least 75 per cent of-
(i) the total amount of production cost and post-production cost (excluding amounts
paid or payable to persons nominated under subparagraph (ii)) is incurred and is
paid or payable in the Republic; and
(ii) the total amount paid or payable, whether by the film owner or any other person,
in respect of services rendered by persons employed directly in connection with
the production of the film (other than a maximum of four such persons nominated
by the film owner for the purposes of this definition) is paid or payable to persons
ordinarily resident in the Republic: Provided that where any person so nominated
is replaced by another person who assumes responsibility for such firstmentioned
person’s duties, the amounts paid or payable to both such persons shall be deemed
to have been paid or to be payable to one person; and
(b) at least 50 per cent of-
(i) the production cost and post-production cost; and
(ii) any expenditure similar to production cost or post-production cost which is
incurred in connection with the film by any person other than the film owner,
is incurred and is paid or payable in the Republic;
‘write-off period’ ……
[Definition of ‘write-off period’ deleted by s. 24 (1) (a) of Act 101 of 1990.] (2) (a) There shall be allowed to be deducted 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.
(b) The film allowance which may be granted in respect of any film shall 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 post-production cost which may otherwise be allowable in
terms of the provisions of this Act.
(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 the sum of-
(a) in the year of assessment in which the completion date of such film falls, the production
cost of such film and any post-production cost of such film incurred during such year;
and
(b) in any subsequent year of assessment, any post-production cost of such film incurred
during such year and the amount of any film allowance disallowed in the preceding year
of assessment under the provisions of subsection (4).
[Sub-s. (3) substituted by s. 24 (1) (b) of Act 101 of 1990.] (4) The film allowance which may be granted in respect of any one film in any year of assessment
shall, together with the total film allowances granted in respect of that film in any preceding years of
assessment, not exceed the sum of-
(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
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 on the last day of
the year of assessment, the amount which may be taken into account under this paragraph
shall be reduced by any portion of such loan or credit so owed by him 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
[Para. (a) amended by s. 19 (1) (a) of Act 90 of 1988.] (b) the amounts of any production cost and post-production cost which have not been paid by

176 the film owner and for which he is under the provisions of subsection (8) deemed to be at
risk on the last day of the year of assessment.
(5) and (6) ……
[Sub-ss. (5) and (6) deleted by s. 24 (1) (c) of Act 101 of 1990.] (7) The amount of any print cost or any marketing expenditure which may be allowed under the
provisions of section 11 shall not in the aggregate exceed the total of-
(a) the amount of such print cost or marketing expenditure which has been paid by the film
owner: Provided that where any loan or credit has been used by him for the payment or
financing of the whole or any portion of such print cost or marketing expenditure and any
portion of such loan or credit is owed by him on the last day of the year of assessment,
the amount to be allowed under this paragraph shall be reduced by any portion of such
loan or credit so owed by him 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
[Para. (a) amended by s. 19 (1) (b) of Act 90 of 1988.] (b) the amount of any print cost or marketing expenditure which has not been paid by the
film owner and for which he is under the provisions of subsection (8) deemed to be at
risk on the last day of the year of assessment:
Provided that where-
(a) any such loan or credit for which the film owner is not deemed to be at risk has been used
by him for the payment or financing of print cost and marketing expenditure; or
(b) he is in respect of the sum of any unpaid amount of print cost and marketing expenditure
not deemed to be at risk,
he shall for the purposes of this subsection be deemed not to be at risk for so much of such loan or credit or
so much of such sum, as the case may be, as does not exceed the amount of such marketing expenditure for
which such loan or credit was used or which is unpaid: Provided further that any amount of print cost or
marketing expenditure which has been disallowed in terms of this subsection shall be carried forward and
be deemed for the purposes of section 11 to be an amount of print cost or marketing expenditure, as the
case may be, incurred in the succeeding year of assessment.
[Sub-s (7) amended by s. 19 (1) (c) of Act 90 of 1988, by s. 30 (a) and (b) of Act 59 of 2000 and by s. 25
(d) of Act 74 of 2002.] (8) For the purposes of subsections (4) and (7), a film owner shall be deemed to be at risk to the
extent that the payment of the production cost, post-production cost, print cost or marketing expenditure
incurred by him, or the repayment of any loan or credit used by him for the payment or financing of any
such production cost, 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, post-production cost, print cost or marketing expenditure is incurred) result in an economic
loss to him were no income to be received by or accrue to him in future years from the exploitation by him
of the film.
[Sub-s. (8) substituted by s. 25 (e) of Act 74 of 2002.] (9) and (10) ……
[Sub-ss. (9) and (10) deleted by s. 25 (f) of Act 74 of 2002.] (11) ……
[Sub-s. (11) added by s. 19 (1) (e) of Act 90 of 1988 and deleted by s. 25 (f) of Act 74 of 2002.] [S. 24F inserted by s. 17 (1) of Act 85 of 1987] 24G Taxable income of toll road operators
(1) For the purposes of this section-
‘agreement’ means an agreement concluded by the taxpayer in terms of which the taxpayer is
entitled to operate a toll road;
‘ancillary service’ in relation to a toll road, means any-
(a) vehicle service station, breakdown or repair facility;
(b) shop or restaurant;
(c) park, recreation or rest area;
(d) emergency medical or first-aid facility;
(e) hotel or other accommodation; or
(f) entertainment facility,
or other service or facility to which persons or vehicles may gain access from the toll road;

177 ‘permanent work’ means-
(a) any earthwork, tunnel, bridge or structure forming part of a toll road, including any
building erected for the purpose of housing toll equipment, but excluding any such work
constructed or erected solely for the purposes of the repair or maintenance of a toll road;
and
(b) the reimbursement for the cost of acquisition or expropriation of land required for the
purposes of the toll road; and
[Para. (b) substituted by s. 14 (1) (a) of Act 16 of 2004.] (c) any payment made to the South African National Roads Agency Limited in respect of the
acquisition of the right to operate a toll road;
[Para. (c) added by s. 14 (1) (b) of Act 16 of 2004.] ‘road pavement’ means the road surface, road shoulders, subbase, base course, wearing courses,
road signage, road markings, lighting, guard rails, tolling equipment, emergency telephone systems,
emergency telephone repeater stations, access roads to emergency telephone repeater station sites and other
parts and road furniture of a toll road, excluding any permanent work or ancillary service;
‘single toll road’ means-
(a) a single continuous toll road or portion thereof, or two or more toll roads or portions
thereof which are not contiguous but which the Minister of Transport Affairs, after
consultation with the Minister of Finance, considers should be regarded as a single toll
road; or
(b) two or more toll roads or portions thereof in respect of which a single agreement has been
concluded with the South African National Roads Agency Limited;
[Para. (b) substituted by s. 14 (1) (c) of Act 16 of 2004.] ‘South African National Roads Agency Limited’ means the South African National Road Agency
Limited incorporated in terms of section 3 of the South African National Roads Agency Limited and
National Roads Act, 1998 (Act 7 of 1998);
[Definition of ‘South African National Roads Agency Limited’ inserted by s. 14 (1) (d) of Act 16 of 2004.] ‘tolling period’, in relation to a toll road, means the initial period during which the South African
National Roads Agency Limited has granted to the taxpayer or any other person the right to operate such
toll road, including any period in respect of which such right was so granted in terms of an interim
agreement concluded by the South African National Roads Agency Limited, but excluding any extension of
such first-mentioned period in respect of which a right of renewal may be exercised;
[Definition of ‘tolling period’ substituted by s. 14 (1) (e) of Act 16 of 2004.] ‘toll road’ means a road or section thereof, including any access road, crossroad or ramp
constituting a necessary adjunct to such road or section, in respect of which the taxpayer derives or will
derive income through the imposition of a toll or the exploitation of the right to impose a toll.
(2) Subject to the provisions of subsection (5), there shall be deducted in the determination of the
taxable income derived by the taxpayer during any year of assessment-
(a) the sum of any annual allowances determined under subsection (3) in relation to
expenditure incurred during the current or any previous year of assessment in respect of
any permanent work, road pavement, major rehabilitation of the road pavement or
erection or construction or ancillary services in relation to a toll road;
(b) any expenditure incurred during the year of assessment in respect of the repair or
maintenance of a toll road or any ancillary service in relation to such toll road, other than
expenditure incurred on major rehabilitation of the road pavement;
(c) any interest (other than interest which is deductible under section 11 (a)) incurred by the
taxpayer during the year of assessment in respect of any loan utilized for the purpose of
financing any expenditure contemplated in paragraph (a) or (b); and
[Para. (c) substituted by s. 41 of Act 45 of 2003.] (d) any amount which has been disallowed in the preceding year of assessment under the
provisions of subsection (5):
Provided that the aggregate of the allowances which may be granted under paragraph (a) shall not exceed
the total expenditure incurred by the taxpayer on such permanent work, road pavement, major rehabilitation
of road pavement or erection or construction of ancillary services.
(3) For the purposes of subsection (2), an annual allowance shall be calculated in respect of
expenditure incurred by the taxpayer on permanent works, road pavements, major rehabilitation of road

178 pavements or the erection, construction, installation or provision of ancillary services during any year of
assessment, such allowance to be equal to the expenditure so incurred during the year divided by the lesser
of the number of years reckoned from the commencement of that year until the end of the tolling period
(for which purpose a portion of a year shall be regarded as a year) and-
(a) in the case of expenditure incurred on permanent works or the erection or construction of
ancillary services, 25 years; and
(b) in the case of such expenditure incurred on road pavements or major rehabilitation of
road pavements, 8 years.
(4) No deduction or allowance shall be granted under this Act in respect of expenditure
contemplated in subsection (2) otherwise than as provided in that subsection.
[Sub-s. (4) substituted by s. 14 (1) (f) of Act 16 of 2004.] (5) The allowances which may be granted under subsection (2) (a), (b) and (d) in any year of
assessment in respect of any single toll road shall not in the aggregate exceed the taxable income (as
determined before the deduction of the said allowances) derived by the taxpayer during such year from-
(a) the exploitation of such toll road or any ancillary service in relation to such toll road; and
(b) any interest derived in the ordinary course of such exploitation and the financing of any
expenditure contemplated in subsection (3) which relates to such toll road.
[S. 24G inserted by s. 20 (1) of Act 90 of 1988.] 24H Persons carrying on trade or business in partnership
Cases
(1) For the purposes of this section, ‘limited partner’ means any member of a partnership en
commandite, an anonymous partnership or any similar partnership, if such member’s liability towards a
creditor of the partnership is limited to the amount which he has contributed or undertaken to contribute to
the partnership or is in any other way limited.
(2) Where any trade or business is carried on in partnership, each member of such partnership
shall, notwithstanding the fact that he may be a limited partner, be deemed for the purposes of this Act to
be carrying on such trade or business.
(3) Notwithstanding anything to the contrary in this Act contained, the amount of any allowance
or deduction which may be granted to any taxpayer under any provision of this Act in respect of or in
connection with any trade or business carried on by him in a partnership in relation to which he is a limited
partner shall not in the aggregate exceed the sum of-
(a) the amount, whether it consists of the taxpayer’s contribution to the partnership or of any
other amount, for which the taxpayer is or may be held liable to any creditor of the
partnership; and
(b) any income received by or accrued to the taxpayer from such trade or business.
[Sub-s. (3) amended by s. 26 of Act 74 of 2002.] (4) Any allowance or deduction which has been disallowed under the provisions of subsection (3)
shall be carried forward and be deemed to be an allowance or deduction to which the taxpayer is entitled in
the succeeding year of assessment.
(5) (a) Where any income has in common been received by or accrued to the members of any
partnership, a portion (determined in accordance with any agreement between such members as to the ratio
in which the profits or loses of the partnership are to be shared) of such income shall, notwithstanding
anything to the contrary contained in any law or the relevant agreement of partnership, be deemed to have
been received by or to have accrued to each such member individually on the date upon which such income
was received by or accrued to them in common.
(b) Where a portion of any income is under the provisions of paragraph (a) deemed to have been
received by or to have accrued to a taxpayer, a portion (determined as aforesaid) of any deduction or
allowance which may be granted under the provisions of this Act in the determination of the taxable
income derived from such income shall be granted in the determination of the taxpayer’s taxable income so
derived.
[S. 24H inserted by s. 21 of Act 90 of 1988.] 24I Gains or losses on foreign exchange transactions
(1) For the purposes of this section-
‘acquisition rate’ means the exchange rate in respect of an exchange item obtained by dividing the
amount of the expenditure incurred for the acquisition of such exchange item by the foreign currency

179 amount in respect of such exchange item;
‘affected contract’ means any foreign currency option contract or forward exchange contract, as the
case may be, which has been entered into by any person during any year of assessment, to serve as a hedge
in respect of a loan, advance or debt, where-
(a) such loan or advance has not yet been obtained or granted, as the case may be, by such
person, or such debt has not yet been incurred by, or the amount payable in respect of
such debt has not yet accrued to such person, as the case may be, during such year of
assessment; and
(b) such loan, advance or debt-
(i) is to be utilised by such person to acquire any asset or to finance any expense; or
(ii) will arise from the sale of any asset or the supply of any services,
in the ordinary course of his trade in terms of an agreement entered into by such person
prior to the end of such year of assessment;
[Definition of ‘affected forward exchange contract’ inserted by s. 18 (1) (a) of Act 21 of 1994 and
substituted by s. 13 (1) (a) of Act 36 of 1996 and by ‘affected contract’ by s. 35 (1) (a) of Act 30 of 1998.] ‘disposal rate’ means the exchange rate in respect of an exchange item obtained by dividing the
amount received or accrued in respect of the disposal of such exchange item by the foreign currency
amount in respect of such exchange item;
‘exchange difference’ means the foreign exchange gain or foreign exchange loss in respect of an
exchange item during any year of assessment determined by multiplying such exchange item by the
difference between-
(a) the ruling exchange rate on transaction date in respect of such exchange item during that
year of assessment, and-
(i) the ruling exchange rate at which such exchange item is realised during that year
of assessment; or
(ii) the ruling exchange rate at which such exchange item is translated at the end of
that year of assessment; or
(b) the ruling exchange rate at which such exchange item was translated at the end of the
immediately preceding year of assessment or at which it would have been translated had
this section been applicable at the end of that immediately preceding year of assessment,
and-
(i) the ruling exchange rate at which such exchange item is realised during that year
of assessment; or
(ii) the ruling exchange rate at which such exchange item is translated at the end of
that year of assessment;
‘exchange item’ of or in relation to a person means an amount in a foreign currency-
(a) which constitutes any unit of currency acquired and not disposed of by that person;
(b) owing by or to that person in respect of a loan or advance or a debt incurred by or
payable to such person;
(c) owed by or to that person in respect of a forward exchange contract; or
(d) where that person has the right or contingent obligation to buy or sell that amount in
terms of a foreign currency option contract.
[Definition of ‘exchange item’ amended by s. 18 (1) (b) of Act 21 of 1994 and substituted by s. 36 (1) (a) of
Act 60 of 2001.] ‘foreign currency’ in relation to any exchange item of a person, means any currency which is not
local currency;
[Definition of ‘foreign currency’ substituted by s. 31 (a) of Act 59 of 2000, by s. 36 (1) (b) of Act 60 of
2001 and by s. 27 (1) (a) of Act 74 of 2002.] ‘foreign currency option contract’ means any agreement in terms of which any person acquires or
grants the right to buy from or to sell to any other person a certain amount of a nominated foreign currency
on or before a future expiry date at a specified exchange rate;
‘forward exchange contract’ means any agreement in terms of which any person agrees with
another person to exchange an amount of currency for another currency at some future date at a specified
exchange rate;
‘forward rate’ means the specified exchange rate as referred to in the definition of ‘forward
exchange contract’;

180 ‘intrinsic value’, in relation to a foreign currency option contract, means the value for the holder or
writer thereof, as the case may be, determined by applying the difference between-
(a) the spot rate on translation date or the date on which the foreign currency option contract
is realised, as the case may be; and
(b) the option strike rate,
to the amount of foreign currency as specified in such foreign currency option contract: Provided that such
foreign currency option contract shall have a nil value for the holder or writer thereof if such holder thereof
would have sustained a loss had he exercised his right in terms of such foreign currency option contract on
such translation date or date realised due to the unfavourable difference between the option strike rate and
the spot rate on such translation date or date realised;
‘local currency’ means in relation to-
(a) any exchange item which is attributable to any permanent establishment of a person
outside the Republic, the currency used by that permanent establishment for purposes of
financial reporting;
(b) any resident in respect of an exchange item which is not attributable to a permanent
establishment outside the Republic, the currency of the Republic; or
[Para. (b) substituted by s. 42 (1) (a) of Act 45 of 2003.] (c) any person that is not a resident in respect of any exchange item which is attributable to a
permanent establishment in the Republic, the currency of the Republic;
[Para. (c) substituted by s. 42 (1) (a) of Act 45 of 2003.] [Definition of ‘local currency’ inserted by s. 36 (1) (c) of Act 60 of 2001 and substituted by s. 27 (1) (b) of
Act 74 of 2002.] ‘market value’, in relation to a foreign currency option contract, means-
(a) in the case of a person who for accounting purposes uses a market-related valuation
method in terms of a practice consistently applied by him to determine the value of all his
foreign currency option contracts, the market-related value so determined; or
(b) in the case of any other person, the intrinsic value of such foreign currency option
contract;
‘option strike rate’ means the specified exchange rate as referred to in the definition of ‘foreign
currency option contract’;
‘premium or discount on a forward exchange contract’ means the amount obtained by applying the
difference between the forward rate in respect of a forward exchange contract and the spot rate on the date
on which such forward exchange contract was entered into, to the foreign currency amount specified in
such forward exchange contract;
‘realised’ means, in relation to an exchange item, where such exchange item is-
(a) a loan or advance or debt in any foreign currency, when and to the extent to which
payment is received or made in respect of such loan, advance or debt, or when and to the
extent to which such loan, advance or debt is settled or disposed of in any other manner;
(b) a forward exchange contract, when payment is received or made in respect of such
forward exchange contract;
(c) a foreign currency option contract, when payment is received or made in respect of the
right in terms of such foreign currency option contract having been exercised, or when
such foreign currency option contract expires without such right having been exercised,
or when such foreign currency option contract is disposed of; or
[Para. (c) substituted by s. 11 (1) (a) of Act 140 of 1993.] (d) an amount which constitutes a unit of currency, when that amount is disposed of;
[Para. (d) added by s. 27 (1) (d) of Act 74 of 2002.] ‘ruling exchange rate’ means, in relation to an exchange item, where such exchange item is-
(a) a loan or advance or debt in a foreign currency on-
(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;
(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,

181 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
(iii) the date it is realised, the spot rate on such date:
Provided that where the rate prescribed in respect of a loan or advance or debt in terms of
this definition is the spot rate on transaction date or the spot rate on the date on which
such loan or advance or debt is realised, and any consideration paid or payable or
received or receivable in respect of the acquisition or disposal of such loan or advance or
debt was determined by applying a rate other than such spot rate on transaction date or
date realised, such spot rate shall be deemed to be the acquisition rate or disposal rate, as
the case may be;
(b) a forward exchange contract on-
(i) transaction date, the forward rate in terms of such forward exchange contract;
(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;
[Sub-para. (ii) substituted by s. 18 (1) (c) of Act 21 of 1994 and by s. 35 (1) (b) of Act 30 of 1998.] (iii) the date it is realised, the spot rate on such date; or
(c) a foreign currency option contract on-
(i) transaction date, a nil rate;
(ii) the date it is translated-
(aa) in relation to a foreign currency option contract which is not an affected
contract, the rate obtained by dividing the market value of such foreign
currency option contract on that date by the foreign currency amount as
specified in such foreign currency option contract; or
(bb) in relation to a foreign currency option contract which is an affected
contract, the rate obtained by dividing any amount included or deducted, as
the case may be, in terms of subsection (3) (b) by the foreign currency
amount, as specified in such affected contract;
[Item (bb) substituted by s. 27 (1) (e) of Act 74 of 2002.] [Sub-para. (ii) substituted by s. 35 (1) (c) of Act 30 of 1998.] (iii) the date it is realised, the rate obtained by dividing the market value of such
foreign currency option contract on that date by the foreign currency amount as
specified in such foreign currency option contract: Provided that where such
foreign currency option contract is realised by the disposal thereof, the rate shall
be obtained by dividing the amount received or accrued as a result of the disposal
of such foreign currency option contract, by the foreign currency amount as
specified in such foreign currency option contract:
[Sub-para. (iii) amended by s. 11 (1) (b) of Act 140 of 1993.] (iv) ……
[Sub-para. (iv) deleted by s. 11 (1) (c) of Act 140 of 1993.] (d) an amount which constitutes a unit of currency, on-
(i) transaction date, the spot rate on that date;
(ii) the date it is translated, the spot rate on that date; or
(iii) the date it is realised, the spot rate on that date:
[Para. (d) inserted by s. 27 (1) (f) of Act 74 of 2002.] Provided that the Commissioner may, having regard to the particular circumstances of the case, prescribe
an alternative rate to any of the aforementioned prescribed rates to be applied by a person in such particular
circumstances, if such alternative rate is used for accounting purposes in terms of generally accepted
accounting practice;
[Definition of ‘ruling exchange rate’ amended by s. 18 (1) (d) of Act 21 of 1994.] ‘spot rate’ means the appropriate quoted exchange rate at a specific time for the delivery of

182 currency;
[Definition of ‘spot rate’ substituted by s. 36 (1) (d) of Act 60 of 2001.] ‘transaction date’ means, in relation to-
(a) a loan or advance owing by a person, the date on which the amount payable in respect of
such loan or advance was received by such person;
(b) a debt owing by a person, the date on which such debt was actually incurred;
(c) a loan or advance owing to a person, the date on which the amount payable in respect of
such loan or advance was paid to another person or the date on which such loan or
advance was acquired by such person in any other manner;
(d) a debt owing to a person, the date on which the amount payable in respect of such debt
accrued to such person or the date on which such debt was acquired by such person in
any other manner;
(e) a forward exchange contract, the date on which such contract was entered into;
(f) a foreign currency option contract, the date on which such contract was entered into or
acquired; and
(g) an amount which constitutes a unit of currency, the date on which that amount was
acquired;
[Para. (g) added by s. 27 (1) (h) of Act 74 of 2002.] ‘transitional exchange difference’ ……
[Definition of ‘transitional exchange difference’ deleted by s. 36 (1) (e) of Act 60 of 2001.] ‘translate’ means the restatement of an exchange item in the local currency at the end of any year
of assessment, by applying the ruling exchange rate to such exchange item.
[Definition of ‘translate’ substituted by s. 36 (1) (f) of Act 60 of 2001.] (2) The provisions of this section shall apply in respect of any-
(a) company;
(b) trust carrying on any trade;
(c) natural person who holds any amount contemplated in paragraph (a) or (b) of the
definition of ‘exchange item’ as trading stock; and;
[Para. (c) substituted by s. 27 (1) (k) of Act 74 of 2002.] (d) natural person or trust in respect of any amount contemplated in paragraph (c) or (d) of
the definition of ‘exchange item:
[Sub-para. (d) added by s. 27 (1) (l) of Act 74 of 2002.] Provided that this section does not apply in respect of any exchange item of a person who is not a resident
(other than a controlled foreign company), unless that exchange item is attributable to a permanent
establishment of that person in the Republic.
[Sub-s. (2) amended by s. 31 (b) and (c) of Act 59 of 2000, substituted by s. 26 (1) (g) of Act 60 of 2001
and amended by s. 27 (1) (i) of Act 74 of 2002 and by s. 23 of Act 32 of 2004.] (3) In determining the taxable income of any person contemplated in subsection (2), there shall be
included in or deducted from the income, as the case may be, of that person-
(a) any exchange difference in respect of an exchange item of or in relation to that person,
subject to subsection (10);
(b) (i) any premium or like consideration received by, or paid by, such person in terms of
a foreign currency option contract entered into by such person; or
(ii) any consideration paid by such person in respect of a foreign currency option
contract acquired by such person; and
(c) any discount which accrued to such person or any premium incurred by him in respect of
any forward exchange contract, where-
(i) such forward exchange contract was entered into by such person as a related or
matching forward exchange contract to serve as a hedge in respect of any loan,
advance or debt utilized or to be utilized by such person to acquire any asset or to
finance any expense, or to serve as a hedge in respect of any loan, advance or debt
arising from the sale of any asset or the supply of any services; and
(ii) such loan, advance or debt was recorded on transaction date at the forward rate in
terms of such forward exchange contract, but such asset so acquired or such
expense so financed, or such asset so sold or services so supplied, was recorded at
the spot rate or an alternative rate as the Commissioner may have prescribed in

183 terms of the definition of ‘ruling exchange rate’:
Provided that such discount or premium shall be deemed to have accrued or been
incurred, as the case may be, on a day to day basis during the period of such forward
exchange contract for the purposes of this paragraph.
[Sub-s. (3) substituted by s. 36 (1) (h) of Act 60 of 2001.] (4) ……
[Sub-s. (4) substituted by s. 18 (1) (e) of Act 21 of 1994, amended by s. 31 (d) of Act 59 of 2000 and
deleted by s. 27 (1) (m) of Act 74 of 2002.] (5) Where during any year of assessment any premium or discount on a forward exchange contract
is included in any exchange difference in respect of any loan, advance or debt, where such exchange
difference arose by reason of such loan, advance or debt having been-
(a) translated at the forward rate as contemplated in paragraph (a) (ii) of the definition of
‘ruling exchange rate’ or an alternative rate as the Commissioner may have prescribed in
terms of that definition; and
(b) (i) recorded during that year of assessment at the spot rate on transaction date as
contemplated in paragraph (a) (i) of that definition; or
(ii) translated at the end of the immediately preceding year of assessment at the spot
rate on translation date as contemplated in paragraph (a) (ii) of that definition; or
(iii) translated at the end of the immediately preceding year of assessment at the
forward rate as contemplated in paragraph (a) (ii) of that definition, but such
forward rate differs from the forward rate contemplated in paragraph (a) of this
subsection; or
(iv) recorded or translated, as the case may be, on any of the dates contemplated in
subparagraph (i), (ii) or (iii) at an alternative rate as the Commissioner may have
prescribed in terms of the definition of ‘ruling exchange rate’, such premium or
discount on such forward exchange contract which is so included in such
exchange difference, shall be deemed to have been incurred or accrued, as the case
may be, on a day to day basis during the period of such forward exchange contract
and such premium or discount shall, for the purposes of subsection (2), be
included in or deducted from a person’s income on such basis; or
(v) recorded during that year of assessment at the forward rate on the transaction date
as contemplated in paragraph (a) (i) of the definition of ‘ruling exchange rate’,
[Sub-para. (v) added by s. 18 (b) of Act 28 of 1997.] [Sub-s. (5) substituted by s. 18 (1) (e) of Act 21 of 1994.] (6) Any inclusion in or deduction from income in terms of this section shall be in lieu of any
deduction or inclusion which may otherwise be allowed or included under any other provision of this Act.
[Sub-s. (6) substituted by s. 26 of Act 53 of 1999 and by s. 36 (1) (i) of Act 60 of 2001.] (7) Notwithstanding the provisions of subsection (3), but subject to the provisions of sections 36
and 37E-
(a) any exchange difference arising from a loan, advance or debt having been utilized by a
person in respect of-
(i) the acquisition, installation, erection or construction of any machinery, plant,
implement, utensil, building or improvements to any building, as the case may be;
or
(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), as the case may be;
(b) any exchange difference arising from a forward exchange contract or a foreign currency
option contract which has been entered into by a person contemplated in paragraph (a), to
the extent to which such forward exchange contract or foreign currency option contract is
entered into to serve as a hedge in respect of a loan or advance obtained or to be obtained
or a debt incurred or to be incurred for the utilization thereof as contemplated in
paragraph (a); and
[Para. (b) substituted by s. 11 (1) (e) of Act 140 of 1993.] (c) any premium or other consideration paid or payable in respect of or in terms of a foreign
currency option contract entered into or acquired by a person contemplated in paragraph

184 (a), to the extent to which such foreign currency option contract is entered into or
obtained in order to serve as a hedge in respect of a loan or advance obtained or to be
obtained or a debt incurred or to be incurred for the utilization thereof as contemplated in
paragraph (a),
[Para. (c) substituted by s. 11 (1) (e) of Act 140 of 1993.] shall, where such exchange difference arose or such premium or other consideration was paid or became
payable in a year of assessment prior to the year of assessment during which such machinery, plant,
implement, utensil, building, improvements to any building, invention, patent, design, trade mark,
copyright or other similar property or knowledge was or is brought into use for the purposes of such
person’s trade, be carried forward and be taken into account in the determination of the taxable income of
such person in the year of assessment during which such machinery, plant, implement, utensil, building,
improvements to any building, invention, patent, design, trade mark, copyright or other similar property or
knowledge was or is so brought into use for the purposes of such person’s trade: Provided that where the
Commissioner is satisfied that during any year of assessment subsequent to the year of assessment during
which such exchange difference arose or such premium or other consideration was paid or became payable-
(a) the loan, advance or debt to be obtained or incurred, as the case may be, as contemplated
in paragraph (b) or (c) of this subsection will no longer be so obtained or incurred;
(b) such loan, advance or debt has not been utilised as contemplated in paragraph (a); or
(c) any such asset, property or knowledge will no longer be brought into use for the purpose
of such person’s trade,
such exchange difference or premium or other consideration shall no longer be carried forward, but shall be
taken into account in the determination of such person’s taxable income in such subsequent year of
assessment.
[Sub-s. (7) amended by s. 11 (1) (d) of Act 140 of 1993, by s. 18 (1) (f ) of Act 21 of 1994, by s. 13 (1) (b)
of Act 36 of 1996 and by s. 36 (1) (j) of Act 60 of 2001.] (7A) (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 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-
(i) such company is a connected person in relation to such other company; and
(ii) the qualifying exchange item is of a capital nature.
[Para. (a) amended by s. 36 (1) (k) of Act 60 of 2001.] (b) The deferred amount of any exchange difference shall, subject to the provisions of paragraphs
(c), (d) and (e), be the sum of-
(i) the foreign exchange gain or foreign exchange loss as determined in terms of this section
during any year of assessment in respect of any qualifying exchange item if such foreign
exchange gain or foreign exchange loss arose as a result of the translation of such
qualifying exchange item at the end of such year of assessment; and
(ii) the balance of any foreign exchange gain or foreign exchange loss, in respect of any
qualifying exchange item which had arisen as a result of the translation of such qualifying
exchange item during any preceding year of assessment, not included in or deducted from
the income of such company in terms of paragraph (a) during such preceding year of
assessment.
(c) The foreign exchange gain and foreign exchange loss referred to in paragraph (b) (i) shall
exclude-
(i) in respect of all years of assessment ending on or before 31 December 1995, any foreign
exchange loss in respect of any loan or advance made by such company to any other
company or by any other company to such company on or before 31 December 1994; and
(ii) any foreign exchange gain or foreign exchange loss arising in respect of any qualifying
exchange item at the end of any year of assessment to the extent to which such qualifying
exchange item is hedged by a related or matching forward exchange contract.
(d) The balance of any foreign exchange gain or foreign exchange loss in respect of any qualifying
exchange item referred to in paragraph (b) (ii) shall-

185 (i) where the foreign currency amount of a qualifying exchange item, to the extent to which
it is not hedged by a related or matching forward exchange contract, at the end of any
year of assessment is less than the foreign currency amount of such qualifying exchange
item, to the extent to which it was not hedged by a matching or related forward exchange
contract, as at the end of the immediately preceding year of assessment, be reduced by an
amount which bears to such balance the same ratio as the reduction in the foreign
currency amount of such qualifying exchange item which is not so hedged at the end of
such year of assessment bears to the foreign currency amount of such qualifying
exchange item which was not so hedged at the end of such immediately preceding year of
assessment; or
(ii) be reduced by 100 per cent of such balance in the first year of assessment during which
the provisions of paragraph (a) have not been complied with.
(e) Where any qualifying exchange item (hereinafter referred to as the old qualifying exchange
item) is realized during the year of assessment by conversion thereof into a qualifying exchange item
denominated in any other foreign currency (hereinafter referred to as the new qualifying exchange item)-
(i) any exchange difference arising as a result of such conversion shall, for the purposes of
paragraph (b) (i), be deemed to be a deferred amount of any exchange difference in
respect of such old qualifying exchange item;
(ii) the foreign currency amount of such old qualifying exchange item shall, for the purposes
of paragraph (d), be deemed not to have been reduced on realization to the extent that it
was converted into a new qualifying exchange item and, thereafter, the old qualifying
exchange item and the new qualifying exchange item shall be deemed to be one and the
same qualifying exchange item and a reduction of the foreign currency amount of the
new qualifying exchange item shall be deemed to be a reduction of the old qualifying
exchange item; and
(iii) the foreign currency amount of the old qualifying exchange item at the end of such
immediately preceding year of assessment shall for the purposes of paragraph (d) be
restated in the foreign currency in which the new qualifying exchange item is
denominated by applying the appropriate exchange rate used to convert the old qualifying
exchange item to the new qualifying exchange item.
(f) Any reduction in terms of paragraph (d) of the balance of any foreign exchange gain or foreign
exchange loss in respect of a qualifying exchange item shall be included in or deducted from, as the case
may be, the income of such company in the year of assessment of such reduction.
[Sub-s. (7A) inserted by s. 18 (1) (g) of Act 21 of 1994.] (8) Any foreign exchange loss sustained in respect of a transaction entered into by a person, or any
premium or other consideration paid in respect of or in terms of a foreign currency option contract entered
into or acquired by a person, shall not be allowed as a deduction from such person’s income under
subsection (3) if such transaction was entered into or such foreign currency option contract was entered into
or acquired solely or mainly to enjoy a reduction in tax by way of a deduction from income.
[Sub-s. (8) substituted by s. 36 (1) (l) of Act 60 of 2001.] (9) For the purposes of this section, any exchange item of or in relation to-
(a) a person contemplated in subsection (2), held or owed by that person on 1 October 2001,
other than in the course of trade of such person, shall be deemed to have been received,
incurred, acquired or entered into, as the case may be, by that person on that date at the
ruling exchange rate on that date; and
(b) a foreign company which becomes a controlled foreign company shall be deemed to have
been received, incurred, acquired or entered into, as the case may be, by that controlled
foreign company on the later of-
(i) the first day of the year of assessment commencing on or after 1 January 2000; or
(ii) the date that the foreign company becomes a controlled foreign company.
[Sub-s. (9) added by s. 36 (1) (m) of Act 60 of 2001 and substituted by s. 42 (1) (b) of Act 45 of 2003.] (10) No amount shall 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 a controlled foreign company in relation either to that resident or
to any other company, which is a resident, and which forms part of the same group of

186 companies as that resident; or
(b) any controlled foreign company in relation to any exchange item contemplated in
paragraph (a):
[Para. (b) substituted by s. 42 (1) (c) of Act 45 of 2003.] Provided that where that exchange item is realised during any year of assessment, the exchange difference
in respect of that exchange item shall be determined by multiplying that exchange item by the difference
between the ruling exchange rate on the date on which that exchange item is realised and the ruling
exchange rate on transaction date, after taking into account any exchange difference included in or
deducted from the income of that person in terms of this section in respect of that exchange item.
[Sub-s. (10) added by s. 36 (1) (m) of Act 60 of 2001 and substituted by s. 27 (1) (n) of Act 74 of 2002.] (11) No amount shall be included in or deducted from the income of a person in terms of this
section in respect of any exchange difference arising from-
(a) any amount owing by a person in respect of a loan, advance or debt incurred by that
person in foreign currency to acquire any asset, other than an asset-
(i) which constitutes an exchange item;
(ii) the currency of expenditure of which is denominated in the local currency of that
person; or
(iii) in respect of which the provisions of section 9G or paragraph 43 (4) of the Eighth
Schedule would apply had that asset been disposed of, regardless of whether or
not that asset constitutes trading stock; and
[Sub-para. (iii) substituted by s. 42 (1) (d) of Act 45 of 2003.] (b) any forward exchange contract or foreign currency option contract entered into to hedge
such loan, advance or debt.
[Sub-s. (11) added by s. 36 (1) (m) of Act 60 of 2001 and substituted by s. 27 (1) (n) of Act 74 of 2002.] (12) Where a person holds any exchange item and the provisions of this section at any time during
a year of assessment-
(a) become applicable to that person, that exchange item shall be deemed to have been
acquired at that time for the purposes of this section; or
(b) cease to apply to that person, that exchange item shall be deemed to have been realised at
that time for the purposes of this section.
[Sub-s. (12) added by s. 36 (1) (m) of Act 60 of 2001 and substituted by s. 27 (1) (n) of Act 74 of 2002.] [S. 24I inserted by s. 21 of Act 113 of 1993.] 24J Incurral and accrual of interest
(1) For the purposes of this section, unless the context otherwise indicates-
‘accrual amount’, in relation to an accrual period, means an amount determined in accordance with
the following formula:
A = B x C
in which formula-
(a) ‘A’ represents the amount to be determined;
(b) ‘B’ represents the yield to maturity; and
(c) ‘C’ represents the adjusted initial amount:
Provided that-
(i) where the commencement or end of any year of assessment falls within an accrual period,
the amount so determined shall be apportioned on a day to day basis over the term of
such accrual period in order to determine the relevant portion of such amount relating to
that part of such accrual period falling within the year of assessment so commencing or
ending, as the case may be;
(ii) where an instrument is transferred on a date other than at the end of an accrual period, the
amount so determined shall be apportioned on a day to day basis over the term of such
accrual period in order to determine the relevant portion of such amount relating to the
relevant transferor or transferee, as the case may be, in relation to such instrument; and
(iii) the amount so determined shall be appropriately adjusted by taking into account amounts
received or payments made other than at the end of an accrual period;
‘accrual period’, in relation to an instrument, means-
(a) where in terms of such instrument regular payments at intervals of equal length and not
exceeding 12 months per interval are to be made throughout the term of such instrument,

187 the period between such regular payments; or
(b) any period not exceeding 12 months elected by the holder or issuer, as the case may be,
which period shall be applied consistently throughout the term of such instrument;
‘adjusted gain on transfer or redemption of an instrument’ means-
(a) in relation to the holder of any income instrument, where-
(i) an alternative method has not been applied, the amount by which the sum of the
transfer price or redemption payment of such income instrument in relation to
such holder and any payments received by such holder in terms of such income
instrument during the accrual period in which such income instrument is
transferred or redeemed, exceeds the sum of the adjusted initial amount in relation
to such income instrument and the accrual amount in relation to such accrual
period and any payments made by such holder in terms of such income instrument
during such accrual period; or
(ii) an alternative method has been applied, the amount by which the sum of the
transfer price or redemption payment of such income instrument in relation to
such holder and any payments received by such holder in terms of such income
instrument during the period from acquisition until transfer or redemption of such
income instrument by such holder, exceeds the sum of the initial amount and all
amounts determined in accordance with such alternative method and any other
payments made by such holder in terms of such income instrument during the
period from acquisition until transfer or redemption of such income instrument by
such holder; or
(b) in relation to the issuer of any instrument, where-
(i) an alternative method has not been applied, the amount by which the sum of the
adjusted initial amount in relation to such instrument and the accrual amount in
relation to the accrual period during which such instrument is transferred or
redeemed and any payments received by such issuer in terms of such instrument
during the accrual period, exceeds the sum of the transfer price or redemption
payment in relation to such instrument in relation to such issuer and any payments
made by such issuer in terms of such instrument during such accrual period; or
(ii) an alternative method has been applied, the amount by which the sum of the initial
amount and all amounts determined in accordance with such alternative method
and any other payments received by such issuer in terms of such instrument
during the period from issue or acquisition until transfer or redemption of such
instrument by such issuer, exceeds the sum of the transfer price or redemption
payment in relation to such instrument in relation to such issuer and any payments
made by such issuer in terms of such instrument during the period from issue or
acquisition until transfer or redemption of such instrument by such issuer;
[Definition of ‘adjusted gain on transfer or redemption of an instrument’ substituted by s. 14 (1) (a) of Act
36 of 1996.] ‘adjusted initial amount’ means-
(a) in relation to the holder of an income instrument with regard to a particular accrual
period, the sum of the initial amount and the accrual amounts in relation to all previous
accrual periods and any other payments made by such holder during all such previous
accrual periods less any payments received by such holder during all such previous
accrual periods, in terms of such income instrument; or
(b) in relation to the issuer of an instrument with regard to a particular accrual period, the
sum of the initial amount and the accrual amounts in relation to all previous accrual
periods and any other payments received by such issuer during all such previous accrual
periods less any payments made by such issuer during all such previous accrual periods,
in terms of such instrument: Provided that where that instrument forms part of any
transaction,operation or scheme-
(i) any payments made by the issuer to any other person pursuant to that transaction,
operation or scheme with a purpose or with the probable effect of making
payment directly or indirectly to the holder or a connected person in relation to the
holder, must be deducted for purposes of this paragraph; and

188 (ii) in the case where any party to that transaction, operation or scheme is a connected
person in relation to that issuer, any payments made by that connected person to
any other person pursuant to that transaction, operation or scheme with a purpose
or with the probable effect of making payment directly or indirectly to the holder
or a connected person in relation to the holder, must be deducted for purposes of
this paragraph;
[Para. (b) amended by s. 24 (1) (a) of Act 32 of 2004.] ‘adjusted loss on transfer or redemption of an instrument’ means-
(a) in relation to the holder of any income instrument, where-
(i) an alternative method has not been applied, the amount by which the sum of the
adjusted initial amount in relation to such income instrument and the accrual
amount in relation to the accrual period during which such income instrument is
transferred or redeemed and any payments made by such holder in terms of such
income instrument during such accrual period, exceeds the sum of the transfer
price or redemption payment in relation to such income instrument in relation to
such holder and any payments received by such holder in terms of such income
instrument during such accrual period; or
(ii) an alternative method has been applied, the amount by which the sum of the initial
amount and all amounts determined in accordance with such alternative method
and any other payments made by such holder in terms of such income instrument
during the period from acquisition until transfer or redemption of such income
instrument by such holder, exceeds the sum of the transfer price or redemption
payment in relation to such income instrument in relation to such holder and any
payments received by such holder in terms of such income instrument during the
period from acquisition until transfer or redemption of such income instrument by
such holder; or
(b) in relation to the issuer of any instrument, where-
(i) an alternative method has not been applied, the amount by which the sum of the
transfer price or redemption payment of such instrument in relation to such issuer
and any payments made by such issuer in terms of such instrument during the
accrual period during which such instrument is transferred or redeemed, exceeds
the sum of the adjusted initial amount in relation to such instrument and the
accrual amount in relation to such accrual period and any payments received by
such issuer in terms of such instrument during such accrual period; or
(ii) an alternative method has been applied, the amount by which the sum of the
transfer price or redemption payment of such instrument in relation to such issuer
and any payments made by such issuer in terms of such instrument during the
period from issue or acquisition until transfer or redemption of such instrument by
such issuer, exceeds the sum of the initial amount and all amounts determined in
accordance with such alternative method and any other payments received by such
issuer in terms of such instrument during the period from issue or acquisition until
transfer or redemption of such instrument by such issuer;
[Definition of ‘adjusted loss on transfer or redemption of an instrument’ substituted by s. 14 (1) (b) of Act
36 of 1996.] ‘alternative method’ means a method of calculating interest in relation to any class of instruments
which-
(a) conforms with generally accepted accounting practice;
(b) is consistently applied in respect of all such instruments (excluding any instrument as
contemplated in subsection (9)) for all financial reporting purposes; and
(c) method achieves a result in so far as the timing of the accrual and incurral of interest is
concerned which does not differ significantly from the result achieved by the application
of the provisions of subsections (2) (a) and (3) (a);
‘deferred interest’ includes-
(a) any interest where such interest (or any portion thereof), calculated in respect of any
accrual period falling within the term of any instrument by applying a constant interest
rate throughout the term of such instrument, is not payable or receivable in terms of such

189 instrument within one year from the date of the commencement of such accrual period;
and
(b) any interest payable or receivable in terms of any instrument where such interest is not
calculated by applying a constant interest rate throughout the term of such instrument;
‘fixed rate instrument’ means an instrument in terms of which the amount or amounts payable or
receivable is or are or consists of or consist of-
(a) a specified amount or specified amounts;
(b) an amount or amounts the method of calculation of which does not involve the
application of a variable rate; or
(c) any combination of amounts referred to in paragraph (a) or (b);
‘holder’, in relation to an income instrument-
(a) means any person who has become entitled to any interest or amount receivable in terms
of such income instrument; or
[Para. (a) substituted by s. 24 (1) (b) of Act 32 of 2004.] (b) at any particular time, means any person who, if any interest payable in terms of such
income instrument was due and payable at that time, would be entitled to receive
payment of such interest;
‘income instrument’ means-
(a) in the case of any person other than a company, any instrument-
(i) the term of which will, or is reasonably likely to, exceed one year; and
(ii) which is issued or acquired at a discount or premium or bears deferred interest;
and
(b) in the case of any company, any instrument;
[Definition of ‘income instrument’ substituted by s. 14 (1) (c) of Act 36 of 1996.] ‘initial amount’ means the issue price or transfer price, as the case may be, in relation to an
instrument’;
‘instrument’ means any form of interest-bearing arrangement, whether in writing or not, including-
(a) any stock, bond, debenture, bill, promissory note, certificate or similar arrangement;
(b) any deposit with a bank or other financial institution;
(c) any secured or unsecured loan, advance or debt;
(d) any acquisition or disposal of any right to receive interest or the obligation to pay any
interest, as the case may be, in terms of any other interest bearing arrangement; or
(e) any repurchase agreement or resale agreement,
which was-
(i) issued or deemed to have been issued after 15 March 1995;
(ii) issued on or before 15 March 1995 and transferred on or after 19 July 1995; or
(iii) in so far as it relates to the holder thereof, issued on or before 15 March 1995 and was
unredeemed on 14 March 1996 (excluding any arrangement contemplated in
subparagraphs (i) and (ii)),
but excluding-
(A) any lease agreement (other than a sale and leaseback arrangement as contemplated in
section 23G);
(B) ……
[Item (B) deleted by s. 19 (1) (c) of Act 28 of 1997.] [Definition of ‘instrument’ amended by s. 14 (1) (d) of Act 36 of 1996 and by s. 19 (1) (c) of Act 28 of
1997.] ‘interest’ includes the-
(a) gross amount of any interest or related finance charges, discount or premium payable or
receivable in terms of or in respect of a financial arrangement;
(b) amount (or portion thereof) payable by a borrower to the lender in terms of any lending
arrangement as represents compensation for any amount to which the lender would, but
for such lending arrangement, have been entitled; and
[Para. (b) substituted by s. 27 (1) (a) of Act 53 of 1999.] (c) absolute value of the difference between all amounts receivable and payable by a person
in terms of a sale and leaseback arrangement as contemplated in section 23G throughout
the full term of such arrangement, to which such person is a party,

190 irrespective of whether such amount is-
(i) calculated with reference to a fixed rate of interest or a variable rate of interest; or
(ii) payable or receivable as a lump sum or in unequal instalments during the term of the
financial arrangement;
[Definition of ‘interest’ substituted by s. 19 (1) (a) of Act 28 of 1997.] ‘interest rate agreement’ means an interest rate agreement as defined in section 24K;
[Definition of ‘interest rate agreement’ inserted by s. 19 (1) (b) of Act 28 of 1997.] ‘issue’, in relation to an instrument, means the creation of the liability to pay or the right to receive
an amount or amounts in terms of such instrument;
‘issue price’, in relation to an instrument, means the market value of the consideration given or
received, as the case may be, for the issue of the instrument as determined on the date on which that
instrument is issued;
[Definition of ‘issue price’ substituted by s. 24 (1) (c) of Act 32 of 2004.] ‘issuer’, in relation to any instrument-
(a) means any person who has incurred any interest or has any obligation to repay any
amount in terms of such instrument; or
[Para. (a) substituted by s. 24 (1) (d) of Act 32 of 2004.] (b) at any particular time, means any person who, if any interest payable in terms of such
instrument was due and payable at that time, would be liable to pay such interest;
‘lending arrangement’ means any arrangement or agreement in terms of which-
(a) a person (in this section referred to as the lender) lends any instrument to another person
(in this section referred to as the borrower); and
(b) the borrower in return undertakes to return any instrument of the same kind and of the
same or equivalent quantity and quality to the lender;
[Definition of ‘lending arrangement’ inserted by s. 27 (1) (b) of Act 53 of 1999.] ‘redemption’, in relation to an instrument, means the discharging of all liability to pay all amounts
in terms of such instrument;
‘redemption payment’, in relation to an instrument, means any payment made or received which
has the effect of redeeming such instrument;
‘repurchase agreement’ means the obtaining of money (which money shall for the purposes of this
section be deemed to have been so obtained by way of a loan) through the disposal of an asset by any
person to any other person subject to an agreement in terms of which such person undertakes to acquire
from such other person at a future date the asset so disposed of or any other asset issued by the issuer of,
and which has been so issued subject to the same conditions regarding term, interest rate and price as, the
asset so disposed of;
‘resale agreement’ means the provision of money (which money shall for the purposes of this
section be deemed to have been so provided in the form of a loan) through the acquisition of an asset by
any person from any other person subject to an agreement in terms of which such person undertakes to
dispose of to such other person at a future date the asset so acquired or any other asset issued by the issuer
of, and which has been so issued subject to the same conditions regarding term, interest rate and price as,
the asset so acquired;
‘short selling’ means the sale of any instrument by a person who is not the owner of such
instrument, and in respect of which such person has the obligation to deliver such instrument at a future
date;
‘term’, in relation to an instrument, means the period from the issue or transfer, as the case may be,
until the date of redemption thereof;
‘transfer’, in relation to an instrument, includes-
(a) the transfer, sale, assignment or disposal in any other manner of such instrument by the
holder or issuer thereof, as the case may be; or
(b) the acquisition of such instrument by the holder or issuer thereof, as the case may be, by
way of a transfer, sale, assignment or disposal in any other manner,
but does not include the redemption of such instrument;
‘transfer price’, in relation to the transfer of an instrument, means the market value of the
consideration payable or receivable, as the case may be, for the transfer of such instrument as determined
on the date on which that instrument is transferred;
[Definition of ‘transfer price’ substituted by s. 24 (1) (e) of Act 32 of 2004.]

191 ‘variable rate’ means a rate determined with reference to an interest or indexation rate or other
similar factor, being a rate or factor that varies or may vary during the term of the instrument;
‘variable rate instrument’ means an instrument which is not a fixed rate instrument; and
‘yield to maturity’ means the rate of compound interest per accrual period at which the present
value of all amounts payable or receivable in terms of any instrument in relation to a holder or an issuer, as
the case may be, of such instrument during the term of such instrument equals the initial amount in relation
to such holder or issuer of such instrument: Provided that where-
(a) such instrument is a variable rate instrument, such rate of compound interest shall be
calculated with reference to the variable rate applicable on the date such rate of
compound interest is to be calculated to determine all amounts payable or receivable after
such date;
(b) in the case of a variable rate instrument the variable rate in relation to such instrument
changes, the rate of compound interest shall be redetermined in relation to such variable
rate instrument with reference to-
(i) the appropriate adjusted initial amount in relation to such variable rate instrument
determined before such change in the rate; and
(ii) such changed variable rate applicable on the date such rate of compound interest
is to be redetermined to determine all amounts payable or receivable after such
date;
(c) any variation in the terms or conditions of such instrument takes place which will result
in a change in such rate of compound interest in relation to such instrument, the rate of
compound interest shall be redetermined in relation to such instrument with reference to
the appropriate adjusted initial amount in relation to such instrument determined before
such variation ; or
(d) there is a variation or alteration-
(i) of the rights or interests of a holder in relation to an income instrument in respect
of any amounts receivable in terms of such income instrument, the rate of
compound interest in relation to such income instrument shall be redetermined in
respect of such holder with reference to the appropriate adjusted initial amount in
relation to such income instrument determined before such variation or alteration;
or
[Sub-para. (i) substituted by s. 24 (1) (f) of Act 32 of 2004.] (ii) in the obligations of an issuer in relation to an instrument in respect of any
amounts payable in terms of such instrument, the rate of compound interest in
relation to such instrument shall be redetermined in respect of such issuer with
reference to the appropriate adjusted initial amount in relation to such instrument
determined before such variation or alteration:
[Sub-para. (ii) substituted by s. 24 (1) (f) of Act 32 of 2004.] Provided further that where that instrument forms part of any transaction, operation or scheme-
(a) any payments made by the issuer to any other person pursuant to that transaction,
operation or scheme with a purpose or with the probable effect of making payment
directly or indirectly to the holder or a connected person in relation to the holder; and
(b) in the case where any party to that transaction, operation or scheme is a connected person
in relation to that issuer, any payments made by that connected person to any other
person pursuant to that transaction, operation or scheme with a purpose or with the
probable effect of making payment directly or indirectly to the holder or a connected
person in relation to the holder,
must be taken into account as amounts payable for purposes of determining that rate of compound interest.
[Sub-s. (1) amended by s. 24 (1) (g) of Act 32 of 2004.] (2) Where any person is the issuer in relation to an instrument during any year of assessment, such
person shall for the purposes of this Act be deemed to have incurred an amount of interest during such year
of assessment, which is equal to-
(a) the sum of all accrual amounts in relation to all accrual periods falling, whether in whole
or in part, within such year of assessment in respect of such instrument; or
(b) an amount determined in accordance with an alternative method in relation to such year
of assessment in respect of such instrument,

192 which must be deducted from the income of that person derived from carrying on any trade, if that amount
is incurred in the production of the income;
[Sub-s. (2) amended by s. 24 (1) (h) of Act 32 of 2004.] (3) Where any person is the holder in relation to an income instrument during any year of
assessment, there shall for the purposes of this Act be deemed to have accrued to that person and must be
included in the gross income of that person during that year of assessment (whether or not that amount
constitutes a receipt or accrual of a capital nature), an amount of interest which is equal to-
(a) the sum of all accrual amounts in relation to all accrual periods falling, whether in part or
in whole, within such year of assessment in respect of such income instrument; or
(b) an amount determined in accordance with an alternative method in relation to such year
of assessment in respect of such income instrument.
[Sub-s. (3) amended by s. 24 (1) (i) of Act 32 of 2004.] (3A) Where any person is the holder of an income instrument which is an instrument as
contemplated in paragraph (iii) of the definition of ‘instrument’, the amount by which the sum of all accrual
amounts in relation to all accrual periods falling within the period from the date of acquisition (whether by
way of issue or transfer, as the case may be) of such income instrument by such person until 13 March
1996, exceeds the sum of all interest received by or accrued to such person during such period had the
provisions of this section not been applicable during such period in respect of such income instrument, shall
for the purposes of this Act be deemed to have accrued to such person in the year of assessment during
which such income instrument is transferred by such holder or redeemed (whichever is the earlier):
Provided that the provisions of this subsection shall not apply in so far as any interest in relation to such
income instrument was assessed to tax in the hands of such person under an assessment raised with a date
of assessment before the date of promulgation of this Act.
[Sub-s. (3A) inserted by s. 14 (1) (e) of Act 36 of 1996.] (4) Any-
(a) adjusted gain on transfer or redemption of an instrument calculated in relation to the
transfer or redemption, as the case may be, of such instrument by a person during any
year of assessment shall for the purposes of this Act be deemed to have accrued to such
person in such year of assessment; and
(b) adjusted loss on transfer or redemption of an instrument calculated in relation to the
transfer or redemption, as the case may be, of such instrument by a person during any
year of assessment, shall for the purposes of this Act be deemed to have been incurred by
such person in such year of assessment.
(4A) Where in the case of any-
(a) holder of an income instrument any adjusted loss on transfer or redemption of such
income instrument which has been deemed to have been incurred by such holder in terms
of subsection (4) (b) during any year of assessment, includes an amount in relation to
such income instrument representing an-
(i) accrual amount; or
(ii) amount determined in accordance with an alternative method,
which amount has been included in the income of the holder during such year of
assessment or any previous year of assessment, such amount shall be allowed as a
deduction from the income of such holder during such year of assessment; or
(b) issuer of an instrument any adjusted gain on transfer or redemption which has been
deemed to have been accrued to such issuer in terms of subsection (4) (a) during any year
of assessment, includes an amount in relation to such instrument representing an-
(i) accrual amount; or
(ii) amount determined in accordance with an alternative method,
which amount has been allowed as a deduction from the income of such issuer during
such year of assessment or any previous year of assessment, such amount shall be
included in the income of such issuer during such year of assessment.
[Sub-s. (4A) inserted by s. 14 (1) (f) of Act 36 of 1996.] (5) Where any interest actually-
(a) paid by any person in terms of an instrument is to be taken into account in the
determination of any accrual amount in relation to such an instrument or any other
amount determined in accordance with an alternative method in relation to such

193 instrument which accrual amount or other amount is to be dealt with in terms of the
provisions of subsection (2), no account shall for the purposes of section 11 be taken of
any such interest so actually paid, save by way of the operation of such subsection; or
(b) received by any person in terms of an income instrument is to be taken into account in the
determination of any accrual amount in relation to such income instrument or any other
amount determined in accordance with an alternative method in relation to such income
instrument which accrual amount or other amount is to be dealt with in terms of the
provisions of subsection (3), no account shall for the purposes of the definition of ‘gross
income’ in section 1 be taken of any such interest so actually received, save by way of the
operation of such subsection.
(5A) Any amount which has been deemed to have been incurred by or accrued to a person, as the
case may be, in respect of an instrument in terms of the provisions of this section, shall for the purposes of
this Act not be deducted from or included in, as the case may be, the income of such person more than once
by reason of the application of this section.
[Sub-s. (5A) inserted by s. 14 (1) (g) of Act 36 of 1996.] (6) Where the term of an instrument issued on or before 15 March 1995 is extended or the terms or
conditions of such instrument are materially varied after the said date, such instrument shall be deemed to
have been issued after the said date and the provisions of this section shall apply to both the issuer and the
holder in relation to such instrument as from the date of such extension or material variation.
(7) Where there is more than one-
(a) holder in relation to an income instrument and any accrual amount in relation to an
accrual period with regard to any one of the holders in relation to such income instrument
is to be determined, such accrual amount shall be so determined without taking into
account any consideration or any amount or amounts paid or payable or received or
receivable by any other holder in terms of such income instrument; and
(b) issuer in relation to an instrument and any accrual amount in relation to an accrual period
with regard to any one of the issuers in relation to such instrument is to be determined,
such accrual amount shall be so determined without taking into account any consideration
or any amount or amounts paid or payable or received or receivable by any other issuer in
terms of such instrument.
(8) Where in relation to an instrument any person is entitled to any interest in terms of such
instrument and also liable to pay any interest in terms of such instrument, such person shall for the purposes
of this section-
(a) where the interest which he is entitled to receive in terms of such instrument exceeds the
interest which he is liable to pay in terms of such instrument, be deemed not to be an
issuer in relation to such instrument; and
(b) where the interest which he is liable to pay in terms of such instrument exceeds the
interest which he is entitled to receive in terms of such instrument, be deemed not to be a
holder in relation to such instrument.
(9) (a) Any company whose business comprises the dealing in instruments (including the short
selling of instruments), interest rate agreements or option contracts may elect that the provisions of
subsections (2) to (8), inclusive, section 24K and section 24L shall not apply to all such instruments,
interest rate agreements or option contracts in respect of which it so deals in.
[Para. (a) substituted by s. 19 (1) (d) of Act 28 of 1997 and by s. 27 (1) (c) of Act 53 of 1999.] (b) Any election referred to in paragraph (a) shall-
(i) be made in writing;
(ii) be accompanied by a statement setting forth full details of the methodology to be applied
by the company to determine the market value as contemplated in paragraph (c) in
relation to all instruments, interest rate agreements or option contracts contemplated in
paragraph (a);
[Sub-para. (ii) substituted by s. 19 (1) (e) of Act 28 of 1997 and by s. 27 (1) (d) of Act 53 of 1999.] (iii) not take effect unless the Commissioner has, subject to such conditions as he may deem
necessary, approved-
(A) the methodology to be applied by such company to determine the market value as
contemplated in paragraph (c) in respect of such instruments, interest rate
agreements or option contracts; and

194 [Item (A) substituted by s. 19 (1) (f) of Act 28 of 1997 and by s. 27 (1) (e) of Act 53 of 1999.] (B) the manner in which such market value in relation to such instruments, interest
rate agreements or option contracts is to be taken into account in the determination
of the taxable income of such company during any year of assessment; and
[Item (B) substituted by s. 19 (1) (f) of Act 28 of 1997 and by s. 27 (1) (e) of Act 53 of 1999.] (iv) subject to the provisions of paragraphs (e) and (f), be binding upon such company in
respect of all such instruments, interest rate agreements and option contracts during the
year of assessment in which it took effect and every succeeding year of assessment.
[Sub-para. (iv) substituted by s. 19 (1) (g) of Act 28 of 1997 and by s. 27 (1) (f) of Act 53 of 1999.] (c) The market value in relation to all instruments, interest rate agreements and option contracts
contemplated in paragraph (a) of a company which made an election as contemplated in such paragraph
shall be determined in accordance with commercially accepted practice which is applied by such company
consistently in respect of all such instruments, interest rate agreements and option contracts for financial
reporting purposes to its shareholders.
[Para. (c) substituted by s. 19 (1) (h) of Act 28 of 1997 and by s. 27 (1) (g) of Act 53 of 1999.] (d) Any instrument, interest rate agreement or option contract contemplated in paragraph (a)
which as a result of an election made in terms of such paragraph is to be dealt with on a market value basis
as contemplated in the aforegoing provisions of this subsection shall (subject to the provisions of
paragraphs (e) and (f)) be so dealt with until the date of redemption or transfer of such instrument, interest
rate agreement or option contract; and
[Para. (d) substituted by s. 19 (1) (h) of Act 28 of 1997 and by s. 27 (1) (g) of Act 53 of 1999.] (e) Where the Commissioner is satisfied that the approval granted by him in terms of paragraph (b)
(iii) was obtained by fraud or in consequence of any misrepresentation or failure to disclose any material
fact by the company which made the election in terms of paragraph (a), he shall, if he is satisfied that in the
light of the full facts the approval should not have been granted, withdraw such approval as from the date
such approval was granted by him.
(f) Where any company during any year of assessment no longer complies with the provisions of
this subsection-
(i) the approval granted by the Commissioner in terms of paragraph (b) (iii) shall be deemed
to have been withdrawn by the Commissioner as from such year of assessment; and
(ii) an appropriate adjustment shall be made to the taxable income of such company during
such year of assessment in relation to all instruments, interest rate agreements or option
contracts contemplated in paragraph (a) of the company held and not disposed of or not
redeemed by it, as the case may be, as at the end of such year of assessment, having
regard to all interest or amounts which would have been deemed to have been incurred by
or accrued to such company had the provisions of this subsection not been applicable
during all years of assessment before such year of assessment and all amounts which
have been included in or deducted from the income of such company during such years
of assessment: Provided that the provisions of this paragraph shall not have the effect that
an amount be included in or deducted from the income of such company more than once.
[Sub-para. (ii) substituted by s. 19 (1) (i) of Act 28 of 1997 and amended by s. 27 (1) (h) of Act 53 of
1999.] (10) Any reference in this section to any payment made or an amount paid or payable,
consideration given or received or any payment received or an amount received or receivable, as the case
may be, shall be construed as including a payment or an amount or consideration otherwise than in cash.
(11) Any decision of the Commissioner in the exercise of his discretion under this section shall be
subject to objection and appeal.
[S. 24J inserted by s. 21 (1) of Act 21 of 1995.] 24K Incurral and accrual of amounts in respect of interest rate agreements
(1) For the purposes of this section ‘interest rate agreement’ means any agreement in terms of
which any person-
(a) acquires the right to receive-
(i) an amount calculated by applying any rate of interest to a notional principal
amount specified or referred to in such agreement; or
(ii) an amount calculated with reference to the difference between any combination of
rates of interest applied to a notional principal amount specified or referred to in

195 such agreement; or
(iii) a fixed amount specified or referred to in such agreement as consideration in
terms of such agreement whereunder the obligation is imposed to pay any other
amount as contemplated in paragraph (b) (i) in terms of such agreement or an
amount equal to the difference between such fixed amount and such other amount;
or
(b) becomes liable to pay-
(i) an amount calculated by applying any rate of interest to a notional principal
amount specified or referred to in such agreement; or
(ii) an amount calculated with reference to the difference between any combination of
rates of interest applied to a notional principal amount specified or referred to in
such agreement; or
(iii) a fixed amount specified or referred to in such agreement as consideration in
terms of such agreement whereunder the right is acquired to receive any other
amount as contemplated in paragraph (a) (i) in terms of such agreement or an
amount equal to the difference between such fixed amount and such other amount.
(2) Any amount contemplated in the definition of ‘interest rate agreement’ in subsection (1) shall
for the purposes of this Act be deemed to have been incurred by or accrued to, as the case may be, a person
contemplated in such definition on a day to day basis during the period in respect of which it is calculated.
[Sub-s. (2) substituted by s. 15 (1) of Act 16 of 2004.] (3) Where any amount contemplated in subsection (2) is to be calculated with reference to a
variable rate for the purposes of such subsection, such amount shall be calculated with reference to the
variable rate applicable on the date such amount is to be calculated to determine all amounts payable or
receivable after such date.
[S. 24K inserted by s. 20 (1) of Act 28 of 1997.] 24L Incurral and accrual of amounts in respect of option contracts
(1) For the purposes of this section-
‘intrinsic value’, in relation to an option contract, means an amount equal to the difference between
the market price or value of an asset, index, currency, rate of interest or any other factor, as provided for in
the option contract, on the date of acquisition of the option contract and the pre-arranged price or value
provided for in the option contract; and
‘option contract’ means an agreement the effect of which is that any person acquires the option
(excluding a foreign currency option contract as defined in section 24I (1))-
(a) to buy from or to sell to another person a certain quantity of corporeal or incorporeal
things before or on a future date at a pre-arranged price; or
(b) that an amount of money will be paid to or received from another person before or on a
future date depending on whether the value or price of an asset, index, currency, rate of
interest or any other factor is higher or lower before or on that future date than a pre-
arranged value or price.
(2) The amount of-
(a) any premium or like consideration paid or payable by a person in terms of an option
contract; or
(b) any consideration paid or payable by a person in respect of the acquisition of an option
contract by such person,
shall for the purposes of this Act be deemed to have been incurred by such person on a day to day basis
during the term of such option contract: Provided that-
(i) where such option contract is exercised, terminated or is disposed of, the portion of the
amount attributable to the period from the date of exercise, termination or disposal until
the end of the original term of the option contract shall be deemed to have been incurred
by such person on the date of exercise, termination or disposal of the option contract;
(ii) the provisions of this section shall not be applied to an option contract held by a person as
trading stock;
(iii) where such amount includes an amount representing the intrinsic value in relation to the
option contract, so much of such amount so representing the intrinsic value shall for the
purposes of this Act be deemed to have been incurred by such person on the date of
exercise, termination or disposal of the option contract.

196 (3) The amount of any premium or like consideration received or receivable by a person in terms
of an option contract shall for the purposes of this Act be deemed to have accrued to such person on a day
to day basis during the term of such option contract: Provided that where such option contract is exercised,
terminated or disposed of, the portion of the amount attributable to the period from the date of exercise,
termination or disposal of such option contract until the end of the original term of the option contract shall
be deemed to have accrued to such person on the date of exercise, termination or disposal of the option
contract.
[S. 24L inserted by s. 28 (1) of Act 53 of 1999.] 24M Incurral and accrual of amounts in respect of assets acquired or disposed of for unquantified
amount
(1) If a person during any year of assessment disposes of an asset for consideration which consists
of or includes an amount which cannot be quantified in that year of assessment, so much of that
consideration as-
(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
(b) becomes quantifiable during any subsequent year of assessment must for purposes of this
Act be deemed to have been accrued to that person from that disposal in that subsequent
year.
(2) If a person during any year of assessment acquires an asset for consideration which consists of
or includes an amount which cannot be quantified in that year of assessment, so much of that consideration
as-
(a) cannot be quantified in that year must for purposes of this Act be deemed not to have
been incurred by that person in that year; and
(b) becomes quantifiable during any subsequent year of assessment must for purposes of this
Act be deemed to have been incurred by that person in respect of the acquisition of that
asset in that subsequent year.
(3) The amount of any recovery or recoupment by a person of any amount allowed as a deduction
in respect of any asset contemplated in subsection (1) must, for purposes of section 8 (4), be determined
with reference to the amounts received by or accrued to that taxpayer in terms of this section.
(4) If an asset which was acquired by a person during any year of assessment as contemplated in
subsection (2)-
(a) constitutes a depreciable asset; and
(b) any amount is in terms of subsection (2) (b) deemed to have been actually incurred by
that person in any subsequent year of assessment which has not been taken into account
in determining the amount of any allowance in respect of that depreciable asset in any
previous year and would have been so taken into account had that amount been actually
incurred by that person,
so much of the amount as would have been so allowed as an allowance in any previous year must be
allowed in that subsequent year of assessment.
[S. 24M inserted by s. 25 (1) of Act 32 of 2004.] 24N Incurral and accrual of amounts in respect of disposal or acquisition of equity shares
(1) Where a person (hereinafter referred to as ‘the seller’) during a year of assessment disposes of
equity shares to any other person (hereinafter referred to as ‘the purchaser’) in the circumstances
contemplated in subsection (2), any quantified or quantifiable amount payable by the purchaser to the seller
must-
(a) to the extent that it is not due and payable to the seller during that year, be deemed for
purposes of this Act-
(i) not to have been accrued to the seller in that year; and
(ii) not to have been incurred by the purchaser during that year; and
(b) to the extent that it becomes due and payable to the seller in any subsequent year of
assessment, be deemed for purposes of this Act-
(i) to have been accrued to the seller during that subsequent year; and
(ii) to have been incurred by the purchaser during that subsequent year.
(2) Subsection (1) applies in respect of the disposal by a seller to a purchaser of any equity shares
in a company where-
(a) more than 25 per cent of the amount payable for those shares becomes due and payable

197 by the purchaser after the end of the year of assessment of the seller and the amount
payable is based on the future profits of that company;
(b) the value of the equity shares in that company which have in aggregate been disposed of
during that year and in respect of which the provisions of this section apply, exceeds 25
per cent of the total value of equity shares in that company;
(c) the purchaser and seller are not connected persons in relation to each other after that
disposal;
(d) the purchaser is obliged to return the equity shares to the seller in the event of failure by
the purchaser to pay any amount when due; and
(e) the amount is not payable by the purchaser to the seller in terms of a financial instrument
which is payable on demand and which is readily tradeable in the open market.
[S. 24N inserted by s. 26 (1) of Act 32 of 2004.] 25 Income of beneficiaries and estates of deceased persons
Cases
(1) Any income received by or accrued to or in favour of any person in his capacity as the
executor of the estate of a deceased person, and any amount so received or accrued which would have been
income in the hands of the deceased person had it been received by or accrued to or in favour of such
deceased person during his lifetime, shall, to the extent to which such income or amount has been derived
for the immediate or future benefit of any ascertained heir or legatee of such deceased person, be deemed to
be income received by or accrued to such heir or legatee, and shall, to the extent to which such income or
amount is not so derived, be deemed to be income of the estate of such deceased person.
(2) Any deduction or allowance which may be granted under the provisions of this Act in the
determination of the taxable income derived by way of any income or amount referred to in subsection (1)
shall, to the extent to which such income or amount is under the provisions of that subsection deemed to be
income which has accrued to an heir or legatee or the estate of such deceased person, be deemed to be a
deduction or allowance which may be made in the determination of the taxable income derived by such heir
or legatee or such estate, as the case may be.
[S. 25 substituted by s. 22 of Act 113 of 1993.] 25A Determination of taxable incomes of permanently separated spouses
(1) Where during any period of assessment any taxpayer who is married in community of property
has lived apart from his spouse in circumstances which, in the opinion of the Commissioner, indicate that
the separation is likely to be permanent, his taxable income for such period shall be determined at such
amount as the Commissioner, having regard to the circumstances of the case, determines to be the amount
at which such taxpayer’s taxable income would have been determined under the provisions of this Act if
such taxpayer had not been married in community of property.
(2) Any decision of the Commissioner under subsection (1) as to the amount of the taxpayer’s
taxable income shall be subject to objection and appeal.
[S. 25A inserted by s. 21 (1) of Act 55 of 1966.] 25B Income of trusts and beneficiaries of trusts
(1) Any amount received by or accrued to or in favour of any person during any year of
assessment in his or her capacity as the trustee of a trust, shall, subject to the provisions of section 7, to the
extent to which that amount has been derived for the immediate or future benefit of any ascertained
beneficiary who has a vested right to that amount during that year, be deemed to be an amount which has
accrued to that beneficiary, and to the extent to which that amount is not so derived, be deemed to be an
amount which has accrued to that trust.
(2) Where a beneficiary has acquired a vested right to any amount referred to in subsection (1) in
consequence of the exercise by the trustee of a discretion vested in him or her in terms of the relevant deed
of trust, agreement or will of a deceased person, that amount shall for the purposes of that subsection be
deemed to have been derived for the benefit of that beneficiary.
(2A) Where during any year of assessment any resident acquires any vested right to any amount
representing capital of any trust which is not a resident, that amount must be included in the income of that
resident in that year, if-
(a) that capital arose from any receipts and accruals of such trust which would have
constituted income if such trust had been a resident, in any previous year of assessment
during which that resident had a contingent right to that amount; and

198 (b) that amount has not been subject to tax in the Republic in terms of this Act.
(3) Any deduction or allowance which may be made under the provisions of this Act in the
determination of the taxable income derived by way of any amount referred to in subsection (1), must, to
the extent to which that amount is under that subsection deemed to be an amount which has accrued to-
(a) a beneficiary, be deemed to be a deduction or allowance which may be made in the
determination of the taxable income derived by that beneficiary; and
(b) the trust, be deemed to be a deduction or allowance which may be made in the
determination of the taxable income derived by that trust.
(4) The deduction or allowance contemplated in subsection (3) which is deemed to be made in the
determination of the taxable income of a beneficiary of a trust during any year of assessment, shall be
limited to so much of the amount deemed to have been received by or accrued to that beneficiary in terms
of subsection (1), as is included in the income of that beneficiary during that year of assessment.
(5) The amount by which the sum of the deductions and allowances contemplated in subsection
(4) exceeds the amount included in the income of the beneficiary during a year of assessment as
contemplated in that subsection-
(a) is deemed to be a deduction or allowance which may be made in the determination of the
taxable income of the trust during that year: Provided that the sum of those deductions
and allowances shall be limited to the taxable income of that trust during that year of
assessment as calculated before allowing any deduction or allowance under this
subsection; or
(b) where the trust is not subject to tax in the Republic, must be carried forward and be
deemed to be a deduction or allowance which may be made in the determination of the
taxable income derived by that beneficiary by way of amounts referred to in subsection
(1) during the immediately succeeding year of assessment.
(6) The amount by which the sum of the deductions and allowances contemplated in subsection
(4) exceeds the sum of the amount included in the income of the beneficiary as contemplated in subsection
(4) and the taxable income of the trust as contemplated in subsection (5) (a), must be deemed to be a
deduction or allowance for purposes of subsection (3), which may be made in the determination of the
taxable income derived by that beneficiary by way of any amount referred to in subsection (1) during the
immediately succeeding year of assessment.
(7) Subsections (4), (5) and (6) do not apply in respect of any amount which is deemed to have
accrued to any beneficiary in terms of subsection (1), where that beneficiary is not subject to tax in the
Republic on that amount.
[S. 25B inserted by s. 27 (1) of Act 129 of 1991, amended by s. 22 of Act 141 of 1992, by s. 36 (1) of Act
30 of 1998, by s. 32 (1) of Act 59 of 2000 and by s. 14 (1) of Act 19 of 2001 and substituted by s. 27 (1) of
Act 32 of 2004.] 25C Income of insolvent estates
For the purposes of this Act, and subject to any such adjustments as may be necessary the estate of
a person prior to sequestration and that person’s insolvent estate shall be deemed to be one and the same
person for purposes of determining-
(a) the amount of any allowance, deduction or set off to which that insolvent estate may be
entitled;
(b) any amount which is recovered or recouped by or otherwise required to be included in the
income of that insolvent estate; and
(c) any taxable capital gain or assessed capital loss of that insolvent estate.
[S. 25C inserted by s. 21 of Act 28 of 1997 and substituted by s. 13 of Act 5 of 2001 and by s. 43 of Act 45
of 2003.] 25D Determination of taxable income in foreign currency
(1) Unless expressly otherwise provided in this Act, any amount derived by a person during any
year of assessment from amounts received by or accrued to, or in respect of expenditure incurred by, that
person in any currency other than the currency of the Republic, shall be determined-
(a) where the amounts so received, accrued or incurred are attributable to a permanent
establishment of that person outside the Republic, 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); or
(b) in any other case, in the currency in which the amounts so received or accrued or the

199 expenditure so incurred is denominated.
(2) Unless expressly otherwise provided in this Act, the amount determined in terms of this Act in
any currency other than the currency of the Republic, must be translated to the currency of the Republic by
applying the average exchange rate for the relevant year of assessment.
[S. 25D inserted by s. 33 of Act 59 of 2000 and substituted by s. 37 (1) of Act 60 of 2001, by s. 28 (1) of
Act 74 of 2002 and by s. 44 (1) of Act 45 of 2003.] 26 Determination of taxable income derived from farming
Cases
(1) The taxable income of any person carrying on pastoral, agricultural or other farming operations
shall, in so far as it is derived from such operations, be determined in accordance with the provisions of this
Act but subject to the provisions of the First Schedule.
(2) In the case of any person who has discontinued carrying on pastoral, agricultural or other
farming operations and is still in possession of any livestock or produce, or has entered into a ‘sheep lease’
or similar agreement relating to livestock or produce, which has been taken into account and in respect of
which expenditure under the provisions of this Act or any previous Income Tax Act has been allowed in the
determination of the taxable income derived by such person when such operations were carried on, the
provisions of this Act, but subject to the provisions of paragraphs 1, 2, 3, 4, 5, 6, 7, 8, 9, or 11 of the First
Schedule, shall continue to be applicable to that person in respect of such livestock or produce, as the case
may be, until the year of assessment during which he disposes of the last of such livestock or produce,
notwithstanding the fact that such operations have been discontinued.
[S. 26 substituted by s. 10 of Act 101 of 1978.] 26A Inclusion of taxable capital gain in taxable income
There shall be included in the taxable income of a person for a year of assessment the taxable
capital gain of that person for that year of assessment, as determined in terms of the Eighth Schedule.
[S. 26A inserted by s. 14 of Act 5 of 2001.] 27 Determination of taxable income of co-operative societies and companies
Cases
(1) In the determination of the taxable income of any co-operative trading society, as defined in
the Co-operative Societies Act, 1939 (Act 29 of 1939), derived by that society from its transactions,
whether with persons who are members or with persons who are not members of the society, the amount of
any bonus distributed in any year of assessment to its members by any such society which is a closed
society as defined in section ninety-seven of that Act shall be allowed as a deduction from the income of the
society in so far as such bonus does not exceed an amount equivalent to one-tenth of the aggregate value of
the business of such society with its members during such year of assessment, but no such deduction shall
be allowed in the case of any such co-operative trading society which is not such a closed society.
(2) In the determination of the taxable income of any agricultural co-operative, there shall be
allowed as deductions from the income of such agricultural co-operative for the year of assessment in
question-
(a) the amounts of any profits distributed by it during the specified period in
relation to the year of assessment by way of bonuses (other than bonuses distributed out of the stabilization
fund referred to in paragraph (h)) to persons entitled to participate in such distribution: Provided that the
amounts allowed as deductions under this paragraph shall not in the aggregate exceed an amount which
bears to the taxable income of such agricultural co-operative for the year of assessment (as calculated
before allowing any deductions under this paragraph and before setting off any balance of assessed loss
brought forward from a previous year of assessment) the same ratio as the aggregate value of the business
conducted by such agricultural co-operative with its members during such year bears to the aggregate value
of all business conducted by it during such year;
[Para. (a) amended by s. 28 (a) of Act 129 of 1991, by s. 23 of Act 141 of 1992, by s. 23 (a) of Act 113 of
1993, by s.15 of Act 36 of 1996, by s. 34 of Act 59 of 2000 and by s. 29 of Act 74 of 2002.] (b) subject to the provisions of subsections (3), (4) and (5), an allowance equal to two per
cent of the cost (after the deduction of any amount referred to in subsection (4)) to such
agricultural co-operative of-
(i) any building which was during the year of assessment wholly or mainly used by
such co-operative as a storage, building, if such building was erected by such co-
operative or by any other co-operative agricultural society or company or farmers’

200 special co-operative company as defined in the Co-operative Societies Act, 1939,
and the erection of such building was commenced on or after 25 March 1959; or
(ii) any improvements (other than repairs) to any building referred to in subparagraph
(i) which was during the year of assessment used as contemplated in that
subparagraph; or
(iii) any improvements (other than repairs) to any other building which was during the
year of assessment used as a storage building by such co-operative, if such
improvements were commenced on or after 1 April 1971:
Provided that no allowance shall be granted under this paragraph in respect of the cost of
any building or improvements if an allowance in respect of such cost has been granted in
respect of the year of assessment under the provisions of section 13 (1): Provided further
that no allowance shall be made under this paragraph in respect of such portion of the
cost of any building or of any improvements as has been taken into account in the
calculation of any storage building initial allowance or any allowance to such co-
operative under section 11 (g), whether in the current or any previous year of assessment:
Provided further that in the case of any such building the erection of which commences
on or after 1 January 1989 and any such improvements which commence on or after that
date the allowance under this paragraph shall be increased to 5 per cent of the cost (after
the deduction of any amount as provided in subsection (4)) to the taxpayer of such
building or improvements.
[Para. (b) amended by s. 15 (1) (a) of Act 96 of 1985 and by s. 22 of Act 90 of 1988.] (c) ……
[Para. (c) amended by s. 11 (a) of Act 101 of 1978, by s. 19 (1) (a) of Act 104 of 1980 and by s. 21 (1) (a)
of Act 96 of 1981 and deleted by s. 28 (b) of Act 129 of 1991.] (d) ……
[Para. (d) amended by s. 21 (1) (b) of Act 96 of 1981, substituted by s. 15 (1) (b) of Act 96 of 1985,
amended by s. 18 (a) of Act 85 of 1987 and deleted by s. 28 (b) of Act 129 of 1991.] (e) ……
[Para. (e) amended by s. 11 (b) of Act 101 of 1978, by s. 19 (1) (b) of Act 104 of 1980 and by s. 21 (1) (c)
of Act 96 of 1981 and deleted by s. 28 (b) of Act 129 of 1991.] (f) ……
[Para. (f) amended by s. 18 (b) of Act 85 of 1987 and deleted by s. 28 (b) of Act 129 of 1991.] (g) such allowance in respect of the year of assessment as the Commissioner may make in
respect of losses suffered by such agricultural co-operative in consequence of physical
damage to or deterioration of pastoral, agricultural and other farm products held by such
agricultural co-operative on behalf of any control board established under the provisions
of the Marketing Act, 1968 (Act 59 of 1968): Provided that such allowance shall be
included in the income of such agricultural co-operative in the following year of
assessment; and
(h) in the case of the vereniging defined in section 1 of the Wine and Spirit Control Act,
1970 (Act 47 of 1970), an allowance equal to so much of any amount which the said
vereniging has, within the specified period in relation to the year of assessment,
transferred from its profits for such year to a price stabilization fund for distribution to its
members or winegrowers within a period not exceeding five years reckoned from the end
of such year of assessment, as does not exceed an amount equal to that portion of the
profits derived by such vereniging for that year of assessment in the exercise of its
functions relating to the control of, and the stabilization of prices in, the wine industry;
[Para. (h) substituted by s. 28 (c) of Act 129 of 1991.] (i) ……
[Para. (i) added by s. 15 (1) (c) of Act 96 of 1985, amended by s. 18 (c) of Act 85 of 1987 and deleted by s.
28 (d) of Act 129 of 1991.] [Sub-s. (2) substituted by s. 17 (1) of Act 113 of 1977.] (2A) ……
[Sub-s. (2A) inserted by s. 21 (1) (d) of Act 96 of 1981 and deleted by s. 28 (e) of Act 129 of 1991.] (3) The aggregate of the allowances under subsection (2) (b) and section 13 (1) in respect of any
building or improvements shall not exceed the cost (after the deduction of any amount referred to in

201 subsection (4)) of such building or improvements, as the case may be, less the aggregate of any storage
building initial allowance and any allowances made to the agricultural co-operative concerned in respect of
such building or improvements, as the case may be, under section 11 (g).
[Sub-s. (3) substituted by s. 17 (1) of Act 113 of 1977 and by s. 15 (1) (d) of Act 96 of 1985.] (4) If in any year of assessment there falls to be included in an agricultural co-operative’s income
in terms of paragraph (a) of section 8 (4) an amount, which has been recovered or recouped, in respect of
any allowance made under subsection (2) (b) in respect of any building or improvements, such portion of
the amount so recovered or recouped as is set off against the cost of a further building as hereinafter
provided shall, notwithstanding the provisions of the said paragraph, at the option of such co-operative, to
be notified by it in writing to the Commissioner when submitting its return of income for the year of
assessment during which the recovery of recoupment occurred, and provided it erects within twelve months
or such further period as the Commissioner may allow from the date on which the event giving rise to the
recovery or recoupment occurred, any other building to which the provisions of subsection (2) (b) apply,
not be included in its income for such year of assessment, but shall be set off against so much of the cost to
it of such further building erected by it as remains after the deduction of any portion of such cost in respect
of which an allowance has been granted to such co-operative under section 11 (g), whether in the current or
any previous year of assessment.
[Sub-s. (4) added by s. 17 (1) of Act 113 of 1977.] (5) Where any agricultural co-operative (hereinafter referred to as the new co-operative) has
before 1 April 1977 been constituted by an amalgamation under section 94 of the Co-operative Societies
Act, 1939, of two or more other agricultural co-operatives and by reason of such amalgamation the
ownership of any building used as a storage building by one of such other co-operatives (hereinafter
referred to as the other co-operative) has passed from the other co-operative to the new co-operative-
(a) an allowance may in the appropriate circumstances be granted under subsection (2) (b) to
the new co-operative in respect of such building or any improvements (other than repairs)
thereto if such allowance would have been granted to the other co-operative if the
amalgamation had not been effected;
[Para. (a) substituted by s. 23 (b) of Act 113 of 1993.] (b) ……
[Para. (b) deleted by s. 28 (f) of Act 129 of 1991.] (c) where an allowance or deduction may be granted or allowed as contemplated in
paragraph (a) or (b), the provisions of subsections (2) (b), (3) and (4) shall be applied as
though the other co-operative and the new co-operative had at all relevant times been one
co-operative.
[Para. (c) substituted by s. 28 (g) of Act 129 of 1991.] [Sub-s. (5) added by s. 17 (1) of Act 113 of 1977 and amended by s. 19 (1) (c) of Act 104 of 1980.] (5A) Where any agricultural co-operative has on or after 1 April 1977 and before the date of
commencement of the Co-operatives Act, 1981, been constituted by an amalgamation under section 94 of
the Co-operatives Societies Act, 1939, of two or more other agricultural co-operatives, the said co-
operative and such other co-operatives shall, for the purposes of assessments under this Act, be deemed to
be and to have been one and the same agricultural co-operative.
[Sub-s. (5A) inserted by s. 19 (1) (d) of Act 104 of 1980 and substituted by s. 21 (1) (e) of Act 96 of 1981.] (5B) Where any co-operative has on or after the date of commencement of the Co-operatives Act,
1981, come into being in pursuance of a conversion or amalgamation in terms of Chapter VIII of the Act,
such co-operative and any company, co-operative or co-operatives out of which it so came into being shall,
for the purposes of assessments under this Act for the year of assessment during which such co-operative
came into being and subsequent years of assessment but subject to such conditions as the Commissioner
may impose, be deemed to be and to have been one and the same co-operative.
[Sub-s. (5B) inserted by s. 21 (1) (f) of Act 96 of 1981.] (6) ……
[Sub-s. (6) added by s. 17 (1) of Act 113 of 1977, amended by s. 11 (c) of Act 101 of 1978, by s. 19 (1) (e)
of Act 104 of 1980 and by s. 21 (1) (g) of Act 96 of 1981 and deleted by s. 28 (h) of Act 129 of 1991.] (7) ……
[Sub-s. (7) added by s. 17 (1) of Act 113 of 1977, amended by s. 11 (d) of Act 101 of 1978, by s. 19 (1) (f)
of Act 104 of 1980 and by s. 21 (1) (h) of Act 96 of 1981 and deleted by s. 28 (h) of Act 129 of 1991.] (8) (a) The full amount of any bonus distributed by any agricultural co-operative shall, to the

202 extent that such amount qualifies for deduction from the income of such co-operative under subsection (2)
(a) or, if it is distributed out of the stabilization fund referred to in subsection (2) (h), be included in the
gross income of the person who has become entitled thereto and shall be deemed to have accrued to such
person on the date of the distribution of the bonus by such co-operative.
(b) For the purposes of this section the amount of any bonus distributed by way of capitalization
shares or bonus debentures or securities shall be deemed to be the nominal value of such shares, debentures
or securities, as the case may be.
[Sub-s. (8) added by s. 17 (1) of Act 113 of 1977.] (9) In this section-
‘agricultural co-operative’ means any co-operative agricultural society or company or any farmers’
special co-operative company, as defined in the Co-operative Societies Act, 1939;
‘bonus’ means any amount distributed by any co-operative society or company referred to in this
section out of its profits or surplus for any year of assessment or, in the case of the vereniging referred to in
paragraph (h) of subsection (2), out of the stabilization fund referred to in that paragraph, whether such
amount is distributed in cash or by way of a credit or an award of capitalization shares or bonus debentures
or securities, if such amount-
(a) is divided among the persons entitled thereto in such manner that the amount accruing to
each such person is determined in accordance with the value of the business transactions
between such society or company and such person; and
(b) is distributed during the specified period in relation to such year of assessment or is
distributed out of the stabilization fund referred to in subsection (2) (h);
‘improvements’, in relation to any storage building, means any extension, addition or
improvements (other than repairs) to a storage building which is or are effected for the purpose of
increasing the capacity of the building for storing or packing pastoral, agricultural or other farm products or
for carrying on therein any primary process in respect of any such products;
‘primary process’, in relation to any product produced in the course of pastoral, agricultural or
other farming operations, means the first process to which such product is subjected by an agricultural co-
operative in order to render such product marketable or to convert such product into a marketable
commodity, and includes any further process carried on by such co-operative which is so connected with
the said first process that such first process and such further process or processes may be regarded as one
process and to be necessary to convert such product into a marketable commodity;
[Definition of ‘primary process’ substituted by s. 23 (c) of Act 113 of 1993.] ‘storage building’, in relation to any agricultural co-operative, means-
(a) a building which is at any relevant time or during any relevant period wholly or mainly
used by such co-operative for storing or packing pastoral, agricultural or other products
produced by such co-operative’s members or for carrying on therein any primary process
in respect of such products; or
(b) a structure of a permanent nature which is at any relevant time or during any relevant
period wholly or mainly used by such co-operative in connection with the fattening of
livestock on behalf of the members of such co-operative:
Provided that for the purposes of this definition the members of a central co-operative agricultural company
or central farmers’ special co-operative company or federal co-operative agricultural company or federal
farmers’ special co-operative company, as defined in the Co-operative Societies Act, 1939, shall be deemed
to include the members of any agricultural co-operative which itself is a member of such company.
[Definition of ‘storage building’ substituted by s. 19 (1) (g) of Act 104 of 1980.] [Sub-s. (9) added by s. 17 (1) of Act 113 of 1977.] 28 Determination of taxable income derived from insurance business
Cases
(1) ……
[Sub-s. (1) substituted by s. 21 (1) (a) of Act 88 of 1971, amended by s. 19 (1) of Act 91 of 1982, by s. 17
(a) of Act 65 of 1986, by s. 23 (1) of Act 90 of 1988 and by s. 13 (1) (a) of Act 70 of 1989, substituted by s.
25 (1) (a) of Act 101 of 1990, amended by s. 29 (a) of Act 129 of 1991, by s. 24 (a) of Act 113 of 1993 and
by s. 19 (1) (b) of Act 21 of 1994 and deleted by s. 33 (a) of Act 30 of 2000.] (1A) ……
[Sub-s. (1A) inserted by s. 17 (b) of Act 65 of 1986, substituted by s. 29 (b) of Act 129 of 1991 and deleted

203 by s. 33 (a) of Act 30 of 2000.] (1B) ……
[Sub-s. (1B) inserted by s. 13 (1) (b) of Act 70 of 1989, amended by s. 25 (1) (b) of Act 101 of 1990 and
deleted by s. 33 (a) of Act 30 of 2000.] (1C) ……
[Sub-s. (1C) inserted by s. 24 (b) of Act 113 of 1993 and deleted by s. 33 (a) of Act 30 of 2000.] (2) Subject to the provisions of this Act the taxable income derived by any taxpayer from the
carrying on in the Republic of short-term insurance business (whether on mutual principles or otherwise)
shall be determined by charging against the sum of all premiums (including premiums on reinsurance)
received by or accrued to such taxpayer in respect of the insurance of any risk, and other amounts derived
from the carrying on of such business of insurance in the Republic, the sum of-
(a) the total amount of the liability incurred in respect of premiums on reinsurance;
(b) the actual amount of the liability incurred in respect of any claims during the year of
assessment in respect of that business of insurance, less the value of any claims recovered
or recoverable under any contract of insurance, guarantee, security or indemnity;
(c) the expenditure, not being expenditure falling under paragraph (a) or (b), incurred in
respect of that business of insurance;
(d) such allowance as may be made each year by the Commissioner in respect of unexpired
risks: Provided that the allowance granted under this paragraph in respect of any year of
assessment shall be included in the income of the taxpayer in the following year of
assessment;
[Para. (d) substituted by s. 24 of Act 89 of 1969 and amended by s. 22 of Act 94 of 1983.] (e) such allowance as may be made each year by the Commissioner in respect of claims
which have been intimated but not paid: Provided that the allowance granted under this
paragraph in respect of any year of assessment shall be included in the income of the
taxpayer in the following year of assessment, and for that purpose any allowance granted
in terms of paragraph (v) of subsection (2) of section eighteen of the Income Tax Act,
1941, in respect of the year of assessment ended on the thirtieth day of June, 1961, shall
be deemed to be an allowance which was granted under this paragraph; and
[Para. (e) amended by s. 17 of Act 90 of 1962.] (f) such allowance as may be made each year by the Commissioner in respect of claims
which have not been intimated or paid: Provided that the allowance granted under this
paragraph in respect of any year of assessment shall be included in the income of the
taxpayer in the following year of assessment.
[Para. (f) added by s. 22 of Act 55 of 1966.] (3) Nothing in this section contained shall be construed as relieving any taxpayer from the
obligation to render returns of any income derived otherwise than from the carrying on of short-term
insurance business or in the form of dividends or from any liability for taxation in respect of any taxable
income so derived or as depriving the taxpayer of the right to set off against the taxable income derived
from the business of insurance any loss incurred in respect of any other business or any balance of loss so
incurred which the taxpayer would be entitled to set off under the provisions of section 20.
[Sub-s. (3) substituted by s. 21 (1) (b) of Act 88 of 1971, amended by s. 25 (1) (c) of Act 101 of 1990 and
substituted by s. 33 (b) of Act 30 of 2000.] (4) In this section-
‘insurance’ includes reinsurance;
‘long-term insurance business’ ……
[Definition of ‘long-term insurance business’ substituted by s. 19 (1) of Act 65 of 1973 and deleted by s. 33
(c) of Act 30 of 2000.] ‘short-term insurance business’ means any short-term insurance business as defined in the Short-
term Insurance Act, 1998 (Act 53 of 1998).
[Definition of ‘short-term insurance business’ substituted by s. 33 (d) of Act 30 of 2000.] 28bis ……
[S. 28bis inserted by s. 19 (1) of Act 88 of 1965, amended by s. 25 of Act 85 of 1974, by s. 18 (1) of Act
113 of 1977, by s. 34 of Act 30 of 2000 and by s. 35 of Act 59 of 2000 and repealed by s. 38 (1) of Act 60
of 2001.] 29 Taxable income of companies carrying on long-term insurance business

204 (1) For the purposes of this section-
‘Insurance Act’ means the Insurance Act, 1943 (Act 27 of 1943);
‘insurer’ means any company carrying on long-term insurance business as defined in section 1 of
the Insurance Act;
‘market value’, in relation to any asset, means the sum which a person having the right freely to
dispose of such asset might reasonably expect to obtain from a sale of such asset in the open market;
‘owner’, in relation to a policy, means the person who is entitled to enforce any benefit provided
for in the policy;
‘policy’ means a policy as defined in section 1 of the Insurance Act, the assumption of obligations
under which constitutes long-term insurance business as so defined;
‘policy-holder fund’ means any fund contemplated in subsection (4) (a), (b) or (c);
‘prescribed value’, in relation to the assets required to be held at any time by an insurer in a
policyholder fund, means an amount equal to the net liabilities of the insurer in respect of the business
conducted by it in the fund concerned in the Republic determined in the manner as contemplated in section
1 (2) (a) of the Insurance Act, but subject to such modifications as may from time to time be determined for
the purposes of this section by the Chief Actuary of the Financial Services Board.
[Definition of ‘prescribed value’ substituted by s. 16 (a) of Act 36 of 1996.] (2) The taxable income derived by any insurer in respect of any year of assessment commencing
before 1 January 2000, shall be determined in accordance with the provisions of this Act, but subject to the
provisions of this section; and
[Sub-s. (2) substituted by s. 29 (a) of Act 53 of 1999.] (3) Every insurer shall, not later than the commencement of its first year of assessment
commencing on or after 1 July 1996, establish four separate funds as contemplated in subsection (4), and
shall thereafter maintain such funds in accordance with the provisions of this section.
(4) The funds referred to in subsection (3) shall be-
(a) a fund, to be known as the untaxed policyholder fund, in which shall be placed assets
having a market value equal to the prescribed value determined in relation to, and
liabilities (other than those taken into account in the determination of such prescribed
value) relating to-
(i) business carried on by the insurer with, and any policy of which the owner is, any
pension fund, provident fund, retirement annuity fund or benefit fund;
(ii) any policy of which the owner is a person or body the entire receipts and accruals
of whom or of which are exempt from tax under any provision of section 10:
Provided that an insurer shall not deal with a policy in terms of the provisions of
this subparagraph unless it has satisfied itself beyond all reasonable doubt that the
owner of such policy is a person or body contemplated herein;
(iii) any annuity contracts entered into by it in respect of which annuities are being
paid;
(b) a fund, to be known as the individual policyholder fund, in which shall be placed assets
having a market value equal to the prescribed value determined in relation to, and
liabilities (other than those taken into account in the determination of such prescribed
value) relating to, any policy (other than a policy contemplated in paragraph (a)) of
which the owner is any person other than a company;
(c) a fund, to be known as the company policyholder fund, in which shall be placed assets
having a market value equal to the prescribed value determined in relation to, and
liabilities (other than those taken into account in the determination of such prescribed
value) relating to, any policy (other than a policy contemplated in paragraph (a)) of
which the owner is a company; and
(d) a fund, to be known as the corporate fund, in which shall be placed all the assets (if any)
held by the insurer, and all liabilities owed by it, other than those contemplated in
paragraphs (a), (b) and (c) and those relating to business conducted by it elsewhere than
in the Republic.
[Para. (d) substituted by s. 16 (b) of Act 36 of 1996.] (5) For the purposes of subsection (4), where the owner of a policy is the trustee of any trust or
where two or more owners jointly own a policy-
(a) if all the beneficiaries in such trust or all such owners are funds, persons or bodies

205 contemplated in subsection (4) (a), the owner of such policy shall be deemed to be such a
fund, person or body, as the case may be; or
(b) where paragraph (a) is not applicable and all the beneficiaries in such trust or all such
owners are persons other than a company, the owner of such policy shall be deemed to be
a person other than a company; or
(c) where paragraphs (a) and (b) are not applicable, the owner of such policy shall be
deemed to be a company.
(6) Every insurer shall within a period of six months after the end of every year of assessment
redetermine the prescribed value in relation to each of its policyholder funds as at the last day of such year,
and-
(a) where the market value of the assets actually held by it in any such fund exceeds the
prescribed value, it shall, subject to the provisions of subsection (8), within the said
period transfer from such fund to its corporate fund assets having a market value equal to
such excess; or
(b) where the market value of the assets actually held by it in any such fund is less than the
prescribed value, it shall within the said period transfer from its corporate fund to such
fund assets having a market value equal to the shortfall.
(7) (a) An insurer who becomes aware that, in consequence of a change of ownership of any
policy issued by it, the assets held by it in relation to such policy should in terms of the provisions of
subsection (4) be held in a policyholder fund other than the policyholder fund in which such assets are
actually held, may at its option forthwith transfer from such lastmentioned fund to such firstmentioned fund
assets having a market value equal to the prescribed value determined on the date of such transfer in
relation to the said policy.
(b) Any transfer of an asset effected by an insurer between one policyholder fund and another
policyholder fund otherwise than in terms of the provisions of paragraph (a), shall be effected by way of a
sale of such asset at the market value thereof and shall for the purposes of this section be treated as a
purchase or sale of such asset, as the case may be, in each such fund.
(8) An insurer shall, in addition to assets having a market value equal to the prescribed value, be
permitted to retain in each of its policyholder funds at the end of any year of assessment assets having a
market value not exceeding the sum of-
(a) 80 per cent of the residual surplus arising in the fund concerned during such year;
(b) 60 per cent of the residual surplus so arising in the year of assessment immediately
preceding the year referred to in paragraph (a);
(c) 40 per cent of the residual surplus so arising in the year of assessment immediately
preceding the year referred to in paragraph (b); and
(d) 20 per cent of the residual surplus so arising in the year of assessment immediately
preceding the year referred to in paragraph (c):
Provided that where in any case the year of assessment first mentioned in paragraph (b), (c) or (d) is a year
of assessment which commenced before 1 July 1993, the provisions of that paragraph shall not apply.
(9) For the purposes of subsection (8), the residual surplus arising in any fund during a year of
assessment shall be an amount determined in accordance with the formula-
S = A – B + C – D
in which formula-
(a) ‘S’ represents the residual surplus to be determined;
(b) ‘A’ represents the amount of the excess (if any) contemplated in subsection (6) (a)
determined in respect of the fund concerned at the end of the said year of assessment;
(c) ‘B’ represents the amount of the excess (if any) contemplated in subsection (6) (a)
determined in respect of the fund concerned at the end of the immediately preceding year
of assessment;
(d) ‘C’ represents the amount (if any) actually transferred from the fund concerned to the
corporate fund in respect of the said immediately preceding year of assessment in terms
of the provisions of subsection (6) (a); and
(e) ‘D’ represents the amount (if any) actually transferred from the corporate fund to the fund
concerned in respect of the said immediately preceding year of assessment in terms of the
provisions of subsection (6) (b).
(10) (a) Where-

206 (i) the market value of the assets actually held by an insurer in its individual policyholder
fund or its company policyholder fund at the end of any year of assessment is less than
the prescribed value in relation to the fund concerned and the insurer is required in terms
of the provisions of subsection (6) (b) to transfer assets from its corporate fund to make
good the shortfall; and
(ii) the taxable income derived by the insurer in its corporate fund in such year, as
determined before deducting the transfer contemplated in subparagraph (i), is less than
the amount of such transfer,
the insurer may designate so much of the amount of such transfer as exceeds its taxable income
(determined as contemplated in subparagraph (ii)) to be a special transfer for the purposes of subsection
(14).
(b) Where any amount has been designated as a special transfer under the provisions of paragraph
(a), so much of any subsequent transfer made from the insurer’s individual policyholder fund or company
policyholder fund, as the case may be, to its corporate fund under the provisions of subsection (6) (a) as
does not exceed the amount of the said special transfer, shall be a special transfer for the purposes of
subsection (14).
(11) (a) An insurer may as at the commencement of the first year of assessment in which it
establishes separate funds as contemplated in subsection (3) calculate in respect of each of its policyholder
funds, in a manner determined for the purposes of this section by the Chief Actuary of the Financial
Services Board, an amount representing unrecouped new business expenses.
(b) The amount calculated by an insurer under paragraph (a) shall be advised to the Commissioner
in the return of income rendered by the insurer in respect of the said first year of assessment.
(c) So much of any amount transferred by an insurer from any policyholder fund to its corporate
fund as does not exceed the sum of-
(i) 12,5 per cent of the amount calculated under paragraph (a) in relation to such
policyholder fund; and
(ii) any amount carried forward from the preceding year of assessment in terms of the
provisions of paragraph (d),
shall for the purposes of subsection (14) constitute a special transfer.
(d) Where in relation to any year of assessment the sum referred to in paragraph (c) exceeds the
amount transferred from the policyholder fund concerned to the corporate fund, the excess shall be carried
forward and be included for the purposes of determining the amount which may constitute a special transfer
in relation to the succeeding year of assessment.
(e) The amounts constituting special transfers in relation to any policyholder fund in terms of the
provisions of this subsection shall not in the aggregate exceed the amount calculated under paragraph (a) in
respect of that fund.
(12) There shall be exempt from tax-
(a) any income received by or accrued to an insurer from assets held by it in, and business
conducted by it in relation to, its untaxed policyholder fund; and
(b) any amount transferred to that fund in terms of subsection (6) (b).
(13) The taxable income derived by an insurer in respect of its individual policyholder fund, its
company policyholder fund and its corporate fund shall be determined separately in accordance with the
provisions of this Act as if each such fund had been a separate taxpayer.
(14) In the determination of the taxable income derived by an insurer in respect of its individual
policyholder fund, its company policyholder fund and its corporate fund-
(a) the amount to be allowed as a deduction in respect of selling expenses shall be the annual
average of such expenses incurred during the current year of assessment and the
immediately preceding four years of assessment;
(b) any amount received or accrued from a source outside the Republic in respect of business
conducted by the insurer in the Republic, shall be deemed to have been received or
accrued from a source within the Republic;
[Para. (b) substituted by s. 16 (c) of Act 36 of 1996.] (c) there shall be exempt from tax income derived by the insurer from assets held by it in the
Republic in respect of business conducted by it in Namibia;
(d) any amount transferred in terms of the provisions of subsection (6) shall be deducted
from the income of the fund from which it is transferred and included in the income of

207 the fund to which it is transferred: Provided that any transfer relating to the
redetermination of the prescribed value in terms of subsection (6) in respect of the last
year of assessment commencing before 1 January 2000, shall be deemed to have been
made on the last day of such year of assessment and shall be included in or deducted
from the income of the relevant fund in determining the taxable income of such fund for
such year of assessment;
[Para. (d) amended by s. 29 (b) of Act 53 of 1999.] (e) the amount of any transfer contemplated in subsection (7) (a) and of any special transfer
contemplated in subsection (10) or (11) shall not be deducted from the income of the
fund from which it is transferred and shall not be included in the income of the fund to
which it is transferred; and
(f) premiums and reinsurance claims received and claims and reinsurance premiums paid
shall be disregarded.
(15) Where any insurer is in its first year of assessment to which the provisions of this section
apply entitled in terms of section 20 (1) (a) to set off a balance of assessed loss carried forward from the
preceding year of assessment, such balance of assessed loss shall be allowed to be set off against the
income derived in its individual policyholder fund, its company policyholder fund and its corporate fund in
the ratio which the assets held in each such fund at the commencement of such first year of assessment
bears to the total assets held in the said funds.
(16) In the allocation of any asset, expenditure or liability to any fund contemplated in subsection
(4), an insurer shall, when establishing such fund and at all times thereafter-
(a) to the extent to which such asset, expenditure or liability relates exclusively to business
conducted by it in any one fund, allocate such asset, expenditure or liability to that fund;
and
(b) to the extent to which such asset, liability or expenditure does not relate exclusively to
business conducted by it in any one fund, allocate such asset, expenditure or liability in a
manner which is consistent with and appropriate to the manner in which its business is
conducted.
(17) Notwithstanding the provisions of this section and of section 28, the tax payable by an insurer
in respect of its first and second years of assessment commencing on or after 1 July 1993, shall be equal to
the greater of the tax payable in respect of the year concerned as determined by applying the provisions of
section 28 and-
(a) in respect of the said first year, an amount equal to two-thirds of the tax payable as
determined by applying the provisions of section 28 and one-third of the tax payable as
determined by applying the provisions of this section; and
(b) in respect of the said second year, an amount equal to one-third of the tax payable as
determined by applying the provisions of section 28 and two-thirds of the tax payable as
determined by applying the provisions of this section.
(18) For the purposes of subsection (17), the tax payable on taxable income determined in terms of
section 28 in respect of any year of assessment ending during the period of 12 months ending on 31 March
of any calendar year shall be calculated at the highest marginal rate of tax fixed under section 5 (2) for the
year of assessment ending on the last day of February of that calendar year in respect of taxable income
received by or accrued to a natural person.
[Sub-s. (18) amended by s. 22 of Act 21 of 1995.] (19) An insurer who as at the commencement of its first year of assessment commencing on or
after 1 July 1993 has not established the separate funds contemplated in subsection (4) shall as at the
commencement of that year determine the prescribed value required in respect of each of its policyholder
funds, and shall be deemed for the purposes of applying this section in that year and in any succeeding year
of assessment in which it has not yet established such funds, to have established and maintained such funds
in accordance with the provisions of this section.
(20) For the purposes of subsection (19)-
(a) an appropriate portion of all the assets and liabilities of an insurer shall be deemed to
have been placed by it in each of its funds in accordance with the provisions of this
section;
(b) an appropriate portion of any income received by or accrued to an insurer and any
expenditure incurred by it shall be deemed to have been received by or to have accrued

208 to, or to have been incurred by, as the case may be, each of its funds; and
(c) any amount which would have been required to be transferred in terms of the provisions
of subsection (6) (a) or (b) had such separate funds been so established and maintained,
shall be deemed to have been so transferred.
[S. 29 amended by s. 18 of Act 90 of 1962, repealed by s. 23 of Act 121 of 1984 and inserted by s. 25 (1) of
Act 113 of 1993.] 29A Taxation of long-term insurers
(1) For the purposes of this section-
‘business’ means any long-term insurance business as defined in section 1 of the Long-term
Insurance Act;
‘insurer’ means any long-term insurer as defined in section 1 of the Long-term Insurance Act;
‘Long-term Insurance Act’ means the Long-term Insurance Act, 1998 (Act 52 of 1998);
‘market value’, in relation to any asset, means the sum which a person having the right freely to
dispose of such asset might reasonably expect to obtain from a sale of such asset in the open market;
‘owner’, in relation to a policy, means the person who is entitled to enforce any benefit provided
for in the policy: Provided that where a policy has been-
(a) ceded or pledged solely for the purpose of providing security for the performance of any
obligation, the owner shall be the person who retains the beneficial interest in such
policy; or
(b) reinsured by one insurer with another insurer, the reinsurance policy shall be deemed to
be owned by the owner of the insurance policy so insured;
‘policy’ means a long-term policy as defined in section 1 of the Long-term Insurance
Act;’policyholder fund’ means any fund contemplated in subsection (4)(a), (b) or (c);’value of liabilities’,
means an amount equal to the value of the liabilities of the insurer in respect of the business conducted by it
in the fund concerned calculated on the basis as shall be determined by the Chief Actuary of the Financial
Services Board in consultation with the Commissioner.
(2) The taxable income derived by any insurer in respect of any year of assessment commencing
on or after 1 January 2000, shall be determined in accordance with the provisions of this Act, but subject to
the provisions of this section.
(3) Every insurer shall establish four separate funds as contemplated in subsection (4), and shall
thereafter maintain such funds in accordance with the provisions of this section: Provided that where any
insurer which carries on long-term insurance business has prior to the commencement of this section
established four separate funds in terms of the provisions of section 29 (3), such funds shall for the
purposes of this section continue to be maintained in terms of this section.
(4) The funds referred to in subsection (3) shall be-
(a) a fund, to be known as the untaxed policyholder fund, in which shall be placed assets
having a market value equal to the value of liabilities determined in relation to-
(i) business carried on by the insurer with, and any policy of which the owner is, any
pension fund, provident fund, retirement annuity fund or benefit fund;
(ii) any policy of which the owner is a person where any amount constituting gross
income of whatever nature would be exempt from tax in terms of section 10 were
it to be received by or accrue to that person: Provided that an insurer shall not deal
with a policy in terms of the provisions of this subparagraph unless it has satisfied
itself beyond all reasonable doubt that the owner of such policy is such a person or
body;
[Sub-para. (ii) amended by s. 16 of Act 16 of 2004.] (iii) any annuity contracts entered into by it in respect of which annuities are being
paid;
(b) a fund, to be known as the individual policyholder fund, in which shall be placed assets
having a market value equal to the value of liabilities determined in relation to any policy
(other than a policy contemplated in paragraph (a)) of which the owner is any person
other than a company;
(c) a fund, to be known as the company policyholder fund, in which shall be placed assets
having a market value equal to the value of liabilities determined in relation to any policy
(other than a policy contemplated in paragraph (a)) of which the owner is a company; and
(d) a fund, to be known as the corporate fund, in which shall be placed all the assets (if any)

209 held by the insurer, and all liabilities owed by it, other than those contemplated in
paragraphs (a), (b) and (c).
(5) For the purposes of subsection (4), where the owner of a policy is the trustee of any trust or
where two or more owners jointly own a policy-
(a) if all the beneficiaries in such trust or all such joint owners are funds, persons or bodies
contemplated in subsection (4) (a), the owner of such policy shall be deemed to be such a
fund, person or body, as the case may be; or
(b) where paragraph (a) is not applicable and all the beneficiaries in such trust or all such
joint owners are persons other than a company, the owner of such policy shall be deemed
to be a person other than a company; or
(c) where paragraphs (a) and (b) are not applicable, the owner of such policy shall be
deemed to be a company.
(6) An insurer who becomes aware that, in consequence of-
(a) a change of ownership of any policy issued by it; or
(b) any change affecting the status of the owner of any policy,
the assets held by it in relation to such policy should in terms of the provisions of subsection (4) be held in
a policyholder fund other than the policyholder fund in which such assets are actually held, shall forthwith
transfer from such lastmentioned fund to such firstmentioned fund assets having a market value equal to the
value of liabilities determined on the date of such transfer in relation to the said policy.
(7) Every insurer shall within a period of four months after the end of every year of assessment
redetermine the value of liabilities in relation to each of its policyholder funds as at the last day of such
year, and-
(a) where the market value of the assets actually held by it in any such fund exceeds the
value of liabilities in relation to such fund on such last day, it shall within the said period
transfer from such fund to its corporate fund assets having a market value equal to such
excess; or
(b) where the market value of the assets actually held by it in any such fund is less than the
value of liabilities in relation to such fund on such last day, it shall within the said period
transfer from its corporate fund to such fund assets having a market value equal to the
shortfall,
and such transfer shall for the purposes of this section be deemed to have been made on such last day.
(8) Any transfer of an asset effected by an insurer between one fund and another fund shall be
effected by way of a disposal of such asset at the market value thereof and shall for the purposes of this Act
be treated as an acquisition or disposal of such asset, as the case may be, in each such fund.
[Sub-s. (8) substituted by s. 15 (1) (a) of Act 5 of 2001.] (9) Subject to the provisions of subsection (11) (d), there shall be exempt from tax any income
received by or accrued to an insurer from assets held by it in, and business conducted by it in relation to, its
untaxed policyholder fund.
(10) The taxable income derived by an insurer in respect of its individual policyholder fund, its
company policyholder fund and its corporate fund shall be determined separately in accordance with the
provisions of this Act as if each such fund had been a separate taxpayer and the individual policyholder
fund, company policyholder fund, untaxed policyholder fund and corporate fund, shall be deemed to be
separate companies which are connected persons in relation to each other for the purposes of subsections
(6), (7) and (8) and sections 9B, 20, 24I, 24J, 24K, 24L, and 26A and the Eighth Schedule to this Act.
[Sub-s. (10) substituted by s. 15 (1) (b) of Act 5 of 2001 and by s. 39 (1) of Act 60 of 2001.] (11) In the determination of the taxable income derived by an insurer in respect of its individual
policyholder fund, its company policyholder fund and its corporate fund in respect of any year of
assessment-
(a) the amount of any expenses, allowances and transfers to be allowed as a deduction in the
policyholder funds in terms of this Act shall, subject to subsections (11A), (11B) and
(11C), be limited to the total of-
(i) the amount of expenses and allowances directly attributable to the income of such
fund;
(ii) such percentage of the amount of-
(aa) all expenses allocated to such fund which are directly incurred during such
year of assessment in respect of the selling and administration of policies;

210 and
(bb) all expenses and allowances allocated to such fund which are not included
in subparagraph (i), but excluding any expenses directly attributable to any
amounts received or accrued which do not constitute income as defined in
section 1,
which percentage shall-
(AA) in the case of the individual policyholder fund, be determined in
accordance with the formula

(BB) in the case of the company policyholder fund, be determined in accordance
with the formula

in which formulae-
(A) ‘Y’ represents the percentage to be applied to such amount;
(B) ‘I’ represents the gross amount of any interest as defined in section 24J of
this Act, received by or accrued to such fund;
(C) ‘R’ represents the rental income of such fund after deduction of expenses
directly attributable to such income; and
(D) ‘L’ represents the dividend income (other than taxable foreign dividends) of
such fund; and
[Item (D) substituted by s. 15 (1) (e) of Act 5 of 2001.] (E) ‘F’ represents the taxable foreign dividends of such fund; and
[Item (E) added by s. 15 (1) (f) of Act 5 of 2001.] (iii) such percentage, determined in accordance with the formula contemplated in
subparagraph (ii), of 50 per cent of the amount transferred from the policyholder
fund in terms of subsection (7) (a), to the extent that the amount of such transfer is
required to be included in the income of the corporate fund during such year of
assessment in terms of paragraph (d) (i) of this subsection: Provided that the
amount of the deduction in terms of this subparagraph shall not exceed the
balance of the amount of the income of the policyholder fund remaining after
taking into account any other amounts allowed to be deducted from the income of
such fund in terms of this section;
[Para. (a) amended by s. 15 (1) (c) and (d) of Act 5 of 2001.] (b) ……
[Para. (b) deleted by s. 30 of Act 74 of 2002.] (c) ……
[Para. (c) deleted by s. 36 of Act 59 of 2000.] (d) any amount required to be transferred-
(i) to the corporate fund in terms of the provisions of subsection (7) (a) shall be
included in the income of the corporate fund; and
(ii) from the corporate fund in terms of the provisions of subsection (7) (b) shall not
be deducted from the income of the corporate fund,
for the purposes of determining the taxable income of such fund for the year of assessment in respect of
which the value of liabilities in relation to its policyholder funds was redetermined in terms of that
subsection: Provided that where any amount is transferred from the corporate fund to any policyholder fund
as contemplated in subparagraph (ii), any subsequent transfers from the policyholder fund to the corporate
fund of any amounts which in the aggregate do not exceed the total amount of such transfer, shall not be
included in the income of the corporate fund in terms of the provisions of subparagraph (i) of this

211 paragraph;
(e) subject to the provisions of paragraph (a) (iii), no amount transferred to or from the
corporate fund in terms of the provisions of subsection (7), shall be deducted from or
included in the income of the policyholder fund from or to which such amount was
transferred, as the case may be;
(f) the amount of any transfer contemplated in subsection (6) or (8) shall not be deducted
from the income of the fund from which it is transferred and shall not be included in the
income of the fund to which it is transferred; and
(g) premiums and reinsurance claims received and claims and reinsurance premiums paid
shall be disregarded.
(11A) For the purposes of subsection (11), the percentage of the amount of expenses, allowances
and transfers contemplated in subsection (11) (a) (ii) (aa) and (bb) and subsection (11) (a) (iii) to be
allowed in respect of the first five years of assessment commencing on or after 1 January 2002, shall be
reduced by an amount determined in accordance with the provisions of subsection (11B) and (11C).
[Sub-s. (11A) inserted by s. 15 (1) (g) of Act 5 of 2001 and substituted by s. 15 (1) of Act 19 of 2001.] (11B) The amount referred to in subsection (11A) means-
(a) in respect of the year of assessment commencing on or after 1 January 2002, but before 1
January 2003, five-sixths of the difference between the percentage determined in
accordance with subsection (11) (a) (ii) (hereinafter referred to as the new percentage)
and the percentage determined in accordance with subsection (11C) (hereinafter referred
to as the old percentage);
(b) in respect of the year of assessment commencing on or after 1 January 2003, but before 1
January 2004, four-sixths of the difference between the new percentage and the old
percentage;
(c) in respect of the year of assessment commencing on or after 1 January 2004, but before 1
January 2005, three-sixths of the difference between the new percentage and the old
percentage;
(d) in respect of the year of assessment commencing on or after 1 January 2005, but before 1
January 2006, two-sixths of the difference between the new percentage and the old
percentage; and
(e) in respect of the year of assessment commencing on or after 1 January 2006, but before 1
January 2007, one-sixth of the difference between the new percentage and the old
percentage.
[Sub-s. (11B) inserted by s. 15 (1) (g) of Act 5 of 2001.] (11C) The old percentage referred to in subsection (11B) shall be determined in accordance with
the formula

in which formula-
(a) ‘Y’ represents the percentage to be determined; and
(b) ‘I’, ‘R’, ‘L’ and ‘F’ shall bear the same meaning as the symbols contemplated in subsection
(11) (a) (ii).
[Sub-s. (11C) inserted by s. 15 (1) (g) of Act 5 of 2001.] (12) In the allocation of any asset, expenditure or liability to any fund contemplated in subsection
(4), an insurer shall, when establishing such fund and at all times thereafter-
(a) to the extent to which such asset, expenditure or liability relates exclusively to business
conducted by it in any one fund, allocate such asset, expenditure or liability to that fund;
and
(b) to the extent to which such asset, expenditure or liability does not relate exclusively to
business conducted by it in any one fund, allocate such asset, expenditure or liability in a
manner which is consistent with and appropriate to the manner in which its business is
conducted.
(13) An insurer who as at the commencement of its first year of assessment commencing on or

212 after 1 January 2000 has not established the separate funds contemplated in subsection (4) shall as at the
commencement of that year determine the value of liabilities required in respect of each of its policyholder
funds, and shall be deemed for the purposes of applying this section in that year and in any succeeding year
of assessment in which it has not yet established such funds, to have established and maintained such funds
in accordance with the provisions of this section.
(14) For the purposes of subsection (13)-
(a) an appropriate portion of all the assets and liabilities of an insurer shall be deemed to
have been placed by it in each of its funds in accordance with the provisions of this
section;
(b) an appropriate portion of any income received by or accrued to an insurer and any
expenditure incurred by it shall be deemed to have been received by or to have accrued
to, or to have been incurred by, as the case may be, each of its funds in accordance with
the provisions of this section; and
(c) any amount which would have been required to be transferred in terms of the provisions
of subsection (7) (a) or (b) had such separate funds been so established and maintained,
shall be deemed to have been so transferred.
(15) Every insurer shall, within 6 months after the commencement of the first year of assessment
commencing on or after 1 January 2000, determine the value of liabilities in relation to each of its
policyholder funds as at the first day of such year of assessment and where the market value of the assets
held in such policyholder fund, after taking into account any transfers required to be made in terms of
section 29 in respect of the last year of assessment commencing before 1 January 2000-
(a) exceeds the value of the liabilities so determined in relation to such policyholder fund,
the insurer shall, within such period, transfer from such policyholder fund to its corporate
fund assets having a market value equal to such excess; or
(b) is less than the value of liabilities so determined in relation to such policyholder fund, the
insurer shall, within such period, transfer from the corporate fund to such policyholder
fund assets having a market value equal to such shortfall,
and such transfer shall for the purposes of this section be deemed to have been made on such first day of
such first year.
(16) Any amount transferred from-
(a) the policyholder fund to the corporate fund in terms of subsection (15) (a), shall be
included in the income of the corporate fund in respect of its first year of assessment
commencing on or after 1 January 2000, and-
(i) such amount shall in the first instance be reduced by the balance of any assessed
loss incurred by the corporate fund in any previous year which has been carried
forward from the year preceding such year of assessment and the balance of the
assessed loss shall be reduced accordingly; and
(ii) where such amount so transferred exceeds the balance of the assessed loss
contemplated in subparagraph (i), there shall be allowed to be deducted in the
corporate fund from the amount of the remainder of such transfer, an amount
equal to-
(aa) the balance of any special transfer contemplated in section 29 (10) (b) and
(11), which has not been utilised as at the last day of the last year of
assessment commencing before 1 January 2000; and
(bb) such percentage, determined in accordance with the formula contemplated
in subsection (11) (a) (ii), in respect of its first year of assessment
commencing on or after 1 January 2000, of the amount of any selling
expenses contemplated in section 29 (14) (a) incurred during the last year
of assessment commencing before 1 January 2000 and the four preceding
years of assessment which were not allowed as a deduction in terms of that
section during such years of assessment:
Provided that-
(A) the amount to be deducted in terms of items (aa) and (bb) shall be limited to such
remainder of the transfer; and
(B) so much of the special transfers contemplated in item (aa) and the selling
expenses contemplated in item (bb) as is not deducted from the amount of the

213 transfer included in the income of the corporate fund in terms of subsection (15)
shall be forfeited and not be allowed as a special transfer or deduction in any
future year of assessment; and
(b) the corporate fund to the policyholder fund in terms of subsection (15) (b) shall be dealt
with as if such transfer was made in terms of subsection (7) (b).
[S. 29A inserted by s. 30 of Act 53 of 1999.] 30 Public benefit organisations
(1) For the purposes of this Act-
‘public benefit activity’ means-
(a) any activity listed in Part I of the Ninth Schedule; and
(b) any other activity determined by the Minister from time to time by notice in the Gazette
to be of a benevolent nature, having regard to the needs, interests and well-being of the
general public;
[Definition of ‘public benefit activity’ substituted by s. 22 (a) of Act 30 of 2002.] ‘public benefit organisation’ means any organisation-
(a) which is a company formed and incorporated under section 21 of the Companies Act,
1973 (Act 61 of 1973), or a trust or an association of persons;
(b) of which the sole object is carrying on one or more public benefit activities (including
any undertakings or activities which are not prohibited under subsection (3) (b) (iv)),
where-
(i) all such activities are carried on in a non-profit manner and with an altruistic or
philanthropic intent;
(ii) no such activity is intended to directly or indirectly promote the economic self-
interest of any fiduciary or employee of the organisation, otherwise than by way
of reasonable remuneration payable to that fiduciary or employee; and
(iii) at least 85 per cent of such activities, measured as either the cost related to the
activities or the time expended in respect thereof, are carried out for the benefit of
persons in the Republic, unless the Minister, having regard to the circumstances of
the case, directs otherwise: Provided that cost incurred for the benefit of persons
outside the Republic shall be disregarded to the extent of donations received by
that organisation from persons who are not resident and receipts and accruals
derived directly or indirectly therefrom which donations, receipts and accruals
have not previously been taken into account for purposes of this proviso; and
[Sub-para. (iii) substituted by s. 45 (1) of Act 45 of 2003.] (c) where-
(i) each such activity carried on by that organisation is for the benefit of, or is widely
accessible to, the general public at large, including any sector thereof (other than
small and exclusive groups);
(ii) each such activity carried on by that organisation is for the benefit of, or is readily
accessible to, the poor and needy; or
(iii) that organisation is at least 85 per cent funded by donations, grants from any
organ of state or any foreign grants;
[Definition of ‘public benefit organisation’ substituted by s. 22 (b) of Act 30 of 2002.] (2) Any activity determined by the Minister in terms of paragraph (b) of the definition of ‘public
benefit activity’ in subsection (1) or any conditions prescribed by the Minister in terms of subsection (3) (a)
must be tabled in Parliament within a period of 12 months after the date of publication by the Minister of
that activity or those conditions in the Gazette, for incorporation into this Act.
[Sub-s. (2) substituted by s. 22 (c) of Act 30 of 2002.] (3) The Commissioner shall, for the purposes of this Act, approve a public benefit organisation
which-
(a) complies with such conditions as the Minister may prescribe by way of regulation to
ensure that the activities and resources of such organisation are directed in the
furtherance of its object;
(b) has submitted to the Commissioner a copy of the constitution, will or other written
instrument under which it has been established and in terms of which it is-
(i) required to have at least three persons, who are not connected persons in relation

214 to each other, to accept the fiduciary responsibility of such organisation and no
single person directly or indirectly controls the decision making powers relating to
that organisation: Provided that the provisions of this subparagraph shall not apply
in respect of any trust established in terms of a will of any person who died on or
before 31 December 2003;
[Sub-para. (i) substituted by s. 22 (d) of Act 30 of 2002.] (ii) prohibited from distributing any of its funds to any person (otherwise than in the
course of undertaking any public benefit activity) and is required to utilise its
funds solely for the object for which it has been established, or to invest such
funds-
(aa) with a financial institution as defined in section 1 of the Financial Services
Board Act, 1990 (Act 97 of 1990);
[Item (aa) substituted by s. 22 (e) of Act 30 of 2002.] (bb) in any listed financial instrument of a company contemplated in paragraph
(a) of the definition of ‘listed company’; or
[Item (bb) substituted by s. 28 (1) of Act 32 of 2004.] (cc) in such other prudent investments in financial instruments and assets as the
Commissioner may determine after consultation with the Executive Officer
of the Financial Services Board and the Director of Non-Profit
Organisations:
Provided that the provisions of this subparagraph shall not prohibit any such
organisation from retaining any investment (other than any investment in the form
of a business undertaking or trading activity or asset which is used in such
business undertaking or trading activity) in the form that it was acquired by way
of donation, bequest or inheritance;
(iii) required on dissolution to transfer its assets to-
(aa) any similar public benefit organisation which has been approved in terms
of this section;
(bb) any institution, board or body which is exempt from tax under the
provisions of section 10 (1) (cA) (i), which has as its sole or principal
object the carrying on of any public benefit activity; or
(cc) 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);
[Sub-para. (iii) substituted by s. 22 (f) of Act 30 of 2002.] (iv) prohibited from carrying on any business undertaking or trading activity,
otherwise than to the extent that-
(aa) the gross income derived from all such business undertakings or trading
activities do not in total exceed the greater of-
(A) 15 per cent of the gross receipts of such public benefit
organisation; or
(B) R25 000;
[Item (aa) amended by s. 16 (1) of Act 19 of 2001.] (bb) the undertaking or activity is-
(A) integral and directly related to the sole object of such public
benefit organisation; and
(B) carried out or conducted on a basis substantially the whole of
which is directed towards the recovery of cost and which would
not result in unfair competition in relation to taxable entities;
(cc) the undertaking or activity, if not integral and directly related to the sole
object of such public benefit organisation as contemplated in item (bb), is
of an occasional nature and undertaken substantially with assistance on a
voluntary basis without compensation; or
(dd) 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;

215 (B) the direct connection and interrelationship of the undertaking or
activity with the sole purpose of the public benefit organsiation;
(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;
(v) prohibited from accepting any donation which is revocable at the instance of the
donor for reasons other than a material failure to conform to the designated
purposes and conditions of such donation, including any misrepresentation with
regard to the tax deductibility thereof in terms of section 18A: Provided that a
donor (other than a donor which is an approved public benefit organisation or an
institution board or body which is exempt from tax in terms of section 10 (1) (cA)
(i), which has as its sole or principal object the carrying on of any public benefit
activity) may not impose conditions which could enable such donor or any
connected person in relation to such donor to derive some direct or indirect benefit
from the application of such donation;
[Sub-para. (v) amended by s. 22 (g) of Act 30 of 2002.] (vi) required to submit to the Commissioner a copy of any amendment to the
constitution, will or other written instrument under which it was established;
(c) the Commissioner is satisfied is or was not knowingly a party to, or does not knowingly
permit, or has not knowingly permitted, itself to be used as part of any transaction,
operation or scheme of which the sole or main purpose is or was the reduction,
postponement or avoidance of liability for any tax, duty or levy which, but for such
transaction, operation or scheme, would have been or would have become payable by any
person under this Act or any other Act administered by the Commissioner;
(d) has not and will not pay any remuneration, as defined in the Fourth Schedule, to any
employee, office bearer, member or other person which is excessive, having regard to
what is generally considered reasonable in the sector and in relation to the service
rendered and has not and will not economically benefit any person in a manner which is
not consistent with its objects;
[Para. (d) substituted by s. 22 (h) of Act 30 of 2002.] (e) complies with such reporting requirements as may be determined by the Commissioner;
(f) the Commissioner is satisfied that, in the case of any public benefit organisation which
provides funds to any association of persons contemplated in paragraph 10 (iii) of Part 1
of the Ninth Schedule, has taken reasonable steps to ensure that the funds are utilised for
the purpose for which it has been provided; and
[Para. (f) substituted by s. 31 (1) (a) of Act 74 of 2002.] (g) has, within such period as the Commissioner may determine, been registered in terms of
section 13 (5) of the Nonprofit Organisations Act, 1997 (Act 71 of 1997), and complied
with any other requirements imposed in terms of that Act, unless the Commissioner in
consultation with the Director of Nonprofit Organisations designated in terms of section 8
of the Nonprofit Organisations Act, 1997, on good cause shown, otherwise directs; and;
[Para. (g) added by s. 22 (i) of Act 30 of 2002.] (h) has not and will not use its resources directly or indirectly to support, advance or oppose
any political party:
[Para. (g) added by s. 22 (j) of Act 30 of 2002.] Provided that notwithstanding subparagraph (iv) of paragraph (b), any business undertaking or trading
activity, or asset used in such undertaking or activity, acquired by such organisation before 1 January 2001
may be retained or continued, as the case may be, in the form so acquired for a period of five years after
that date.
[Sub-s. (3) amended by s. 22 (k) of Act 30 of 2002.] (3A) The Commissioner may, for the purposes of subsection (3), grant approval in respect of any
group of organisations sharing a common purpose, which carry on any public benefit activity under the
direction or supervision of a regulating or co-ordinating body, where that body takes such steps, as
prescribed by the Commissioner, to exercise control over those organisations in order to ensure that they
comply with the provisions of this section.

216 [Sub-s. (3A) inserted by s. 22 (l) of Act 30 of 2002.] (3B) Where an organisation applies for approval before the later of 31 December 2004 or the last
day of its first year of assessment, the Commissioner may approve that organisation for the purposes of this
section, or for the purposes of any provision contained in section 10 which was repealed on 15 July 2001,
with retrospective effect.
[Sub-s. (3B) inserted by s. 22 (l) of Act 30 of 2002 and substituted bys. 28 (1) (b) of Act 32 of 2004.] (4) Where the constitution, will or other written instrument does not comply with the provisions of
subsection (3) (b), it shall be deemed to so comply-
(a) in the case of a public benefit organisation established under the terms of a will, or under
a constitution or other written instrument which cannot be amended to comply with the
said subsection; or
(b) in any other case, for a period not exceeding five years,
if the person responsible in a fiduciary capacity for the funds and assets of such organisation furnishes the
Commissioner with a written undertaking that such organisation will be administered in compliance with
the provisions of this section.
(5) Where the Commissioner is-
(a) satisfied that any public benefit organisation approved under subsection (3) has during
any year of assessment in any material respect; or
(b) during any year of assessment satisfied that any such public benefit organisation has on a
continuous or repetitive basis,
failed to comply with the provisions of this section, or the constitution, will or other written instrument
under which it is established to the extent that it relates to the provisions of this section, the Commissioner
shall after due notice withdraw approval of the organisation with effect from the commencement of that
year of assessment, where corrective steps are not taken by that organisation within a period stated by the
Commissioner in that notice.
[Sub-s. (5) amended by s. 22 (m) of Act 30 of 2002.] (5A) Where any regulating or co-ordinating body contemplated in subsection (3A)-
(a) with intent or negligently fails to take any steps contemplated in that subsection to
exercise control over any public benefit organisation; or
(b) fails to notify the Commissioner where it become aware of any material failure by any
public benefit organisation over which it exercises control to comply with any provision
of this section,
the Commissioner shall after due notice withdraw the approval of the group of public benefit organisations
with effect from the commencement of that year of assessment, where corrective steps are not taken by that
organisation within a period stated by the Commissioner in that notice.
[Sub-s. (5A) inserted by s. 22 (n) of Act 30 of 2002.] (6) Where the Commissioner has so withdrawn his approval of such organisation, such
organisation shall, within three months or such longer period as the Commissioner may allow after the date
of such withdrawal, transfer, or take reasonable steps to transfer, its remaining assets to any other
organisation which is-
(a) approved in terms of this section; and
(b) not a connected person in relation to such organisation.
(7) Where any such organisation fails so to transfer, or so to take reasonable steps to transfer, its
remaining assets, the accumulated net revenue which has not been distributed in terms of this section shall
for the purposes of this Act be deemed to be an amount of taxable income which accrued to such
organisation during the year of assessment referred to in subsection (5).
(8) The provisions of this section shall not, if the Commissioner is satisfied that the non-
compliance giving rise to the withdrawal contemplated in subsection (5) has been rectified, preclude any
such organisation from applying for approval in terms of this section in the year of assessment following
the year of assessment during which the approval was so withdrawn by the Commissioner.
(9) Any books of account, records or other documents relating to any approved public benefit
organisation shall-
(a) where kept in book form, be retained and carefully preserved by any person in control of
such organisation for a period of four years after the date of the last entry in any book; or
(b) where not kept in book form, be retained and carefully preserved by any person in control
of such organisation for a period of four years after completion of the transactions, acts or

217 operations to which they relate.
(10) In the application of the provisions of this Act, the Commissioner may by notice in writing
require any person whom the Commissioner may deem able to furnish information in regard to any
approved public benefit organisation-
(a) to answer any questions relating to such organisation; or
(b) to make available for inspection by the Commissioner or any person appointed by him,
any books of account, records or other documents relating to such organisation; or
(c) to attend at the time and place appointed by the Commissioner for the purposes of
producing for examination by the Commissioner or any person appointed by him, any
books of account, records or other documents relating to such organisation.
(11) ……
[Sub-s. (11) deleted by s. 31 (1) (b) of Act 74 of 2002.] (12) Any person who is in a fiduciary capacity responsible for the management or control of the
income and assets of any approved public benefit organisation who intentionally fails to comply with any
provision of this section or of the constitution, will or other written instrument under which such
organisation is established to the extent that it relates to the provisions of this section, shall be guilty of an
offence and on conviction be liable to a fine or to imprisonment for a period not exceeding two years.
[S. 30 amended by s. 26 of Act 113 of 1993, repealed by s. 20 (1) of Act 21 of 1994 and inserted by s. 35
(1) of Act 30 of 2000.] 31 Determination of taxable income of certain persons in respect of international transactions
(1) For the purposes of this section-
‘goods’ includes any corporeal movable thing, fixed property and any real right in any such thing
or fixed property;
‘international agreement’ means a transaction, operation or scheme entered into between-
(a) (i) a resident; and
(ii) any other person who is not a resident; or
(b) (i) a person who is not a resident; and
(ii) any other person who is not a resident,
for the supply of goods or services to or by a permanent establishment of either of such
persons in the Republic; or
(c) (i) a person who is a resident; and
(ii) any other person who is a resident,
for the supply of goods or services to or by a permanent establishment of either of such
persons outside the Republic; or
(d) ……
[Para. (d) deleted by s. 46 of Act 45 of 2003.] where either of such persons is as a result of the application of the provisions of any
agreement entered into by the Republic for the prevention of double taxation, not subject
to tax in the Republic; and
[Definition of ‘international agreement’ substituted by s. 37 (1) of Act 30 of 1998, amended by s. 31 (1) (b)
of act 53 of 1999 and substituted by s. 37 (a) of Act 59 of 2000.] ‘permanent establishment’ ……
[Definition of ‘permanent establishment’ inserted by s. 37 (b) of Act 59 of 2000 and deleted by s. 16 of Act
5 of 2001.] ‘services’ includes anything done or to be done, including, without limiting the generality of the
foregoing-
(a) the granting, assignment, cession or surrender of any right, benefit or privilege;
(b) the making available of any facility or advantage;
(c) the granting of financial assistance, including a loan, advance or debt, and the provision
of any security or guarantee;
(d) the performance of any work;
(e) an agreement of insurance; or
(f) the conferring of rights to incorporeal property.
(2) Where any goods or services are supplied or acquired in terms of an international agreement
and-
(a) the acquirer is a connected person in relation to the supplier; and

218 (b) the goods or services are supplied or acquired at a price which is either-
(i) less than the price which such goods or services might have been expected to fetch
if the parties to the transaction had been independent persons dealing at arm’s
length (such price being the arm’s length price); or
(ii) greater than the arm’s length price,
then, for the purposes of this Act in relation to either the acquirer or supplier, the Commissioner may, in the
determination of the taxable income of either the acquirer or supplier, adjust the consideration in respect of
the transaction to reflect an arm’s length price for the goods or services.
(3) (a) Where any person who is not a resident (hereinafter referred to as the investor) has granted
financial assistance contemplated in paragraph (c) of the definition of ‘services’ in subsection (1), whether
directly or indirectly, to-
(i) any connected person (in relation to the investor) who is a resident; or
[Sub-para. (i) substituted by s. 37 (c) of Act 59 of 2000.] (ii) any other person (in whom he has a direct or indirect interest) other than a natural person,
which is a resident (hereinafter referred to as the recipient) and, by virtue of such interest,
is entitled to participate in not less than 25 per cent of the dividends, profits or capital of
the recipient, or is entitled, directly or indirectly, to exercise not less than 25 per cent of
the votes of the recipient,
[Sub-para. (ii) substituted by s. 37 (c) of Act 59 of 2000.] and the Commissioner is, having regard to the circumstances of the case, of the opinion that the value of the
aggregate of all such financial assistance is excessive in relation to the fixed capital (being share capital,
share premium, accumulated profits, whether of a capital nature or not, or any other permanent owners’
capital, other than permanent capital in the form of financial assistance as so contemplated) of such
connected person or recipient, any interest, finance charge or other consideration payable for or in relation
to or in respect of the financial assistance shall, to the extent to which it relates to the amount which is
excessive as contemplated in this paragraph, be disallowed as a deduction for the purposes of this Act.
[Para. (a) amended by s. 37 (c) of Act 59 of 2000.] (b) For the purposes of paragraph (a), financial assistance granted indirectly shall be deemed to
include any financial assistance granted by any third person who is not a connected person in relation to the
investor, a connected person contemplated in paragraph (a) or the recipient, where such financial assistance
has been granted by arrangement, directly or indirectly, with the investor and on the strength of any
financial assistance granted, directly or indirectly, by the investor or any connected person in relation to the
investor, to such third person.
[S. 31 substituted by s. 23 (1) of Act 21 of 1995.] 31A ……
[S. 31A inserted by s. 47 (1) of Act 45 of 2003 and repealed by s. 29 (1) of Act 32 of 2004.] 32 Assessment in the case of submarine cable or wireless business
(1) Any person who carries on in the Republic the business of transmitting messages to places
outside the Republic by submarine cables or by any form of wireless apparatus, shall be deemed to have
derived therefrom (apart from the taxable income derived from other sources) a taxable income of ten rand
for every two hundred rand payable to such person in respect of messages transmitted from any office of
such person in the Republic, whether the amount be payable in or outside the Republic.
(2) For the purposes of this section any message which is delivered at any office in the Republic of
the person who carries on the business referred to in subsection (1) for transmission in any manner
whatsoever shall be deemed to be transmitted from that office.
(3) The provisions of this section shall not apply to any person so carrying on business who
renders accounts which satisfactorily disclose the taxable income derived by such person from the business
carried on by him in the Republic.
[Sub-s. (3) substituted by s. 27 of Act 113 of 1993.] 33 Assessment of owners or charterers of ships or aircraft who are not residents of the Republic
(1) Any person other than a resident who embarks passengers or loads livestock, mails or goods in
the Republic, as an owner or charterer of any ship or aircraft, shall be deemed to have derived therefrom
(apart from any taxable income derived by him from other sources) a taxable income of 10 per cent of the
amount payable to him or to any agent on his behalf, whether the amount be payable in or outside the
Republic, in respect of passengers, livestock, mails and goods so embarked or loaded, but the provisions of
this section shall not apply to any such person who renders accounts which satisfactorily disclose the

219 taxable income derived by him from the embarking of passengers or the loading of livestock, mails and
goods as aforesaid.
[Sub-s. (1) amended by s. 26 of Act 85 of 1974 and substituted by s. 28 of Act 113 of 1993 and by s. 38 of
Act 59 of 2000.] (2) Where the person so embarking passengers or loading livestock, mails or goods has no
recognized agent in the Republic other than the master of the ship or the pilot of the aircraft in connection
with which any such amounts are payable, or where the agent fails to make returns of any such amounts
payable in respect of any ship or aircraft-
(a) the Commissioner may make the assessment from such information as may be available
to him;
(b) the tax thereon shall be payable to the Commissioner prior to the clearance of the ship or
aircraft;
(c) the principal officer of customs at the port or airport where such ship or aircraft is being
cleared shall have power to detain the clearance until such payment is made; and
(d) upon such payment the master, pilot or agent (as the case may be) shall be entitled to a
certificate from such officer of customs that the amount so paid has been paid under the
provisions of this Act, and such certificate shall be sufficient warrant to such master, pilot
or agent of the amount so paid.
[S. 33 amended by s. 40 of Act 60 of 2001.] 34 ……
[S. 34 repealed by s. 19 of Act 90 of 1962.] 35 Assessment of persons not ordinarily resident or registered, managed or controlled in the
Republic who derive income from royalties or similar payments
(1) Any person (other than a resident or a controlled foreign company) by whom any amount is
received or to whom any amount accrues by virtue of-
(a) the use or right of use in the Republic of, or the grant of permission to use in the
Republic-
(i) any patent as defined in the Patents Act, 1978 (Act 57 of 1978), or any design as
defined in the Designs Act, 1993 (Act 195 of 1993), or any trade mark as defined
in the Trade Marks Act, 1993 (Act 194 of 1993), or any copyright as defined in
the Copyright Act, 1978 (Act 98 of 1978), or any model, pattern, plan, formula or
process or any other property or right of a similar nature; or
(ii) any motion picture film, or any film or video tape or disc for use in connection
with television, or any sound recording or advertising matter used or intended to
be used in connection with such motion picture film, film or video tape or disc,
wheresoever such patent, design, trade mark, copyright, model, pattern, plan, formula,
process, property, right, motion picture film, film, video tape or disc, sound recording or
advertising matter has been produced or made or such right of use or permission has been
granted or payment for such use, right of use or grant of permission has been made or is
to be made, and whether such payment has been made or is to be made by a person
resident in or outside the Republic; or
(b) the imparting of or the undertaking to impart any scientific, technical, industrial or
commercial knowledge or information for use in the Republic, or the rendering of or the
undertaking to render, any assistance or service in connection with the application or
utilisation of such knowledge or information, wheresoever such knowledge or
information has been obtained or such knowledge or information has been imparted or is
to be imparted or such assistance or service has been rendered or is to be rendered or any
such undertaking has been given, and whether payment for such knowledge, information,
assistance, service or undertaking has been made or is to be made by a person resident in
or outside of the Republic,
shall be liable for tax, to be known as the withholding tax on royalties, which shall be levied
and paid for the benefit of the National Revenue Fund at a rate of 12 per cent of such amount:
Provided that the provisions of this subsection shall not apply in respect of any amount which
is received by or accrues to any-
(i) company which is not a resident, if such amount is derived by such company from
any trade carried on through a branch or agency in the Republic and such amount

220 is subject to tax in the Republic;
(ii) person (other than a person whose place of residence is in a neighbouring country)
in respect of the use (otherwise than for advertising purposes in connection with
any motion picture film or otherwise than in connection with television) in any
printed publication of any copyright as aforesaid.
[Sub-s. (1) amended by s. 20 (a) of Act 90 of 1962, substituted by s. 20 (1) (a) of Act 65 of 1973, amended
by s. 27 (a) of Act 85 of 1974, substituted by s. 39 (a) of Act 59 of 2000 and amended by s. 32 (1) (a) of
Act 74 of 2002.] (2) (a) Any person who incurs a liability to pay to any other person who is not a resident any
amount referred to in subsection (1), or who receives payment of any such amount on behalf of such other
person, shall within 14 days after the end of the month during which the said liability is incurred or the said
payment is received, as the case may be, or within such further period as the Commissioner may approve,
make a payment (which shall be a final payment made on behalf of such other person) to the Commissioner
in respect of such other person’s liability for tax in terms of subsection (1), and shall submit to the
Commissioner at the time of such tax payment a declaration in such form as the Commissioner may
prescribe: Provided that-
(i) if the Commissioner is satisfied that the tax payment required to be made in terms of this
paragraph in respect of the said amount has been or will be made by any person, the
Commissioner may direct that any other person who is in terms of this paragraph required
to make a tax payment in respect of the said amount, shall be relieved of the duty to make
such payment;
(ii) for the purposes of this subsection a person having an address outside the Republic shall
until the contrary is proved be deemed not to be a resident;
[Para. (ii) substituted by s. 27 (c) of Act 85 of 1974 and by s. 39 (c) of Act 59 of 2000.] (iii) this paragraph shall not be construed as requiring any person to make a tax payment in
terms of this paragraph in respect of any liability to pay any amount in respect of the use
in the Republic of or the grant of permission to use in the Republic or the imparting of or
the undertaking to impart any knowledge directly or indirectly connected with the use in
the Republic of any motion picture film or any sound recording or advertising matter
used or intended to be used in connection with such film, if such liability was incurred
and discharged before the commencement of the Income Tax Amendment Act, 1962.
[Para. (a) amended by s. 20 (b) of Act 90 of 1962, by s. 20 (1) (b) of Act 65 of 1973, by s. 27 (b) of Act 85
of 1974, by s. 24 of Act 94 of 1983, by s. 21 (1) of Act 21 of 1994 and by s. 39 (b) of Act 59 of 2000.] (b) Any person making a payment to the Commissioner in terms of paragraph (a) shall,
notwithstanding any agreement to the contrary, be entitled to deduct or withhold the amount of such
payment from the amount which he is liable to pay to the aforesaid other person, or to recover the amount
so paid from such other person or to retain out of any money that may be in his possession or may come to
him as the agent of such other person an amount equal to the amount of such payment.
(c) ……
[Para. (c) substituted by s. 39 (d) of Act 59 of 2000 and by s. 32 (1) (b) of Act 74 of 2002 and deleted by s.
48 (a) of Act 45 of 2003.] (d) A taxpayer on whose behalf a payment has been made to the Commissioner in terms of
paragraph (a) shall not be entitled to recover the amount of such payment from the person who under the
provisions of paragraph (b) deducts, withholds or retains the amount of such payment and shall be deemed
to have received the amount so deducted or withheld.
(e) Every person who is required to make a payment to the Commissioner in terms of paragraph
(a) shall be personally liable for making such payment, and the amount so payable shall be deemed to be a
tax due by such person and shall be recoverable from him in the manner prescribed in section ninety-one.
(f) Nothing in this section contained shall be construed as relieving any person to whom the
provisions of subsection (1) apply from the obligation to render a return of income for any year of
assessment or from paying any tax for which he may be liable or as depriving him of the right to prove for
the purposes of section one hundred and two that payments made on his behalf in terms of paragraph (a) in
respect of any year of assessment were in excess of the amount of normal tax properly chargeable under
this Act in respect of income received by or accrued to him during such year.
(3) The general provisions contained in Parts I to VI of Chapter III of this Act shall mutatis
mutandis apply in respect of any withholding tax on royalties payable in terms of this section.

221 [Sub-s. (3) added by s. 48 (b) of Act 45 of 2003.] [NB: A s. 35A has been inserted by s. 30 of the Revenue Laws Amendment Act 32 of 2004, a provision
which will be put into operation by proclamation. See PENDLEX.] 36 Calculation of redemption allowance and unredeemed balance of capital expenditure in
connection with mining operations
Cases
(1) and (2) ……
[Sub-ss. (1) and (2) deleted by s. 24 (a) of Act 141 of 1992.] (2)bis ……
[Sub-s. (2)bis inserted by s. 12 (a) of Act 72 of 1963 and deleted by s. 24 (a) of Act 141 of 1992.] (3) …..
[Sub-s. (3) amended by s. 12 (b) of Act 72 of 1963 and deleted by s. 24 (a) of Act 141 of 1992.] (3)bis ……
[Sub-s. (3)bis inserted by s. 12 (c) of Act 72 of 1963, substituted by s. 15 (a) of Act 90 of 1964, amended
by s. 20 of Act 88 of 1965 and by s. 14 (1) (a) of Act 76 of 1968 and deleted by s. 24 (a) of Act 141 of
1992.] (3)ter ……
[Sub-s. (3)ter inserted by s. 14 (1) (b) of Act 76 of 1968 and deleted by s. 24 (a) of Act 141 of 1992.] (4) ……
[Sub-s. (4) amended by s. 12 (d) of Act 72 of 1963 and by s. 14 (1) (c) of Act 76 of 1968 and deleted by s.
24 (a) of Act 141 of 1992.] (5) ……
[Sub-s. (5) deleted by s. 24 (a) of Act 141 of 1992.] (6) ……
[Sub-s. (6) amended by s. 15 (b) and (c) of Act 90 of 1964 and deleted by s. 24 (a) of Act 141 of 1992.] (7) ……
[Sub-s. (7) deleted by s. 24 (a) of Act 141 of 1992.] (7A) ……
[Sub-s. (7A) inserted by s. 26 of Act 89 of 1969 and deleted by s. 24 (a) of Act 141 of 1992.] (7B) ……
[Sub-s. (7B) inserted by s. 21 (a) of Act 65 of 1973 and deleted by s. 24 (a) of Act 141 of 1992.] (7C) Subject to the provisions of subsections (7E), (7F) and (7G), the amounts to be deducted
under section 15 (a) from income derived from the working of any producing mine shall be the amount of
capital expenditure incurred.
[Sub-s. (7C) inserted by s. 21 (a) of Act 65 of 1973, amended by s. 25 (a) of Act 94 of 1983 and by s. 26
(a) of Act 101 of 1990 and substituted by s. 24 (b) of Act 141 of 1992 and by s. 29 of Act 113 of 1993.] (7D) ……
[Sub-s. (7D) inserted by s. 21 (a) of Act 65 of 1973, amended by s. 25 (b) of Act 94 of 1983 and deleted by
s. 24 (c) of Act 141 of 1992.] (7E) The aggregate of the amounts of capital expenditure determined under subsection (7C) in
respect of any year of assessment in relation to any mine or mines shall not exceed the taxable income (as
determined before the deduction of any amount allowable under section 15 (a), but after the set-off of any
balance of assessed loss incurred by the taxpayer in relation to such mine or mines in any previous year
which has been carried forward from the preceding year of assessment) derived by the taxpayer from
mining, and any amount by which the said aggregate would, but for the provisions of this subsection, have
exceeded such taxable income as so determined, shall be carried forward and be deemed to be an amount of
capital expenditure incurred during the next succeeding year of assessment in respect of the mine or mines
to which such capital expenditure relates.
[Sub-s. (7E) inserted by s. 25 (c) of Act 94 of 1983 and substituted by s. 26 (b) of Act 101 of 1990.] (7F) The aggregate of the amounts of capital expenditure determined under subsection (7C) in
respect of any year of assessment in relation to any one mine shall, unless the Minister of Finance, after
consultation with the Minister of Mineral and Energy Affairs and having regard to any relevant fiscal,
financial or technical implications, otherwise directs, not exceed the taxable income (as determined before
the deduction of any amount allowable under section 15 (a), but after the set-off of any balance of assessed
loss incurred by the taxpayer in relation to that mine in any previous year which has been carried forward

222 from the preceding year of assessment) derived by the taxpayer from mining on that mine, and any amount
by which the said aggregate would, but for the provisions of this subsection, have exceeded such taxable
income as so determined, shall be carried forward and be deemed to be an amount of capital expenditure
incurred during the next succeeding year of assessment in respect of that mine: Provided that where the
taxpayer was on 5 December 1984 carrying on mining operations on two or more mines, the said mines
shall for the purposes of this subsection be deemed to be one mine.
[Sub-s. (7F) inserted by s. 16 (1) of Act 96 of 1985 and amended by s. 26 (c) of Act 101 of 1990.] (7G) (a) Where in the case of any mine in respect of which mining operations or any related
operations were or are commenced by the taxpayer after 14 March 1990 (in this subsection referred to as a
new mine) an amount of capital expenditure falls to be disallowed under the provisions of subsection (7F),
there shall, notwithstanding the provisions of that subsection, be deducted from the total taxable income
derived by the taxpayer from mining (as determined after the deduction of any capital expenditure which
does not fall to be disallowed under the said provisions and after the set-off of any assessed loss incurred by
him from mining operations in a previous year of assessment which has been carried forward) so much of
the total amount of capital expenditure which has been so disallowed in relation to all producing new mines
owned by the taxpayer as does not exceed 25 per cent of such taxable income.
(b) The provisions of paragraph (a) shall not apply to capital expenditure incurred in respect of
any new mine-
(i) which has been disposed of by the taxpayer in the current or any previous year of
assessment; or
(ii) if the taxpayer is a company and its acquisition of the right to mine or the mineral rights
in respect of such mine was financed wholly or partly by the issue of any share in respect
of which any dividend is to be calculated by reference to that portion of the company’s
profits which is attributable to the operation of such mine.
[Sub-s. (7G) inserted by s. 26 (d) of Act 101 of 1990.] (8) ……
[Sub-s. (8) substituted by s. 21 (b) of Act 65 of 1973 and by s. 28 (1) (a) of Act 85 of 1974 and deleted by
s. 24 (c) of Act 141 of 1992.] (9) ……
[Sub-s. (9) substituted by s. 21 (b) of Act 65 of 1973 and deleted by s. 24 (c) of Act 141 of 1992.].] (10) Where separate and distinct mining operations are carried on in mines that are not contiguous,
the allowance for redemption of capital expenditure shall be computed separately.
[Sub-s. (10) substituted by s. 24 (d) of Act 141 of 1992.] (11) For the purposes of this section-
‘capital expenditure’ means-
(a) expenditure (other than interest or finance charges) on shaft sinking and mine equipment
(other than expenditure referred to in paragraph (d)) and, in the case of a natural oil mine,
the cost of laying pipelines from the mining block to the marine terminal or the local
refinery, as the case may be; and
[Para. (a) substituted by s. 28 (1)(b) of Act 85 of 1974, by s. 14 (a) of Act 70 of 1989 and by s. 30 of Act
129 of 1991.] (b) expenditure on development, general administration and management (including any
interest and other charges payable after the thirty-first day of December, 1950, on loans
utilized for mining purposes) prior to the commencement of production or during any
period of non-production; and
(c) in the case of any post-1973 gold mine, any other deep level gold mine, any post-1990
gold mine or any natural oil mine, a capital allowance calculated at the rate of 10 per cent
per annum in the case of a post-1973 gold mine or any other deep level gold mine or 12
per cent per annum in the case of any post-1990 gold mine or any natural oil mine on the
amount of the aggregate of-
(i) the expenditure referred to in paragraphs (a) and (b), excluding any interest and
other charges on loans referred to in paragraph (b), if the mine is a post-1973 gold
mine, a post-1990 gold mine or a natural oil mine, or the expenditure referred to in
paragraph (a), if the mine is any other deep level gold mine;
(ii) the amount (if any) allowed to rank as capital expenditure in terms of section 37;
(iii) any expenditure incurred during any period of production on development on any

223 reef on which at the date of such development stoping has not yet commenced;
(iv) the instalments of expenditure referred to in paragraph (d); and
[Sub-para. (iv) substituted by s. 24 (f) of Act 141 of 1992.] (v) the unredeemed balance of the aggregate determined in terms of this paragraph up
to the end of the year of assessment immediately preceding the year of assessment
under charge and which shall include the capital allowance determined in terms of
this paragraph for such preceding year of assessment,
[Sub-para. (v) substituted by s. 24 (f) of Act 141 of 1992.] if the mine is a post-1973 gold mine, a post-1990 gold mine or a natural oil mine, for the
period from the end of the month in which the expenditure is actually incurred up to the
end of the year of assessment immediately preceding the first year of assessment in
respect of which the determination of the taxable income derived from the working of
such mine does not result in an assessed loss or nil, and, if the mine is any other deep
level gold mine, for a period of ten years from the commencement of the year of
assessment during which the mine is recognized as any other deep level gold mine:
Provided that-
(aa) the amount under this paragraph shall not be calculated for any period during
which mining operations are not carried on in accordance with the terms of the
relevant-
(A) mining authorization issued under the Minerals Act, 1991 (Act 50 of
1991); or
(B) prospecting right, mining right, exploration right or production right,
mining permit or retention permit issued in terms of the Mineral and
Petroleum Resources Development Act, 2002 (Act 28 of 2002);
[Sub-para. (aa) substituted by s. 31 (1) of Act 32 of 2004.] (bb) notwithstanding anything to the contrary in any law contained, the amount under
this paragraph shall not be taken into account for the purpose of-
(A) calculating the capital allowance provided for in section 25 (2) of the
Mining Rights Act, 1967;
(B) determining the profits of which a share is payable to the State in terms of
any mining authorization issued under the Minerals Act, 1991 (Act 50 of
1991); or
(C) determining the amounts payable to the State in terms of the transitional
mineral and petroleum provisions contemplated in Schedule 3 of the Taxation
Laws Amendment Act, 2004 (Act 16 of 2004);
[Sub-para. (bb) substituted by s. 31 (1) of Act 32 of 2004.] (cc) the unredeemed balance of the aggregate of the amounts referred to in
subparagraphs (i) to (v) inclusive, of this paragraph, shall be determined by the
deduction from such aggregate at the end of every year of assessment-
(i) of the taxable income derived from the working of such mine for such year
of assessment, as determined before the deduction of any amount allowable
under section 15 (a) in relation to such mine and before the set-off in terms
of section 20 (1) (a) of any balance of assessed loss which is attributable to
any deduction made under section 15 (a) in relation to such mine; and
(ii) where the mine concerned is a mine to which subsection (7G) applies, an
amount equal to that portion of the capital expenditure of such mine which
has been set off against the taxable income of another mine or mines
during such year of assessment;
(dd) the sum of the expenditure contemplated in this paragraph shall be reduced by the
sum of the amounts received or accrued during the said relevant period from
disposals of assets contemplated in the definition of ‘capital expenditure incurred’;
(ee) ……
(ff) ……
(gg) notwithstanding anything to the contrary in this paragraph, the instalment of
expenditure which is in terms of paragraph (d) deemed to be payable during a year
of assessment shall qualify for the calculation of the amount under this paragraph

224 as from the first day of the year of assessment following the said year of
assessment;
(hh) where a sale, transfer, lease or cession of any mining property, as contemplated in
section 37, occurs which results in the disposal of an asset in respect of which the
provisions of paragraph (d) are applicable, so much of the effective value as
relates to the asset so disposed of shall qualify for the calculation of the amount
under this paragraph as from the first day of the year of assessment following the
year of assessment during which the agreement of sale, transfer, lease or cession
of that mining property takes effect; and
[Para. (hh) substituted by s. 41 (1) of Act 60 of 2001.] [Para. (c) amended by s. 14 (1) (d) of Act 76 of 1968, substituted by s. 28 (1)(c) of Act 85 of 1974,
amended by s. 20 (1) of Act 104 of 1980, substituted by s. 14 (b) of Act 70 of 1989 and amended by s. 26
(e) of Act 101 of 1990 and by s. 24 (e) and (g) of Act 141 of 1992.] (d) expenditure (excluding the cost of land, surface rights and servitudes) the payment of
which has become due on or after 1 July 1989 in respect of the acquisition, erection,
construction, improvement or laying out of-
(i) housing for residential occupation by the taxpayer’s employees (other than
housing intended for sale) and furniture for such housing;
(ii) infrastructure in respect of residential areas developed for sale to the taxpayer’s
employees;
(iii) any hospital, school, shop or similar amenity (including furniture and equipment)
owned and operated by the taxpayer mainly for the use of his employees or any
garage or carport for any motor vehicle referred to in subparagraph (vi);
(iv) recreational buildings and facilities owned and operated by the taxpayer mainly
for the use of his employees;
(v) any railway line or system having a similar function for the transport of minerals
from the mine to the nearest public transport system or outlet;
(vi) motor vehicles intended for the private or partly private use of the taxpayer’s
employees:
Provided that-
(aa) such expenditure shall for the purposes of this definition be deemed to be payable
in ten successive equal annual instalments or, where subparagraph (vi) is
applicable, five successive equal annual instalments, the first of which shall be
deemed to be payable on the date on which payment of the relevant expenditure
became due and the succeeding instalments on the appropriate anniversaries of
that date, but if any such anniversary falls on a date after the asset to which such
expenditure relates has been sold, disposed of or scrapped by the taxpayer, the
instalment of such expenditure so deemed to be payable on such anniversary shall
be disregarded;
(bb) where it is shown to the satisfaction of the Commissioner that the life of the
relevant mine will extend over a period which is shorter than the period during
which the said instalments are so deemed to be payable, the Commissioner may
reduce the number of instalments relating to the expenditure not yet redeemed and
the amount of each such instalment shall be determined by dividing the amount of
the expenditure remaining to be redeemed by the number of years in the remainder
of the life of the mine;
(cc) where any asset the expenditure in respect of which has qualified as capital
expenditure under this paragraph is sold, disposed of or scrapped by the taxpayer
during any year of assessment, an allowance shall be made in respect of that asset,
equal to the amount by which the full amount of the expenditure incurred by the
taxpayer in respect of that asset, as contemplated in this paragraph, exceeds the
total amount of all the instalments of such expenditure which are deemed by
paragraph (aa) of this proviso to be payable before the asset was sold, disposed of
or scrapped, and in such case the amount of the said allowance shall be deemed to
be the final instalment of the said expenditure made on the date on which the asset
was sold, disposed of or scrapped;

225 [Para. (d) added by s. 14 (c) of Act 70 of 1989.] [Definition of ‘capital expenditure’ amended by s. 12 (e), (f), (g) and (h) of Act 72 of 1963 and substituted
by s. 15 (d) of Act 90 of 1964, by s. 23 of Act 55 of 1966 and by s. 16 of Act 95 of 1967.] ‘capital expenditure incurred’, for the purpose of determining the amount of capital expenditure
incurred during any period in respect of any mine, means the amount (if any) by which the expenditure that
is incurred during such period in respect of such mine and is capital expenditure, exceeds the sum of the
amounts received or accrued during the said period from disposals of assets the cost of which has in whole
or in part been included in capital expenditure taken into account (whether under this Act or any previous
Income Tax Act) for the purposes of any deduction in respect of such mine under section 15 (a) of this Act
or the corresponding provisions of any previous Income Tax Act;
[Definition of ‘capital expenditure incurred’ inserted by s. 21 (c) of Act 65 of 1973 and substituted by s.17
of Act 36 of 1996.] ‘expenditure on shaft sinking’ includes the expenditure on sumps, pump-chambers, stations and ore
bins accessory to a shaft;
‘expenditure’ means net expenditure after taking into account any rebates or returns from
expenditure, regardless of when such last-mentioned expenditure was incurred.
[Definition of ‘expenditure’ substituted by s. 21 (d) of Act 65 of 1973.] (12) The balance of capital expenditure unredeemed at the commencement of the first year of
assessment chargeable under this Act shall be the balance shown to be unredeemed at the end of the last
year of assessment chargeable under the Income Tax Act, 1941.
37 Calculation of capital expenditure on sale, transfer, lease or cession of mining property
Cases
(1) For the purposes of this Act, but subject to subsection (1A), whenever a taxpayer-
(a) sells, transfers, leases or cedes any mining property; and
(b) disposes of any assets contemplated in section 36 (11) (hereinafter referred to as ‘the
capital assets’) in consequence of the sale, transfer, lease or cession contemplated in
paragraph (a),
the person acquiring those capital assets shall be deemed to have acquired such capital assets at a cost equal
to the effective value of those capital assets to that person on the effective date of that agreement of sale,
transfer, lease or cession of the mining property, and the said cost shall be deemed to be expenditure that is
incurred by that person during the period of assessment during which that agreement takes effect and to be
capital expenditure which is in respect of such period required to be taken into account for the purposes of
the definition of ‘capital expenditure incurred’ in section 36 (11).
(1A) Where any consideration is given by the person acquiring the assets disposed of by the
taxpayer, as contemplated in subsection (1), and the effective value of all those assets (including any
mining property) so acquired, exceeds that consideration, the amount of the cost and expenditure in respect
of the capital assets shall, for the purposes of subsection ( 1), be deemed to be an amount which bears to the
total amount of such consideration the same ratio as such effective value of those capital assets bears to the
effective value to that person of all the assets (including any mining property) so disposed of to that person.
(2) For the purposes of paragraph (j) of the definition of ‘gross income’ in section 1 and section 36,
the taxpayer who disposes of any capital assets contemplated in subsection (1), shall be deemed to have
disposed of such capital assets for a consideration equal in value to the cost of those capital assets to the
person acquiring such capital assets as determined under subsection (1) and (1A), and such consideration
shall be deemed to have been received by or to have accrued to the said taxpayer on the effective date of
the agreement of sale, transfer, lease or cession.
(3) If the value of the consideration given or the value of the property disposed of is in dispute, the
value may, be fixed by the Commissioner and shall be determined-
(a) in the case of any mining property, in the same manner as if transfer duty were payable;
or
(b) in the case of any capital asset, at the market value of such capital asset.
(4) The effective value on the effective date of the agreement of sale, transfer, lease or cession, of
all the assets disposed of, shall be determined by the Director-General for Minerals and Energy who shall,
notwithstanding the repeal of the Second Schedule to the Transvaal Mining Leases and Mineral Law
Amendment Act, 1918 (Act 30 of 1918), for the purposes of such determination have all the powers which
were conferred upon him by the provisions of that Schedule.

226 (5) For the purpose of this section, ‘mining property’ means-
(a) any land on which mining is carried on; or
(b) any right to minerals (including any right to mine for minerals) and a lease or sub-lease of
such a right.
[S. 37 amended by s. 29 of Act 85 of 1974 and by s. 25 of Act 141 of 1992 and substituted by s. 42 (1) of
Act 60 of 2001.] 37A ……
[S. 37A inserted by s. 27 of Act 89 of 1969, amended by s. 18 (1) of Act 52 of 1970, by s. 22 (1) of Act 88
of 1971 and by s. 30 (1) of Act 85 of 1974 and repealed by s. 26 of Act 94 of 1983.] 37B ……
[S. 37B inserted by s. 12 (1) of Act 101 of 1978 and repealed by s. 22 (1) of Act 21 of 1994.] 37C Determination of taxable income of persons previously assessable under certain other laws
Where any rule provided in this Act as to the inclusion of any amount in the income of a taxpayer
for any year of assessment ending on or after 1 March 1984, or as to the deduction or set-off of any amount
from or against his income for such year, in effect 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 in or in relation to a year of assessment in respect of which the taxpayer was
assessable for taxation purposes under the Black Taxation Act, 1969 (Act 92 of 1969), or any law of a
legislative assembly established under the provisions of section 1 of the National States Constitution Act,
1971 (Act 21 of 1971), imposing a tax on income, shall for the purposes of applying such rule but subject
to such adjustments as the Commissioner may make, be taken into account.
[S. 37C inserted by s. 3 of Act 30 of 1984.] 37D Determination of taxable income of married women
For the purposes of the determination of the taxable income of any married woman, where any
rule provided in this Act as to the inclusion of any amount in her income or as to the deduction or set-off of
any amount from or against her income, in effect 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 in or in relation to a year of assessment during which income derived by such
married woman was under the provisions of section 7 (2) (prior to the amendment thereof by section 4 of
the Income Tax Act, 1990) deemed to be income derived by her husband, shall, subject to such adjustments
as may in the circumstances be appropriate, be taken into account for the purposes of applying such rule.
[S. 37D inserted by s. 27 of Act 101 of 1990.] 37E Application of certain provisions where taxpayer carries on value-added process
(1) For the purposes of this section-
‘commencement date’ means 12 September 1991;
‘committee’ means the committee appointed in terms of subsection (2);
‘intermediate product’ means any substance or material which is produced by any person in order
to be subjected to further processing by any other person;
‘local country’ means the Republic, Botswana, Lesotho, Namibia, Swaziland or any country the
territory of which formerly formed part of the Republic;
‘value-added process’ means any process approved by the committee whereby any raw material or
any intermediate product is processed to yield any intermediate product or final product, if in the opinion of
the committee-
(a) such process will add at least 35 per cent to the value of the raw material or intermediate
product processed, such added value being determined in accordance with the formula-
A – (B + C)
x 100
A 1
in which formula-
(i) ‘A’ represents the ex-factory price of the intermediate product or final product
produced by the taxpayer;
(ii) ‘B’ represents the cost of raw materials and intermediate products used by him in
the production of such intermediate product or final product; and
(iii) ‘C’ represents the cost of electricity consumed by him in such production;
(b) such process will be carried on on a scale which makes it internationally competitive; and
(c) where the taxpayer intends acquiring any imported capital goods for use in such process,

227 he will make use of any foreign term credits which may be available for the purpose of
financing the acquisition of such capital goods,
but excludes any process which is either a simple purification process in consequence of which the raw
material or intermediate product in question remains unchanged except for the removal of impurities or a
physical process resulting merely in a change of shape and any process which is a mining operation or any
operation which is normally carried on in the course of mining operations.
(2) The Minister of Finance shall with the concurrence of the Minister of Trade and Industry
appoint a committee which shall have power to-
(a) approve any process as a value-added process for the purposes of this section, subject to
such requirements and conditions as the committee considers necessary to ensure that the
provisions of this section are applied in such a manner as to promote the carrying on of
value-added processes;
(b) direct that where the provisions of this section are applicable to any taxpayer, the
taxpayer shall be excluded from such further assistance from the State as the committee
may determine; and
(c) perform such other functions as are assigned to it under the provisions of this section.
(3) In deciding whether a process is to be approved as a value-added process, the committee shall
have regard to-
(a) the degree to which the production of an intermediate product will encourage further
processing of such intermediate product by industries situated in a local country;
(b) the effect on the Exchequer;
(c) the degree of preference which will be granted to products and skills from a local
country; and
(d) the effect of such process on small and medium size enterprises in a local country.
(4) Where any taxpayer incurs expenditure for the purpose of his trade on or in connection with-
(a) any new or unused machinery or plant referred to in section 12C(1)(a) which the
committee is satisfied will-
(i) be brought into use by the taxpayer within a period determined by the committee;
and
(ii) be used by the taxpayer directly in a value-added process carried on by him; or
(b) any building referred to in section 13 (1) (b) which the committee is satisfied will-
(i) be brought into use by the taxpayer within a period determined by the committee;
and
(ii) be used by the taxpayer for the purpose of carrying on therein any value-added
process,
the provisions of sections 11 (bA), 12C and 13 (1) shall, notwithstanding the fact that such machinery,
plant or building may not have been brought into use or used as contemplated in those sections, be applied
in accordance with the provisions of subsection (5), but subject to the provisions of subsection (6).
(5) Where any expenditure referred to in subsection (4)-
(a) constitutes an amount of interest or related finance charges referred to in section 11 (bA)
which has been incurred by the taxpayer in respect of the cost of any machinery or plant
referred to in subsection (4) (a) or any building referred to in subsection (4) (b), the
deduction under section 11 (bA) shall be allowed in the year of assessment in which such
expenditure is incurred;
(b) constitutes the whole or a portion of the cost to the taxpayer of any machinery or plant
referred to in subsection (4) (a), the deduction under section 12C shall be allowed in the
year of assessment in which such expenditure is incurred and in each of the four
succeeding years of assessment; or
(c) constitutes the whole or a portion of the cost to the taxpayer of any building referred to in
subsection (4) (b), the deduction under section 13 (1) shall be allowed in the year of
assessment in which such expenditure is incurred and in each applicable succeeding year
of assessment.
(6) The provisions of this section shall apply to any taxpayer who on the commencement date has
not yet commenced the erection of a value-added plant, if the process to be carried on by the taxpayer is
approved by the committee as a value-added process within two years (or such shorter period as the
committee in any case determines) after the commencement date.

228 (7) For the purposes of subsection (6), a taxpayer shall be deemed to have commenced the erection
of a value-added plant on the date upon which he concludes an agreement for the acquisition of any
machinery or plant referred to in subsection (4) (a) or on the date upon which he concludes an agreement
for the erection of a building referred to in subsection (4) (b), whichever date is the earlier.
(8) Where a taxpayer fails to comply with any of the requirements or conditions imposed by the
committee, no deduction shall be granted under the provisions of this section unless the committee
otherwise directs.
(9) Where the sum of the deductions to which the taxpayer is entitled in any year of assessment
under the provisions of sections 11(bA), 12C and 13(1), as applied in terms of the provisions of this
section, in respect of expenditure referred to in subsection (4) exceeds the taxable income of the taxpayer
for such year as determined before allowing the said deductions, the Commissioner may on application
made to him by the taxpayer-
(a) disallow as a deduction in the determination of the taxpayer’s taxable income for such
year an amount equal to so much of such sum as would, had such amount been allowed
as a deduction, have created or increased an assessed loss as defined in section 20 (2);
and
(b) issue, subject to such terms and conditions as he may determine, to the taxpayer a
negotiable tax credit certificate for such amount as, having regard to the rate of normal
tax applicable to the taxpayer in such year, represents the amount of normal tax which
would be payable in respect of a taxable income equal to the amount disallowed under
the provisions of paragraph (a).
(10) A negotiable tax credit certificate issued to any taxpayer under the provisions of subsection
(9) or (11) may be disposed of by such taxpayer or subsequent holder to any other taxpayer, and may in
such case be utilized by such other taxpayer in payment of any normal tax, secondary tax on companies or
provisional tax due by him.
(11) Where a negotiable tax credit certificate is utilized by any taxpayer and the value thereof is in
excess of the amount of normal tax, secondary tax on companies or provisional tax due by such taxpayer,
the Commissioner shall not be required to make a refund of such excess if such excess exceeds R5000, but
he may issue to such taxpayer a replacement negotiable tax credit certificate in respect of such excess.
(12) The utilization by the taxpayer of a negotiable tax credit certificate or a refund by the
Commissioner of any excess of a negotiable tax credit certificate shall be treated as a drawback from
revenue charged to the National Revenue Fund.
[Sub-s. (12) amended by s. 41 of Act 36 of 1996.] (13) For the purposes of section 8 (4) (a), any amount disallowed under subsection (9) (a) shall be
deemed to be an amount allowed to be deducted or set off as contemplated in that section.
[S. 37E inserted by s. 3 (1) of Act 136 of 1991, amended by s. 26 (1) of Act 141 of 1992 and substituted by
s. 30 (1) of Act 113 of 1993.] 37F Determination of taxable income derived by persons previously assessable under certain other
laws
Where it is necessary for any rule provided in this Act as to the inclusion in the income of any
taxpayer for any year or as to the deduction or set-off of any amount from or against his income for such
year, 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 in or in relation to a year of
assessment during which the taxpayer was assessable for taxation purposes in terms of any law of a former
self-governing territory declared under section 26 of the repealed Self-governing Territories Constitution
Act, 1971 (Act 21 of 1971), to be a self-governing territory or of the former Republic of Transkei,
Bophuthatswana, Venda or Ciskei for any year of assessment, shall, subject to such adjustments as may in
the circumstances be appropriate, for the purposes of applying such rule be taken into account.
[S. 37F inserted by s. 24 (1) of Act 21 of 1995.] 37G Determination of taxable income derived from small business undertakings
(1) The Minister of Finance may make regulations to facilitate compliance with the provisions of
this Act by natural persons who carry on business through small business undertakings, whether as sole
proprietors or in partnership with other natural persons.
(2) A regulation made under subsection (1) may-
(a) prescribe what shall constitute a small business undertaking, having regard to-
(i) the nature of the undertaking;

229 (ii) the turnover, taxable income or profit of the undertaking;
(iii) the number of persons employed in the undertaking;
(iv) the nature and extent of other income derived by the proprietor or partners; and
(v) any other feature which, in the opinion of the said Minister, indicates that an
undertaking should be regarded as a small business undertaking;
(b) provide for the variation of any provision of this Act relating to the determination of the
taxable income derived from a small business undertaking, including-
(i) the determination of taxable income having regard only to amounts actually
received or expended;
(ii) any variation in the manner in which the values of trading stock are taken into
account;
(iii) the manner in which expenditure of a capital nature incurred is to be treated; and
(iv) any other provision which, save in so far as the timing of the receipt or accrual of
income or the incurral of expenditure is concerned, will not result in a material
variation in the determination of the taxable income derived by the undertaking
over a period of time;
(c) provide for the exemption from, or extension of time limits in, any provision of this Act
relating to the preparation and submission of documents, accounts, returns or payments;
(d) make such other provision as in the opinion of the said Minister will facilitate the
carrying on of small business undertakings.
[S. 37G inserted by s. 24 (1) of Act 21 of 1995.] 37H Tax holiday scheme for certain companies
(1) For the purposes of this section-
‘board’ means the board established by section 2 of the Regional Industrial Development Act, 1993
(Act 187 of 1993);
‘commencement date’ means 1 October 1996;
‘goods’ means goods as defined in section 31 (1);
‘project’ means a project which in the opinion of the board-
(a) represents the manufacturing of any products, goods, articles or any other things as
classified in ‘Major Division 3: Manufacturing’ of the Standard Industrial Classification
of all Economic Activities (Fifth Edition) issued by the Central Statistical Services in
January 1993; and
(b) meets the investment requirements prescribed by the regulations under subsection (14)
(a);
‘qualifying company’ means any company which-
(a) is incorporated on or after the commencement date;
(b) commences the carrying on of one qualifying project for the first time on or after the
commencement date; and
(c) has the sole object of carrying on one qualifying project as from the date of such
incorporation and which does not carry on any trade other than such qualifying project;
‘qualifying project’ means a project which has been approved by the board in terms of subsection
(2) (a);