REPUBLIC OF SOUTH AFRICA

TAXATION LAWS AMENDMENT BILL

(As introduced)

(MINISTER OF FINANCE)

[B - 00]


GENERAL EXPLANATORY NOTE:

[    ] Words in bold type in square brackets indicate omissions from existing enactments.

____ Words underlined with a solid line indicate insertions in existing enactments.


BILL

To amend the …

Amendment of section 3 of Act 32 of 1948

  1. (1) Section 3 of the Marketable Securities Tax Act, 1948, is hereby amended by the deletion of subparagraph (vii) of paragraph (c) of subsection (3).

(2) Subsection (1) shall come into operation on 1 January 2000.

Amendment of section 9C of Act 32 of 1948

  1. Section 9C of the Marketable Securities Tax Act, 1948, is hereby amended -
  1. by the substitution for paragraph (b) of subsection (8) of the following paragraph:

"(b) have the same powers -

  1. to enforce the attendance of witnesses and to compel them to give evidence or to produce evidential material; and
  2. relating to contempt,

as are vested in a President of the Special Court contemplated in section 83 of the Income Tax Act, 1962; and";

  1. by the substitution for subsections (11), (12) and (13) of the following subsections:

"(11) Any person whose affairs are investigated in the course of an inquiry contemplated in this section, shall be entitled to be present [throughout] at the inquiry during such time as his affairs are investigated, unless on application by the person contemplated in subsection (1), the presiding officer directs otherwise on the ground that the presence of the person and his representative, or either of them, would be prejudicial to the effective conduct of the inquiry.

(12) Any person contemplated in subsection (9) has the right to [a representative of his choice] have a legal representative present during the time that he appears before the presiding officer.

(13) An inquiry contemplated in this section shall [not be public] be private and confidential and the presiding officer shall at any time on application [of] by the person whose affairs are investigated or any other person giving evidence or the person contemplated in subsection (1), exclude from such inquiry or require to withdraw therefrom, all or any persons whose attendance is not necessary for the inquiry.";

  1. by the addition after subsection (14) of the following subsections:

"(15) Any person who has been required to appear before the presiding officer at the inquiry and who—

  1. at his or her appearance before the inquiry—

  1. fails to produce a book, document or other object in his or her possession or under his or her control which he or she has been summoned to produce; or

  2. refuses to be sworn or to make an affirmation after he or she has been asked by the presiding officer to do so; or

  1. having been sworn or having made an affirmation—
  1. fails to answer fully and to the best of his or her ability any question lawfully put to him or her; or
  2. gives false evidence knowing that evidence to be false or not knowing or not believing it to be true,

shall be guilty of an offence.

(16) The evidence given under oath or solemn declaration at an inquiry may be used by the Commissioner in any subsequent proceedings to which the person whose affairs are investigated is a party or to which a person who had dealings with such person is a party.

(17)(a) No person may refuse to answer any question on the grounds that it may incriminate him or her.

  1. No such incriminating evidence shall be admissible in any criminal proceedings against the person giving such evidence, other than in proceedings where that person stands trial on a charge relating to the administering or the giving of false evidence or the making of a false statement in connection with such questions and answers, or a failure to answer lawful questions fully and satisfactorily, or a charge in connection with a breach of the provisions of subsection (15).

(18) An inquiry in terms of this section shall proceed notwithstanding the fact that any civil or criminal proceedings are pending or contemplated against or involving any person identified in subsection (6)(c) or any witness or potential witness or any person whose affairs may be investigated in the course of that inquiry.".

Amendment of section 9 of Act 40 of 1949

  1. (1) Section 9 of the Transfer Duty Act, 1949, is hereby amended - 
  1. by the deletion of paragraph (bA) of subsection (1);
  2. by the substitution for the words preceding the proviso to paragraph (c) of subsection (1) of the following words:

"a public benefit organisation [religious, charitable or educational institution of a public character] which is exempt from tax in terms of section [10(1)(f)] 10(1)(cN) of the Income Tax Act, 1962 (Act No. 58 of 1962), in respect of property acquired [for religious, charitable or educational purposes] exclusively for purposes of the public benefit activity carried on by such public benefit organisation:";

  1. by the deletion of paragraph (j) of subsection (1);
  2. by the insertion after subsection (1) of the following subsection:

"(1A) No duty shall be payable in respect of the registration of any property transferred by-

  1. any public benefit organisation which is exempt from tax in terms of the provisions of section 10(1)(cN) of the Income Tax Act, 1962, to any other entity in order to comply with the provisions of the proviso subsection (2) of section 30 of that Act; or

  2. any fund contemplated in section 10(1)(fA) of the Income Tax Act, 1962, to any other entity in order to comply with the provisions of paragraph (b) of the first proviso to section 10(1)(fA);";

  1. by the deletion of subsection (13); and
  2. by the deletion of subsection (14).

(2)(a) Subsection (1)(a) shall come into operation on 1 January 2000.

  1. Subsection (1)(b), (c) and (d) shall come into operation on a date determined by the President by way of proclamation in the Gazette.

  2. Subsection (1)(e) shall come into operation on the date of promulgation of this Act.

Amendment of section 11D of Act 40 of 1949

  1. Section 11D of the Transfer Duty Act, 1949, is hereby amended - 
  1. by the substitution for paragraph (b) of subsection (8) of the following paragraph:

"(b) have the same powers-

  1. to enforce the attendance of witnesses and to compel them to give evidence or to produce evidential material; and
  1. relating to contempt,

as are vested in a President of the Special Court contemplated in section 83 of the Income Tax Act, 1962; and";

  1. by the substitution for subsections (11), (12) and (13) of the following subsections:

"(11) Any person whose affairs are investigated in the course of an inquiry contemplated in this section, shall be entitled to be present [throughout] at the inquiry during such time as his affairs are investigated, unless on application by the person contemplated in subsection (1), the presiding officer directs otherwise on the ground that the presence of the person and his representative, or either of them, would be prejudicial to the effective conduct of the inquiry.

(12) Any person contemplated in subsection (9) has the right to [a representative of his choice] have a legal representative present during the time that he appears before the presiding officer.

(13) An inquiry contemplated in this section shall [not be public] be private and confidential and the presiding officer shall at any time on application [of] by the person whose affairs are investigated or any other person giving evidence or the person contemplated in subsection (1), exclude from such inquiry or require to withdraw therefrom, all or any persons whose attendance is not necessary for the inquiry."; and

  1. by the addition after subsection (14) of the following subsections:

"(15) Any person who has been required to appear before the presiding officer at the inquiry and who—

  1. at his or her appearance before the inquiry—

  1. fails to produce a book, document or other object in his or her possession or under his or her control which he or she has been summoned to produce; or

  2. refuses to be sworn or to make an affirmation after he or she has been asked by the presiding officer to do so; or

  1. having been sworn or having made an affirmation—

  1. fails to answer fully and to the best of his or her ability any question lawfully put to him or her; or

  2. gives false evidence knowing that evidence to be false or not knowing or not believing it to be true,

shall be guilty of an offence.

(16) The evidence given under oath or solemn declaration at an inquiry may be used by the Commissioner in any subsequent proceedings to which the person whose affairs are investigated is a party or to which a person who had dealings with such person is a party.

(17)(a) No person may refuse to answer any question on the grounds that it may incriminate him or her.

  1. No such incriminating evidence shall be admissible in any criminal proceedings against the person giving such evidence, other than in proceedings where that person stands trial on a charge relating to the administering or the giving of false evidence or the making of a false statement in connection with such questions and answers, or a failure to answer lawful questions fully and satisfactorily, or a charge in connection with a breach of the provisions of subsection (15).

(18) An inquiry in terms of this section shall proceed notwithstanding the fact that any civil or criminal proceedings are pending or contemplated against or involving any person identified in subsection (6)(c) or any witness or potential witness or any person whose affairs may be investigated in the course of that inquiry.".

Amendment of section 15 of Act 40 of 1949

  1. Section 15 of the Transfer Duty Act, 1949, is hereby amended by the substitution for subsection (3) of the following subsection:

"(3) Any person who fails to comply with any provision of this section shall be guilty of an offence and liable on conviction to a fine [not exceeding fifty rand] or to imprisonment for a period not exceeding three months."

Amendment of section 1 of Act 45 of 1955

  1. Section 1 of the Estate Duty Act, 1955, is hereby amended by the insertion after the definition of "company" of the following definition:

"'domestic policy' means any life policy as defined in section 1 of the Long-term Insurance Act, 1998 (Act No. 52 of 1998), issued anywhere upon an application made or presented to a representative of an insurer (or to any person on behalf of such a representative) at any place in the Republic, not being a life policy which has been made payable at a place outside the Republic at the request of the owner, but includes any life policy issued outside the Republic which has subsequently been made payable in the Republic at the request of the owner;".

Amendment of section 3 of Act 45 of 1955

  1. Section 3 of the Estate Duty Act, 1955, is hereby amended by the substitution for paragraph (a) of subsection (3) of the following paragraph:

"(a) so much of any amount due and recoverable under any policy of insurance which is a domestic policy [as defined in section 1 of the Insurance Act, 1943 (Act 27 of 1943)], upon the life of the deceased as exceeds the aggregate amount of any premiums or consideration proved to the satisfaction of the Commissioner to have been paid by any person who is entitled to the amount due under the policy, together with interest at six per cent per annum calculated upon such premiums or consideration from the date of payment to the date of death: Provided that the foregoing provisions of this paragraph shall not apply in respect of any amount due and recoverable under a policy of insurance, if any".

Amendment of section 4 of Act 45 of 1955

  1. (1) Section 4 of the Estate Duty Act, 1955, is hereby amended-
  1. by the substitution for subparagraph (i) of paragraph (h) of the following subparagraph:

"(i) any [charitable, educational or religious institution of a public character] public benefit organisation which is exempt from tax in terms of section 10(1)[(f)](cN) of the Income Tax Act, 1962 (Act 58 of 1962), and any fund which has been approved by the Commissioner under the provisions of section 10(1)(fA) of that Act which provides funds solely to any such public benefit organisation; or"; and

  1. by the deletion of subparagraphs (ii) and (iv) of paragraph (h).

(2) Subsection (1) shall come into operation on a date to be determined by the President by proclamation in the Gazette and shall apply in respect of any person who dies on or after that date.

Amendment of section 8D of Act 45 of 1955

  1. Section 8D of the Estate Duty Act, 1955, is hereby amended-
  1. by the substitution for paragraph (b) of subsection (8) of the following paragraph:

"(b) have the same powers-

  1. to enforce the attendance of witnesses and to compel them to give evidence or to produce evidential material; and
  1. relating to contempt,

as are vested in a President of the Special Court contemplated in section 83 of the Income Tax Act, 1962; and";

  1. by the substitution for subsections (11), (12) and (13) of the following subsections:

"(11) The executor of the estate of the deceased person whose affairs are investigated in the course of an inquiry contemplated in this section, shall be entitled to be present [throughout] at the inquiry during such time as his affairs are investigated, unless on application by the person contemplated in subsection (1), the presiding officer directs otherwise on the ground that the presence of the executor and his representative, or either of them, would be prejudicial to the effective conduct of the inquiry.

(12) Any person contemplated in subsection (9) has the right to [a representative of his choice] have a legal representative present during the time that he appears before the presiding officer.

(13) An inquiry contemplated in this section shall [not be public] be private and confidential and the presiding officer shall at any time on application [of] by the executor or any other person giving evidence or the person contemplated in subsection (1), exclude from such inquiry or require to withdraw therefrom, all or any persons whose attendance is not necessary for the inquiry."; and

  1. by the addition after subsection (14) of the following subsections:

"(15) Any person who has been required to appear before the presiding officer at the inquiry and who—

  1. at his or her appearance before the inquiry—

  1. fails to produce a book, document or other object in his or her possession or under his or her control which he or she has been summoned to produce; or

  2. refuses to be sworn or to make an affirmation after he or she has been asked by the presiding officer to do so; or

  1. having been sworn or having made an affirmation—

  1. fails to answer fully and to the best of his or her ability any question lawfully put to him or her; or

  2. gives false evidence knowing that evidence to be false or not knowing or not believing it to be true,

  3. shall be guilty of an offence.

(16) The evidence given under oath or solemn declaration at an inquiry may be used by the Commissioner in any subsequent proceedings to which the executor is a party or to which a person who had dealings with such executor is a party.

(17)(a) No person may refuse to answer any question on the grounds that it may incriminate him or her.

  1. No such incriminating evidence shall be admissible in any criminal proceedings against the person giving such evidence, other than in proceedings where that person stands trial on a charge relating to the administering or the giving of false evidence or the making of a false statement in connection with such questions and answers, or a failure to answer lawful questions fully and satisfactorily, or a charge in connection with a breach of the provisions of subsection (15).

(18) An inquiry in terms of this section shall proceed notwithstanding the fact that any civil or criminal proceedings are pending or contemplated against or involving any person identified in subsection (6)(c) or any witness or potential witness or any person whose affairs may be investigated in the course of that inquiry.".

Substitution of section 23 of Act 45 of 1955

  1. Section 23 of the Estate Duty Act, 1955, is hereby substituted by the following section:

"Every person who carries on in the Republic any insurance business shall whenever he, on the death of any person, makes payment of any claim under any policy of insurance which is a domestic policy [as defined in section one of the Insurance Act, 1943 (Act 27 of 1943)], upon the life of that person, advise the Commissioner, in such form as the Commissioner may require, of such payment."

Amendment of section 28 of Act 45 of 1955

  1. Section 28 of the Estate Duty Act, 1955, is hereby amended by the substitution for the words following paragraph (b) of subsection (1) of the following words:

"shall be guilty of an offence and liable on conviction to a fine [not exceeding one thousand rand] or to imprisonment for a period not exceeding two years or to both such fine and such imprisonment.".

Fixing of rates of normal tax in terms of Act 58 of 1962

  1. The rates of normal tax to be levied in terms of section 5(2) of the Income Tax Act, 1962, in respect of-
  1. the taxable income of any person other than a company for the year of assessment ending on 28 February 2001 or 30 June 2001; and
  2. the taxable income of any company for any year of assessment ending during the period of 12 months ending on 31 March 2001,

shall be as set out in Schedule 1 to this Act.

Amendment of section 1 of Act 58 of 1962

  1. (1) Section 1 of the Income Tax Act, 1962, is hereby amended—
  1. by the substitution for paragraph (b) of the definition of "company" of the following paragraph:

"(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 [if such association, corporation, company or body, as the case may be, carries on business or has an office or place of business in the Republic or derives income from any source within or deemed to be within the Republic or in which any person ordinarily resident or carrying on business in the Republic is interested as a shareholder or a member]; or";

  1. by the deletion of paragraph (c) of the definition of "company";
  2. by the substitution for paragraph (d) of the definition of "company" of the following paragraph:

"(d) any association (not being an association referred to in paragraph (a) or (f) [or an association to which the provisions of section 10 (1) (e) apply]) formed in the Republic to serve a specified purpose, beneficial to the public or a section of the public; or";

  1. by the substitution of paragraph (e) of the definition of "company" of the following paragraph:

"(e) any

  1. unit portfolio comprised in any unit trust scheme in securities other than property shares managed or carried on by any company registered as a management company under section 4 of the Unit Trusts Control Act, 1981 (Act 54 of 1981), if

[(i)](aa) such portfolio was created on or after the date of commencement of the Unit Trusts Control Amendment Act, 1962 (Act 11 of 1962);

[(ii)](bb) such portfolio was created before that date and the relevant trust deed has after that date been amended in order to create further units in that portfolio; or

  1. arrangement or scheme carried on outside the Republic in pursuance of which members of the public are or will be 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;";
  1. by the substitution of the words preceding paragraph (a) of the definition of "dividend" of the following words:

"’dividend’, means any amount distributed by a company (not being [a mutual building society or] an institution to which section 10(1)(d) applies) to its shareholders or any amount distributed out of the assets pertaining to any unit portfolio referred to in paragraph (e) of the definition of 'company' in this section to shareholders in relation to such unit 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"; and

  1. by the insertion after paragraph (c) of the definition of "gross income" of the following paragraph:

(cA) any amount received by or accrued to any person who:

  1. is a natural person;
  2. 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);
  3. is or was a personal service company as defined in the Fourth Schedule; or
  4. is or was a personal service trust as defined in the Fourth Schedule,

as compensation for any restraint of trade imposed on such person;";

  1. by the insertion after paragraph (eA) of the definition of "gross income" of the following paragraph:

"(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 No. 24 of 1956)), who 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;";

  1. by the substitution for paragraph (k) of the definition of "gross income" of the following paragraph:

"(k) any amount received or accrued by way of dividends including any [dividends distributed by a private company out of or by way of capitalization of any profits of such company, which in terms of section 37 of the Income Tax Act, 1941 (Act 31 of 1941), had previously been apportioned among its shareholders as the taxable income or the income subject to super tax of such company, and for the purposes of this paragraph all dividends from sources outside the Republic received by or accrued to any person (other than a company) who is ordinarily resident in the Republic or received by or accrued to any company, shall be deemed to have been received by or to have accrued to such person or company from a source within the Republic] amount determined in accordance with the provisions of section 9E in respect of any foreign dividend received by or accrued to any person who is a resident of the Republic as defined in such section;"; and

  1. by the substitution for the definition of "prescribed rate" of the following definition:

"’prescribed rate’, in relation to any interest payable in terms of this Act, means such rate as the Minister of Finance may from time to time fix by notice in the Gazette for purposes of - 

  1. [in the case of] interest payable to any taxpayer under the provisions of section 89quat(4) [a rate of 12 per cent per annum]; or

  2. [in] any other [case a rate of 15 per cent per annum] provision of this Act

  3. [or, in either case, such other rate as the Minister of Finance may from time to time fix by notice in the Gazette];"; and

  1. by the substitution for the definition of "trading stock" of the following definition:

"'trading stock' includes—

  1. anything produced, manufactured, purchased or in any other manner acquired by a taxpayer—

(i) for purposes of manufacture, sale or exchange by him or on his behalf; or
(ii) the proceeds from the disposal of which forms or will form part of his gross income; or

  1. any consumable stores and spare parts acquired by him to be used or consumed in the course of his trade,

but does not include a foreign currency option contract and a forward exchange contract as defined in section 24 I (1)."

(2)(a) Subsection (1)(a), (b) and (d) will be deemed to have come into operation on 23 February 2000.

  1. Subsection (1)(c) shall come into operation on a date to be determined by the President by way of proclamation in the Gazette.

  2. Subsection (1)(f) shall be deemed to have come into operation on 23 February 2000, and shall apply in respect of any amount received or accrued on or after that date.

  3. Subsection (1)(g) shall be deemed to have come into operation on 23 Febraury 2000, and shall apply in respect of any amount received or accrued on or after that date.

  4. Subsection (1)(h) shall be deemed to have come into operation on 23 February 2000, and shall apply in respect of any foreign dividend—

  1. received by or accrued to any resident on or after that date; or

  2. which accrued to the resident before 23 February 2000, but which is received on or after that date: Provided that the provisions of this paragraph shall not apply in respect of any dividend declared by a company before 23 February 2000, where—

  1. such company is listed on a recognised stock exchange; or
  2. in any other case, the chief executive officer and—
  1. an external auditor of the company; or
  2. where a company is situated in a country which does not require compulsory appointment of an external auditor, a registered public accountant of the same standing as a qualified chartered accountant,

has declared under oath or made a solemn declaration that such dividend was actually declared by the company before 23 February 2000.

Amendment of section 4 of Act 58 of 1962

  1. Section 4 of the income Tax Act, 1962, is hereby amended—
  1. by the substitution for paragraph (c) of the proviso to subsection (1) of the following paragraph:

"(c) the provisions of this subsection not be construed as preventing the Commissioner —

  1. from 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 No. 66 of 1976), or any regulation thereunder; or.

  2. publishing a list of public benefit organisations for purposes of the provisions of section 10(1)(fA), section 18A and section 30.";

  1. by the substitution of subsection (3) of the following subsection:

"(3) Any person who contravenes the provisions of subsection (1) or (2A) shall be guilty of an offence and liable on conviction to a fine [not exceeding R5 000] or to imprisonment for a period not exceeding two years or to both such fine and such imprisonment.".

Amendment of section 6 of Act 58 of 1962

  1. Section 6 of the Income Tax Act, 1962, is hereby amended -
  1. by the substitution for the expression "R3 710" in paragraph (a) of subsection (2) of the expression "R3 800"; and
  2. by the substitution for the expression R2 775" in paragraph (b) of subsection (2) of the expression "R2 900".

Amendment of section 6quat of Act 58 of 1962

  1. (1) Section 6quat of the Income Tax Act, 1962, is hereby amended by the substitution for subsection (1) of the following subsections:

"(1) Subject to the provisions of subsection (2), there shall be deducted from the normal tax payable by any resident of the Republic or any person contemplated in section 9C(2)(b) or any shareholder who is a "resident" as defined in section 9E, in whose taxable income there is included —

  1. any income received by or accrued to such resident or person from any country other than the Republic; or
  2. any proportional amount of investment income contemplated in section 9D; or
  3. any income payable to such resident from the Republic, where such income is deemed to be from a source within the Republic in terms of the provisions of paragraphs (d), (d)bis and (f) of section 9(1), or
  4. any foreign dividend contemplated in section 9E,

a rebate determined in accordance with this section.

(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, 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 —

[(i)](a) [(aa)] (i) such resident of the Republic; and

[(bb)] (ii) any controlled foreign entity, as contemplated in section 9D, in respect of such proportional amount; or

[(ii)](b) such person contemplated in section 9C(2)(b); or

  1. (i) such shareholder in respect of any dividend contemplated in subsection (1)(d); and

(ii) any company in respect of any profits from which such dividend is declared or deemed to have been declared; or

  1. any company in respect of the proportional amount of any profits from which any dividend is declared or deemed to have been declared to a controlled foreign entity and which dividend is included in the income of such shareholder as contemplated in subsection (1)(b),

    2.

to the government of such other country in respect of the amount of income so included in that resident's or person's or shareholder’s taxable income. (1B) [Provided that] Notwithstanding the provisions of subsection (1A), -

  1. the rebate [under this subsection] shall not exceed an amount which bears to the total normal tax payable the same ratio as the taxable income attributable to the income so included bears to the total taxable income; and
  2. where such sum of any taxes payable to the government of any such other country exceeds the rebate as determined in paragraph (a) [of this proviso] (hereinafter referred to as the excess amount), such excess amount [(excluding so much of such excess amount relating to foreign tax paid or payable by any controlled foreign entity which distributes its profits in the form of dividends] may -
  1. in the case of any excess amount relating to any amount included in the income of any company in terms of paragraphs (a), (c) or (d) of subsection (1), be deducted from any Secondary Tax on Companies which becomes payable by such company after the determination of such excess amount, limited to an amount determined by applying the rate of the Secondary Tax on Companies to the profits attributable to the inclusion of the income contemplated in [paragraph (a) of this subsection] such paragraphs, or
  1. in the case of any excess amount relating to any amount included in the income of any company in terms of paragraph (b) of subsection (1), be deducted from any Secondary Tax on Companies which becomes payable by such company on the distribution of any profits derived by way of dividends declared to such company by such controlled foreign entity from profits that were so included in terms of paragraph (b), limited to an amount determined by applying the rate of the Secondary Tax on Companies to the amount of the taxable income attributable to the inclusion of the income contemplated in such paragraph, after the deduction of -

[(i)](aa) any normal tax paid or payable; or
[(ii)](bb) such sum of taxes payable to the government of any such other country,

whichever amount is the greater;

  1. where any shareholder, whether directly or indirectly, effectively holds for his own benefit less than 10 per cent of the equity share capital in any company in which the profits from which the dividend is distributed is derived, no rebate shall, notwithstanding the provisions of subsection (1A)(c)(ii), be allowed in respect of the tax imposed on such company; and

  2. no rebate shall be allowed in respect of any tax payable on any amount contemplated in subsection (1)(d), if the shareholder has made an election as contemplated in section 9E(6).".

(2) Subsection (1) shall be deemed to have come into operation on 23 February 2000, and apply in respect of any foreign dividend - 

  1. received by or accrued to any resident on or after that date; or
  2. which accrued to the resident before 23 February 2000, but which is received on or after that date: Provided that the provisions of this paragraph shall not apply in respect of any dividend declared by a company before 23 February 2000, where -

(i) such company is listed on a recognised stock exchange; or
(ii) in any other case, the chief executive officer and - 

  1. an external auditor of the company; or
  2. where a company is situated in a country which does not require compulsory appointment of an external auditor, a registered public accountant of the same standing as a qualified chartered accountant,

has declared under oath or made a solemn declaration that such dividend was actually declared by the company before 23 February 2000.

Amendment of section 8 of Act 58 of 1962

  1. (1) Section 8 of the Income Tax Act, 1962, is hereby amended - 
  1. by the substitution for paragraph (g) of subsection (1) of the following paragraph:

"(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 of R2 500 referred to in the proviso to paragraph (d)(iv) and the amount determined [by the Minister] 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.";

  1. by the addition to paragraph (a) of subsection (4) of the following proviso:

"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 income of such taxpayer in terms of paragraph (eB) of the definition of ‘gross income’."; and

  1. by the substitution for paragraph (e) of subsection (4) of the following paragraph:

"(e) If any amount which was deducted -

  1. under the provisions of section 11(e) or section 12(1) or section 12(1) as applied by section 12(3) or the corresponding provisions of any previous Income Tax Act or section 12B or section 12C or section 14 or section 14bis or section 27(2)(d), in respect of machinery or plant which was used by the taxpayer directly in a process of manufacture, or directly in any other process carried on by him on or after 15 March 1961, which in the opinion of the Commissioner was of a similar nature; or

  2. in respect of machinery or plant which was used by an agricultural co-operative (as defined in section 27(9)) directly 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); or

  3. in respect of a ship or aircraft used by him for purposes of his trade; or

  4. in respect of any pipeline, transmission line or cable or railway line as contemplated in section 12D,

has as a result of damage or destruction (hereinafter referred to as 'the event') been recovered or recouped during any year of assessment, and if the taxpayer satisfies the Commissioner -

[(i)](aa) that he has concluded or will within a period of one year (or such longer period as the Commissioner in the circumstances of the case may allow) from the date of the event conclude a contract for the acquisition by him of further new or unused machinery or plant, [or a] ship, [or] aircraft, pipeline, transmission line or cable or railway line (hereinafter referred to as the 'further asset') to replace the aforesaid machinery, [or] plant, [or] ship, [or] aircraft, pipeline, transmission line or cable or railway line; and

[(ii)](bb) that the further asset has been or will be brought into use within a period of three years from the date of the event and will be used by him -

[(aa)](A) directly in a process of manufacture or any other process which in the opinion of the Commissioner is of a similar nature;

[(bb)](B) in the case of such co-operative, directly for storing or packing pastoral, agricultural or other farm products or for subjecting such products to a primary process, as defined in section 27 (9); or

[(cc)](C) in the case of a ship or aircraft, directly for the purposes of the taxpayer's trade,

(D) in the case of a pipeline, transmission line or cable or railway line in his sole business of the transportation or persons, goods, things or natural oil or refined by-products of such natural oil or the transmission of electricity or any telecommunication signal,

for a period of not less than five years or until the further asset is scrapped or disposed of in the ordinary course of the taxpayer's trade prior to the expiry of such period of five years,

the said amount shall, notwithstanding the provisions of paragraph (a) of this subsection, not be included in the income of the taxpayer for the aforesaid year of assessment: Provided that if, owing to any occurrence 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 in terms of the preceding provisions of this paragraph he is required to be satisfied, the said amount shall be included in the income of the taxpayer for the year of assessment during which such occurrence takes place or such circumstance arises.".

(2)(a) Subsection (1)(a) shall be deemed to have come into operation on 1 March 1999.

  1. Subsection (1)(b) shall be deemed to have come into operation on 23 February 2000.

  2. Subsection (1)(c) shall be deemed to have come into operation on 23 February 2000.

Amendment of section 9C of Act 58 of 1962

  1. (1) Section 9C of the Income Tax Act, 1962, is hereby amended by the substitution for the definition of "resident" in subsection (1) of the following definition:

"‘resident’ means - 

  1. any natural person who is ordinarily resident in the Republic; and
  2. any person other than a natural person which is incorporated or has its place of effective management in the Republic;".

(2) Subsection (1) shall be deemed to have come into operation on 23 February 2000.

Amendment of section 9D of Act 58 of 1962

  1. (1) Section 9D of the Income Tax Act, 1962, is hereby amended - 
  1. by the substitution for the definition of "investment income" in subsection (1) of the following definition:

"'investment income' means investment income as defined in section 9C(1) and includes any foreign dividend as defined in section 9E;";

  1. by the substitution for the proviso to subsection (2) of the following proviso:

"Provided that - 

  1. the provisions of this subsection shall not apply to any amount of investment income to which the provisions of subsection (4) are applicable; and

  2. the amount of any investment income received by or accrued to such entity by way of foreign dividends, shall for the purposes of this section be determined in accordance with the provisions of section 9E, as if such entity had been a resident.";

  1. by the substitution of the words preceding the proviso to paragraph (a) of subsection (9) of the following words:

"in respect of investment income, other than income from foreign dividends, where the foreign tax actually paid or payable 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) in any country other than the Republic, relating to the proportional amount contemplated in subsection (2) or (4), after taking into consideration any deductions or allowances under the taxation provisions of such other country determined at the ratio as contemplated in subsection (2) or (4), as the case may be, is more than 85 per cent of the normal tax payable in the Republic:"; and

  1. by the substitution for paragraph (d) of subsection (9) of the following paragraph:

"(d) to any particular class of investment income which is taxable in a country which the Minister of Finance has identified by notice in the Gazette as a country whose tax on income is determined on a basis which is substantially the same as that of the Republic; or"; and

  1. by the addition to subsection (9) of the following paragraph:

"(f) in relation to the proportional amount of any foreign dividend declared to or deemed to has been declared to a controlled foreign entity which is attributable to any resident, to the extent that the profits from which the dividend is declared or deemed to be declared has been included in the income of such resident in terms of the provisions of this section.

(2) Subsection (1) shall be deemed to have come into operation on 23 February 2000, and apply in respect of any foreign dividend - 

  1. received by or accrued to any resident on or after that date; or
  2. which accrued to the resident before 23 February 2000, but which is received on or after that date: Provided that the provisions of this paragraph shall not apply in respect of any dividend declared by a company before 23 February 2000, where -

(i) such company is listed on a recognised stock exchange; or
(ii) in any other case, the chief executive officer and - 

  1. the external auditor of the company; or
  2. where a company is situated in a country which does not require compulsory appointment of an external auditor, a registered public accountant of the same standing as a qualified chartered accountant,

has declared under oath or made a solemn declaration that such dividend was actually declared by the company before 23 February 2000.

Insertion of section 9E in Act 58 of 1962

  1. (1) The following section is hereby inserted in the Income Tax Act, 1962, after section 9D:

"Taxation of foreign dividends.

9E. (1) For the purposes of this section -

"designated country" means a country which the Minister of Finance has identified by notice in the Gazette, as contemplated in subsection (8);

"effective date" means 23 February 2000;

"fixed capital" includes share capital, share premium and accumulated profits, whether of a capital nature or not;

"foreign dividend" means any dividend received by or which accrued to any person from any company, to the extent that the dividend is declared from profits derived by such company from a source outside the Republic and which is not deemed to be from a source within the Republic, and includes the following amounts, which shall be deemed to be a dividend declared by such company to such person, -

  1. any amount deemed to have been distributed by any company as contemplated in section 64C(3)(a), (b), (c) or (d) to such person or any resident who is a connected person in relation to such person to the extent that such company could have distributed a dividend to such person from profits derived from a source outside the Republic and not deemed to be from a source in the Republic and none of the provisions contained in section 64C(4) apply: Provided that the provisions of this paragraph shall not apply in respect of any amount distributed by any company which is being wound up or liquidated, out of profits of a capital nature (other than profits of a capital nature derived from the disposal by such company on or after 23 February 2000 of any interest in any other company with retained profits which were available for distribution by such other company to such company which would not have been excluded from the provisions of paragraph (b) had that provision applied); or

  2. any amount derived by any person from the disposal by such person of any share or interest in the fixed capital in a company, to the extent that such company or any subsidiary of such company has any undistributed profits which were derived from a source outside the Republic and not deemed to be from a source in the Republic, which were available for distribution to such person: Provided that the provisions of this paragraph shall not apply in respect of the disposal of any share or other interest in the fixed capital in a company -

  1. where such person at all times on and after 23 February 2000 held less than 10 per cent of the total equity share capital of such company;

  2. to any resident or to any entity which is a controlled foreign entity for purposes of section 9D;

  3. where such person retains the same effective interest in the equity share capital or fixed capital in the non-resident company as prior to the disposal: Provided that the provisions of this subparagraph shall not apply if the main or one of the main purposes of such disposal is the avoidance, postponement or reduction of liability for the payment of any tax;

  4. by a shareholder who acquired such shares or interest from any person who is not a resident and who is not a connected person in relation to such shareholder, to the extent that such undistributed profits were derived prior to the acquisition of the shares by such shareholder;

  5. to the extent that the proceeds from the disposal have otherwise been taken into account in the determination of the taxable income of such person; or

  6. where the Commissioner is satisfied that the disposal of the shares was not effected for purposes of avoiding the liability for tax, taking into account such conditions as the Minister may prescribe by way of regulation;

"proportionate amount of the profit" in relation to a shareholder means an amount which bears to the total profit, the same ratio as such shareholder’s shareholding bears to the total shareholding, and for this purpose, if there are different classes of shares - 

  1. the expression "total shareholding shall refer only to the total of the class of shares to which such shareholding belongs; and
  2. the expression "total profits" shall mean the total profit attributable to such class of shares;

"resident" means a resident as defined in section 9C(1).

(2) Any foreign dividend received by or accrued to a resident shall for the purposes of the definition of "gross income" in section 1, be deemed to have been received by or to have accrued to such resident from a source within the Republic.

(3) Subject to subsection (7), where during any year of assessment any foreign dividend is received by or accrues to any resident, the amount to be included in the gross income of such resident for such year of assessment in terms of paragraph (k) of the definition of "gross income" in section 1 of this Act, shall be - 

  1. if such resident holds for his own benefit at least 10 per cent of the equity share capital in the company declaring the dividend, the proportionate amount of the profit from which the dividend is distributed, before taking into account any foreign tax on income imposed in respect of such profit and any withholding tax paid in respect of such dividend: Provided that -
  1. the dividend will be deemed to have been distributed from the profits most recently derived and available for distribution; and
  2. where such company derived its profits by way of dividends received or accrued and by way of profits other than dividends, the dividend shall be deemed to have been declared on a proportionate basis from such profits; or
  1. if such resident holds for his own benefit less than 10 per cent of the equity share capital in the company declaring the dividend, the amount of such dividend declared before taking into account the amount of any withholding tax paid in respect of such dividend.

(4) In determining the proportionate amount of the profit to be included in the income of any resident in terms of subsection (3)(a), there shall be taken into account any profits derived by any other company in which the company distributing the dividend has a direct or indirect interest and which have been distributed to such company in the form of dividends, if the resident has an direct or indirect interest in the equity share capital of such other company of at least 10 per cent: Provided that - 

  1. the dividend will be deemed to have been distributed by such other company from the profits most recently derived and available for distribution; and
  2. where such other company derived its profits by way of dividends received or accrued to such company and by way of profits other than dividends, the dividend shall be deemed to have been declared by such other company on a proportionate basis from such profits.

(5) For the purposes of subsection (3)(b), where - 

  1. any dividend is declared by a company to any unit portfolio referred to in paragraph (e)(i) of the definition of "company" in section 1; and
  2. such dividend is distributed by such unit portfolio 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 registered as holders of units in such unit portfolio,

such dividend contemplated in paragraph (a) will be deemed to have been declared by such company directly to such holders of units.

(6) Any resident who receives a foreign dividend or to whom a foreign dividend accrues may, notwithstanding the provisions of subsection (3), in respect of any year of assessment elect that the amount of such dividend to be included in the gross income of such resident shall - 

  1. if such resident holds for his own benefit at least 10 per cent of the equity share capital in the company, be the amount of such dividend after taking into account any foreign tax on income imposed in respect of such profit and any withholding tax paid in respect of such dividend; or
  2. if such resident holds for his own benefit less than 10 per cent of the equity share capital in the company, be the amount of such dividend after taking into account any withholding tax paid in respect of such dividend,

and such election shall apply in respect of all foreign dividends received by or accrued to such resident during the year of assessment in respect of which the election was made.

(7) There shall be exempt from tax any foreign dividend declared or deemed to have been declared by - 

  1. any company which is a resident of the Republic which, during each of the three years of assessment preceding the year of assessment during which such dividend is declared or deemed to have been declared, derived 75 per cent or more of its total receipts or accruals from a source in the Republic or deemed to be from a source in the Republic;
  2. any company incorporated in the Republic out of profits derived -

(i) by way of dividends which accrued to such company prior to the effective date;
(ii) by such company through a branch outside the Republic -

  1. if such profits were repatriated to the Republic prior to the effective date; or
  2. in any other case, if such branch is situated in a designated country and the profit from which the dividend is distributed is subject to tax at a rate of at least 27 per cent;
  1. any company listed on a stock exchange as defined in section 1 of the Stock Exchanges Control Act, 1985 (Act No. 1 of 1985), to a resident who, together with any connected person in relation to such resident, holds less than 10 per cent of the equity share capital of such company, if more than 10 per cent of the shareholding in such company is at the time of the declaration of such dividend held collectively by residents: Provided that where such company was not listed on such a stock exchange on the effective date, the exemption shall apply only upon approval by the Commissioner which approval the Commissioner may grant on application by such company, having regard to -
  1. whether the profits of such company were generated in a designated country; and
  2. the tax rate at which the profits from which the dividend was declared was or will be taxed;
  1. any company, which is distributed to a resident who directly or indirectly holds for his own benefit at least 10 per cent of the equity share capital in the company, to the extent that the profits from which the dividend is declared -
  1. were generated in a designated country; and
  2. are or will be subject to tax at a rate of at least 27 per cent without any right of recovery (other than a right of recovery in terms of an entitlement to carry back losses arising during any year of assessment to any year of assessment prior to such year of assessment); or
  1. any company to the extent that the profits from which the dividend is distributed have been or will be -
  1. included in the income of the shareholder of such company in terms of section 9D; or
  2. taken into account in the determination of the taxable income of such company (other than profits derived by a unit portfolio referred to in paragraph (e)(i) of the definition of company in section 1, from any dividend which is exempt in terms of the provisions of section 10(1)(iA)).

(8) The Minister of Finance may, by way of notice in the Gazette, designate certain countries which - 

  1. have entered into an agreement with the Republic for the avoidance of double taxation and where such agreement is in force;
  2. have a tax on income that is determined on a basis which is substantially the same as that of the Republic;
  3. have a statutory rate of tax on income on companies of at least 27 per cent without any right of recovery of such tax by any person (other than a right of recovery in terms of an entitlement to carry back losses arising during any tax year to any tax year prior to such year of assessment); and
  4. comply with any other requirement which the Minister of Finance may prescribe by regulation.

(9) The discretion of the Commissioner exercised in terms of this section shall be subject to objection and appeal.

(2) Subsection (1) shall be deemed to have come into operation on 23 February 2000, and apply in respect of any foreign dividend - 

  1. received by or accrued to any resident on or after that date; or
  2. which accrued to the resident before 23 February 2000, but which is received on or after that date: Provided that the provisions of this paragraph shall not apply in respect of any dividend declared by a company before 23 February 2000, where -

(i) such company is listed on a recognised stock exchange; or
(ii) in any other case, the chief executive officer and - 

  1. an external auditor of the company; or
  2. where a company is situated in a country which does not require compulsory appointment of an external auditor, a registered public accountant of the same standing as a qualified chartered accountant,

has declared under oath or made a solemn declaration that such dividend was actually declared by the company before 23 February 2000.

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