Amendment of section 10 of Act 58 of 1962

21. (1) Section 10 of the Income Tax Act, 1962, is hereby amended - 

1. by the insertion after subparagraph (ii) of paragraph (cA) of subsection (1) of the following words:

"other than any institution, board, body or company, which is exempt from tax under the provisions of paragraph (cN) of this subsection:";

2. by the deletion of paragraphs (cB), (cC), (cD), (cF), (cI), (cJ) and (f) of subsection (1);
3. by the deletion of paragraph (cK) of subsection (1);
4. by the insertion after paragraph (cM) of subsection (1) of the following paragraph:

"(cN) the receipts and accruals of any public benefit organisation which has been approved by the Commissioner in terms of the provisions of section 30(2);";

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

"(d) the receipts and accruals of any [terminating building society] -

1. pension fund, provident fund, retirement annuity fund; or

2. benefit fund [mutual savings bank], mutual loan association, fidelity or indemnity fund, trade union, chamber of commerce or industries (or an association of such chambers), local publicity association or non-proprietary stock exchange, approved by the Commissioner subject to such conditions as the Minister may prescribe by regulation; or

3. any company, society or other association of persons established to -

27. provide social and recreational amenities or facilities for the members of such company, society or other association; or
28. promote the common interests of persons (being members of such company, society or association of persons) carrying on any particular kind of business,

approved by the Commissioner subject to such conditions as the Minister may prescribe by regulation;";

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

"(fA) the receipts and accruals of any fund the sole object of which is to provide funds for any [body, such body being a company, society, association of persons or trust contemplated in paragraph (cF) or any religious, charitable or educational institution contemplated in paragraph (f),] - 

5. public benefit organisation exempt from tax in terms of the provisions of section 10(1)(cN);
6. institution, board or body contemplated in section 10(1)(cA)(i), which carries on any public benefit activity approved by the Minister for purposes of section 18A; or
7. association of persons carrying on any public benefit activity in the Republic: Provided that -

27. the funds so provided does not exceed ten per cent of the gross receipts of the fund during any year of assessment; and
28. the fund take all reasonable steps to ensure that the funds are utilised for the purpose for which it has been provided,

if such fund -

[(i)](aa) has been approved by the Commissioner subject to such conditions as [he may deem necessary] the Minister may prescribe by way of regulation to ensure that no benefits are allocated by the fund for purposes other than the provision of funds for such a [fund] public benefit organisation, institution, board, body or association of persons;

[(ii)](bb) has submitted to the Commissioner a copy of the [written] constitution, will or any other written instrument under which it has been established and in terms of which it is -

[(aa)](A) not permitted to distribute any of its funds to any person other than such a [fund] public benefit organisation, institution, board, body or association of persons;

[(bb)](B) required to utilize its funds solely for the object for which it has been established or to invest such funds -

[(A)](AA) with a financial institution as defined in section 1 of the Financial Institutions (Investment of Funds) Act, 1984 (Act 39 of 1984);

[(B)](BB) in securities listed on a stock exchange as defined in section 1 of the Stock Exchanges Control Act, 1985 (Act 1 of 1985); or

[(C)](CC) in such other prudent financial instruments and investments as the Commissioner may approve;

[(cc)](C) required to distribute, unless the Commissioner, having regard to the distribution capacity, sustainability and the long-term needs and objectives of the fund, otherwise directs, at least 75 per cent of its net revenue (being the gross income of such fund less the costs of its administration) to any such [fund] public benefit organisation, institution, board, body or association of persons within a period of 12 months from the end of the financial year during which such net revenue was derived: Provided that in the case of any such fund which is approved in terms of the provisions of section 18A, net revenue shall include any donation in respect of which a receipt has been issued in terms of that section;

[(dd)](D) required on dissolution to transfer its assets to any such [body] public benefit organisation, institution, board, body, association of persons or any other fund approved in terms of this paragraph;

[(ee)](E) not permitted [except to the extent that the Commissioner directs] to carry on any [business] trading activity other than such activities that the Minister may prescribe by way of regulation;

[(ff)](F) required to submit to the Commissioner a copy of any amendment to the constitution, will or other written instrument under which it was established; and

[(gg)](G) not permitted to accept any donation which is [not irrevocable] revocable and [unconditional] conditional at the instance of the donor: Provided that the provisions of this item shall not prevent the donor from stipulating that the donation shall be used for a specific public benefit activity; [and

(hh) required to apply its net revenue, unless the Minister of Finance otherwise directs, for the furtherance of its sole object in the Republic]:

Provided that -

1. where such constitution, will or other written instrument does not comply with the provisions of this subparagraph, it shall be deemed so to comply if - 

1. in the case of a fund established under the terms of a will; or
2. in the case of a fund established prior to 21 June 1993 under a constitution or other written instrument which cannot be amended to comply with the said provisions,

the trustee of the fund furnishes the Commissioner with a written undertaking that the fund will be administered in compliance with the said provisions; and

2. notwithstanding the provisions of subitems [(bb)](B) and [(ee)](E), any asset or business undertaking acquired by such fund by way of donation, inheritance or bequest, 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 from that date:

Provided further that - 

1. where the Commissioner is satisfied that any such fund has during any year of assessment failed to comply in any material respect with the provisions of this paragraph or the constitution, will or other written instrument in terms of which it has been established, he may after due notice withdraw his approval of the fund with effect from the commencement of that year of assessment;

2. where the Commissioner has withdrawn his approval of such fund, it shall, within [two] three months, or such longer period as the Commissioner may allow, from the date of such withdrawal, transfer, or take reasonable steps to transfer, its remaining assets to any such [body] public benefit organisation [which is exempt from tax under the provisions of paragraph (cF) or (f)];

3. where a fund 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 fund during the year of assessment referred to in paragraph (a) of this proviso; [and]

4. any decision of the Commissioner in the exercise of his discretion under this paragraph shall be subject to objection and appeal;

5. any person who is in a fiduciary capacity responsible for the management or control of the income and assets of such fund, who with intent fails to comply with any provision of this Act or of the constitution, will or other written instrument under which such fund is established, shall be guilty of an offence and on conviction be liable to a fine or imprisonment not exceeding two years, or to both such fine and imprisonment; and

6. such fund complies with such reporting requirements as may be determined by the Commissioner.";

7. by the substitution for subparagraph (iii) of paragraph (hA) of subsection (1) of the following subparagraph:

"(iii) for the purposes of this paragraph, so much of any dividend as has been distributed by any unit portfolio constituting a company in terms of paragraph (e)(i) of the definition of 'company' in section 1 out of interest derived by such unit portfolio which is exempt from tax in the hands of such unit portfolio under the provisions of paragraph (iA), shall be deemed to be interest;";

8. by the deletion of subparagaph (i) of paragraph (hA) of subsection (1);

9. by the substitution for subparagraph (v) of paragraph (hA) of subsection (1) of the following subparagraph:

"(v) the exemption under this paragraph shall not apply to any interest received by or accrued to a company which is managed and controlled outside the Republic or any person other than a company who is not ordinarily resident in the Republic, if such interest is effectively connected with the business carried on by that company or person in the Republic;";

10. by the substitution for subparagraph (xv) of paragraph (i) of subsection (1) of the following subparagraph:

"(xv) in the case of any taxpayer who is a natural person, so much of the aggregate of any dividends and interest received by or accrued to him which is not otherwise exempt from tax, as does not during the year of assessment exceed [the amount of R2000] - 

27. in the case of any person who was or, had he lived would have been, at least 65 years of age on the last day of the year of assessment, the amount of R4 000; or
28. in any other case, the amount of R3 000:

Provided that the amount of the exemption from tax shall - 

1. first apply in respect of any foreign dividends contemplated in section 9E received or accrued which would not otherwise have been exempt; and
2. in so far as such amount exceeds the amount of such foreign dividends, apply in respect of such interest and other taxable dividends received or accrued.";

11. by the deletion of subparagraph (xvi) of paragraph (i) of subsection (1);
12. by the substitution for paragraph (iA) of subsection (1) of the following paragraph:

"(iA) in the case of any unit portfolio referred to in paragraph (e)(i) of the definition of 'company' in section 1, so much of the interest or foreign dividends contemplated in section 9E received by or accrued to such unit 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 registered as holders of units in such unit portfolio on a date falling on or after the first day of April, 1971;";

13. by the addition of the word "or" at the end of subitem (B) of item (bb) of subparagraph (i) of paragraph (k) of subsection (1);

14. by the addition to subparagraph (i) of paragraph (k) of subsection (1) of the following item:

"(cc) to the amount of any foreign dividend contemplated in section 9E received by or accrued to any resident as defined in section 9D as defined in section 9D;"; and

15. by the deletion of subparagraph (xii) of paragraph (t) of subsection (1).

(2)(a) Subsections (1)(a), (b), (d), (e) and (f) shall come into operation on a date to be determined by the President by way of proclamation in the Gazette: Provided that any company, society, trust, institution or other association of persons whose receipts and accruals were exempt from tax in terms of the provisions of paragraphs (cB), (cC), (cD), (cF), (cI), (cJ) and (f) of section 10(1) of the principal Act prior to the amendment thereof by this section, which company, society, trust, institution or other association of persons applies for approval by the Commissioner in terms of section 10(1)(cN) within … -  months from the date so determined by the President, shall continue to enjoy exemption until written notification by the Commissioner of his decision in the exercise of his discretion in terms of such section 30 of the principal Act.

2. Subsection (1)(c) and (o) shall be deemed to have come into operation on 1 January 2000 and shall apply in respect of any year of assessment commencing on or after that date.

3. Subsection (1)(g) will be deemed to have come into operation on 23 February 2000.

4. Subsection (1)(h) and (i) shall come into operation on the date of promulgation of this Act, and shall apply in respect of any interest which received or accrued on or after that date.

5. Subsection (1)(k) will be deemed to have come into operation on ….

6. Subsection (1)(l), (m) and (n) 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 - 

(aa) such company is listed on a recognised stock exchange; or
(ab) 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.

Amendment of section 11 of Act 58 of 1962

22. (1) Section 11 of the Income Tax Act, 1962, is hereby amended - 

1. by the insertion after paragraph (c) of the following paragraph:

"(cA) an allowance in respect of any amount actually incurred by such person in the course of the carrying on his trade, as compensation in respect of any restraint of trade imposed on any other 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,

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 - 

27. 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
28. one-third of such amount so incurred."; and

2. by the substitution for paragraph (o) of the following paragraph:

"save as provided in paragraph 12(2) of the First Schedule, an allowance in respect of -

1. any building (or portion thereof) referred to in section 13(1) or (4) or section 13bis(1) or section 27(2)(b) or of any improvements (or portion thereof) to such building; or

2. [of] any shipbuilding structure referred to in section 13(8) or of any improvement to such shipbuilding structure; or

3. _[of] any residential unit referred to in section 13ter; or

4. _[of] any permanent work, road pavement or ancillary service referred to in section 24G; or

5. [of] any machinery, plant, implements, utensils or articles used by the taxpayer for the purposes of his trade; or

6. any transmission line or cable or railway line referred to in section 12D,

which have been scrapped by such taxpayer during the year of assessment, such allowance to be the excess of the original cost to such taxpayer of such building (or portion thereof) or such improvements (or portion thereof) to such building or such shipbuilding structure or such improvements to such shipbuilding structure or such residential unit or such permanent work, road pavement or ancillary service or such machinery, plant, implements, utensils or articles or such transmission line or cable or railway line over the total amount arrived at by adding all the allowances made in respect thereof under the provisions of paragraph (e) of this section, or section 12(1), or section 12(1) as applied by section 12(3), or section 12A(2), or section 12B, or section 12C, or section 12D, or section 13(1), or section 13(1) as applied by section 13(4) or (8), or section 13bis (1), (2) or (3), or section 13ter(2) or (3), or section 14(1) (a) or (b), or the corresponding provisions of any previous Income Tax Act, or section 14bis(1)(a), (b) or (c), or section 24F, or section 24G, or section 27(2)(b) or (d), to any amount or the value of any advantage accruing to the taxpayer in respect of the sale or other disposal of such building, shipbuilding structure, improvements, residential unit, permanent work, road pavement, ancillary service, machinery, plant, implements, utensils or articles or transmission line or cable or railway line: Provided that -

1. no allowance shall be made in the case of any such building (or portion thereof) or of any such improvements (or portion thereof) to such building or of any such shipbuilding structure or of any such improvements to such shipbuilding structure or of any such residential unit or of any transmission line or cable or railway line which has or have been scrapped within a period of ten years from the date of erection or purchase, or in the case of any such residential unit in respect of which any amount has fallen for inclusion in the taxpayer's income under the provisions of section 13ter(7)(a), whether in the current or in any previous year of assessment;

for the purposes of this paragraph the cost of any building (or portion thereof) or of any improvements (or portion thereof) to any building or of any shipbuilding structure or of any improvements to any shipbuilding structure or of any such residential unit or of any transmission line or cable or railway line shall be deemed to be that portion of the actual cost on which the allowance in question was made;".

2. by the substitution for subitem (B) of item (dd) of the proviso to paragraph (w) of the following subitem:

"(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 [personal accident] disability policy as defined in section 1 of the [Insurance Act, 1943 (Act 27 of 1943)] Long-term Insurance Act, 1998 (Act No. 52 of 1998); or";

2. by the substitution for item (ff) of the proviso to paragraph (w) of the following item:

"(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 [personal accident] disability policy as defined in section 1 of the [Insurance Act, 1943] Long-term Insurance Act, 1998 (Act No. 52 of 1998), a deduction which may, in appropriate circumstances, be made under paragraph (a) or (b) of this section;".

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

(b) Subsection (1)(b) shall come into operation on 23 February 2000, and shall apply in respect of any transmission line or cable or railway line contracted for on or after that date.

Insertion of section 12D in Act 58 of 1962

23. The following section is hereby inserted after section 12C of the Income Tax Act, 1962:

"Deduction in respect of certain pipelines, transmission lines and railway lines.

12D. (1) For the purposes of this section -

"affected asset" means any -

1. pipeline used for the transportation of natural oil and refined by-products of such natural oil;
2. line or cable used for the transmission of electricity;
3. telephone line or cable used for the transmission of any signal for purposes of telecommunication; and
4. 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; and

"effective date" means 23 February 2000.

(2) In respect of any new and unused affected asset which -

1. is owned by the taxpayer and is brought into use for the first time by such taxpayer on or after the effective date; and
2. is used directly by such taxpayer -

(i) in the production of income; and
(ii) in carrying on its sole business of -

27. the transportation of persons, goods, things or natural oil or refined by-products of such natural oil; or
28. the transmission of electricity or any telecommunication signal,

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 such asset.

(3) The allowance contemplated in subsection (2) shall not for any one year exceed -

1. 10 per cent of the cost incurred in respect of any asset contemplated in paragraph (a) of the definition of "affected asset"; or
2. 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".

(4) For the purposes of this section the cost to a taxpayer of any affected assets shall be deemed to be -

1. 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

2. in any other case, the lesser of -

1. the actual cost of acquisition of the asset incurred by the taxpayer; or
2. 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 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."

Amendment of section 18A of Act 58 of 1962

24. (1) Section 18A of the Income Tax Act, 1962, is hereby substituted by the following section:

"(1) There shall be allowed to be deducted from the taxable income of any taxpayer so much of the sum of any bona fide donations in cash or in kind made by such taxpayer and actually paid or transferred during the year of assessment to - 

1. any -

(i) public benefit organisation approved by the Commissioner in terms of section 30; or
(ii) institution, board or body contemplated in section 10(1)(cA)(i),

which carries on any public benefit activity which is approved by the Minister by way of notice in the Gazette for the purposes of this section, a copy of which shall be laid upon the Table in Parliament;

1. any fund which is approved by the Commissioner under the provisions of section 10(1)(fA), which provides funds solely to any public benefit organisation, institution, board or body contemplated in paragraph (a),
2. as does not exceed the greater of - 

27. five per cent of the taxable income of such taxpayer as calculated before allowing any deduction under this section or section 18; or
28. R1 000.

(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, body or fund concerned, on which the following details are given, namely - 

1. the reference number of the public benefit organisation, institution, board, body or fund issued by the Commissioner for the purposes of this section;
2. the date of the receipt of the donation;
3. the name of the public benefit organisation, institution, board, body or fund which received the donation, together with an address to which enquiries may be directed in connection therewith;
4. the name and address of the donor;
5. the amount of the donation or the nature of the donation (if not made in cash);
6. 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, body or fund concerned.

(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 - 

1. where such property constitutes 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

2. where such property (other than trading stock) constitutes an asset used by the taxpayer for the purposes of his trade, 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

3. where such property does not constitute trading stock of the taxpayer or an asset used by him for the purposes of his trade, 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

4. 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 cost to the taxpayer of such property.

(4) The provisions of subsections (6) and (7) of section 30 shall apply mutatis mutandis in respect of any institution, board, body or fund contemplated in subsection (1)(a) or (b).

(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, body or fund has with intent - 

1. in any way failed to carry out the objects for which the public benefit organisation, institution, board, body or fund was established or has expended moneys belonging to the public benefit organisation, institution, board, body or fund for purposes not covered by such objects; or

2. issued a receipt to any taxpayer for purposes of this section in respect of any fees or other emoluments payable to such organisation, institution, board, body or fund by such person,

the Commissioner may by notice in writing addressed to that member, trustee, director or other responsible 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.".

(2) Subsection (1) shall - 

1. in so far as it determines the limit of the deduction as contemplated in section 18A(1), be deemed to have come into operation in respect of years of assessment commencing on or after 1 March 2000; and
2. in so far as it amends the rest of section 18A, come into operation on a date to be determined by the President by proclamation in the Gazette.

Repeal of section 19 of Act 58 of 1962

25. (1) Section 19 of the Income Tax Act, 1962, is hereby repealed.
    (2) Subsection (1) shall come into operation on …

Amendment of section 20 of Act 58 of 1962

26. . Section 20 of the Income Tax Act, 1962, is hereby amended by the addition to subsection (1) of the following proviso:

"Provided that there shall not be set off against any amount of assets distributed to such person by any pension 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 - 

1. balance of assessed loss; or
2. any "assessed loss" as defined in subsection (2) incurred in such year before taking into account any amount of such assets.".

Amendment of section 22 of Act 58 of 1962

27. (1) Section 22 of the Income Tax Act, 1962, is hereby amended - 

1. by the substitution of subsection (5) of the following subsection:

"(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."; and

2. by the deletion of subsection (5A).

(2) Subsection (1) shall come into operation with effect from years of assessment commencing on or after 1 January 2000.

Amendment of section 23 of Act 58 of 1962

28. (1) Section 23 of the Income Tax Act, 1962, is hereby amended -

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

"(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 or levy payable under any Act administered by the Commissioner, the Regional Services Councils Act, 1985 (Act 109 of 1985), [and] the KwaZulu and Natal Joint Services Act, 1990 (Act 84 of 1990) and the Skills Development Levies Act, 1999 (Act No. 9 of 1999);"; and

2. by the addition of the following paragraphs:

"(k) any expense incurred by -

1. 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,
2. a personal service company as defined in the said Schedule, or
3. 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.

(l) any expense incurred in respect of the payment of any restraint of trade, except as provided for in section 11(cA).".

(2)(a) Subsection (1)(a) shall come into operation on 1 April 2001 and shall apply in respect of any year of assessment commencing on or after that date.

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

Amendment of section 23B of Act 58 of 1962

29. Section 23B of the Income Tax Act, 1962, is hereby amended by the substitution for subsection (1) of the following subsection:

"(1) Where, but for the provisions of this subsection, an amount qualifies or has qualified for a deduction or an allowance, or is otherwise taken into account in determining the taxable income of any person, under more than one provision of this Act, such amount [or a deduction or allowance in respect of such amount] or any portion thereof, shall not be allowed or taken into account more than once in the determination of the taxable income of any person.".

Amendment of section 23F of Act 58 of 1962

30. (1) Section 23F of the Income Tax Act, 1962, is hereby substituted by the following section:

"Acquisition or disposal of trading stock -

23F. (1) Where any taxpayer has during any year of assessment actually 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) or (b) 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 -

1. such trading stock is disposed of by him;
2. the value of such trading stock falls to be included in his income under the provisions of section 22(1); or
3. 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 has been actually paid by such taxpayer.

(2) Where any taxpayer has during any year of assessment disposed of any trading stock in the ordinary course of his trade for any consideration the full amount of which will not accrue to him during such year of assessment and any expenditure incurred in respect of the acquisition of such trading stock was allowed as a deduction under the provisions of section 11(a) or (b) during such year or any previous year of assessment, the amount of such expenditure so allowed as a deduction shall be deemed to have been recovered or recouped by such taxpayer and be included in the income of the taxpayer for the year of assessment during which such trading stock was so disposed of and there shall be allowed to be deducted in - 

1. such year, so much of such expenditure which bears to the full amount of such expenditure, the same ratio as the amount of such consideration which has accrued to the taxpayer during such year bears to the full amount of such consideration;
2. any subsequent year of assessment, so much of such expenditure which bears to the full amount of such expenditure, the same ratio as the amount of such consideration which has accrued to the taxpayer during such subsequent year bears to the full amount of such consideration; or
3. any year of assessment during which it is shown by such taxpayer that the consideration will never accrue to him, so much of such expenditure as has not been allowed as a deduction in terms of the provisions of paragraph (a) or (b), to the extent that such expenditure was actually paid.

(3) Where 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 -  

1. 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
2. any expenditure incurred in respect of the acquisition of such asset was allowed as a deduction under the provisions of section 11(a) or (b) during such year or any previous year of assessment,

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 right or interest contemplated in paragraph (a).".

(2) Subsection (1) shall be deemed to have come into operation on 23 February 2000, and shall apply in respect of trading stock disposed of on or after that date.

Insertion of section 23H in Act 58 of 1962

31. (1) The following section is hereby inserted after section 23G of the Income Tax Act, 1962:

"Limitation of certain deductions -

23H. (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) - 

1. which is allowable as a deduction in terms of the provisions of section 11(a), (b), (c) or (d); and
2. in respect of goods, services or any other benefit, all of which will not be supplied or rendered to such person, or the full benefit of which such person will not become entitled to during such year of assessment,

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 - 

1. 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
2. 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
3. any other benefit to which such person will become entitled, 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 be entitled to such benefit bears to the total number of months during which such person will be entitled to such benefit:

Provided that the provisions of this section shall not apply - 

27. where all the goods or services are to be supplied or rendered within 6 months after the end of the year of assessment during which the expenditure was incurred, or such person becomes entitled to the full benefit in respect of which the expenditure was incurred within such period; or
28. 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
29. to any expenditure to which the provisions of section 24I, 24J, 24K or 24L applies; or
30. 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 - 

1. the goods or services in respect of which the expenditure is incurred will never be received by or be rendered to such person; or
2. such person will never become entitled to such other benefit in respect of which any expenditure is incurred,

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.".

(2) Subsection (1) shall come into operation on 23 February 2000, and shall apply in respect of any expenditure incurred on or after that date.

Repeal of section 24B of Act 58 of 1962

32. . Section 24B of the Income Tax Act, 1962, is hereby repealed.

Amendment of section 28 of Act 58 of 1962

33. . Section 28 of the Income Tax Act, 1962, is hereby amended - 

1. by the substitution for the heading of the following heading:

"Determination of taxable income derived from short-term insurance business. - ";

2. by the deletion of subsections (1), (1A), (1B) and (1C);
3. by the substitution for subsection (3) of the following subsection:

"(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 [long-term or] short-term insurance business or in the form of dividends [(notwithstanding the inclusion of such dividends or of a portion thereof in the gross amounts referred to in subsection (1))] 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.";

4. by the deletion of the definition of "long-term insurance business" in subsection (4);
5. by the substitution for the definition of "short-term insurance business" in subsection (4) of the following definition:

"’short-term insurance business’ means any short-term insurance business [other than long-term insurance business] as defined in the Short-term Insurance Act, 1998 (Act no. 53 of 1998).".

Amendment of section 28bis of Act 58 of 1962

34. Section 28bis of the Income Tax Act, 1962, is hereby amended by the substitution for paragraph (b) of subsection (1) of the following paragraph:

"(b) that at the time the arrangement was implemented, all the issued shares of the subsidiary were held for its own benefit by the foreign company or a company which was incorporated, managed and controlled outside the Republic and was controlled by or controlled the foreign company, [or that the arrangement was implemented in order to meet the requirements of section 3quat of the Insurance Act, 1943 (Act 27 of 1943)]".

Insertion of section 30 in Act 58 of 1962

35. (1) The following section is hereby inserted after section 29A of the Income Tax act, 1962:

"Public benefit organisations -

30. (1) For the purposes of this section and the Act -

‘public benefit activity’ means any activity which has been determined by the Minister of Finance, having regard to the material, charitable, spiritual, cultural, physical, educational, environmental or moral interests and well-being of the general public, as an approved activity by way of notice in the Gazette, a copy of which shall be laid upon the Table in Parliament;

‘public benefit organisation’ means any organisation of a public character,

1. which is a company formed and incorporated under section 21 of the Companies Act, 1973 (Act No. 61 of 1973), a trust or an association of persons;
2. the sole object of which is the carrying on in an altruistic manner of one or more public benefit activity in the Republic; and
3. which has, within such period as the Commissioner may determine, been registered in terms of section 13(5) of the Non-profit Organisations Act, 1997 (Act No. 71 of 1997), and complied with any other requirements imposed in terms of such Act.

(2) The Commissioner shall for the purposes of this Act, approve a public benefit organisation which - 

1. complies with such conditions as the Minister may prescribe by way of regulation to ensure that the activities and resources of such organisation are wholly, or substantially the whole of which is, directed to the furtherance of its public benefit activities in the Republic;

2. has submitted to the Commissioner a copy of the constitution, will or any other written instrument under which it has been established and in terms of which it is -

1. required to have at least three members or trustees, who are not connected persons in relation to each other, to accept the fiduciary responsibility of such organisation;
2. subject to paragraph (d) not permitted to distribute any of its funds to any person and is required to utilise its funds solely for the object for which it has been established, or to invest such funds - 

27. with a financial institution as defined in section 1 of the Financial Institutions (Investment of Funds) Act, 1984 (Act No. 39 of 1984);
28. in securities listed on a stock exchange as defined in section 1 of the Stock Exchanges Control Act, 1985 (Act No. 1 of 1985); or
29. in such other prudent financial instruments and investments as the Commissioner may approve;

1. required on dissolution to transfer its assets to any similar public benefit organisation which is exempt or will qualify for exemption under the provisions of this section;
2. not permitted to carry on any trading activity other than such activities that the Minister may prescribe by way of regulation; and
3. not permitted to accept any donation which is revocable and conditional at the instance of the donor: Provided that this paragraph shall not prevent the donor from stipulating that the donation shall be used for a specific public benefit activity;

3. 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;

4. has not paid any remuneration to any employee, office bearer, member or other person which in the opinion of the Commissioner is excessive, having regard to what is generally considered reasonable in the sector and in relation to the service rendered;

5. complies with such reporting requirements as may be determined by the Commissioner; and

6. required to submit to the Commissioner a copy of any amendment to such constitution, will or other written instrument:

Provided that notwithstanding subparagraphs (ii) and (iv) of paragraph (b), any asset or business undertaking acquired by such organisation before 1 January 2001, by way of donation, inheritance or bequest may be retained or continued, as the case may be, in the form so acquired for a period of five years from that date.

(3) Where the Commissioner is satisfied that any public benefit organisation approved under subsection (2) has during any year of assessment failed to comply with the provisions of this section, or the constitution, will or other written instrument under which it is established, he may withdraw his approval of the organisation with effect from the commencement of that year of assessment.

(4) Where the Commissioner has withdrawn his approval of such organisation as contemplated in subsection (3), such organisation shall, within three months from the date of such withdrawal, transfer, or take reasonable steps to transfer, its remaining assets to any other organisation which is - 

1. exempt from tax under this section; and
2. not a connected person in relation to such organisation.

(5) Where any organisation fails to transfer, or take reasonable steps to transfer, its remaining assets as contemplated in subsection (4), 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 organisation during the year of assessment referred to in subsection (3).

(6) Any books of account, records or other documents relating to any public benefit organisation shall - 

1. where kept in book form, be retained and carefully preserved by any person in control of such fund for a period of four years from the date of the last entry in any book; or
2. where not kept in book form, be retained and carefully preserved by any person in control of such public benefit organisation for a period of four years after completion of the transactions, acts or operations to which they relate.

(7) 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 such organisation - 

1. to answer any questions relating to such public benefit organisation; or
2. to make available for inspection by the Commissioner or any person appointed by him, any book of account, records or other documents relating to such public benefit organisation; or

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 public benefit organisation.

(8) Any decision of the Commissioner in the exercise of his discretion under this section shall be subject to objection and appeal.

(9) Any person who is in a fiduciary capacity responsible for the management or control of the income and assets of such public benefit organisation who with intent fails to comply with any provision of this section or of the constitution, will or other written instrument under which such organisation is established, shall be guilty of an offence and on conviction be liable to a fine or imprisonment not exceeding two years, or to both such fine and imprisonment.".

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

Amendment of section 38 of Act 58 of 1962

36. (1) Section 38 of the Income Tax Act, 1962, is hereby amended by the substitution for paragraph (i) of subsection (2) of the following paragraph:

"(i) any unit portfolio referred to in paragraph (e)(i) of the definition of 'company' in section one.".

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

37. Section 55 of the Income Tax Act, 1962, is hereby amended by the substitution for paragraph (k) of subsection (2) by the following paragraph:

"(k) There shall be no appearance by or on behalf of either party before the Board, whose decision shall be [final and shall be] communicated in duplicate to the Commissioner who shall forward one copy thereof to the donor.".

Amendment of section 56 of Act 58 of 1962

38. (1) Section 56 of the Income Tax Act, 1962, is hereby amended -

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

"(h) by or to any person (including any government) referred to in section 10(1)(a), (b), (cA), [(cB), (cC), (cD)], (cE), [(cF), (cI), (cJ), (cL)], (cN), (d), (e) or (fA);";

2. by the deletion of paragraphs (i) and (j) of subsection (1).

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

39. (1) Section 64B of the Income Tax Act, 1962, is hereby amended -

1. by the substitution for the words preceding the proviso to subsection (3) of the following words:

"The net amount of any dividend referred to in subsection (2) shall be the amount by which such dividend declared by a company exceeds the sum of any dividends (other than any dividends contemplated in subsection (5)(b), (c), (d) and (f) or any foreign dividends as defined in section 9E, but including foreign dividends which are exempt in terms of section 9E(7)(a), (b), (c), (d), (e) or (f)(ii)) which have during the dividend cycle in relation to such firstmentioned dividend accrued to the company:";

2. by the substitution for paragraph (d) of subsection (5) of the following paragraph:

"(d) so much of any dividend declared by a unit portfolio referred to in paragraph (e)(i) of the definition of 'company' in section 1 as represents a distribution of interest or of dividends referred to in section 11(s) received by or accrued to such unit portfolio;"; and

3. by the substitution for paragraph (j) of subsection (5) of the following paragraph:

"(j) any dividend declared by a company contemplated in paragraph (e)(i) of the definition of 'company' in section 1.".

(2)(a) Subsection (1)(a) 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 -

27. such company is listed on a recognised stock exchange; or

28. in any other case, the chief executive officer and the external auditor of the company has declared under oath or made a solemn declaration that such dividend was actually declared by the company before 23 February 2000.

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

40. (1) Section 64C of the Income Tax Act, 1962, is hereby amended -

1. by the substitution for paragraph (b) of the definition of "recipient" in subsection (1) of the following paragraph:

"(b) any [relative of such] connected person in relation to a shareholder; or"; and

2. by the deletion of paragraph (c) of the definition of "recipient" in subsection (1).

(2) Subsection (1) shall come into operation on …

Amendment of section 66 of Act 58 of 1962

41. (1) Section 66 of the Income Tax Act, 1962, is hereby amended by the substitution for item (aa) of subparagraph (ii) of paragraph (b) of subsection (1) of the following item:

"(aa) any amount derived by way of interest or dividends [contemplated in section 19(5A)] that are not exempt from tax if the aggregate of such interest and dividends [exceeded R2000] -

1. in the case of any person who was, or had he lived would have been, at least 65 year of age in the last day of the year of assessment, exceeded R4 000; or
2. in any other case, exceeded R3 000; or".

(2) Subsection (1) shall come into operation on …

Amendment of section 70 of Act 58 of 1962

42. Section 70 of the Income Tax Act, 1962, is hereby amended by the substitution for subsection (2) of the following subsection:

"(2) Where, during any period of twelve months ending on the last day of February in any year, any cash or any asset the amount or value of which in whole or part constitutes a dividend as defined in section 1, is given to shareholders in any company or a company distributes to shareholders any amount which constitutes a dividend so defined, whether by way of an award of capitalization shares or bonus debentures or securities or otherwise, the company concerned shall, within thirty days after the end of the said period, or within such further period as the Commissioner may allow -

1. furnish the Commissioner with a return giving the full name and address of each shareholder and the amount of the dividend accruing to such shareholder; and

2. where such dividend represents an amount of any foreign dividend as determined in accordance with the provisions of section 9E and such company is a resident as defined in section 9C, notify each shareholder who is a resident of the amount of such foreign dividend.".

43. . Section 74C of the Income Tax Act, 1962, 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; and".

2. 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.";

3. by the substitution for subsection(15) of the following subsection:

"(15) The provisions with regard to the preservation of secrecy contained in section 4 shall mutatis mutandis apply to any person present at the questioning of any person contemplated in subsection (9), including the person being questioned.";

4. by the addition after subsection (15) of the following subsections:

"(16) Any person who fails to comply with the provisions of subsection (15) shall be guilty of an offence and on conviction shall be liable to a fine or to imprisonment for a period not exceeding two years or to both such fine and imprisonment.

(17) Any person who has been required to appear before the presiding officer at the enquiry and who—

5. at his or her appearance before the enquiry—

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

6. 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.

(18) 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.

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

2. 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).

(20) 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.".

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