Implementation of Geneva Conventions Act, 2012
R 385
Income Tax Act, 1962 (Act No. 58 of 1962)Chapter II : The TaxesPart I : Normal Tax10B. Exemption of foreign dividends and dividends paid or declared by headquarter companies |
| (1) | For the purposes of this section, "foreign dividend" means any— |
| (a) | foreign dividend as defined in section 1; or |
| (b) | dividend paid or declared by a headquarter company. |
| (2) | Subject to subsection (4), there must be exempt from normal tax any foreign dividend received by or accrued to a person— |
| (a) | if that person (whether alone or together with any other company forming part of the same group of companies as that person) holds at least 10 per cent of the total equity shares and voting rights in the company declaring the foreign dividend; |
| (b) | if that person is a foreign company and the foreign dividend is paid or declared by another foreign company that is resident in the same country as that person; |
[Section 10B(2)(b) substituted by section 20(1)(a) of the Taxation Laws Amendment Act, 2012 (Act No. 22 of 2012)]
| (c) | who is a resident to the extent that the foreign dividend does not exceed the aggregate of all amounts which are included in the income of that resident in terms of section 9D in any year of assessment, which relate to the net income of— |
| (i) | the company declaring the foreign dividend; or |
| (ii) | any other company which has been included in the income of that resident in terms of section 9D by virtue of that resident's participation rights in that other company held indirectly through the company declaring the foreign dividend, |
reduced by—
| (aa) | the amount of any foreign tax payable in respect of the amounts so included in that resident’s income; and |
| (bb) | so much of all foreign dividends received by or accrued to that resident at any time from any company contemplated in subparagraph (i) or (ii), as was— |
| (A) | exempt from tax in terms of paragraph (a), (d) or (e); or |
[Section 10B(2)(c)(ii)(bb)(A) substituted by section 23(a) of the Taxation Laws Amendment Act, 2018 (Act No. 23 of 2018), GG 42172, dated 17 January 2019]
| (B) | previously not included in the income of that resident by virtue of any prior inclusion in terms of section 9D; |
Provided that for the purposes of this paragraph, the net income of any company contemplated in subparagraphs (i) and (ii) must be determined without regard to subsection (3);
[Proviso to section 10B(2)(c) inserted by section 20(1)(b) of the Taxation Laws Amendment Act, 2012 (Act No. 22 of 2012)]
[Section 10B(2)(c) substituted by section 25(1)(a) of the Taxation Laws Amendment Act, 2013 (Act No. 31 of 2013) - effective 1 March 2014]
| (d) | to the extent that the foreign dividend is received by or accrues to that person in respect of a listed share and does not consist of a distribution of an asset in specie; |
[Section 10B(2)(d) substituted by section 25(1)(b) of the Taxation Laws Amendment Act, 2013 (Act No. 31 of 2013) - effective 1 March 2014]
| (e) | to the extent that the foreign dividend is received by or accrues to a company that is a resident in respect of a listed share and consists of the distribution of an asset in specie; |
[Section 10B(2)(e) substituted by section 25(1)(c) of the Taxation Laws Amendment Act, 2013 (Act No. 31 of 2013) - effective 1 March 2014]
Provided that paragraphs (a) and (b) must not apply to any foreign dividend to the extent that the foreign dividend is deductible by the foreign company declaring or paying that foreign dividend in the determination of any tax on income on companies of the country in which that foreign company has its place of effective management:
[Proviso to section 10B(2) inserted by section 20(1)(c) of the Taxation Laws Amendment Act, 2012 (Act No. 22 of 2012)]
Provided further that paragraph (a) must not apply to any foreign dividend received by or accrued to that person in respect of a share other than an equity share.
[Further proviso to section 10B(2) inserted by section 25(1)(d) of the Taxation Laws Amendment Act, 2013 (Act No. 31 of 2013) - effective 1 April 2014]
| (3) | In addition to the exemption provided for in subsection (2), there must be exempt from normal tax so much of the amount of the aggregate of any foreign dividends received by or accrued to a person during a year of assessment as— |
| (a) | is not exempt from normal tax in terms of subsection (2) for that year of assessment; and |
| (b) | does not during the year of assessment exceed an amount determined in accordance with the following formula: |
(b).png){kind=small}
in which formula:
| (i) | ‘A’ represents the amount to be exempted for a year of assessment in terms of this paragraph; |
| (ii) | ‘B’ represents— |
| (aa) | where the person is a natural person, deceased estate, insolvent estate or trust, the ratio of the number 25 to the number 45; |
[Section 10B(3)(ii)(aa) substituted by section 8(1)(a) of the Rates and Monetary Amounts and Amendment of Revenue Laws Act, 2017 (Act No. 14 of 2017) - deemed to have come into operation on 1 March 2017]
| (bb) | where the person is— |
| (A) | a person other than a natural person, deceased estate, insolvent estate or trust; or |
| (B) | an insurer in respect of its company policyholder fund, corporate fund and risk policy fund, |
[Section 10B(3)(ii)(bb)(B) substituted by section 15(1) of the Taxation Laws Amendment Act, 2014 (Act No. 43 of 2014) - effective 1 January 2016]
the ratio of the number 7 to the number 27; or
[Words following section 10B(3)(ii)(bb)(B) substituted by section 10(1)(a) of the Taxation Laws Amendment Act, 2023 (Act No. 17 of 2023), Notice No. 4226, GG49894, dated 22 December 2023 - deemed to have come into operation on 31 March 2023 and applies in respect of years of assessment ending on or after that date (section 10(2))]
| (cc) | where the person is an insurer in respect of its individual policyholder fund, the ratio of the number 10 to the number 30; and |
[Section 10B(3)(b)(ii)(cc) substituted by section 8(1)(c) of the Rates and Monetary Amounts and Amendment of Revenue Laws Act, 2017 (Act No. 14 of 2017) - deemed to have come into operation on 1 March 2017]
[Section 10B(3)(b)(ii) substituted by section 20(1)(d) of the Taxation Laws Amendment Act, 2012 (Act No. 22 of 2012)]
| (iii) | ‘C’ represents the aggregate of any foreign dividends received by or accrued to the person during a year of assessment that is not exempt from normal tax in terms of subsection (2). |
| (4) | Subsections (2)(a), (2)(b), (2)(d) and (3) do not apply in respect of any foreign dividend received by or accrued to any person if— |
(a)
| (i) | any amount of that foreign dividend is determined directly or indirectly with reference to; or |
| (ii) | that foreign dividend arises directly or indirectly from, |
any amount paid or payable by any person to any other person; and
| (b) | the amount so paid or payable is deductible from the income of the person by whom it is paid or payable and— |
| (i) | is not subject to normal tax in the hands of the other person contemplated in paragraph (a); and |
| (ii) | where that other person contemplated in paragraph (a) is a controlled foreign company, is not taken into account in determining the net income, contemplated in section 9D(2A), of that controlled foreign company, |
unless the amount so paid or payable is paid or payable as consideration for the purchase of trading stock by the person by whom the amount is paid or payable or the foreign dividend is declared from profits where less than 20 per cent of the profits were generated from transactions with persons that deducted the amount so paid or payable from income; and
[Section 10B(4) substituted by section 10(1)(b) of the Taxation Laws Amendment Act, 2023 (Act No. 17 of 2023), Notice No. 4226, GG49894, dated 22 December 2023 - comes into operation on 1 January 2024 and apply in respect of dividends or foreign dividends received or accrued on or after that date (section 10(3))]
| (4A) | Subsection (2)(a) and (b) do not apply in respect of any foreign dividend received by or accrued to any person from any portfolio contemplated in paragraph (e)(ii) of the definition of ‘company’ in section 1. |
[Section 10B(4A) inserted by section 10(1)(c) of the Taxation Laws Amendment Act, 2023 (Act No. 17 of 2023), Notice No. 4226, GG49894, dated 22 December 2023 - comes into operation on 1 January 2024 and apply in respect of dividends or foreign dividends received or accrued on or after that date (section 10(3))]
| (5) | The exemptions from tax provided by subsections (2) and (3) do not apply in respect of any portion of an annuity or extend to any payments out of any foreign dividend received by or accrued to any person. |
[Section 10B(5) substituted by section 17(a) of the Taxation Laws Amendment Act, 2017 (Act No. 17 of 2017)]
| (6) | Subsections (2) and (3) do not apply to any foreign dividend received by or accrued to a person in respect of— |
| (a) | services rendered or to be rendered or in respect of or by virtue of employment or the holding of any office, other than a foreign dividend in respect of a share held by that person; or |
| (b) | a restricted equity instrument as defined in section 8C that was acquired in the circumstances contemplated in that section if that foreign dividend is derived directly or indirectly from, or constitutes— |
| (i) | an amount— |
| (aa) | transferred or applied by a company as consideration for the acquisition or redemption of any share in that company; or |
| (bb) | received or accrued in anticipation or in the course of the winding up, liquidation, deregistration or final termination of a company; or |
| (ii) | an equity instrument that does not qualify, at the time of the receipt or accrual of that foreign dividend, as a restricted equity instrument as defined in section 8C. |
[Section 10B(6)(b)(ii) substituted by section 17(b) of the Taxation Laws Amendment Act, 2017 (Act No. 17 of 2017)]
[Section 10B(6) substituted by section 25(1) of the Taxation Laws Amendment Act, 2016 (Act No. 15 of 2016) - effective 1 March 2017]
| (6A) | Subsections (2) and (3) do not apply to any foreign dividend received by or accrued to any company in respect of a share to the extent that the aggregate of those foreign dividends does not exceed an amount equal to the aggregate of any deductible expenditure incurred by that company or any amount taken into account that has the effect of reducing income in the application of section 24JB(2), and the amount of that expenditure or reduction is determined directly or indirectly with reference to the foreign dividend in respect of a share that is an identical share to that share: Provided that the deductible expenditure so incurred or the amount of the reduction must be reduced by any amount of income accrued to the company in respect of any distribution in respect of any other share that is an identical share in relation to that share. |
[Section 10B(6A) inserted by section 11(1) of the Taxation Laws Amendment Act, 2020 (Act No. 23 of 2020), GG44083, dated 20 January 2021 - comes into operation on 1 January 2021 and applies to foreign dividends received or accrued on or after that date (section 11(2)]
(7)
| (a) | The Minister may announce in the national annual budget contemplated in section 27(1) of the Public Finance Management Act, that, with effect from a date or dates mentioned in that announcement, the numbers contemplated in subsection (3)(b)(ii) will be altered to the extent mentioned in the announcement. |
[Section 10B(7)(a) substituted by section 6(1) of the Taxation Laws Amendment Act, 2022 (Act No. 20 of 2022), Notice No. 1541, GG47826, dated 5 January 2023 - deemed to have come into operation on 17 January 2019 (section 6(2))]
| (b) | If the Minister makes an announcement of an alteration contemplated in paragraph (a), that alteration comes into effect on the date or dates determined by the Minister in that announcement and continues to apply for a period of 12 months from that date subject to Parliament passing legislation giving effect to that announcement within that period of 12 months. |
[Section 10B(7) inserted by section 23(b) of the Taxation Laws Amendment Act, 2018 (Act No. 23 of 2018), GG 42172, dated 17 January 2019]
