| (1) |
The amount which shall, in the determination of the taxable income derived by any person during any year of assessment from carrying on any trade (other than farming), be taken into account in respect of the value of any trading stock held and not disposed of by him at the end of such year of assessment, shall be— |
| (a) |
in the case of trading stock other than trading stock contemplated in paragraph (b), the cost price to such person of such trading stock, less such amount as the Commissioner may think just and reasonable as representing the amount by which the value of such trading stock, not being any financial instrument, has been diminished by reason of damage, deterioration, change of fashion, decrease in the market value or for any other reason satisfactory to the Commissioner: Provided that for the purposes of this subsection— |
| (i) |
the amount of trading stock must be taken into account in determining taxable income by including such amount in gross income; and |
| (ii) |
in determining any diminution in the value of trading stock, no account must be taken of the fact that the value of some items of trading stock held and not disposed of by the taxpayer may exceed their cost price; and |
[Section 22(1)(a) proviso inserted by section 24(1) of the Taxation Laws Amendment Act, 2019 (Act No. 34 of 2019), GG 42951, dated 15 January 2020 - comes into operation on 1 January 2020 and applies in respect of years of assessment commencing on or after that date (section 24(2)]
| (b) |
in the case of any trading stock which consists of any instrument, interest rate agreement or option contract in respect of which a company has made an election which has taken effect as contemplated in section 24J(9), the market value of such trading stock as contemplated in such section. |
[Section 22(1)(b) substituted by section 25(1)(a) of the Revenue Laws Amendment Act, 1999 (Act No. 53 of 1999)]
| (1A) |
Where in respect of any year of assessment ending after the commencement date defined in section 1 of the value-added Tax Act any amount of sales tax referred to in section 23C(2) which was included in the cost price to the taxpayer of any trading stock is deemed by that section to have been recovered or recouped for the purposes of section 8(4)(a), the cost of such trading stock held and not disposed of by the taxpayer at the end of such year shall be deemed to have been reduced by the said amount. |
[Section 22(1A) substituted by section 55(a) of the Taxation Laws Amendment Act, 2013 (Act No. 31 of 2013)]
| (2) |
The amount which shall in the determination of the taxable income derived by any person during any year of assessment from carrying on any trade (other than farming), be taken into account in respect of the value of any trading stock held and not disposed of by him at the beginning of any year of assessment, shall— |
| (a) |
if such trading stock formed part of the trading stock of such person at the end of the immediately preceding year of assessment be the amount which was, in the determination of the taxable income of such person for such preceding year of assessment, taken into account in respect of the value of such trading stock at the end of such preceding year of assessment; or |
| (b) |
if such trading stock did not form part of the trading stock of such person at the end of the immediately preceding year of assessment, be the cost price to such person of such trading stock. |
(2A)
| (a) |
Where any person carries on any construction, building, engineering or other trade in the course of which improvements are effected by him to fixed property owned by any other person, any such improvements effected by him and any materials delivered by him to such fixed property which are no longer owned by him shall, until the contract under which such improvements are effected has been completed, be deemed for the purposes of this section to be trading stock held and not disposed of by him. |
| (b) |
For the purposes of paragraph (a), a contract shall be deemed to have been completed when the taxpayer has carried out all the obligations imposed upon him under the contract and has become entitled to claim payment of all amounts due to him under the contract. |
[Section 22(2A) inserted by section 21(a) of the Income Tax Act, 1990 (Act No. 101 of 1990)]
(3)
| (a) |
For the purposes of this section the cost price at any date of any trading stock in relation to any person shall – |
| (i) |
subject to subparagraphs (iA) and (ii), be the cost incurred by such person, whether in the current or any previous year of assessment in acquiring such trading stock, plus any further costs incurred by such person, in terms of IFRS (in the case of a company), up to and including the said date in getting such trading stock into its then existing condition and location, but excluding any exchange difference as defined in section 24I(1) relating to the acquisition of such trading stock; |
[Section 22(3)(a)(i) substituted by section 32(a) of the Taxation Laws Amendment Act, 2014 (Act No. 43 of 2014)]
| (iA) |
include an amount that has been included in that person’s income in terms of section 8(5), which was applied in reduction or towards settlement of the purchase price of that trading stock; |
[Section 22(3)(a)(iA) inserted by section 36(1)(b) of the Revenue Laws Amendment Act, 2008 (Act No. 60 of 2008)]
| (ii) |
in the case of any trading stock which is in terms of paragraph 12(2)(c) of the Eighth Schedule treated as having been acquired at a cost equal to the market value, be that market value; or |
[Section 22(3)(a)(ii) substituted by section 36(1)(c) of the Revenue Laws Amendment Act, 2008 (Act No. 60 of 2008)]
| (aa) |
a right in a controlled foreign company held directly by a resident, include an amount equal to the proportional amount of the net income (without having regard to the percentage adjustments contemplated in paragraph 10 of the Eighth Schedule) of that company and of any other controlled foreign company in which that controlled foreign company and that resident directly or indirectly have an interest, which was included in the income of that resident in terms of section 9D during any year of assessment, reduced by the amount of any foreign dividend distributed by that company to that resident during any year of assessment which was exempt from tax in terms of section 10B(2)(a) or (c); or |
| (bb) |
a right in a controlled foreign company held directly by another controlled foreign company, include an amount equal to the proportional amount of the net income (without having regard to the percentage adjustments contemplated in paragraph 10 of the Eighth Schedule) of that first-mentioned controlled foreign company and of any other controlled foreign company in which both the first- and second-mentioned controlled foreign companies directly or indirectly have an interest, which during any year of assessment would have been included in the income of that second-mentioned controlled foreign company in terms of section 9D had it been a resident, reduced by the amount of any foreign dividend distributed by that first-mentioned controlled foreign company to the second-mentioned controlled foreign company if that dividend would have been exempt from tax in terms of section 10B(2)(a) or (c) had that second-mentioned controlled foreign company been a resident; |
[Section 22(3)(a)(iii) substituted by section 37(1)(b) of the Taxation Laws Amendment Act, 2015 (Act No. 25 of 2015)]
| (b) |
[Section 22(3)(b) deleted by section 32(b) of the Taxation Laws Amendment Act, 2014 (Act No. 43 of 2014)] |
| (c) |
[Section 22(3)(c) deleted by section 17(1)(b) of the Income Tax Act, 1993 (Act No. 113 of 1993)] |
| (d) |
[Section 22(3)(d) deleted by section 17(1)(b) of the Income Tax Act, 1993 (Act No. 113 of 1993)] |
| (3A) |
For the purposes of this section the cost price of trading stock referred to in subsection (2A) shall be the sum of the cost to the taxpayer of material used by the taxpayer in effecting the relevant improvements, and such further costs incurred by the taxpayer as in accordance with IFRS are to be regarded as having been incurred directly in connection with the relevant contract, and such portion of any other costs incurred by the taxpayer in connection with the relevant contract and other contracts as in accordance with IFRS are to be regarded as having been incurred in connection with the relevant contract, less a deduction of so much of— |
[Words preceding section 22(3A)(a) substituted by section 33(1)(a) of the Taxation Laws Amendment Act, 2017 (Act No. 17 of 2017)]
| (a) |
any income received by or accrued to the taxpayer in respect of the relevant contract; |
| (b) |
any portion of an amount payable to the taxpayer under the relevant contract (but not exceeding 15 per cent of the total amount payable to him under such contract) the payment of which has been withheld as a retention; and |
| (c) |
any of the said costs included under this subsection as exceed that portion of the contract price which relates to the improvements actually effected by him, |
as does not exceed the said sum.
| (3B) |
[Section 22(3B) deleted by section 55(b) of the Taxation Laws Amendment Act, 2013 (Act No. 31 of 2013), GG 37158, dated 12 December 2013] |
| (4) |
If any trading stock has been acquired by any person for no consideration or for a consideration which is not measurable in terms of money, other than a government grant in kind, such person shall for the purposes of subsection (3), unless subsection (3)(a)(iA) applies, be deemed to have acquired such trading stock at a cost equal to the current market price of such trading stock on the date on which it was acquired by such person. |
[Section 22(4) substituted by section 33(1)(b) of the Taxation Laws Amendment Act, 2017 (Act No. 17 of 2017)]
| (4A) |
For the purposes of subsection (4) where— |
| (a) |
any security has been lent by a lender to a borrower in terms of a securities lending agreement, such security shall be deemed not to have been acquired by such borrower; or |
[Section 22(4A) substituted by section 37(1)(a) of the Revenue Laws Amendment Act, 2003 (Act No. 45 of 2003)]
| (b) |
another security that is an identical security has been returned by such borrower to such lender, such other security shall be deemed not to have been acquired by such lender. |
[Section 22(4A)(b) substituted by section 37(1)(c) of the Taxation Laws Amendment Act, 2015 (Act No. 25 of 2015) - effective 1 January 2016]
| (4B) |
For the purposes of subsection (4), where— |
| (a) |
any share has been transferred by a transferor to a transferee in terms of a collateral arrangement, that share shall be deemed not to have been acquired by that transferee; or |
| (b) |
a share that is an identical share to the share contemplated in paragraph (a) has been returned by that transferee to that transferor in terms of that collateral arrangement, the share so returned shall be deemed not to have been acquired by that transferor. |
[Section 22(4B) inserted by section 37(1)(d) of the Taxation Laws Amendment Act, 2015 (Act No. 25 of 2015) - effective 1 January 2016]
| (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. |
[Section 22(5) substituted by section 27(1)(a) of the Taxation Laws Amendment Act, 2000 (Act No. 30 of 2000) - effective 1 July 2000]
| (5A) |
[Section 22(5A) deleted by section 37(1)(e) of the Taxation Laws Amendment Act, 2015 (Act No. 25 of 2015)]. |
| (6) |
Any reference in this section to the beginning or end of a year of assessment includes – |
| (a) |
where the period assessed is less than twelve months, a reference to the beginning or end, as the case may be, of the period assessed; |
| (b) |
where accounts are accepted under section 66(13A) or (13C) to a date agreed to by the Commissioner, a reference to the beginning or end, as the case may be, of the period covered by the accounts. |
[Section 22(6) substituted by section 24(1)(a) of the Revenue Laws Amendment Act, 2002 (Act No. 74 of 2002)]
| (7) |
[Section 22(7) deleted by section 20(b) of the Income Tax Act, 1983 (Act No. 94 of 1983)] |
(8) If during any year of assessment—
| (a) |
any taxpayer has applied trading stock to his private or domestic use or consumption or for the purpose of making any donation of trading stock (other than livestock or produce in respect of which the provisions of paragraph 11 of the First Schedule are applicable); or |
| (i) |
taxpayer has applied trading stock for the purpose of making any donation thereof; |
| (ii) |
taxpayer has disposed of trading stock, other than in the ordinary coarse of his or her trade, for a consideration less than the market value thereof; |
[Section 22(8)(b)(ii) substituted by section 40(1)(a) of the Taxation Laws Amendment Act, 2016 (Act No. 15 of 2016) - effective 1 January 2016]
| (iii) |
trading stock of any company has on or after 21 June 1993 been distributed in specie, to any holder of shares in that company; |
[Section 22(8)(b)(iii) substituted by section 55(c) of the Taxation Laws Amendment Act, 2013 (Act No. 31 of 2013)]
| (iv) |
taxpayer has applied any trading stock or for any other purpose other than the disposal thereof in the ordinary course of his trade and under circumstances other than those contemplated in paragraph (a) or subparagraph (i), (ii) or (iii) of this paragraph; or[Section 22(8)(b)(ii) [Section 22(8)(b)(iv) substituted by section 12(c) of the Taxation Laws Amendment Act, 2001 (Act No. 5 of 2001)]
|
| (v) |
assets which were held as trading stock by any taxpayer cease to be held as trading stock by such taxpayer, |
[Section 22(8)(b)(v) inserted by section 12(d) of the Taxation Laws Amendment Act, 2001 (Act No. 5 of 2001)]
and the cost price of such trading stock has been taken into account in the determination of the taxable income of the taxpayer for any year of assessment, the taxpayer shall be deemed to have recovered or recouped—
| (A) |
where such trading stock has been applied in a manner contemplated in paragraph (a)an amount equal to the cost price to him of such trading stock (less any sum which has been deducted therefrom under the provisions of subsection (1)) or where the cost price cannot be readily determined, the market value of such trading stock; or |
| (B) |
where such trading stock has been applied, disposed of or distributed in a manner contemplated in paragraph (b) (otherwise than in the manner contemplated in paragraph (C)) or ceases to be held as trading stock, an amount equal to the market value of such trading stock; or |
[Section 22(8)(B) substituted by section 40 of the Taxation Laws Amendment Act, 2012 (Act No. 22 of 2012)]
| (C) |
where such trading stock has been applied for the purpose of making a donation in respect of which the provisions of section 18A apply, an amount equal to the amount which was taken into account for that year of assessment in respect of the value of that trading stock, |
[Section 22(8)(C) inserted by section 37(1)(c) of the Revenue Laws Amendment Act, 2003 (Act No. 45 of 2003)]
and such amount shall be included in the income of the taxpayer for the year of assessment during which such trading stock was so applied, disposed of, distributed or ceased to be held as trading stock:
Provided that where—
| (a) |
an asset consisting of trading stock so applied is used or consumed by the taxpayer in carrying on his trade, the amount included in his income under this subsection shall for the purposes of this Act be deemed to be expenditure incurred in respect of the acquisition by him of such asset; |
| (b) |
the provisions of paragraph (b)(ii) apply and any consideration contemplated in that paragraph has been received by or accrued to the taxpayer, the amount included in his income in terms of this subsection shall be reduced by such consideration; |
[Paragraph (b) of the proviso to section 22(8) substituted by section 24(1)(b) of the Revenue Laws Amendment Act, 2002 (Act No. 74 of 2002)]
| (c) |
such trading stock consists of livestock or produce in respect of which the provisions of paragraph 11 of the First Schedule are applicable, the provisions of this subsection shall not apply; or |
[Paragraph (c) of the proviso to section 22(8) substituted by section 24(1)(c) of the Revenue Laws Amendment Act, 2002 (Act No. 74 of 2002)]
| (d) |
such trading stock consists of assets in respect of which any amount received or accrued from the disposal thereof is or will be included in the gross income of the taxpayer in terms of paragraph (jA) of the definition of "gross income", the provisions of paragraph (b)(iv) shall not apply. |
[Paragraph (d) of the proviso to section 22(8) inserted by section 24(1)(d) of the Revenue Laws Amendment Act, 2002 (Act No. 74 of 2002)]
(9) Where—
(a)
| (i) |
the trading stock of any person during any year of assessment includes any— |
| (aa) |
security or any bond issued by the government of the Republic in the national or local sphere; or |
| (bb) |
bond issued by any sphere of government of any country other than the Republic, |
if that bond is listed on a recognised exchange as defined in paragraph 1 of the Eighth Schedule;
[Section 22(9)(a)(i) substituted by section 33(1)(c) of the Taxation Laws Amendment Act, 2017 (Act No. 17 of 2017) - effective 1 January 2018]
| (iii) |
a security or a bond that is an identical security or such same bond has not been returned by the borrower to such person at the end of such year of assessment, |
such security or such bond shall, for the purposes of this section, be deemed to be trading stock held and not disposed of by such person at the end of such year of assessment;
[Section 22(9)(a) substituted by section 40(1)(b) of the Taxation Laws amendment Act, 2016 (Act No. 15 of 2016) - effective 1 January 2017]
(b)
| (i) |
the trading stock of any other person during any year of assessment includes any— |
| (aa) |
security or any bond issued by the government of the Republic in the national or local sphere; or |
| (bb) |
bond issued by any sphere of government of any country other than the Republic, |
if that bond is listed on a recognised exchange as defined in paragraph 1 of the Eighth Schedule;
[Section 22(9)b)(i) substituted by section 33(1)(d) of the Taxation Laws Amendment Act, 2017 (Act No. 17 of 2017) - effective 1 January 2018]
| (ii) |
such other person has, during such year of assessment, borrowed such security or such bond from a lender in terms of a securities lending arrangement ; and |
| (iii) |
a security that is an identical security or that same bond has not been returned by such other person to such lender at the end of such year of assessment, |
[Section 22(9)(b)(iii) substituted by section 37(1)(i) of the Taxation Laws Amendment Act, 2015 (Act No. 25 of 2015)]
such security or such bond shall, for the purposes of this section, be deemed not to be trading stock held and not disposed of, by such other person at the end of such year of assessment; or
[Section 22(9)(b) substituted by section 40(1)(b) of the Taxation Laws amendment Act, 2016 (Act No. 15 of 2016) - effective 1 January 2017]
(c)
| (i) |
the trading stock of any person during any year of assessment includes any— |
| (aa) |
share or any bond issued by the government of the Republic in the national or local sphere; or |
| (bb) |
bond issued by any sphere of government of any country other than the Republic, |
if that bond is listed on a recognised exchange as defined in paragraph 1 of the Eighth Schedule;
[Section 22(9)(c)(i) substituted by section 33(1)(e) of the Taxation Laws Amendment Act, 2017 (Act No. 17 of 2017) - effective 1 January 2018]
| (ii) |
that person has, during that year of assessment, transferred that share or that bond to a transferee in terms of a collateral arrangement; and |
| (iii) |
a share that is an identical share to the share contemplated in subparagraph (ii) or that same bond has not been returned by the transferee to that person at the end of that year of assessment, |
such share or such bond shall, for the purposes of this section, be deemed to be trading stock held and not disposed of by that person at the end of that year of assessment; or
[Section 22(9)(c) substituted by section 40(1)(b) of the Taxation Laws Amendment Act, 2016 (Act No. 15 of 2016) - effective 1 January 2017]
(d)
| (i) |
the trading stock of any transferee during any year of assessment includes any— |
| (aa) |
share or any bond issued by the government of the Republic in the national or local sphere; or |
| (bb) |
bond issued by any sphere of government of any country other than the Republic, |
if that bond is listed on a recognised exchange as defined in paragraph 1 of the Eighth Schedule;
[Section 22(9)(d)(i) substituted by section 33(1)(f) of the Taxation Laws Amendment Act, 2017 (Act No. 17 of 2017)]
| (ii) |
that transferee has, during such year of assessment, acquired such share or such bond from a transferor in terms of a collateral arrangement; and |
| (iii) |
a share that is an identical share to the share contemplated in subparagraph (ii) or that same bond has not been returned by such transferee to such transferor at the end of such year of assessment, |
such share or such bond shall, for the purposes of this section, be deemed not to be trading stock held and not disposed of, by such transferee at the end of such year of assessment.
[Section 22(9)(d) substituted by section 40(1)(b) of the Taxation Laws Amendment Act, 2016 (Act No. 15 of 2016]
Basic Conditions of Employment Act, 1997
