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Income Tax Act, 1962 (Act 58 of 1962)

Chapter II: The Taxes

Part I: Normal Tax

12T. Exemption of amounts received or accrued in respect of tax free investments

 

(1)        For the purposes of this section—

 

tax free investment’ means any financial instrument or policy as defined in section 29A

(a) administered by a person or entity designated by notice by the Minister in the Gazette;

(b)        owned by—

(i)        a natural person; or

(ii) the deceased estate or insolvent estate of a natural person that is deemed to be one and the same person as that natural person in respect of the contributions made by that person; and
(c) that complies with the requirements of the Regulations contemplated in subsection (8).

 

(2) There shall be exempt from normal tax any amount received by or accrued to a natural person or deceased estate or insolvent estate of that person in respect of a tax free investment.

[Subsection (2) amended by section 29(1)(a) of the Taxation Laws Amendment Act, 2015 (Act No. 25 of 2015]

 

(3) In determining the aggregate capital gain or aggregate capital loss of a person in respect of any year of assessment, any capital gain or capital loss in respect of the disposal of a tax free investment shall be disregarded.

 

(4) Contributions in respect of tax free investments shall be—
(a) limited to an amount of R30 000 in aggregate during any year of assessment;
(b) an amount in cash; and
(c) limited to an amount of R500 000 in aggregate.

 

(5) Any amount contemplated in subsection (2) shall not be taken into account in determining whether a person contributed in excess in respect of the amounts contemplated in subsections (4)(a) and (c).

 

(6)        Any—

(a) transfer of an amount in respect of a tax free investment of a person to another tax free investment of that person; or
(b) amount received by or accrued in respect of a tax free investment, shall not be taken into account in determining whether that person contributed in excess of the amounts contemplated in subsections (4)(a) and (c) as a contribution in respect of that other tax free investment.

 

(7)        

(a) If during any year of assessment any person contributes in excess of the amount of R30 000 in respect of tax free investments, an amount equal to 40 per cent of that excess is deemed to be an amount of normal tax payable by the person contemplated in subsection 1(b) in respect of that year of assessment.

[Subsection (7) amended by section 29(1)(b) of the Taxation Laws Amendment Act, 2015 (Act No. 25 of 2015]

(b) If any person contributes in excess of R500 000 in aggregate in respect of tax free investments, an amount equal to 40 per cent of so much of that excess as has not previously been taken into account in terms of this subsection shall be deemed to be an amount of normal tax payable by the person contemplated in subsection 1(b) in respect of the year of assessment in which that excess is contributed.

[Subsection (7) amended by section 29(1)(c) of the Taxation Laws Amendment Act, 2015 (Act No. 25 of 2015]

 

(8) The Minister shall make regulations prescribing the requirements—
(a) to which any financial instrument or policy as defined in section 29A shall conform for the purposes of constituting a tax free investment;
(b) that must be complied with when a tax free investment is transferred; and
(c) in respect of disclosure by any person contemplated in paragraph (a) of the definition of ‘tax free investment’ in subsection (1) in respect of a tax free investment.

 

(9)        

(a) The Financial Services Board established under the Financial Services Board Act (hereafter Financial Services Board) shall be responsible for supervising and enforcing compliance with any regulations made by the Minister in terms of subsection (8).
(b) The supervising and enforcing compliance contemplated in paragraph (a) shall form part of the legislative mandate of the Financial Services Board.
(c) The Financial Services Board, acting through the Registrar, as defined in section 1 of the Financial Institutions (Protection of Funds) Act, 2001 (Act No. 28 of 2001), in supervising and enforcing compliance as contemplated in paragraph (a), shall exercise any power afforded to the Registrar as defined in section 1 of that Act and in any of the Acts contemplated in the definition of ‘law’ in section 1 of that Act.

 

[Section 12T inserted by section 28(1) of Act No. 43 of 2014]