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Income Tax Act, 1962 (Act 58 of 1962)

Chapter II: The Taxes

Part I: Normal Tax

14. [Repealed] Deductions in respect of ships

 

[Section 14  repealed by the Taxation Laws Amendment Act, 2013 (Act No. 31 of 2013)]

 

1) There shall be allowed to be deducted from the income of any resident who carries on any business as owner or charterer of any ship—
a) in respect of any ship used by such person for the purposes of his trade during the year of assessment an allowance equal to ten per cent of the adjustable cost to him of such ship: Provided that
i) where an allowance under paragraph (b) or the corresponding provisions of any previous Income Tax Act has been made to any person in respect of any ship. no allowance shall be made under this paragraph to such person in respect of that ship for the year of assessment in which the ship is for the first time used by him for the purposes of his trade; and
ii) the aggregate of all the allowances made to any person in respect of any ship under this paragraph, paragraph (b) of this subsection and section 11(e) or the corresponding provisions of any previous Income Tax Act shall not exceed the cost to such person of such ship or, if such ship was acquired by such person to replace a ship and the cost of the ship so acquired has in terms of the definition of "adjustable cost" or "adjustable cost price" in subsection (2) been reduced by an amount which had not in terms of section 8(4)(d) been included in the income of the taxpayer for any previous year of assessment, the adjustable cost to such person of the ship so acquired;
b) in the case of a person who during any year of assessment concludes a contract for the acquisition by him of a new ship (whether built or still to be built). or of a ship which is not new and is proved to the satisfaction of the Secretary for Transport at all times since its construction to have been maintained in the highest class applicable to a ship of its type, and who satisfies the Commissioner that the ship in question is or will be a South African ship and is or will be used by him for the purposes of his trade for prospecting for minerals (including natural oil) or for mining operations or as a foreign-going ship. an allowance in respect of that year of assessment equal to forty per cent of the adjustable cost to the said person of that ship. or, if at the time at which the allowance under this paragraph has to be made, the cost price of the ship has not yet been determined, of the adjustable estimated cost price of that ship, provided the said person satisfies the Commissioner that not less than forty per cent of the cost price or of the estimated cost price, as the case may be, of the ship will be paid by him within a period of two years or, if the Commissioner agrees, three years after the end of that year. of assessment or, if the said person does not so satisfy the Commissioner, an allowance in respect of any year of assessment equal to forty per cent of the portion, if any, of the adjustable cost price or the adjustable estimated cost price of the ship paid by him during that year of assessment: Provided that—
i) the provisions of this paragraph shall not apply in respect of any ship in respect of which an allowance has in any year of assessment under this Act or any previous Income Tax Act been granted to any other person under this subsection or the corresponding provisions of any previous Income Tax Act;
ii) if any taxpayer to whom an allowance equal to forty per cent of the adjustable cost price or adjustable estimated cost price, as the case may be, of any ship has been made under this paragraph or the corresponding provisions of any previous Income Tax Act, fails to pay at least forty per cent of such cost price or estimated cost price, as the case may be, within the said period of two or (as the case may be) three years after the end of the year of assessment in respect of which the said allowance has been made, the said allowance shall be included in the income of the said taxpayer for the year of assessment ending on the same day as the said period, and there shall be deducted from the income of the said taxpayer for that year of assessment an allowance equal to forty per cent of the portion, if any, of the adjustable cost price of such ship paid by him during the said period, and from the income of the said taxpayer for any year of assessment thereafter an allowance equal to forty per cent of the portion, if any, of the adjustable cost price of such ship paid by him during that year of assessment; and
iii) if in respect of any year of assessment the Commissioner is no longer satisfied that a ship in respect of which an allowance has been made under the preceding provisions of this paragraph or the corresponding provisions of any previous Income Tax Act (whether in the current or any previous year of assessment) will be a South African ship or will be used by the taxpayer as aforesaid, or if in any year of assessment any such ship which has become a South African ship or has been used by the taxpayer as aforesaid, ceases to be a South African ship or to be used by the taxpayer as aforesaid or if in any year of assessment the taxpayer ceases to be a person referred to in section 9(1)(c), so much of the amount of the said allowance as is not in terms of section 8(4) required to be included in the taxpayer's income for the current or any other year of assessment and is not in terms of "adjustable cost" or "adjustable cost price" in subsection (2) of this section required to be deducted from the cost or estimated cost price of a further ship acquired to replace such ship, less such amount as would, if this paragraph had not been enacted, have been allowed to the taxpayer by way of deductions (in addition to those actually allowed) under paragraph (a) of this subsection or section 11(o) or the corresponding provisions of any previous Income Tax Act, either the current or any previous year of assessment, shall in terms of this proviso be included in the income of the taxpayer for the current year of assessment;
c) in respect of any expenditure which such person satisfies the Commissioner he is likely to incur within five years from the end of the year of assessment in question on repairs to any ship used by him for the purposes of his trade, such an allowance as, notwithstanding the provisions of section 23(e), the Commissioner, having regard to the estimated cost of such repairs and the date on which they are likely to be incurred, may make each year: Provided that any such allowance in respect of any year of assessment shall be included in the income of the taxpayer for the following year of assessment.

 

1A) Where during any year of assessment a subsidiary company referred to in paragraph (b) of the definition of "South African ship" in subsection (2) has carried on business as the owner of one or more ships which are by virtue of the said paragraph South African ships and has not ceased to carry on such business, there shall be deducted from the income derived during that year of assessment by the parent company (being a parent company referred to in the said paragraph) of the subsidiary company an allowance equal to so much of any assessed loss which is in terms of section 20 available to be carried forward by the subsidiary company to the following year of assessment, as is attributable to any assessed loss (as determined under section 20) incurred by the subsidiary company in carrying on the aforesaid business: Provided that the allowance granted under this subsection to the parent company in respect of any year of assessment shall be included in the income of that company for the following year of assessment.

 

1B) Where a subsidiary company referred to in paragraph (b) of the definition of "South African ship" in subsection (2) has on or after 1 January 1974 purchased from its parent company (being a parent company referred to in the said paragraph), a ship (being a South African ship by virtue of the provisions of the said paragraph and not being a ship acquired to replace a ship) which is used by the subsidiary company for the purposes of its trade for prospecting for minerals (including natural oil) or for mining operations or as a foreign-going ship and in respect of which any allowance has in respect of any year of assessment been granted to the parent company under subsection (1)(a) or (b) or section 12C
a) any allowances in respect of such ship granted to the subsidiary company under the provisions of subsection (1)(a) or section 12C, as the case may be, shall be equal in amount to the allowances to which the parent company would have been entitled under those provisions if the parent company had continued to use the ship for the purposes of its trade;
b) an allowance in respect of such ship shall not be granted to the subsidiary company under the provisions of subsection (1)(a) or section 12C in respect of the year of assessment during which the ship was purchased by the subsidiary company if any allowance in respect of the ship has been granted to the parent company under the provisions of subsection (1)(a) or (b) or section 12C in respect of the same year of assessment;
c) the cost to the subsidiary company of such ship shall, for the purposes of this section, section 8(4), section 11(o) and section 12C, be deemed to be the adjustable cost to the parent company of the ship;
d) the allowances in respect of such ship granted to the parent company under subsection (1)(a) or (b) of this section or section 12C shall, for the purposes of this section, section 8(4), section 11(o) and section 12C, be deemed to be allowances granted to the subsidiary company in respect of such ship and the provisions of paragraph (iii) of the proviso to subsection (1)(b) of this section or the proviso to section 8(4)(e), as the case may be, shall, as respects such ship apply to the subsidiary company as though it were the taxpayer referred to in those provisions;
e) the parent company shall, for the purposes of section 8(4), not be deemed to have recovered or recouped out of the purchase consideration payable by the subsidiary company any of the allowances granted in respect of such ship to the parent company under subsection (1)(a) or (b) of this section or section 12C and no allowance shall be made to the parent company under section 11(o) in respect of such ship and, for the purposes of paragraph (iii) of the proviso to subsection (1)(b) of this section as applicable to the parent company, the parent company shall not by reason of the sale of the ship to the subsidiary company be deemed to have ceased to use the ship; and
f) in the event of such ship ceasing to be a South African ship or to be used by the subsidiary as aforesaid, the Commissioner may direct that any amount falling to be included in the income of the subsidiary company for any year of assessment under paragraph (iii) of the proviso to subsection (1)(b) or the proviso to section 8 (4) (e), as the case may be, be included in the income of the parent company for such year of assessment and not in the income of the subsidiary company.

 

1C) Where on or after 1 January 1974 any association, corporation or company contemplated in paragraph (a) of the definition of ‘company ’ in section 1 (being a resident who carries on any business as owner or charterer of any ship) has concluded a contract for the acquisition by it of a ship and such company (hereinafter referred to as the taxpayer company) satisfies the Commissioner that—
a) the ship will be sold by the taxpayer company to a subsidiary company of the taxpayer company for a consideration not exceeding the cost to the taxpayer company of such ship;
b) the subsidiary company will qualify for an allowance in respect of the ship under the provisions of subsection (1) (b), and
c) not less than forty per cent of the cost price or, if at the time the allowance under this subsection has to be made, the cost price has not yet been determined, of the estimated cost price which is payable by the taxpayer company in respect of its acquisition of the ship will be paid by the taxpayer company within a period of two years or, if the Commissioner agrees, three years after the end of the year of assessment during which the said contract was concluded,

there shall be deducted from the income of the taxpayer company for the said year of assessment an allowance equal to forty per cent of the said cost price or estimated cost price, as the case may be: Provided that the allowance granted to the taxpayer company under this subsection shall be included in the income of that company for the year of assessment during which the subsidiary company has qualified for an allowance in respect of the ship under the provisions of subsection (1) (b) or, if in respect of any earlier year of assessment the Commissioner is no longer satisfied as to any of the matters in respect of which he is required to be satisfied under this subsection, such earlier year of assessment.

 

1D)
a) Where any subsidiary company (as contemplated in paragraph (b) of the definition of "South African ship" in subsection (2)) carries on business as the owner of any South African ship and does not carry on any other type of business, the parent company (as contemplated in the said paragraph) in relation to such subsidiary company may elect that such parent company and such subsidiary company shall for the purposes of this Act be deemed to be and to have been one and the same company.
b) Any election made under paragraph (a) shall, unless the Commissioner otherwise directs, be binding upon the companies concerned in the year of assessment in respect of which it is made and in all subsequent years of assessment.
c) The provisions of subsections (1A) and (1B) shall not apply in any year of assessment in which the provisions of this subsection are applicable.

 

2) For the purposes of this section—

"adjustable cost" or "adjustable cost price", in relation to any ship, means the cost to the taxpayer of such ship, or, if such ship was acquired by the taxpayer to replace a ship, the cost to the taxpayer of the ship so acquired, less so much of any amount referred to in section 8(4)(a) which has on or after 17 August 1966 been recovered or recouped in respect of the ship so replaced as does not exceed such cost, and ‘adjustable estimated cost price’ shall be construed accordingly;

"foreign-going ship" means—

a) a ship plying between a port in one country and a port in another country;
b) a ship of not less than two hundred gross register tons plying between ports in the same country; or
c) a ship of not less than two hundred gross register tons exclusively employed in sea fishing or seal catching; or
d) a whaling boat other than a shore-based whaling boat of less than two hundred gross register tons;

"South African ship" means—

a) a ship which is owned by a resident who carries on any business as owner or charterer of any ship, if such ship is a South African ship as defined in section 2 of the Merchant Shipping Act, 1951 (Act No. 57 of 1951); or
b) if the Minister, having regard to the circumstances of the case, so directs. a ship which is owned by a company (in this section referred to as a subsidiary company) which is managed and controlled in the Republic if the sole beneficial shareholder in that company is an association, corporation or company contemplated in paragraph (a) of the definition of ‘company’ in section 1 (in this section referred to as a parent company) which is managed and controlled in the Republic.

 

3) Where any allowance under this section is determinable on a portion of the adjustable cost price paid in respect of any ship, such portion shall for the purposes of this section be deemed to be an amount which bears to the portion of the cost price paid the same ratio as the adjustable cost price bears to the full cost price or, if at the time at which the allowance has to be made the cost price of the ship has not yet been determined, the estimated cost price payable in respect of such ship.

 

4) Where any person is entitled to an allowance under this section in respect of any ship acquired by him on or after 21 June 1993 from a connected person, and a deduction under this section was previously granted to such connected person in respect of the ship concerned, whether in the current or any previous year of assessment, the deduction under this section shall be calculated on an amount not exceeding the lesser of the adjustable cost of the ship concerned to such connected person or the market value thereof as determined on the date upon which the ship was acquired by such person.

 

5) The provisions of subsections (1)(a) and (b) and (1C) shall not apply to any ship acquired on or after 1 April 1995 unless such ship was acquired by the taxpayer under an agreement formally and finally signed by every party to the agreement before that date.

 

6)
a) The provisions of subsection (1A) shall only apply to any parent company as contemplated in that subsection in relation to any allowance arising from any assessed loss incurred by the subsidiary company as contemplated in that subsection in so far as such assessed loss arises from the business carried on by such subsidiary company as the owner of any ship acquired in terms of an agreement formally and finally signed by all parties to the agreement on or before 12 March 1997.
b) Where a parent company as contemplated in subsection (1D) made an election as contemplated in that subsection, such parent company and a subsidiary company as contemplated in that subsection in relation to such parent company, shall, notwithstanding the provisions of that subsection, for the purposes of this Act only be deemed to be or to have been one and the same company in so far as it relates to any business carried on by such subsudiary company as the owner of any ship acquired in terms of an agreement formally and finally signed by all parties to the agreement on or before 12 March 1997.