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Income Tax Act, 1962 (Act No. 58 of 1962)

Chapter II : The Taxes

Part I : Normal Tax

28. Taxation of short-term insurance business

[Section 28 heading substituted by section 61(1)(a) of the Taxation Laws Amendment Act, 2012 (Act No. 22 of 2012) - effective 1 January 2013)]

 

(1)        For the purposes of this section—

 

'premium'

means a premium as defined in the Short-term Insurance Act;

 

'Short-term Insurance Act'

[Definition deleted by section 76(1)(a) of the Taxation Laws Amendment Act, 2013 (Act No. 31 of 2013), GG 37158, dated 12 December 2013]

 

'short-term insurance business'

means—

(a) short-term insurance business as defined in the Short-term Insurance Act;
(b) micro-insurance business as defined in section 1 of the Insurance Act; or
(c) business conducted by a foreign reinsurer as contemplated in paragraph (c) of the definition of ‘short-term insurer’;

[Definition substituted by section 50(1)(a) of the Taxation Laws Amendment Act, 2018 (Act No. 23 of 2018), GG 42172, dated 17 January 2019 - effective 1 July 2018 (section 50(2)]

 

'short-term insurer'

means—

(a) a short-term insurer as defined in the Short-term Insurance Act;
(b) a micro-insurer as defined in section 1 of the Insurance Act; or
(c) a foreign reinsurer conducting insurance business through a branch in the Republic in terms of section 6 of the Insurance Act;

[Definition substituted by section 50(1)(b) of the Taxation Laws Amendment Act, 2018 (Act No. 23 of 2018), GG 42172, dated 17 January 2019 - effective 1 July 2018 (section 50(2)]

 

'short-term policy'

means—

(a) a short-term policy as defined in the Short-term Insurance Act;
(b) a policy issued by a micro-insurer as defined in section 1 of the Insurance Act; or
(c) a policy issued by a foreign reinsurer as contemplated in paragraph (c) in the definition of ’short-term insurer.

[Definition substituted by section 50(1)(c) of the Taxation Laws Amendment Act, 2018 (Act No. 23 of 2018), GG 42172, dated 17 January 2019 - effective 1 July 2018 (section 50(2)]

 

(1A) [Section 28(1A) deleted by section 33(a) of the Taxation Laws Amendment Act, 2000 (Act No. 30 of 2000)]

 

(1B) [Section 28(1B) inserted by section 33(a) of the Taxation Laws Amendment Act, 2000 (Act No. 30 of 2000)]

 

(1C) [Section 28(1C) inserted by section 33(a) of the Taxation Laws Amendment Act, 2000 (Act No. 30 of 2000)]

 

(2) For the purpose of determining the taxable income derived during a year of assessment by any short-term insurer from carrying on short-term insurance business—

[Words preceding section 28(2)(a) substituted by section 50(1)(d) of the Taxation Laws Amendment Act, 2018 (Act No. 23 of 2018), GG 42172, dated 17 January 2019 - effective 1 July 2018 (section 50(2)]

(a) a premium received by or accrued to that person in respect of a short-term policy issued by that short-term insurer prior to the date of commencement of the risk cover under that policy shall be deemed to have been received by or accrued to that short-term insurer on the date of commencement of the risk cover under that policy;
(b) an amount of expenditure actually incurred by that short-term insurer in respect of a refund of a premium in respect of a short-term policy issued by that short-term insurer may only be deducted in terms of section 11(a) to the extent that the amount of the premium was included in the gross income of that short-term insurer;
(c) an amount of expenditure payable by that short-term insurer in respect of any claim in terms of a short-term policy—
(i) may be deducted in terms of section 11(a) to the extent that the amount has been paid by that short-term insurer; and
(ii) to the extent that the amount has been paid by the short-term insurer, sections 23(c) and 23H shall not apply to that expenditure;
(d) section 23H shall not apply to expenditure (other than expenditure contemplated in paragraph (c)) incurred in respect of—
(i) a short-term policy issued by that short-term insurer; or
(ii) a policy of reinsurance if that short-term insurer is the holder of that policy; and
(e) an amount recoverable by that short-term insurer in respect of a claim incurred under a short-term policy issued by that short-term insurer shall only be included in the income of that short-term insurer when the amount is received by that short-term insurer.

[Section 28(2) substituted by section 76(1)(c) of the Taxation Laws Amendment Act, 2013 (Act No. 31 of 2013) - effective 1 January 2013]

 

(3) Notwithstanding section 23(e), for the purpose of determining the taxable income derived during any year of assessment by any short-term insurer from carrying on short-term insurance business, there shall be allowed as a deduction from the income of that short-term insurer an amount equal to the sum of liabilities on investment contracts relating to short-term insurance business in accordance with IFRS as reported by that short-term insurer in its audited annual financial statements, and amounts recognised as insurance liabilities, in accordance with IFRS by that short-term insurer in its audited annual financial statements, relating to—

[Words preceding section 28(3)(a) substituted by section 50(1)(e) of the Taxation Laws Amendment Act, 2018 (Act No. 23 of 2018), GG 42172, dated 17 January 2019 - effective 1 July 2018 (section 50(2)]

(a) premiums; and
(b) claims,

reduced by—

(i) the amounts recognised as recoverable under policies of reinsurance in accordance with IFRS as reported by the insurer to shareholders in the audited annual financial statements, other than any amount that is receivable from an owner as contemplated in the definition of ‘cell structure’ in section 1 of the Insurance Act, in respect of a third party risk as defined in that section of that Act; and
(ii) the amounts recognised as deferred acquisition costs in accordance with IFRS as reported by the insurer to shareholders in the audited annual financial statements; and

[Section 28(3) substituted by section 52(1)(d) of the Taxation Laws Amendment Act, 2015 (Act No. 25 of 2015) - deemed to have come into operation on 1 July 2018 and apply to years of assessment ending on or after that date]

 

(4) The total of all amounts deducted from the income of a short-term insurer in respect of a year of assessment in terms of subsection (3) shall be included in the income of that short-term insurer in the following year of assessment.

[Section 28(4) substituted by section 76(1)(c)  of the Taxation Laws Amendment Act, 2013 (Act No. 31 of 2013) - effective 1 January 2013]

 

(5) [Section 28(5) deleted by section 61(1)(c) of the Taxation Laws Amendment Act, 2012 (Act No. 22 of 2012) - effective 1 January 2013]

 

(6) [Section 28(6) deleted by section 61(1)(d) of the Taxation Laws Amendment Act, 2012 (Act No. 22 of 2012)]

 

(7) [Section 28(7) deleted by section 52(1)(e) of the Taxation Laws Amendment Act, 2015 (Act No. 25 of 2015) -deemed to have come into operation on 1 July 2018 and apply to years of assessment ending on or after that date]

 

(8) [Section 28(8) deleted by section 52(1)(e) of the Taxation Laws Amendment Act, 2015 (Act No. 25 of 2015) -deemed to have come into operation on 1 July 2018 and apply to years of assessment ending on or after that date]
(9) [Section 28(9) deleted by section 52(1)(e) of the Taxation Laws Amendment Act, 2015 (Act No. 25 of 2015) - deemed to have come into operation on 1 July 2018 and apply to years of assessment ending on or after that date]

 

(10) [Section 28(10) deleted by section 52(1)(e) of the Taxation Laws Amendment Act, 2015 (Act No. 25 of 2015) - deemed to have come into operation on 1 July 2018 and apply to years of assessment ending on or after that date]

 

(11) [Section 28(11) deleted by section 52(1)(e) of the Taxation Laws Amendment Act, 2015 (Act No. 25 of 2015) - deemed to have come into operation on 1 July 2018 and apply to years of assessment ending on or after that date]