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Income Tax Act, 1962 (Act 58 of 1962)

Chapter II: The Taxes

Part I: Normal Tax

37A. Closure rehabilitation company or trust

 

(1) For purposes of determining the taxable income derived by a person from carrying on any trade, any cash paid during any year of assessment commencing on or after 2 November 2006 by that person to a company or trust shall be deducted from that person’s income if—

[Words in subsection (1) preceding paragraph (a) substituted by section 28(1)(a) of Act No. 8 of 2007]

(a) the sole object of that company or trust is to apply its property solely for rehabilitation upon premature closure, decommissioning and final closure, and post closure coverage of any latent and residual environmental impacts on the area covered in terms of any permit, right, reservation or permission contemplated in paragraph (d)(i)(aa) to restore one or more areas to their natural or predetermined state, or to a land use which conforms to the generally accepted principle of sustainable development;
(b) that company or trust holds assets solely for purposes contemplated in paragraph (a);

[Subsection (1)(b) substituted by section 28(1)(b) of Act No. 8 of 2007]

(c) that company or trust makes distributions solely for purposes contemplated in paragraph (a), or subsection (3) or (4); and

[Subsection (1)(c) substituted by section 28(1)(c) of Act No. 8 of 2007]

(d) that person—

(i)        

(aa) holds a permit or right in respect of prospecting, exploration, mining or production, an old order right or OP26 right as defined in item 1 of Schedule II or any reservation or permission for or right to the use of the surface of land as contemplated in item 9 of Schedule II to the Mineral and Petroleum Resources Development Act; or

[Subsection (1)(d)(i)(aa) substituted by section 84(a) of Act No. 31 of 2013]

(bb) is engaged in prospecting, exploration, mining or production in terms of any permit, right, reservation or permission as contemplated in item (aa); or
(ii) after approval by the Commissioner, paid any cash to that company or trust and that payment was not part of any transaction, operation or scheme designed solely or mainly for purposes of shifting the deduction contemplated in this subsection from another person to that person.

 

(2)        The company or trust contemplated in subsection (1) may only hold—

(a) financial instruments issued by any—
(i) collective investment scheme as regulated in terms of the Collective Investment Schemes Control Act;

[Subsection (2)(a)(i) substituted by section 84(b) of Act No. 31 of 2013]

(ii) long-term insurer as regulated in terms of the Long-term Insurance Act;

[Subsection (2)(a)(ii) substituted by section 84(b) of Act No. 31 of 2013]

(iii) bank as regulated in terms of the Banks Act; or

[Subsection (2)(a)(iii) substituted by section 84(b) of Act No. 31 of 2013]

(iv) mutual bank as regulated in terms of the Mutual Banks Act, 1993 (Act No. 124 of 1993);
(b) financial instruments of a listed company unless—
(i) those financial instruments are issued by a person contemplated in subsection (1)(d); or

[Subsection (2)(b)(i) substituted by section 28(1)(e) of Act No. 8 of 2007]

(ii) those financial instruments are issued by a person that is a connected person in relation to a person contemplated in subsection (1)(d);

[Subsection (2)(b)(ii) substituted by section 28(1)(e) of Act No. 8 of 2007]

(c) financial instruments issued by any sphere of government in the Republic; or
(d) any other investments which were held by that company or trust before 18 November 2003.

 

(3) To the extent that the Cabinet member responsible for mineral resources is satisfied that all of the areas in terms of any permit, right, reservation or permission contemplated in subsection (1)(d)(i)(aa) that have been rehabilitated as contemplated in subsection (1)(a), the company or trust in respect of those areas must be wound-up or liquidated and its assets remaining after the satisfaction of its liabilities must be transferred to—

[Words preceding subsection (3)(a) substituted by section 84(c) of Act No. 31 of 2013]

(a) another company or trust as contemplated in this section as approved of by the Commissioner; or

[Subsection (3)(a) substituted by section 28(1)(f) of Act No. 8 of 2007]

(b) if no such company or trust has been established, to an account or trust prescribed by the Cabinet member responsible for mineral resources as approved of by the Commissioner if the Commissioner is satisfied that such company or trust satisfies the objects of subsection (1)(a).

[Subsection (3)(b) substituted by section 84(d) of Act No. 31 of 2013

 

(4) If the Cabinet member responsible for mineral resources is satisfied that a company or trust as contemplated in subsection (1)(a)—

[Words preceding subsection (4)(a) substituted by section 84(e) of Act No. 31 of 2013]

(a) will be able to satisfy all of the liabilities of that company or trust; and
(b) such company or trust has sufficient assets to rehabilitate and restore, as contemplated in subsection (1)(a), all areas to which any permit, right, reservation or permission contemplated in subsection (1)(d)(i)(aa) relates, as the case may be,

that company or trust may transfer assets not required for purposes of paragraphs (a) and (b) to another company or trust established in terms of this section as approved by the Commissioner.

 

(5)        

(a) The constitution of a company or the instrument establishing a trust contemplated in this section must incorporate the provisions of this section and any amendments thereto.

[Subsection (5) renumbered to subsection (5)(a) by section 28(1)(h) of Act No. 8 of 2007]

(b) Where the constitution of a company or the instrument establishing a trust contemplated in this section does not comply with this section, it shall be deemed to comply for a period not exceeding two years, if the person responsible in a fiduciary capacity for the funds and the assets of that company or trust, furnishes the Commissioner with a written undertaking that that company or trust will be administered in compliance with this section.

[Subsection (5)(b) inserted by section 28(1)(i) of Act No. 8 of 2007]

 

(6) If a company or trust contemplated in this section contravenes any provision of subsection (2) during any year of assessment by holding property other than property contemplated in that subsection—
(a) an amount of taxable income is deemed to accrue equal to the market value of that other property on the first date that company or trust held that other property; and
(b) the deemed amount contemplated in paragraph (a) shall be included in the income of the person contemplated in subsection (1)(d) for the year of assessment of that person during which that contravention occurred to the extent that other property is (directly or indirectly) derived from cash paid by that person to that company or trust.

[Subsection (6)(b) substituted by section 28(1)(j) of Act No. 8 of 2007]

 

(7) If the company or trust contemplated in this section contravenes any provision of subsection (1)(a) during any year of assessment by distributing property from that company or trust for a purpose other than—

(a)        rehabilitation upon premature closure;

(b)        decommissioning and final closure;

(c)        post closure coverage of any latent or residual environmental impacts; or

(d)        transfer to another company, trust, or account established for the purposes contemplated in subsection (1)(a),

an amount equal to the market value of property that was so distributed must for purposes of this Act be deemed to be an amount of taxable income which accrued to such company or trust during the year of assessment in which that distribution occurred

[Subsection (7) substituted by section 47 of Act No. 35 of 2007]

 

(8) Where the Commissioner is satisfied that a company or trust contemplated in this section has contravened any provision of this section during any year of assessment, the Commissioner may—
(a) include an amount equal to twice the market value of all of the property held in that company or trust on the date of that contravention as taxable income; and
(b) include the amount contemplated in paragraph (a) in the income of the person contemplated in subsection (1)(d) for the year of assessment of that person during which the Commissioner is satisfied the contravention occurred to the extent that property is (directly or indirectly) derived from cash paid by that person to that company or trust:

[Subsection (8)(b) substituted by section 28(1)(l) of Act No. 8 of 2007]

Provided that the Commissioner may reduce the amount of taxable income contemplated under this subsection as the Commissioner may think fit.

 

[Section 37A inserted by section 27 of Act No. 20 of 2006]