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Income Tax Act, 1962 (Act 58 of 1962)

Chapter II: The Taxes

Part I: Normal Tax

37B. Deductions in respect of environmental expenditure

 

(1)        For purposes of this section—

 

'environmental treatment and recycling asset' means any air, water, and solid waste treatment and recycling plant or pollution control and monitoring equipment (and any improvement to the plant or equipment) if the plant or equipment is—

(a) utilised in the course of a taxpayer's trade in a process that is ancillary to any process of manufacture or any other process which, in the opinion of the Commissioner, is of a similar nature; and
(b) required by any law of the Republic for purposes of complying with measures that protect the environment; and

[Definition substituted by section 44(a) of Act No. 17 of 2009]

 

'environmental waste disposal asset' means any air, water, and solid waste disposal site, dam, dump, reservoir, or other structure of a similar nature, or any improvement thereto, if the structure is—

(a) of a permanent nature;
(b) utilised in the course of a taxpayer's trade in a process that is ancillary to any process of manufacture or any other process which, in the opinion of the Commissioner, is of a similar nature; and
(c) required by any law of the Republic for purposes of complying with measures that protect the environment.

[Definition substituted by section 44(a) of Act No. 17 of 2009]

 

(2) There shall be allowed to be deducted from the income of the taxpayer, in respect of any year of assessment, an allowance equal to—
(a) in the case of a new and unused environmental treatment and recycling asset owned by the taxpayer or acquired by the taxpayer as purchaser in terms of an agreement contemplated in paragraph (a) of the definition of an 'instalment credit agreement' in section 1 of the Value-Added Tax Act 40 per cent of the cost to the taxpayer to acquire the asset in the year of assessment that it is brought into use for the first time by that taxpayer, and 20 per cent in each succeeding year of assessment; and

[Subsection (2)(a) substituted by section 85 of Act No. 31 of 2013]

(b) in the case of a new and unused environmental waste disposal asset owned by the taxpayer or acquired by the taxpayer as purchaser in terms of an agreement contemplated in paragraph (a) of the definition of an 'instalment credit agreement' in section 1 of the Value-Added Tax Act five per cent of the cost to the taxpayer to acquire the asset in the year of assessment that it is brought into use for the first time by that taxpayer, and five per cent in each succeeding year of assessment.

[Subsection (2)(b) substituted by section 85 of Act No. 31 of 2013]

[Subsection (2) substituted by section 44(b) of Act No. 17 of 2009]

 

(3) For the purposes of this section, the cost to a taxpayer of any asset shall be deemed to be the lesser of the actual cost to the taxpayer or the cost which a person would, if that person had acquired such asset under a cash transaction concluded at arm's length on the date on which the transaction for the acquisition was in fact concluded, have incurred in respect of the direct cost of the acquisition.

 

(4) Where any asset in respect of which any deduction is claimed in terms of this section was during any previous year of assessment used by the taxpayer for the purposes of any trade carried on by such taxpayer, the receipts and accruals of which were not included in the income of such taxpayer during such year, any deduction which could have been allowed in terms of this section during such year or any subsequent year in which such asset was used by the taxpayer shall for the purposes of this section be deemed to have been allowed during such previous year or years as if the receipts and accruals of such trade had been included in the income of such taxpayer.

[Subsection (4) substituted by section 45(1) of Act No. 60 of 2008 - effective 1 March 2009]

 

(5) No deduction shall be allowed under this section in respect of any asset that has been disposed of by the taxpayer during any previous year of assessment.

 

(6) For purposes of determining the taxable income derived during any year of assessment by a taxpayer, there shall be allowed as a deduction any expenditure or loss in respect of decommissioning, remediation or restoration arising from any trade previously carried on by that taxpayer to the extent that such expenditure or loss—
(a) is incurred for purposes of complying with any law of the Republic that provides for the protection of the environment upon the cessation of trade;
(b) would otherwise have been allowed as a deduction in terms of section 11 had that taxpayer still been carrying on that trade; and
(c) is not otherwise allowed as a deduction.

 

(7) Any assessed loss of a taxpayer as denned in section 20(2) that is attributable to any expenditure or loss contemplated in subsection (6) may be set off against income derived by that taxpayer during a year of assessment notwithstanding the fact that the taxpayer is not carrying on any trade during that year.

 

(8) No deduction shall be allowed under section 11, 12C or 13 in respect of the cost of an environmental treatment and recycling asset or an environmental waste disposal asset.

 

(9) The deductions which may be allowed in terms of this section in respect of any asset shall not in the aggregate exceed the cost to the taxpayer of such asset.

 

[Section 37B inserted by section 48 of Act No. 35 of 2007]