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Income Tax Act, 1962 (Act 58 of 1962)

Chapter II:; The Taxes

Part VII: Secondary Tax on Companies

64B. Levy and recovery of secondary tax on companies

 

 

(1)        For the purposes of this Part—

 

*definition "Affected company" [deleted by the Revenue laws Amendment Act, 74 of 2002];

"declared", in relation to any dividend (including a dividend in specie), means the approval of the payment or distribution thereof by the directors of the company or by some other person with comparable authority or, in the case of the liquidation of a company, by the liquidator thereof;

"dividend cycle" means—

(a) in relation to the first dividend declared by a company (other than a company which carries on long-term insurance business) on or after 17 March 1993, the period commencing on the later of—
(i) 1 September 1992;
(ii) the day following the date of declaration of the last dividend (other than a dividend in specie or a dividend payable on a preference share) declared by the company prior to 17 March 1993;
(iii) the date on which that company was incorporated, formed or otherwise established; and
(iv) the date on which that company becomes a resident,

and ending on the date on which such first dividend accrues to the shareholder concerned or on which the amount is deemed to have been declared as contemplated in section 64C(6).

(aA) in relation to the first dividend declared by a company which carries on long-term insurance business out of profits derived during any year of assessment commencing on or after 1 July 1993, the period commencing on the later of—
(i) the later date of the date on which that company was incorporated, formed or otherwise established or 1 July 1993; and
(ii) the day following the date of declaration of the last dividend (other than a dividend in specie or a dividend payable on a preference share) declared by the company prior to the declaration of the said first dividend,

and ending on the date on which such first dividend accrues to the shareholder concerned or on which the amount is deemed to have been distributed as contemplated in section 64C(6) and

(b) in relation to any subsequent dividend declared by that company, the period commencing immediately after the previous dividend cycle of the company and ending on the date on which such dividend accrues to the shareholder concerned or on which the amount is deemed to have been distributed as contemplated in section 64C(6):

Provided that

(i) any dividend cycle of a company that has commenced and that has not ended before the effective date defined in section 64D must be deemed to have ended on the day immediately before that effective date and must be deemed to be the final dividend cycle of that company; and
(ii) where a dividend cycle of a company ends on the day immediately before the effective date defined in section 64D, that dividend cycle must be deemed to be the final dividend cycle of that company;

 

"group of companies" means ‘group of companies’ as defined in section 41; and

*Definition "holding company" [deleted by the Revenue laws Amendment Act, 74 of 2002];

"intermediate company" [Deleted]

"profit" includes any amount deemed in terms of the definition of ‘dividend’ in section 1 to be a profit available for distribution;

 

(2) There shall be levied and paid for the benefit of the National Revenue Fund a tax, to be known as the secondary tax on companies, which is calculated at the rate of 10 per cent of the net amount, as determined in terms of subsection (3), of any dividend declared by any company, other than a headquarter company, which is a resident.

 

(3) Subject to subsection (3A), the net amount of any dividend referred to in subsection (2) is the amount by which the dividend declared by a company exceeds the sum of any dividends (other than any dividends contemplated in subsection (5)(c) which have accrued to that company during the dividend cycle in relation to that first-mentioned dividend,

Provided that—

(a) where the sum of such dividends accrued exceeds such dividend declared, the excess shall be carried forward and be deemed to be a dividend which accrued to the company during the succeeding dividend cycle of the company; and
(b) in the determination of the net amount of any dividend distributed in the course or in anticipation of the liquidation, winding up, deregistration or final termination of the corporate existence of a company, there shall be allowed as a deduction any dividend contemplated in subsection (5)(c)(i) or (ii) which has during the current or any previous dividend cycle accrued to the company.

 

(3A) In determining the sum of the dividends which have accrued to a company as contemplated in subsection (3), no regard must be had to—
(a) any dividend contemplated in subsection (5)(b), (c) or (f);
(b) [deleted by section 51 of the Taxation Laws Amendment Act No. 17 of 2009];
(c) any dividend which accrued to a borrower as contemplated in the definition of ‘securities lending arrangement’ in respect of a share which was borrowed in terms of that arrangement;
(d) [deleted by section 51 of the Taxation Laws Amendment Act No. 17 of 2009]; or
(f) any dividend declared by a headquarter company.

 

(4)        

(a) Where any dividend is declared by a company subject to the condition that it will be payable to shareholders registered in the company's share register on a specified date, such dividend or interim dividend shall for the purposes of this section be deemed to accrue to the shareholders on that date.

Provided that any dividend so declared by a company-

i)        before the effective date as defined in section 64D; and

ii)        that will only accrue to shareholders in that company's share register on a date after that effective date,

must be deemed to have accrued to such shareholders on the day immediately before that effective date.

 

(b) Any interim dividend declared by a company otherwise than as contemplated in paragraph (a), shall for the purposes of this section be deemed to accrue to the shareholders on the date upon which it is declared.

(c)        Where any cash or assets is or are transferred or distributed—

(i) by a company to shareholders of that company otherwise than by way of a formal declaration of a dividend; or
(ii) by the liquidator of a company to the shareholders of that company in the course of the winding up or liquidation of that company,

and the amount of such cash or the value of such assets, in whole or in part constitutes a dividend, such dividend shall for the purposes of this section be deemed to have been declared by the company and to have accrued to the shareholders on the date on which the shareholders became entitled to such cash or assets.

 

(5)        There shall be exempt from the secondary tax on companies—

(a) dividends declared by any company (other than a company that is a registered micro business as defined in the Sixth Schedule) the entire receipts and accruals of which, or so much of the receipts and accruals of which as are derived otherwise than from investments, are exempt from tax under the provisions of section 10: Provided that the provisions of this paragraph shall not apply to a company which is exempt from tax under the said provisions solely because it derives gross income of a particular nature;
(b) any dividend declared by a fixed property company contemplated in section 11(s) which may be allowed as a deduction in the determination of the taxable income of such company in terms of the provisions of that section;
(c) [deleted by the Taxation Laws Amendment Act No. 7 of 2010];
(d) [deleted by Revenue Laws Amendment Act, No. 32 of 2004];
(e) so much of any dividend declared by a company referred to in subsection (12) (e) during any subsequent year of assessment as contemplated in that subsection, as represents a distribution of an amount received by or accrued to such company as a result of the disposal of gold mining assets;
(f) any dividend declared by a controlled group company as contemplated in the definition of ‘group of companies’ which accrues to a shareholder (as defined in Part III) of that company if –
(i) that shareholder is a company forming part of the same group of companies as the company declaring the dividend;
(ii) [deleted by Revenue Laws Amendment Act No. 31 of 2005];
(iii) that shareholder would be subject to secondary tax on companies should that shareholder-
(aa) declare a dividend from that dividend so declared by that company; and
(bb) not elect that this paragraph must apply in respect of that dividend; and
(iv) [deleted by the Revenue Laws Amendment Act, 2003]
(v) the company declaring the dividend elects the exemption under this paragraph to apply by submitting this election –
(aa) no later than the last day on which the secondary tax on companies would otherwise be due but for this paragraph (or no later than any other subsequent date prescribed by the Commissioner), and
(bb) in such form as the Commissioner may prescribe,

Provided that this exemption shall not apply to the extent to which that dividend consist of any shares in that shareholder: Provided further that the provisions of this paragraph do not apply in respect of a dividend declared by a controlling group company to a controlled group company in relation to that controlling group company.

(g) [deleted by the Taxation Laws Amendment Act, 2008 (Act No. 3 of 2008)];
(h) [deleted by section 42 of Act 59 of 2000];
(i) in the case of any company which is a "qualifying company" as defined in section 37H, any dividend declared by such company during the period ending six months after the end of the last year of assessment during which such company qualifies for the tax holiday status referred to in that section out of profits derived during the period during which such company qualifies for such tax holiday status;
(j) any dividend declared by a company contemplated in paragraph (e)(i) of the definition of "company" in section 1,
(k) any dividend declared by a company to a natural person which constitutes a transfer of an interest in a residence as contemplated in paragraph 51 of the Eighth Schedule;
(kA) any dividend declared by a company which constitutes a disposal of an interest in a residence as contemplated in paragraph 51A of the Eighth Schedule;
(l) any dividend declared by any company that is a registered micro business as defined in the Sixth Schedule during any year of assessment during which such company is a registered micro business, to the extent that such dividend does not exceed the amount of R200 000 during such year,

Provided that the provisions of this paragraph shall only apply to the portion of any dividend that relates to the portion of the property contemplated in paragraph 46 of the Eighth Schedule.

 

(6)        [Deleted by the Revenue Laws Amendment Act, 2003].

 

(7) The secondary tax on companies shall be paid to the Commissioner by the company liable therefore by not later than the last day of the month following the month in which the dividend cycle relevant to such dividend ends, and each payment of such tax shall be accompanied by a return in such form as the Commissioner may require,

Provided that—

(i) the Commissioner may in any case extend the applicable date of payment; and
(ii) for the purposes of this subsection the expression "month" means any of the twelve portions into which any calendar year is divided.

 

(8) Where the Commissioner is satisfied that any amount of secondary tax on companies has not been paid in full, he may estimate the unpaid amount and issue to the company concerned a notice of assessment of the unpaid amount.

 

(9)        [Deleted by the Tax Administration Act, 2011 (Act No. 28 of 2011)].

 

(10)        [Deleted by the Revenue Laws Amendment Act, 2003].

 

(11)        [Deleted by the Tax Administration Act, 2011 (Act No. 28 of 2011)].

 

(12) [Subsection (12) was deleted by the Taxation Laws Amendment Act, 2013 (Act No. 31 of 2013) Government Gazette 37158 dated 12 December 2013]

 

(13) In the determination of the net amount of any dividend declared by a company which carries on long-term insurance business, the amount to be taken into account in terms of subsection (3) in respect of dividends accrued to the company shall be limited to dividends accrued on shares constituting an asset in its corporate fund.

 

(14)        [Deleted by Revenue Laws Amendment Act No. 20 of 2006].

 

(15)        [Deleted by the Taxation Laws Amendment Act, 2008 (Act No. 3 of 2008)].

 

(16)        [Deleted by the Taxation Laws Amendment Act, 2008 (Act No. 3 of 2008)].

 

(17)        [Deleted by the Taxation Laws Amendment Act, 2008 (Act No. 3 of 2008)].

 

(18) [Deleted by the Taxation Laws Amendment Act, 2009 (Act No. 17 of 2009)].

 

(19)        [Deleted by the Taxation Laws Amendment Act, 2009 (Act No. 17 of 2009)].