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Income Tax Act, 1962 (Act 58 of 1962)

Chapter II : The Taxes

Part I : Normal Tax

6quat. Rebate or deduction in respect of foreign taxes on income

 

(1) Subject to subsection (2), where the taxable income of any resident during a year of assessment includes—
(a) any income received by or accrued to such resident from any source outside the Republic; or
(b) any proportional amount contemplated in section 9D; or
(c) [Paragraph (1)(c) deleted by section 4 of Act 59 of 2000];
(d) [Paragraph (1)(d) deleted by Act No. 24 of 2011 of the Taxation Laws Amendment Act];
(e) any taxable capital gain contemplated in section 26A, from a source outside the Republic; or
(f) any amount –
(i) contemplated in paragraph (a) or (b) which is received by or accrued to any other person and which is deemed to have been received by or accrued to such resident in terms of section 7;
(ii) of capital gain of any other person from a source outside the Republic and which is attributed to that resident in terms of paragraph 68, 69, 70, 71, 72 or 80 of the Eighth Schedule; or
(iii) contemplated in paragraphs (a),(b) or (e) which represents capital of a trust, and which is included in the income of that resident in terms of section 25B(2A) or taken into account in determining the aggregate capital gain or aggregate capital loss of that resident in terms of paragraph 80(3) of the Eighth Schedule,

in determining the normal tax payable in respect of that taxable income there must be deducted a rebate determined in accordance with this section.

[Subsection (1) substituted by section 10(1)(a) of the Taxation Laws Amendment Act, 2016 (Act No. 15 of 2016)]

 

(1A) For the purposes of subsection (1), the rebate shall be an amount equal to the sum of any taxes on income proved to be payable to any sphere of government of any country other than the Republic, without any right of recovery by any person (other than a right of recovery in terms of any entitlement to carry back losses arising during any year of assessment to any year of assessment prior to such year of assessment), by—
(a) such resident in respect of
(i) any income contemplated in subsection (1)(a); or
(ii) [Subparagraph (1A)(a)(ii) deleted by Act No. 24 of 2011 of the Taxation Laws Amendment Act]; or
(iii) any amount of taxable capital gain as contemplated in subsection (1)(e); or
(b) any controlled foreign company, in respect of such proportional amount contemplated in subsection (1)(b), subject to section 72A(3); or
(c) [Paragraph (1A)(c) deleted by the Revenue Laws Amendment Act of 2003];
(d) [Paragraph (1A)(d)deleted by the Revenue Laws Amendment Act of 2003];
(e) [Paragraph (1A)(e)deleted by the Taxation Laws Amendment Act, No. 17 of 2009]; or
(f) any other person contemplated in subsection (21)(f)(i) or (ii) or any trust contemplated in subsection (1)(f)(iii), in respect of the amount included in the taxable income of that resident as contemplated in subsection (1)(f),

which is so included in that resident's taxable income: Provided that—

(i) where such resident is a member of any partnership or a beneficiary of any trust and such partnership or trust is liable for tax as a separate entity in such other country, a proportional amount of any tax payable by such entity, which is attributable to the interest of such resident in such partnership or trust, shall be deemed to have been payable by such resident; and
(ii) for the purposes of this subsection, the amount so included in such resident's taxable income must be determined without regard to section 10B(3); and

 

(1B) Notwithstanding the provisions of subsection (1A)—
(a) the rebate or rebates of any tax proved to be payable as contemplated in subsection (1A), shall not in aggregate exceed an amount which bears to the total normal tax payable the same ratio as the total taxable income attributable to the income, proportional amount, taxable capital gain or amount, as the case may be, which is included as contemplated in subsection (1), bears to the total taxable income : Provided that—
(i) in determining the amount of the taxable income that is attributable to that income, proportional amount, taxable capital gain or amount, any allowable deductions contemplated in sections 11(n), 18 and 18A must be deemed to have been incurred proportionately in respect of income derived from sources within and outside the Republic;
(iA) the taxes contemplated in subsection (1A)(b) that are attributable to any proportional amount which—
(aa) [deleted by Act No. 24 of 2011 of the Taxation Laws Amendment Act]; or
(bb) relates to any amount contemplated in section 9D(9A)(a) which is not excluded from the application of section 9D(2) in terms of that section or section 9D(9)(b), shall in aggregate be limited to the amount of the normal tax which is attributable to those proportional amounts;
(iB) the taxes contemplated in subsection (1A)(a)(iii) which are attributable to any taxable capital gain in respect of an asset which is not attributable to a permanent establishment of the resident outside the Republic, must in aggregate be limited to the amount of normal tax which is attributable to that taxable capital gain;
(ii) where the sum of any such taxes proved to be payable (excluding any taxes contemplated in paragraphs (iA) and (iB) of this proviso) exceeds the rebate as so determined (hereinafter referred to as the excess amount), that excess amount may—
(aa) be carried forward to the immediately succeeding year of assessment and shall be deemed to be a tax on income paid to the government of any other country in that year; and
(bb) be set off against the amount of any normal tax payable by that resident during that year of assessment in respect of any amount derived from any other country which is included in the taxable income of that resident during that year, as contemplated in subsection (1), after any tax payable to the government of any other country in respect of any amount so included during such year of assessment which may be deducted in terms of subsection (1) and (1A) has been deducted from the amount of such normal tax payable in respect of such amount so included; and
(iii) the excess amount shall not be allowed to be carried forward for more than seven years reckoned from the year of assessment when such excess amount was for the first time carried forward;
(b) [deleted by section 4 of Act 59 of 2000];
(c) [deleted by the Revenue Laws Amendment Act of 2003];
(d) [deleted by the Revenue Laws Amendment Act of 2003];
(e) [deleted by the Revenue Laws Amendment Act, 2007 (Act No. 35 of 2007]

 

(1C)
(a) For the purpose of determining the taxable income derived by any resident from carrying on any trade, there may at the election of the resident be allowed as a deduction from the income of such resident so derived the sum of any taxes on income (other than taxes contemplated in subsection (1A)) paid or proved to be payable by that resident to any sphere of government of any country other than the Republic, without any right of recovery by any person other than in terms of a mutual agreement procedure in terms of an international tax agreement or a right of recovery in terms of any entitlement to carry back losses arising during any year of assessment to any year of assessment prior to such year of assessment.

[Subsection (1C)(a) substituted by section 6(1)(a) of the Taxation Laws Amendment Act, 2015 (Act No. 25 of 2015)]

(b) Where, during any year of assessment, any amount was deducted in terms of this subsection from the income of a resident and, in any year of assessment subsequent to that year of assessment, that resident receives any amount by way of refund in respect of the amount so deducted or is discharged from any liability in respect of that amount, so much of the amount so received or so much of the amount of that discharge as does not exceed that amount must be included in the income of that resident in respect of that subsequent year of assessment.

[Subsection (1C)(b) substituted by section 10(1)(b) of the Taxation Laws Amendment Act, 2016 (Act No. 15 of 2016) - commenced 1 January 2016]

(1D) Notwithstanding the provisions of subsection (1C), the deduction of any tax paid or proved to be payable as contemplated in that subsection shall not in aggregate exceed the total taxable income (before taking into account any such deduction) attributable to income which is subject to taxes as contemplated in that subsection, provided that in determining the amount of the taxable income that is attributable to that income, any allowable deductions contemplated in sections 11(n), 18 and 18A must be deemed to have been incurred proportionately in the ratio that that income bears to total income.

[Definition amended by section 6(1)(b) of the Taxation Laws Amendment Act, 2015 (Act No. 25 of 2015)]

 

(2) The rebate under subsection (1) and the deduction under subsection (1C) shall not be granted in addition to any relief to which the resident is entitled under any agreement between the governments of the Republic and the said other country for the prevention of or relief from double taxation, but may be granted in substitution for the relief to which the resident would be so entitled.

 

(3) For the purposes of this section—

taxes on income’ does not include any compulsory payment to the government of any other country which constitutes a consideration for the right to extract any mineral or natural oil.

 

(4) For the purposes of this section the amount of any foreign tax proved to be payable as contemplated in subsection (1A) or any amount paid or proved to be payable as contemplated in subsection (1C) in respect of any amount which is included in the taxable income of any resident during any year of assessment, shall be translated to the currency of the Republic on the last day of that year of assessment by applying the average exchange rate for that year of assessment.

[Definition amended by section 6(1)(c) of the Taxation Laws Amendment Act, (Act No. 25 of 2015]

 

(4A) If the amount translated in accordance with subsection (4) includes a number of cents that is less than one rand, that amount must be 5 rounded off to the nearest rand.

 

(5) Notwithstanding section 99(1) or 100 of the Tax Administration Act, an additional or reduced assessment in respect of a year of assessment to give effect to subsections (1) and (1A) may be made within a period that does not exceed six years from the date of the original assessment in respect of that year.