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

Schedules

Eighth Schedule : Determination of Taxable Capital Gains and Assessed Capital Losses (Section 26A)

Part IX : Roll-Overs

 

65.        Involuntary disposal

 

(1) A person may elect that this paragraph applies in respect of the disposal of an asset (other than a financial instrument), where—
(a) that asset is disposed of by way of operation of law, theft or destruction;
(b) proceeds accrue to that person by way of compensation in respect of that disposal;
(c) those proceeds are equal to or exceed the base cost of that asset;
(d)
(i) an amount at least equal to the receipts and accruals from that disposal has been or will be expended to acquire one or more asset (hereinafter referred to as the ‘replacement asset or assets’);
(ii) all the replacement assets constitute assets contemplated in section 9(2)(j) or (k);

[Paragraph 65(1)(d)(ii) of the Eighth Schedule substituted by section 119(1)(a) of the Taxation Laws Amendment Act, 2015 (Act No. 25 of 2015)]

(iii) the contracts for the acquisition of the replacement asset or assets have all been or will be concluded within 12 months after the date of the disposal of that asset; and
(iv) the replacement asset or assets will all be brought into use within three years of the disposal of that asset:

Provided that the Commissioner may, on application by the taxpayer, decide to extend the period within which the contract must be concluded or asset brought into use by no more than six months if all reasonable steps were taken to conclude those contracts or bring those assets into use; and

[Proviso to paragraph 64(1)(d)of the Eighth Schedule substituted by section 119(b) of the Taxation Laws Amendment Act, 2015 (Act No. 25 of 2015)]

(e) that asset is not deemed to have been disposed of and to have been reacquired by that person.

 

(2) Where a person has elected in terms of subparagraph (1) that this paragraph must apply in respect of the disposal of an asset, any capital gain determined in respect of that disposal must, subject to subparagraphs (4), (5) and (6) be disregarded when determining that person’s aggregate capital gain or aggregate capital loss.

 

(3) Where a person acquires more than one replacement asset as contemplated in subparagraph (1), that person must, in applying subparagraphs (4) and (5), apportion the capital gain derived from the disposal of that asset to each replacement asset in the same ratio as the receipts and accruals from that disposal respectively expended in acquiring each of those replacement assets bear to the total amount of those receipts and accruals expended in acquiring all those replacement assets.

 

(4) Where a replacement asset contemplated in subparagraph (1) constitutes a depreciable asset, the person must treat as a capital gain for a year of assessment, so much of the disregarded capital gain contemplated in subparagraph (3), as bears to the total amount of that disregarded gain apportioned to that replacement asset as contemplated in subparagraph (3) the same ratio as the amount of any deduction or allowance allowed in that year in respect of the replacement asset bears to the total amount of the deduction or allowance (determined with reference to the cost or value of that asset at the time of acquisition thereof) which is allowable for all years of assessment in respect of that replacement asset.

 

(5) Where a person during any year of assessment disposes of a replacement asset and any portion of the disregarded capital gain which is apportioned to that asset, has not otherwise been treated as a capital gain in terms of this paragraph, that person must treat that portion of disregarded capital gain as a capital gain from the disposal of that replacement asset in that year of assessment.

 

(6) Where a person fails to conclude a contract or fails to bring any replacement asset into use within the period prescribed in subparagraph (1)(d)(iii) or (iv), subparagraph (2) shall not apply and that person must—
(a) treat the capital gain contemplated in subparagraph (2) as a capital gain on the date on which the relevant period ends;
(b) determine interest at the prescribed rate on that capital gain from the date of that disposal to the date contemplated in item (a); and
(c) treat that interest as a capital gain on the date contemplated in item (a) when determining that person’s aggregate capital gain or aggregate capital loss.

 

(7) Where a replacement asset or assets constitute personal use assets, the provisions of this paragraph shall not apply.

 

65B. Disposal by recreational club

 

(1) A recreational club approved in terms of section 30A may elect that this paragraph applies in respect of the disposal of an asset the whole of which was used mainly for purposes of providing social and recreational facilities and amenities for members of that club, where—
(a) proceeds accrue to that club in respect of that disposal;
(b) those proceeds are equal to or exceed the base cost of that asset;

(c)        

(i) an amount at least equal to the receipts and accruals from that disposal has been or will be expended to acquire one or more replacement assets all of which will be used mainly for such purposes;
(ii) the contracts for the acquisition of the replacement asset or assets have all been or will be concluded within 12 months after the date of the disposal of that asset; and
(iii) the replacement asset or assets will all be brought into use within three years of the disposal of that asset:

Provided that the Commissioner may extend the period within which the contract must be concluded or asset brought into use by no more than six months if all reasonable steps were taken to conclude those contracts or bring those assets into use; and

(d) that asset is not deemed to have been disposed of and to have been reacquired by that club.

 

(2) Where a club has elected in terms of subparagraph (1) that this paragraph must apply in respect of the disposal of an asset, any capital gain determined in respect of that disposal must, subject to subparagraphs (3), (4) and (5) be disregarded when determining that club’s aggregate capital gain or aggregate capital loss.

 

(3) Where a club acquires more than one replacement asset as contemplated in subparagraph (1), that club must, in applying subparagraphs (4) and (5), apportion the capital gain derived from the disposal of that asset to each replacement asset in the same ratio as the receipts and accruals from that disposal respectively expended in acquiring each of those replacement assets bear to the total amount of those receipts and accruals expended in acquiring all those replacement assets.

 

(4) Where a club during any year of assessment disposes of a replacement asset and any portion of the disregarded capital gain which is apportioned to that asset, has not otherwise been treated as a capital gain in terms of this paragraph, that club must treat that portion of disregarded capital gain as a capital gain from the disposal of that replacement asset in that year of assessment.

 

(5) Where a club fails to conclude a contract or fails to bring any replacement asset into use within the period prescribed in subparagraph (1)(c)(ii) and (iii), that club must—
(a) treat the capital gain contemplated in subparagraph (2) as a capital gain on the date on which the relevant period ends;
(b) determine interest at the prescribed rate on that capital gain from the date of that disposal to the date contemplated in item (a); and
(c) treat that interest as a capital gain on the date contemplated in item (a) when determining that club’s aggregate capital gain or aggregate capital loss.

 

66. Reinvestment in replacement assets

 

(1) A person may elect that this paragraph applies in respect of the disposal of an asset, where—
(a) that asset qualified for a deduction or allowance in terms of section 11(e), 11D(2), 12B, 12C, 12DA, 12E, 14, 14bis or 37B;
(b) the proceeds received or accrued from that disposal are equal to or exceed the base cost of that asset;
(c) an amount at least equal to the receipts and accruals from that disposal has been or will be expended to acquire one or more assets (hereinafter referred to as the ‘replacement asset or assets’), all of which will qualify for a capital deduction or allowance in terms of section 11(e), 11D(2), 12B, 12C, 12DA, or 12E, or 37B;
(d) all the replacement assets constitute assets contemplated in section 9(2)(j) or (k);

[Paragraph 66(1)(d) of the Eighth Schedule substituted by section 78(1) of the Taxation Laws Amendment Act, 2016 (Act No. 15 of 2016) - effective 1 January 2012]

(e) the contracts for the acquisition of a replacement asset or assets are or will be concluded within 12 months after the asset contemplated in item (a) is disposed of and are all brought into use within three years after that disposal: Provided that the Commissioner may, on application by the taxpayer, decide to extend the period by which the contracts must be concluded or assets brought into use by no more than six months if all reasonable steps were taken to conclude those contracts or bring those assets into use; and

[Proviso to paragraph 66(1)(e) of the Eighth Schedule substituted by section 120 of the Taxation Laws Amendment Act, 2015 (Act No. 25 of 2015)]

(f) that asset is not deemed to have been disposed of and to have been reacquired by that person.

 

(2) Where a person has elected in terms of subparagraph (1) that this paragraph must apply in respect of the disposal of an asset, any capital gain determined in respect of that disposal must, subject to subparagraphs (4), (5), (6) and (7), be disregarded when determining that person’s aggregate capital gain or aggregate capital loss.

 

(3) Where a person acquires more than one replacement asset as contemplated in subparagraph (1), that person must, in applying subparagraphs (4), (5) and (6), apportion the capital gain derived from the disposal of that asset to each replacement asset in the same ratio as the receipts and accruals from that disposal respectively expended in acquiring each of those replacement assets bear to the total amount of those receipts and accruals expended in acquiring all those replacement assets.

 

(4) A person must treat as a capital gain for a year of assessment, so much of the disregarded capital gain contemplated in subparagraph (2), as bears to the total amount of that disregarded capital gain apportioned to that replacement asset as contemplated in subparagraph (3) the same ratio as the amount of any deduction or allowance allowed in that year in terms of section 11(e),11D(2), 12B, 12C, 12DA, 12E or 37B in respect of the replacement asset bears to the total amount of the deduction or allowance in terms of that section (determined with reference to the cost or value of that asset at the time of acquisition thereof) which is allowable for all years of assessment in respect of that replacement asset.

 

(5) Where a person during any year of assessment disposes of a replacement asset and any portion of the disregarded capital gain which is apportioned to that asset as contemplated in subparagraph (3), has not been treated as a capital gain in terms of subparagraph (4) or (6), that person must treat that portion of disregarded capital gain as a capital gain from the disposal of that replacement asset in that year of assessment.

 

(6) Where during any year of assessment a person ceases to use a replacement asset for the purposes of that person’s trade and any portion of the disregarded capital gain which is apportioned to that asset as contemplated in subparagraph (3), has not been treated as a capital gain in terms of subparagraph (4) or (5), that person must treat that portion of disregarded capital gain as a capital gain for that year of assessment.

 

(7) Where a person fails to conclude a contract or to bring any replacement asset into use within the period prescribed in subparagraph (1)(e), subparagraph (2) shall not apply and that person must—
(a) treat the capital gain contemplated in subparagraph (2) as a capital gain on the date that the relevant period ends;
(b) determine interest at the prescribed rate on that capital gain from the date of that disposal to the date contemplated in item (a); and
(c) treat that interest as a capital gain on the date contemplated in item (a) when determining that person’s aggregate capital gain or aggregate capital loss.

 

67. Transfer of asset between spouses

 

[Paragraph 67 of the Eighth Schedule repealed by section 85 of the Taxation Laws Amendment Act, 2018 (Act No. 23 of 2018]

 

67A. Capital gains and capital losses in respect of interests in collective investment schemes in property

 

[Paragraph 67A repealed by section 127(1) of the Taxation Laws Amendment Act, 2012 (Act No. 22 of 2012) - effective 1 April 2012]

 

67AB. Disposal and part-disposal of interests in collective investment schemes in property

 

[Paragraph 67AB of the Eighth Schedule repealed by section 128(1) of the Taxation Laws Amendment Act, 2012 (Act No. 22 of 2012) - 1 April 2012]

 

67B. Disposal of immovable property by share block company

 

(1)        For the purposes of this paragraph—

 

'share'

means a share as defined in section 1 of the Share Blocks Control Act;

 

'share block company'

means a share block company as defined in section 1 of the Share Blocks Control Act; and

 

'Share Blocks Control Act'

[Definition deleted by section 91 of the Taxation Laws Amendment Act, 2014 (Act No. 43 of 2014)].

 

(2) This paragraph applies where a person who holds a right of use of a part of the immovable property of a share block company, which right is conferred by reason of the ownership of a share by that person in that share block company, acquires ownership of that part of immovable property from that share block company as part of any transaction in terms of which a disposal of that part of immovable property is made by that share block company.

 

(3) Where a person who owns a share in a share block company acquires ownership of immovable property as part of any transaction in terms of which a disposal is made by that share block company as contemplated in subparagraph (2)—
(a) the share block company must disregard any capital gain or capital loss determined in respect of that disposal; and
(b) that person must—
(i) disregard any capital gain or capital loss determined in respect of any disposal of that share as a result of that disposal; and
(ii) be treated as having—
(aa) acquired that immovable property for an amount equal to the expenditure contemplated in paragraph 20 incurred by the person in acquiring that share;
(bb) incurred the expenditure contemplated in subsubitem (aa) on the same date that the expenditure was incurred by the person in acquiring that share;
(cc) effected improvements to that immovable property for an amount equal to the expenditure contemplated in paragraph 20 incurred by that person in effecting improvements to the part of the immovable property of the share block company in respect of which the person had a right of use as a result of the ownership of that share;
(dd) incurred the expenditure contemplated in subsubitem (cc) on the same date that the expenditure was incurred by the person in effecting the improvements to the part of the immovable property of the share block company in respect of which the person had a right of use as a result of the ownership of that share;
(ee) acquired that immovable property on the date that the share was acquired by the person; and
(ff) used that immovable property in the same manner as the person used the immovable property in respect of which the person had a right of use as a result of the ownership of that share; and
(c) any valuation of that share which was done by that person within the period prescribed by paragraph 29(4) must be deemed to have been done by that person in respect of that immovable property.

 

[Paragraph 67B of the Eighth Schedule inserted by section 129(1) of the Taxation Laws Amendment Act, 2012 (Act No. 22 of 2012) - effective 1 January 2013]

 

67C.        Mineral rights conversions and renewals

 

Notwithstanding paragraph 11, there is no disposal where—

(a) any old order right or OP26 right as defined in Schedule II of the Mineral and Petroleum Resources Development Act wholly or partially continues in force or is wholly or partially converted into a new right pursuant to the same Schedule; or

[Paragraph 67C(a) of the Eighth Schedule substituted by section 145 of the Taxation Laws Amendment Act, 2013 (Act No. 31 of 2013), GG 37158, dated 12 December 2013]

(b) any prospecting right, mining right, exploration right, production right, mining permit, retention permit or reconnaissance permit, as defined in section 1 of the Mineral and Petroleum Resources Development Act is wholly or partially renewed in terms of that Act,

[Paragraph 67C(b) of the Eighth Schedule substituted by section 145 of the Taxation Laws Amendment Act, 2013 (Act No. 31 of 2013), GG 37158, dated 12 December 2013]

and the continued, converted or renewed right or permit will be treated as one and the same asset as the right or permit before continuation, conversion or renewal for purposes of this Act.

[Words following paragraph 67C(b) of the Eighth Schedule substituted by section 28(1) of Act No. 16 of 2004]

 

[Paragraph 67C of the Eighth Schedule inserted by section 111(1) of  the Revenue Laws Amendment Act, 2003 (Act No. 45 of 2003) - effective 1 May 2004]

 

67D.        Communications licence conversions

 

(1) Where existing licences referred to in Chapter 15 of the Electronic Communications Act, 2005 (Act No. 36 of 2005), are converted to new licences in terms of section 93 of that Act, a licensee of an existing licence or licences is deemed to have disposed of the existing—
(a) licence for an amount equal to the base cost of the licence; or
(b) licences for an amount equal to the aggregate of the base cost of the licences,

on the date of the conversion.

 

(2) The licensee of a new licence contemplated in subparagraph (1)—
(a) is deemed to have acquired the new licence—
(i) in the case where an existing licence is converted to a new licence, at a cost, recognised as such for the purposes of paragraph 20, equal to the expenditure incurred in respect of the existing licence;
(ii) in the case where two or more existing licences are converted to a new licence, at a cost, recognised as such for the purposes of paragraph 20, equal to the aggregate of the expenditure incurred in respect of the existing licences; and
(iii) in the case where an existing licence is converted to two or more new licences, at a cost, recognised as such for the purposes of paragraph 20, that bears to the expenditure incurred in respect of the existing licence the same ratio as the value of that new licence bears to the aggregate value of the new licences,

which cost must be treated as expenditure actually incurred by the licensee in respect of the new licence or licences for the purposes of paragraph 20; and

(b) is deemed to have incurred the cost contemplated in item (a) on the day immediately after the conversion.

 

[Paragraph 67D of the Eighth Schedule inserted by section 77(1) of the Taxation Laws Amendment Act, 2009 (Act No. 17 of 2009)]