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Income Tax Act, 1962 (Act 58 of 1962)

Schedules

Seventh Schedule

Benefits or Advantages Derived by reason of Employment or the Holding of any Office

1. Definitions

 

1)        For the purposes of this Schedule, unless the context otherwise indicates—

 

"associated institution"

in relation to any single employer, means—

a) where the employer is a company, any other company which is associated with the employer company by reason of the fact that both companies are managed or controlled directly or indirectly by substantially the same persons; or
b) where the employer is not a company. any company which is managed or controlled directly or indirectly by the employer or by any partnership of which the employer is a member; or
c) any fund established solely or mainly for providing benefits for employees or former employee's of the employer or for employees or former employees of the employer and any company which is in terms of paragraph (a) or (b) an associated institution in relation to the employer, but excluding any fund established by a trade union or industrial council and any fund established for postgraduate research otherwise than out of moneys provided by the employer or by any associated institution in relation to the employer;

 

"consideration"

as respects any reference in this Schedule to any consideration given by an employee does not include any consideration in the form of services rendered or to be rendered by the employee;

 

"defined benefit component"

means a component of a pension fund, provident fund or retirement annuity fund other than a defined contribution component of a fund;

[Definition inserted by section 117(1)(a) of the Taxation Laws Amendment Act, 2013 (Act No. 31 of 2013)]

 

"defined contribution component"

means a component of a pension fund, provident fund or retirement annuity fund in respect of which the benefit on retirement to an employee as a member of the fund has a value equal to the value of—

(a) the contributions paid by the member and by the employer in terms of the rules of the fund that determine the rates of both their contributions at a fixed rate;
(b) less such expenses as the board of that fund determined should be deducted from the contributions paid;
(c) plus any amount credited to the member's individual account upon—

(i)        the commencement of the member's membership of the fund;

(ii)        the conversion of the component of the fund to which the member belongs from a defined benefit component to a defined contribution component; or

(iii)        the amalgamation of that fund with any other fund, if any,

other than amounts taken into account in terms of subparagraph (d);

(d)        plus any other amounts lawfully permitted, credited to or debited from the member's individual account, if any,

as increased or decreased by fund return: Provided that the board may elect to smooth the fund return;

[Definition inserted by section 117(1)(a) of the Taxation Laws Amendment Act, 2013 (Act No. 31 of 2013)]

 

"employee"

in relation to any employer, means a person who is an employee in relation to such employer for the purposes of the Fourth Schedule, excluding any person who prior to 1 March 1992 by reason of superannuation, ill-health or other infirmity retired from the employ of such employer, but including, in relation to any company, any director of such company and any person who was previously employed by, or was a director of, such company if such person is or was the sole holder of shares in or one of the controlling holders of shares in such company and, for the purposes of paragraphs 2 (h) and 13, including any person who has retired as aforesaid and who, after the employee’s retirement is released by the employee’s employer from an obligation which arose before the employee's retirement to reimburse the employer for an amount paid by the employer on behalf of the employee or to pay any amount which became owing by the employee to the employer before the employee's retirement;

[Definition amended by section 117(b) of Act No. 31 of 2013]

 

"employer"

means any person who is an employer as defined in paragraph 1 of the Fourth Schedule and includes—

a) any company; and
b) for the purpose of paragraph 2 and the determination of the cash equivalent of the value of any taxable benefit granted to any person who derives remuneration as defined in the said paragraph from employment in the public service or any administration or undertaking of the State or who holds office under the Republic, the State;

 

"employment"

means any office or employment;

"loan" includes any form of credit and any loan applied directly towards the replacement of any other loan;

"month" means any of the twelve portions into which any calendar year is divided;

 

"official rate of interest"

means

a) in the case of a debt which is denominated in the currency of the Republic, a rate of interest equal to the South African repurchase rate plus 100 basis points; or
b) in the case of a debt which is denominated in any other currency, a rate of interest that is the equivalent of the South African repurchase rate applicable in that currency plus 100 basis points:

Provided that where a new repurchase rate or equivalent rate is determined, the new rate of interest applies for the purposes of this definition from the first day of the month following the date on which that new repurchase rate or equivalent rate came into operation;

[Definition amended by section 93(b) of the Taxation Laws Amendment Act, 2015 (Act No. 25 of 2015]

 

"retirement-funding income"

means—

(a) in relation to any employee or the holder of an office (including a member of a body of persons whether or not established by or in terms of any law) who in respect of his or her employment derives any income constituting remuneration as defined in paragraph 1 of the Fourth Schedule and who is a member of or, as an employee, contributes to a pension fund or provident fund established for the benefit of employees of the employer from whom such income is derived, that part of the employee's said income as is taken into account in the determination of the contributions made by the employer for the benefit of the employee to such pension fund or provident fund in terms of the rules of the fund; or
(b) in relation to a partner in a partnership (other than a partner contemplated in paragraph (a)) that part of the partner's income from the partnership in the form of the partner's share of profits as is taken into account in the determination of the contributions made by the partnership for the benefit of the partner to a pension fund or provident fund in terms of the rules of the fund: Provided that for the purposes of this definition a partner in a partnership must be deemed to be an employee of the partnership and a partnership must be deemed to be the employer of the partners in that partnership;

[Definition inserted by section 117(1)(c) of the Taxation Laws Amendment Act, 2013 (Act No. 31 of 2013)]

 

"taxable benefit"

means a taxable benefit contemplated in paragraph 2, whether the grant of such benefit is voluntary or otherwise, but excluding"—

a) any benefit the amount or value of which is exempt from normal tax under the provisions of section 10 of this Act;
b) any benefit provided by any benefit fund in respect of medical, dental and similar services. hospital services, nursing services and medicines;
c) any lump sum benefit payable by a benefit fund, pension fund, pension preservation fund, provident fund or provident preservation fund being a benefit referred to in the definition of "benefit fund" in section 1 of this Act or in paragraph (i) of the proviso to paragraph (c) of the definition of "pension fund" in that section or in paragraph (a) of the definition of "provident fund" in that section.
d) any benefit or privilege received by or accrued to a person contemplated in section 9(2)(g) or (h) stationed outside the Republic which is attributable to that person’s services rendered outside the Republic; or
e) any severance benefit.