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

Chapter II : The Taxes

Part I : Normal Tax

23G. Sale and leaseback arrangements

 

(1)        For the purposes of this section—

 

"asset"

means any asset, whether movable or immovable, or corporeal or incorporeal;

 

"sale and leaseback arrangement"

means any arrangement whereby—

(a) any person disposes of any asset (whether directly or indirectly) to any other person; and
(b) such person or any connected person in relation to such person leases (whether directly or indirectly) such asset from such other person.

 

(2) Where the receipts or accruals of any person, who is a lessee or sublessee in relation to a sale and leaseback arrangement, do not for the purposes of this Act constitute income of such person—
(a) any amount which is received by or accrues to any lessor in relation to such sale and leaseback arrangement, shall be limited to an amount which constitutes interest as contemplated in section 24J; and
(b) such lessor shall, notwithstanding the provisions of this Act, not be entitled to any deduction in terms of section 11(e), (f), (gA) or (gC) or sections  12B, 12BA, 12C , 12DA, 13  or 13quin in respect of an asset which is the subject matter of such sale and leaseback arrangement.

[Section 23G(2)(b) substituted by section 25(1) of the Taxation Laws Amendment Act, 2023 (Act No. 17 of 2023), Notice No. 4226, GG49894, dated 22 December 2023 - deemed to have come into operation on 1 March 2023 and applies in respect of assets brought into use on or after that date (section 25(2))]

 

(3) Where the receipts or accruals of any person, who is a lessor in relation to a sale and leaseback arrangement, arising from such arrangement do not for the purposes of this Act constitute income of such person, any deduction to which a lessee or sublessee in relation to such sale and leaseback arrangement is entitled under the provisions of this Act shall, subject to the provisions of section 11(f), be limited to an amount which constitutes interest as contemplated in section 24J.

 

(4) The provisions of subsection (2)(a) shall not apply to any person who is both a lessor and a lessee in relation to the same sale and leaseback arrangement during any year of assessment.