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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 X : Attribution of Capital Gains

 

68.        Attribution of capital gain to spouse

 

(1) Where a person’s capital gain or a capital gain that has vested in or is treated as having vested in that person during the year of assessment in which it arose can be attributed wholly or partly to—
(a) any donation, settlement or other disposition; or
(b) any transaction, operation or scheme,

made, entered into or carried out by that person’s spouse mainly for purposes of reducing, postponing or avoiding that spouse’s liability for any tax, duty or levy which would otherwise have become payable under any Act administered by the Commissioner, so much of the gain as can be so attributed must be disregarded when determining that person’s aggregate capital gain or aggregate capital loss and taken into account when determining the aggregate capital gain or aggregate capital loss of that person’s spouse.

 

(2) Where a person’s capital gain is derived from—
(a) any trade carried on by that person in partnership or association with that person’s spouse or which is in any way connected with any trade carried on by that spouse; or
(b) that person's spouse or any partnership or private company at a time when that spouse was a member of that partnership or the sole, main or one of the principal holders of shares in that company,

[Paragraph 68(2)(b) of the Eighth Schedule substituted by section 146 of the Taxation Laws Amendment Act, 2013 (Act No. 31 of 2013), GG 37158, dated 12 December 2013]

so much of that gain as exceeds the amount to which that person would reasonably be entitled having regard to the nature of the relevant trade, the extent of that person’s participation therein, the services rendered by that person or any other relevant factor, must be disregarded when determining that person’s aggregate capital gain or aggregate capital loss and taken into account when determining the aggregate capital gain or aggregate capital loss of that person’s spouse.

 

69.        Attribution of capital gain to parent of minor child

 

Where a minor child’s capital gain or a capital gain that has vested in or is treated as having vested in or that has been used for the benefit of that child during the year of assessment in which it arose can be attributed wholly or partly to any donation, settlement or other disposition—

(a) made by a parent of that child; or
(b) made by another person in return for any donation, settlement or other disposition or some other consideration made or given by a parent of that child in favour directly or indirectly of that person or his or her family,

so much of that gain as can be so attributed must be disregarded when determining that child’s aggregate capital gain or aggregate capital loss and must be taken into account in determining the aggregate capital gain or aggregate capital loss of that parent.

 

70. Attribution of capital gain subject to conditional vesting

 

Where—

(a) a person has made a donation, settlement or other disposition that is subject to a stipulation or condition imposed by that person or anyone else in terms of which a capital gain or a portion of any capital gain attributable to that donation, settlement or other disposition shall not vest in the beneficiaries of that donation, settlement or other disposition or some of those beneficiaries until the happening of some fixed or contingent event;
(b) a capital gain that is attributable to that donation, settlement or other disposition has arisen during a year of assessment throughout which the person who made that donation, settlement or other disposition has been a resident; and
(c) that capital gain or a portion thereof has not vested during that year in any beneficiary who is a resident,

that capital gain or that portion thereof must be taken into account in determining the aggregate capital gain or aggregate capital loss of the person who made that donation, settlement or other disposition and disregarded when determining the aggregate capital gain or aggregate capital loss of any other person.

 

71. Attribution of capital gain subject to revocable vesting

 

Where—

(a) a deed of donation, settlement or other disposition confers a right upon a beneficiary thereof who is a resident to receive a capital gain attributable to that donation, settlement or other disposition or any portion of that gain;
(b) that right may be revoked or conferred upon another by the person who conferred it; and
(c) a capital gain attributable to that donation, settlement or other disposition or a portion of that gain has in terms of that right vested in that beneficiary during a year of assessment throughout which the person who conferred that right has been a resident and has retained the power to revoke that right,

that capital gain or that portion thereof must be disregarded when determining the aggregate capital gain or aggregate capital loss of that beneficiary and be taken into account when determining the aggregate capital gain or aggregate capital loss of the person retaining the power of revocation.

 

72.        Attribution of capital gain and other amounts vesting in person that is not a resident

[Heading of paragraph 72 substituted by section 86(1) of the Taxation Laws Amendment Act, 2018 (Act No. 23 of 2018), GG 42172, dated 17 January 2019]

 

(1)        This paragraph applies where—

(a) a resident has made a donation, settlement or other disposition to any person (other than an entity which is not resident and which is similar to a public benefit organisation contemplated in section 30);
(b) a capital gain (including any amount that would have constituted a capital gain had that person been a resident) attributable to that donation, settlement or other disposition has arisen during a year of assessment; and
(c) an amount consisting of or derived, directly or indirectly, from—

(i)        that capital gain; or

(ii)        the amount that would have constituted a capital gain,

has during that year vested in or is treated as having vested in any person who is not a resident (other than a controlled foreign company, in relation to that resident).

 

(2) In determining, for purposes of subparagraph (1), whether an amount would have constituted a capital gain had a person been a resident, the provisions of paragraph 64B(1) and (4) must be disregarded in respect of an amount derived by that person, directly or indirectly, from the disposal of an equity share in a foreign company if—
(a) more than 50 per cent of the total participation rights, as defined in section 9D(1), or of the voting rights in that company are directly or indirectly held or are exercisable, as the case may be, by that person whether alone or together with any one or more persons that are connected persons in relation to that person; and
(b) the resident who made the donation, settlement or other disposition  or any person that is a connected person in relation to that resident is a connected person in relation to the person who is not a resident; and
(c) to the extent to which that amount is not included in the income of or attributed as a capital gain to—
(i) the resident who made that donation, settlement or other disposition; or
(ii) a resident who is a connected person in relation to the resident referred to in subitem (i).

 

(3) An amount that is equal to so much of the amount described in item (c) of subparagraph (1) that has vested in or is treated as having vested in  the person who is not a resident as consists of or is derived, directly or indirectly, from—
(a) the capital gain must be disregarded when determining the aggregate capital gain or aggregate capital loss of that person; and
(b) the capital gain or the amount that would have constituted a capital gain must be taken into account as a capital gain when determining the aggregate capital gain or aggregate capital loss of the resident who made the donation, settlement or other disposition described in subparagraph (1).

 

[Paragraph 72 of the Eighth Schedule substituted by section 86(1) of the Taxation Laws Amendment Act, 2018 (Act No. 23 of 2018), GG 42172, dated 17 January 2019 - effective 1 March 2019]

 

73.        Attribution of income and capital gain

 

(1) Where both an amount of income and a capital gain are derived by reason of or are attributable to a donation, settlement or other disposition, the total amount of that income and gain—
(a) that is deemed in terms of section 7 to be that of a person other than the one to whom it accrues or by whom it is received or for whose benefit it is expended or accumulated; and
(b) that is attributed in terms of this Part to a person other than the one in whom it vests,

shall not exceed the amount of the benefit derived from that donation, settlement or other disposition.

 

(2) For purposes of this paragraph, the benefit derived from a donation, settlement or other disposition means the amount by which the person to whom that donation, settlement or other disposition was made, has benefited from the fact that it was made for no or an inadequate consideration, including consideration in the form of interest.