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INCOME TAX ACT 58 OF 1962 s 28
in the income of that short-term insurer when the
amount is received by that short-term insurer.
[Sub-s. (2) amended by s. 17 of Act 90 of 1962, by s. 22 of Act 55 of 1966, by s. 24 of Act 89 of 1969, by s. 22 of Act 94 of 1983, by s. 42 (a) of Act 35 of 2007, by s. 40 of Act 60 of 2008, by s. 40 (1) (a) of Act 17 of 2009 and by s. 51 (1) (a) of Act 7 of 2010 and substituted by s. 61 (1) (b) of Act 22 of 2012 and by s. 76 (1) (c) of Act 31 of 2013 – substitution deemed to have come into operation on 1 January 2013 and applies in respect of years of assessment commencing on or after that date.]
(3) Notwithstanding the provisions of section 23 (e), for the purpose of determining the taxable income derived during a year of assessment by any short-term insurer that is a resident from carrying on short-term insurance business, there shall be allowed as a deduction from the income of that short-term insurer—
(a) the amount which the short-term insurer estimates will
become payable in respect of claims incurred under short-term insurance policies as contemplated in section 32 (1) (a) of the Short-term Insurance Act that are—
(i) reported but not yet paid, reduced by the amount which the short-term insurer estimates will be paid in respect of those claims under policies of reinsurance; and
(ii) not yet reported, reduced by the amount which the short-term insurer estimates will be paid in respect of those claims under policies of reinsurance, being an amount not less than the amount calculated in accordance with Part II of Schedule 2 to the Short-term Insurance Act,
in respect of that year of assessment; and
(b) the amount of an unearned premium provision calculated in accordance with section 32 (1) (b) of the Short-term Insurance Act, being an amount not less than the amount calculated in accordance with Part II of Schedule 2 of that Act in respect of that year of assessment: Provided that a reserve for a cash- back bonus contemplated in paragraph 4.1.1 of Board Notice 169 of 2011, published in Gazette No. 34715 of 28 October 2011, may only be taken into account if the reserve is determined in accordance with a method comprising a best estimate of the liability plus a risk margin, and that method is approved by
the Financial Services Board.
[Sub-s. (3) substituted by s. 21 (1) (b) of Act 88 of 1971, amended by s. 25 (1) (c) of Act 101 of 1990, substituted by s. 33 (b) of Act 30 of 2000, deleted by s. 42 (f) of Act 35 of 2007, inserted by s. 61 (1) (b) of Act 22 of 2012 and substituted by s. 76 (1) (c) of Act 31 of 2013 – substitution deemed to have come into operation on 1 January
2013 and applies in respect of years of assessment commencing on or after that date.]
[NB: Subsection (3) has been substituted by s. 52 (1) (d) of Taxation Laws Amendment Act, 2015, a provision that is to come into operation on the date on which the Insurance Act, 2016, comes into operation and is to apply to years of assessment ending on or after that date. See Pendlex below.]
Pendlex (to come into operation on the date on which an insurer qualifies as a micro-insurer as defined in the Insurance Act, 2016, in terms of that Act)
‘short-term policy’ means a short-term policy as defined in the Short-term Insurance Act and a policy issued by a micro-insurer as defined in section 1 of the Insurance Act;
[Sub-s. (1) substituted by s. 21 (1) (a) of Act 88 of 1971, amended by s. 19 (1) of Act 91 of 1982, by s. 17 (a) of Act 65 of 1986, by s. 23 (1) of Act 90 of 1988 and by s. 13 (1) (a) of Act 70 of 1989, substituted by s. 25 (1) (a) of Act 101 of 1990, amended by s. 29 (a) of Act 129 of 1991, by
s. 24 (a) of Act 113 of 1993 and by s. 19 (1) (b) of Act 21 of 1994, deleted by s. 33 (a) of Act 30 of 2000 and inserted by s. 61 (1) (b) of Act 22 of 2012 – date of commencement: 1 January 2013; this substitution applies in respect of years of assessment commencing on or after that date.]
(1A) . . .
[Sub-s. (1A) inserted by s. 17 (b) of Act 65 of 1986, substituted by s. 29 (b) of Act 129 of 1991, deleted by s. 33 (a) of Act 30 of 2000 and omitted by s. 61 (1) (b) of Act 22 of 2012.]
(1B) . . .
[Sub-s. (1B) inserted by s. 13 (1) (b) of Act 70 of 1989, amended by s. 25 (1) (b) of Act 101 of 1990, deleted by s. 33 (a) of Act 30 of 2000 and omitted by s. 61 (1) (b) of Act 22 of 2012.]
(1C) . . .
[Sub-s. (1C) inserted by s. 24 (b) of Act 113 of 1993, deleted by s. 33 (a) of Act 30 of 2000 and omitted by s. 61 (1) (b) of Act 22 of 2012.]
(2) For the purpose of determining the taxable income derived during a year of assessment by any short-term insurer that is a resident from carrying on short-term insurance business—
(a) a premium received by or accrued to that person in respect of a short-term policy issued by that short- term insurer prior to the date of commencement of the risk cover under that policy shall be deemed to have been received by or accrued to that short-term insurer on the date of commencement of the risk cover under that policy;
(b) an amount of expenditure actually incurred by that short-term insurer in respect of a refund of a premium in respect of a short-term policy issued by that short- term insurer may only be deducted in terms of section 11 (a) to the extent that the amount of the premium was included in the gross income of that short-term insurer;
(c) an amount of expenditure payable by that short-term insurer in respect of any claim in terms of a short- term policy—
(i) may be deducted in terms of section 11 (a) to the extent that the amount has been paid by that short-term insurer; and
(ii) to the extent that the amount has been paid by the short-term insurer, sections 23 (c) and 23H shall not apply to that expenditure;
(d) section 23H shall not apply to expenditure (other than expenditure contemplated in paragraph (c)) incurred in respect of—
(i) a short-term policy issued by that short-term insurer; or
(ii) a policy of reinsurance if that short-term insurer is the holder of that policy; and
(e) an amount recoverable by that short-term insurer in respect of a claim incurred under a short-term policy issued by that short-term insurer shall only be included
Pendlex (to come into operation on the date on which the Insurance Act, 2016, comes into operation)
(3) Notwithstanding section 23 (e), for the purpose of determining the taxable income derived during any year of assessment by any short-term insurer that is a resident from carrying on short-term insurance business, there shall be allowed as a deduction from the income of that short-term insurer an amount equal to the sum of amounts recognised as insurance liabilities, in accordance with IFRS by that short-term insurer in its audited annual financial statements, relating to—
214 SAIT CompendIum oF TAx LegISLATIon VoLume 1