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• expenses incurred by a taxpayer will be allowed as a deduction in the determination of the taxpayer’s taxable income if the deduction complies with the requirements of section 11 (a) read with section 23 (g);
• a lessor will generally be allowed a deduction for wear-and-tear or depreciation on tank containers that is calculated over a straight-line period of 10 years;
• a lessor’s deduction of a wear-and-tear or depreciation allowance on affected assets is limited under section 23A to the taxable income derived from the letting of those assets before deducting that allowance; and
• under paragraph (b) of the proviso to section 20 (1) an assessed loss or balance of assessed loss incurred from carrying on a trade outside South Africa may not be set off against income derived from carrying on a trade in South Africa.
Legal and Policy Division
SOUTH AFRICAN REVENUE SERVICE
Annexure – The law Section 11 (a) and (e)
11. General deductions allowed in determination of taxable income.—For the purpose of determining the taxable income derived by any person from carrying on any trade, there shall be allowed as deductions from the income of such person so derived—
(a) expenditure and losses actually incurred in the production of the income, provided such expenditure and losses are not of a capital nature;
(b) – (d) [. . .]
(e) save as provided in paragraph 12 (2) of the First Schedule, such sum as the Commissioner may think just and
reasonable as representing the amount by which the value of any machinery, plant, implements, utensils and articles (other than machinery, plant, implements, utensils and articles in respect of which a deduction may be granted under section 12B, 12C, 12DA, 12E (1) or 37B) owned by the taxpayer or acquired by the taxpayer as purchaser in terms of an agreement contemplated in paragraph (a) of the de nition of ‘instalment credit agreement’ in section 1 of the Value-Added Tax Act, 1991 (Act No. 89 of 1991), and used by the taxpayer for the purpose of his or her trade has been diminished by reason of wear and tear or depreciation during the year of assessment: Provided that—
(i) ...
(iA) no allowance may be made in respect of any machinery, plant, implement, utensil or article the ownership
of which is retained by the taxpayer as a seller in terms of an agreement contemplated in paragraph (a) of an
‘instalment credit agreement’ as de ned in section 1 of the Value-Added Tax Act, 1991;
(ii) in no case shall any allowance be made for the depreciation of buildings or other structures or works of a
permanent nature;
(iiA) where any machinery, implement, utensil or article qualifying for an allowance under this paragraph is
mounted on or af xed to any concrete or other foundation or supporting structure and—
(aa) the foundation or supporting structure is designed for such machinery, implement, utensil or article and constructed in such manner that it is or should be regarded as being integrated with the
machinery, implement, utensil or article; and
(bb) the useful life of the foundation or supporting structure is or will be limited to the useful life of the
machinery, implement, utensil or article mounted thereon or af xed thereto,
the said foundation or supporting structure shall for the purposes of this paragraph not be deemed to be a structure or work of a permanent nature but shall for the purposes of this Act be deemed to be a part of the machinery, implement, utensil or article mounted thereon or af xed thereto;
(iii) no allowance shall be made under this paragraph in respect of any ship to which the provisions of section 14 (1) (a) or (b) apply or in respect of any aircraft to which the provisions of section 14bis (1) (a), (b) or (c) apply;
(iiiA) no allowance shall be made under this paragraph in respect of any machinery, implement, utensil
or article of which the cost has been allowed as a deduction from the taxpayer’s income under the
provisions of section 24D;
(iv) ...
(v) ...the value of any machinery, implements, utensils or articles used by the taxpayer for the purposes of his trade shall be increased by the amount of any expenditure (other than expenditure referred to in paragraph (a)) which is proved to the satisfaction of the Commissioner to have been incurred by the taxpayer in moving such machinery, implements, utensils or articles from one location to another;
(vi) ...
(vii) where the value of any such machinery, implements, utensils and articles acquired by the taxpayer on or
after 15 March 1984 is for the purposes of this paragraph to be determined having regard to the cost of such machinery, implements, utensils and articles, such cost shall be deemed to be the cost which, in the opinion of the Commissioner, a person would, if he had acquired such machinery, implements, utensils and articles under a cash transaction concluded at arm’s length on the date on which the transaction for the acquisition of such machinery, implements, utensils and articles was in fact concluded, have incurred in respect of the direct cost of the acquisition of such machinery, implements, utensils and articles, including the direct cost of the installation or erection thereof; and
(viii) ...
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