Page 114 - SAIT Compendium 2016 Volume1

s 10A INCOME TAX ACT 58 OF 1962 s 10B
annuity contract is denominated in any currency other than the currency of the Republic, the capital element of that annuity amount must be calculated in terms of subsection (3) in that other currency and must be translated to the currency of the Republic by applying the exchange rate applied in terms of section 25D in respect of the annuity amount payable during the relevant year of assessment. [Sub-s. (11) added by s. 11 of Act 5 of 2001 and substituted by s. 15 of Act 32 of 2004 and by s. 17 (1) of Act 31 of 2005.]
[S. 10A inserted by s. 8 (1) of Act 65 of 1973.]
10B Exemption of foreign dividends and dividends paid or declared by headquarter companies
(1) For the purposes of this section, ‘foreign dividend’ means any—
(a) foreign dividend as de ned in section 1; or
(b) dividend paid or declared by a headquarter company.
(2) Subject to subsection (4), there must be exempt from normal tax any foreign dividend received by or accrued to a person—
(a) if that person (whether alone or together with any
other company forming part of the same group of companies as that person) holds at least 10 per cent of the total equity shares and voting rights in the company declaring the foreign dividend;
(b) if that person is a foreign company and the foreign dividend is paid or declared by another foreign company that is resident in the same country as that person;
[Para. (b) substituted by s. 20 (1) (a) of Act 22 of 2012.*] (c) who is a resident to the extent that the foreign dividend does not exceed the aggregate of all amounts which are included in the income of that resident in terms of section 9D in any year of assessment, which relate to
the net income of—
(i) the company declaring the foreign dividend; or
(ii) any other company which has been included in the income of that resident in terms of section 9D by virtue of that resident’s participation rights in that other company held indirectly through the company declaring the foreign dividend,
reduced by—
(aa) the amount of any foreign tax payable in respect
of the amounts so included in that resident’s
income; and
(bb) so much of all foreign dividends received by or
accrued to that resident at any time from any company contemplated in subparagraph (i) or (ii), as was—
(A) exempt from tax in terms of paragraph (a),
(b) or (d); or
(B) previously not included in the income of
that resident by virtue of any prior inclusion
in terms of section 9D:
Provided that for the purposes of this paragraph, the net income of any company contemplated in
subparagraphs (i) and (ii) must be determined without
regard to subsection (3);
[Proviso to para. (c) added by s. 20 (1) (b) of Act 22 of 2012 – see sub-s. (2) (b) above for particulars relating to the coming into operation of s. 20 (1).]
(d) to the extent that the foreign dividend is received by or accrues to that person in respect of a listed share and does not consist of a distribution of an asset in specie; or
(e) to the extent that the foreign dividend is received by or accrues to a company that is a resident in respect of a listed share and consists of the distribution of an asset in specie:
[Para. (e) added by s. 25 (1) (c) of Act 31 of 2013 – date of commencement: 1 March 2014; the added para. applies in respect of foreign dividends received or accrued on or after that date.]
Provided that paragraphs (a) and (b) must not apply to any foreign dividend to the extent that the foreign dividend is deductible by the foreign company declaring or paying that foreign dividend in the determination of any tax on income on companies of the country in which that foreign company has its place of effective management: Provided further that paragraph (a) must not apply to any foreign dividend received by or accrued to that person in respect of a share other than an equity share.
[Proviso to sub-s. (2) added by s. 20 (1) (c) of Act 22 of 2012 – see sub-s. (2) (b) above for particulars relating to the coming into operation of s. 20 (1).]
[Further proviso to sub-s. (2) added by s. 25 (1) (d) of Act 31 of 2013 – date of commencement: 1 April 2014; the added further proviso applies in respect of foreign dividends received or accrued on or after that date.]
(3) In addition to the exemption provided for in subsection (2), there must be exempt from normal tax so much of the amount of the aggregate of any foreign dividends received by or accrued to a person during a year of assessment as—
(a) is not exempt from normal tax in terms of subsection (2) for that year of assessment; and
(b) does not during the year of assessment exceed an amount determined in accordance with the following
formula:
A= B × C in which formula:
(i) ‘A’ represents the amount to be exempted for a year of assessment in terms of this paragraph;
(ii) ‘B’ represents—
(aa) where the person is a natural person,
deceased estate, insolvent estate or trust, the ratio of the number 26 to the number 41;
[Item (aa) substituted retrospectively by s. 6 (1) of Act 13 of 2015 – date of commencement deemed to have been 1 March 2015; the substituted item applies iro years of assessment commencing on or after that date.]
(bb) where the person is—
* Section 20 (1) of Act 22 of 2012 is deemed to have come into operation—
(a) insofar as it applies to any person that is a natural person, deceased estate, insolvent estate or trust, on 1 March 2012
and applies in respect of dividends and foreign dividends received or accrued on or after that date; and
(b) insofar as it applies to any person that is a person other than a natural person, deceased estate, insolvent estate or
trust, on 1 April 2012,
and the said subsection applies in respect of dividends and foreign dividends received or accrued on or after that date.
106 SAIT CompendIum oF TAx LegISLATIon VoLume 1