Page 175 - SAIT Compendium 2016 Volume1

s 21quat INCOME TAX ACT 58 OF 1962 s 22
21quat . . .
[S. 21quat inserted by s. 17 of Act 65 of 1973, amended by s. 22 (1) of Act 85 of 1974, by s. 17 of Act 104 of 1980, by s. 19 of Act 96 of 1981 and by s. 18 of Act 121 of 1984 and repealed by s. 17 of Act 90 of 1988.]
22 Amounts to be taken into account in respect of values of trading stocks
(1) The amount which shall, in the determination of the taxable income derived by any person during any year of assessment from carrying on any trade (other than farming), be taken into account in respect of the value of any trading stock held and not disposed of by him at the end of such year of assessment, shall be—
(a) in the case of trading stock other than trading stock
contemplated in paragraph (b), the cost price to such person of such trading stock, less such amount as the Commissioner may think just and reasonable as representing the amount by which the value of such trading stock, not being any nancial instrument, has been diminished by reason of damage, deterioration, change of fashion, decrease in the market value or for any other reason satisfactory to the Commissioner; and
[Para. (a) substituted by s. 39 (1) (a) of Act 7 of 2010.]
[NB: Para. (a) has been substituted by s. 37 (1) (a) of Taxation Laws Amendment Act, 2015, a provision that is to come into operation on a date to be determined by the Minister of Finance in the Gazette. See Pendlex below.]
any trading stock held and not disposed of by him at the beginning of any year of assessment, shall—
(a) if such trading stock formed part of the trading stock
of such person at the end of the immediately preceding year of assessment be the amount which was, in the determination of the taxable income of such person for such preceding year of assessment, taken into account in respect of the value of such trading stock at the end of such preceding year of assessment; or
(b) if such trading stock did not form part of the trading stock of such person at the end of the immediately preceding year of assessment, be the cost price to such person of such trading stock.
(2A) (a) Where any person carries on any construction, building, engineering or other trade in the course of which improvements are effected by him to xed property owned by any other person, any such improvements effected by him and any materials delivered by him to such xed property which are no longer owned by him shall, until the contract under which such improvements are effected has been completed, be deemed for the purposes of this section to be trading stock held and not disposed of by him.
(b) For the purposes of paragraph (a), a contract shall be deemed to have been completed when the taxpayer has carried out all the obligations imposed upon him under the contract and has become entitled to claim payment of all amounts due to him under the contract.
[Sub-s. (2A) inserted by s. 21 (a) of Act 101 of 1990.] (3) (a) For the purposes of this section the cost price at any date of any trading stock in relation to any person
shall—
(i) subject to subparagraphs (iA) and (ii), be the cost
incurred by such person, whether in the current or any previous year of assessment in acquiring such trading stock, plus any further costs incurred by such person, in terms of IFRS (in the case of a company), up to and including the said date in getting such trading stock into its then existing condition and location, but excluding any exchange difference as de ned in section 24I (1) relating to the acquisition of such trading stock; [Sub-para. (i) substituted by s. 36 (1) (a) of Act 60
of 2008 and by s. 32 (a) of Act 43 of 2014 – date of commencement: 20 January 2015.]
(iA) include an amount that has been included in that person’s income in terms of section 8 (5), which was applied in reduction or towards settlement of the purchase price of that trading stock;
[Sub-para. (iA) inserted by s. 36 (1) (b) of Act 60 of 2008.]
Pendlex iro para. (a) (to come into operation on a date to be determined by the Minister of Finance in the Gazette)
(a) in the case of trading stock other than trading
stock contemplated in paragraph (b), the cost price to such person of such trading stock, less such amount as represents the amount by which the value of such trading stock, not being any nancial instrument, has been diminished by reason of damage, deterioration, change of fashion, decrease in the market value or for any other reason listed in a public notice issued by the Commissioner; and
(b) in the case of any trading stock which consists of any instrument, interest rate agreement or option contract in respect of which a company has made an election which has taken effect as contemplated in section 24J (9), the market value of such trading stock as contemplated in such section.
[Para. (b) substituted by s. 25 (1) (a) of Act 53 of 1999.] [Sub-s. (1) substituted by s. 19 (1) (a) of Act 21 of 1995.]
(1A) Where in respect of any year of assessment ending after the commencement date de ned in section 1 of the Value-Added Tax Act any amount of sales tax referred to in section 23C (2) which was included in the cost price to the taxpayer of any trading stock is deemed by that section to have been recovered or recouped for the purposes of section 8 (4) (a), the cost of such trading stock held and not disposed of by the taxpayer at the end of such year shall be deemed to have been reduced by the said amount.
[Sub-s. (1A) inserted by s. 22 of Act 129 of 1991 and substituted by s. 55 (a) of Act 31 of 2013 – date of commencement: 12 December 2013.]
(2) The amounts which shall in the determination of the taxable income derived by any person during any year of assessment from carrying on any trade (other than farming), be taken into account in respect of the value of
SAIT CompendIum oF TAx LegISLATIon VoLume 1
(ii) (iii)
in the case of any trading stock which is in terms of paragraph 12 (2) (c) of the Eighth Schedule treated as having been acquired at a cost equal to the market value, be that market value; or
in the case of—
(aa) a right in a controlled foreign company held
directly by a resident, include an amount equal to the proportional amount of the net income (without having regard to the percentage adjustments contemplated in paragraph 10 of the Eighth Schedule) of that company and of any other controlled foreign company in which that controlled foreign company and that resident directly or indirectly have an interest, which was included in the income of that resident in terms of section 9D during any year of assessment, reduced by the amount of any foreign dividend distributed by that company to that resident during any year of assessment which was exempt from tax in terms of section 10B (2) (a) or (c); or
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INCOME TAX ACT – SECTIONS