Page 222 - SAIT Compendium 2016 Volume1

s 28 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.]
(4) The total of all amounts deducted from the income of a short-term insurer in respect of a year of assessment in terms of subsection (3) shall be included in the income of that short-term insurer in the following year of assessment.
[Sub-s. (4) amended by s. 19 (1) of Act 65 of 1973 and by s. 33 (c) and (d) 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.]
(5) . . .
[Sub-s. (5) added by s. 42 (g) of Act 35 of 2007, 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) and deleted by s. 61 (1) (c) of Act 22 of 2012 – date of commencement:
1 January 2014; this deletion applies in respect of years of assessment commencing on or after that date.]
(6) . . .
[Sub-s. (6) added by s. 42 (g) of Act 35 of 2007 and deleted by s. 61 (1) (d) 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.]
(7) In determining the net income, as contemplated in section 9D (2A), derived by any person that is a controlled foreign company from the carrying on outside the Republic of short-term insurance business there shall be deducted from the sum of all premiums (including reinsurance premiums) received by or accrued to that person in respect of the insurance or reinsurance of any risk and other amounts derived from the carrying on of that business, the sum of—
[Words in sub-s. (7) preceding para. (a) substituted by s. 61 (1) (e) 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.]
(a) the total amount of the liability incurred in respect of premiums on reinsurance;
(b) the actual amount of the liability incurred in respect of any claims during the foreign tax year, as de ned in section 9D (1), of that person in respect of that business, less the value of any claims recovered or recoverable under any contract of insurance, reinsurance, guarantee, security or indemnity; and
(c) ii(i) the amount of the liability estimated by that person to become payable in respect of claims incurred under short-term insurance policies; and
(ii) an unearned premium provision:
Provided that no deduction shall be made in terms of this paragraph in respect of a liability incurred as contemplated in paragraph (b).
[Para. (c) amended by s. 51 (1) (b) of Act 7 of 2010.] [Sub-s. (7) added by s. 40 (1) (b) of Act 17 of 2009.]
(a) premiums; and (b) claims, reduced by—
(i) the amounts recognised as recoverable under policies of reinsurance in accordance with IFRS as reported by the insurer to shareholders in the audited annual nancial statements, other than any amount that is receivable from an owner as contemplated in the de nition of ‘cell structure’ [in] section 1 of the Insurance Act, in respect of a third party risk as de ned in that section of that Act; and
(ii) the amounts recognised as deferred acquisition costs in accordance with IFRS as reported by the insurer to shareholders in the audited annual nancial statements.
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 nancial statements, relating to—
214 SAIT CompendIum oF TAx LegISLATIon VoLume 1