Page 425 - SAIT Compendium 2016 Volume1

Tenth Schedule INCOME TAX ACT 58 OF 1962 Tenth Schedule (b) the translation method used by that company for purposes of nancial reporting.
[Sub-para. (1) substituted by s. 114 (1) (a) of Act 7 of 2010.]
(2) Any amount received by or accrued to, or expenditure incurred by, an oil and gas company during any year of
assessment in any currency other than that of the Republic must be—
(a) determined in the functional currency of that company; and
(b) translated to the currency of the Republic by applying the average exchange rate for that year.
(3) . . .
[Sub-para. (2) substituted by s. 114 (1) (a) of Act 7 of 2010.] [Sub-para. (3) deleted by s. 114 (1) (a) of Act 7 of 2010.]
5 Deductions from income derived from oil and gas activities
(1) For purposes of determining the taxable income of an oil and gas company during any year of assessment, there must be allowed as deductions from the oil and gas income of that company all expenditure and losses actually incurred (other than any expenditure or loss actually incurred in respect of the acquisition of any oil and gas right, except as allowed in paragraph 7 (3)) in that year in respect of exploration, or post-exploration.
[Sub-para. (1) substituted by s. 157 (1) (a) of Act 31 of 2013 – date of commencement: 1 April 2014; the substitution applies in respect of years of assessment commencing on or after that date.]
(2) In addition to any other deductions (as contemplated in subparagraph (1) other than any expenditure or loss actually incurred in respect of the acquisition of any oil and gas right) allowable in terms of this paragraph, for purposes of determining the taxable income of an oil and gas company during any year of assessment, there must be allowed as deductions from the oil and gas income of that company derived in that year of assessment—
(a) 100 per cent of all expenditure of a capital nature actually incurred in that year of assessment in respect of exploration in terms of an oil and gas right; and
(b) 50 per cent of all expenditure of a capital nature actually incurred in that year of assessment in respect of post- exploration in respect of an oil and gas right.
[Sub-para. (2) amended by s. 86 (a) of Act 17 of 2009 and substituted by s. 157 (1) (b) of Act 31 of 2013 – date of commencement: 1 April 2014; the substitution applies in respect of years of assessment commencing on or after that date.]
(2A) For the purposes of determining the taxable income of an oil and gas company during the rst year of assessment of that oil and gas company commencing on or after 2 November 2006, there will be brought forward and allowed as a deduction from the oil and gas income of that oil and gas company the amount determined in terms of section 36 (7E) in respect of the immediately preceding year of assessment.
[Sub-para. (2A) inserted by s. 115 (1) of Act 7 of 2010.]
(3) For purposes of determining the taxable income of an oil and gas company during any year of assessment, any assessed losses (as de ned in section 20) in respect of exploration or post-exploration may only be set off against—
[Words preceding item (a) substituted by s. 157 (1) (c) of Act 31 of 2013 – date of commencement: 1 April 2014; the substitution applies in respect of years of assessment commencing on or after that date.]
(a) the oil and gas income of that company; and
(b) income from the re ning of gas derived in respect of any oil and gas right held by that company, to the extent that those assessed losses do not exceed that income.
[Words following item (b) substituted by s. 157 (1) (d) of Act 31 of 2013 – date of commencement: 12 December 2013.] [Sub-para. (3) substituted by s. 73 (1) of Act 8 of 2007 and by s. 86 (b) of Act 17 of 2009.]
(4) To the extent that any assessed losses remain after the set-off contemplated in subparagraph (3), an amount equal to 10 per cent of those remaining assessed losses may be set off against any other income derived by that company.
[Sub-para. (4) substituted by s. 157 (1) (e) of Act 31 of 2013 – date of commencement: 12 December 2013.]
(5) To the extent that any assessed loss remains after the set-offs contemplated in subparagraphs (3) and (4), those
losses may be carried forward to the succeeding year of assessment of that oil and gas company.
[Sub-para. (5) substituted by s. 157 (1) (f) of Act 31 of 2013 – date of commencement: 12 December 2013.]
6 Exploration and post-exploration expenses*
If a company holds an oil and gas right contemplated in paragraph (a) or (b) of the de nition of ‘oil and gas right’ during any year of assessment—
(a) that company is deemed to be carrying on a trade in respect of that oil and gas right; and
(b) expenditure and losses incurred by that company in respect of that oil and gas right are deemed to be incurred in the
production of income of that company.
[Para. 6 amended by s. 74 (1) of Act 8 of 2007 and by s. 116 (1) (a) and (b) of Act 7 of 2010 and substituted by s. 158 (1) of Act 31 of 2013 – date of commencement: 1 April 2014; the substitution applies in respect of years of assessment commencing on or after that date.]
7 Disposal of oil and gas right
(1) If an oil and gas company disposes of any oil and gas right to another company, that oil and gas company and that other company may (instead of any other provision of this Act) agree in writing that rollover treatment as contemplated in subparagraph (2) or participation treatment as contemplated in subparagraph (3) applies in respect of that right.
[Sub-para. (1) substituted by s. 159 (a) of Act 31 of 2013 – date of commencement: 12 December 2013.]
* Para. 6 has been substituted by s. 139 (1) of Act 22 of 2012; the substitution was to have come into operation on 1 March 2014 and was to apply in respect of years of assessment commencing on or after that date. The said s. 139 (1) was, however, retrospectively repealed wef 1 February 2013 by s. 209 of Act 31 of 2013.
SAIT CompendIum oF TAx LegISLATIon VoLume 1 417
INCOME TAX ACT – SCHEDULES