Page 426 - SAIT Compendium 2016 Volume1

Tenth Schedule INCOME TAX ACT 58 OF 1962 Tenth Schedule
(2) If an oil and gas company disposes of any oil and gas right to another company pursuant to an agreement that rollover treatment as contemplated in subparagraph (1) applies, and the market value of that oil and gas right is equal to or exceeds—
[Words preceding item (a) substituted by s. 159 (b) of Act 31 of 2013 – date of commencement: 12 December 2013.]
(a) in the case that right is held as a capital asset, the base cost of that right on the date of that disposal; or
(b) in the case that right is held as trading stock, the amount taken into account in respect of that right in terms of section
11 (a) or 22 (1) or (2),
that company is deemed to have disposed of that right for an amount equal to the amount contemplated in items (a) or (b), as the case may be, and that other company is deemed to have acquired that right—
(i) where that right is so disposed of as a capital asset, for a cost equal to any expenditure in respect of that right incurred by that company that is allowable in terms of paragraph 20 of the Eighth Schedule and to have incurred such cost at the date of incurral by that company of such expenditure, which cost must, where that right is acquired as—
(A) a capital asset, be treated as an expenditure actually incurred and paid by that company in respect of that right
for the purposes of paragraph 20 of the Eighth Schedule; or
[Subitem (A) amended by s. 88 (1) of Act 35 of 2007.]
(B) trading stock, be treated as the amount to be taken into account by that company in respect of that right for the purposes of section 11 (a) or 22 (1) or (2); or
(ii) where that right is so disposed of as trading stock and that right is acquired as trading stock, for a cost equal to the amount referred to in item (b), which cost must be treated as the amount to be taken into account by that company in respect of that right for purposes of section 11 (a) or 22 (1) or (2).
(3) (a) If an oil and gas company disposes of any oil and gas right to another company pursuant to an agreement that participation treatment as contemplated in subparagraph (1) applies and—
[Words preceding subitem (i) substituted by s. 159 (c) of Act 31 of 2013 – date of commencement: 12 December 2013.]
(i) that right is held as a capital asset; and
(ii) the market value of that right exceeds the base cost of that right on the date of that disposal,
any gain derived by that company in respect of the amount contemplated in subitem (ii) is deemed to be an amount of gross income and that other company that acquired that right may deduct from its oil and gas income as contemplated in paragraph 5 (1) (but not including 5 (2)) an amount equal to the amount deemed to be gross income of the company that disposed of that right.
[Item (a) amended by s. 75 (1) (a) of Act 8 of 2007.]
(b) If an oil and gas company disposes of any oil and gas right to another company pursuant to an agreement that
participation treatment as contemplated in subparagraph (1) applies and—
[Words preceding subitem (i) substituted by s. 159 (d) of Act 31 of 2013 – date of commencement: 12 December 2013.]
(i) that right is held as trading stock; and
(ii) the market value of that right exceeds the amount taken into account in respect of that right in terms of section 11 (a) or 22,
that other company that acquired that right may deduct from its oil and gas income as contemplated in paragraph 5 (1) (but not including 5 (2)) an amount equal to the amount deemed to be gross income of the company that disposed of that right less the applicable deduction allowable as contemplated in section 11 (a) or 22, as the case may be, in respect of that right.
[Item (b) amended by s. 75 (1) (a) of Act 8 of 2007.]
8 Fiscal stability
(1) (a) The Minister may enter into a binding agreement with any oil and gas company in respect of an oil and gas right held by that company, and that agreement so entered into must guarantee that the provisions of this Schedule (as at the date on which the agreement was concluded) apply in respect of that right as long as the right is held by the oil and gas company.
(b) Notwithstanding subparagraph (a), the Minister may enter into a binding agreement with any company in anticipation of an oil and gas right to be acquired by that company, and that agreement must guarantee that the provisions of this Schedule (as at the date on which the oil and gas right is granted) apply in respect of that right as long as that right is held by the oil and gas company: Provided that this binding agreement has no force and effect if the oil and gas right is not granted within one year after the agreement is concluded.
(c) If an oil and gas company jointly holds with another oil and gas company an exploration right, as de ned in section 1 of the Mineral and Petroleum Resources Development Act, and any one of those oil and gas companies has concluded an agreement as contemplated in subparagraph (1) in respect of that right, all of the scal stability rights in terms of that agreement relating to that exploration right apply in respect of both of those companies.
[Item (c) added by s. 93 (1) of Act 43 of 2014 (date of commencement: 1 April 2015) and substituted by s. 124 (1) of Taxation Laws Amendment Act, 2015 (‘right’ inserted after ‘exploration’ in the last line) – date of commencement deemed to have been 1 April 2015.]
[Sub-para. (1) substituted by s. 160 (a) of Act 31 of 2013 – date of commencement: 12 December 2013.]
(2) (a) In the case of a disposal of an exploration right, as de ned in section 1 of the Mineral and Petroleum Resources Development Act, an oil and gas company that has concluded an agreement as contemplated in subparagraph (1) in respect of that right may, as part of that disposal, assign all of its scal stability rights in terms of that agreement relating
to the exploration right disposed of to any other oil and gas company.
(b) In the case of a disposal of a production right, as de ned in section 1 of the Mineral and Petroleum Resources
Development Act, an oil and gas company that has concluded an agreement as contemplated in subparagraph (1) in respect of that right disposed of may, as part of that disposal, assign all its scal stability rights in terms of that agreement relating to the production right disposed of to another company if that other company is a company within the same group of companies as the oil and gas company transferring the scal stability rights at the time the agreement is concluded. [Sub-para. (2) substituted by s. 160 (b) of Act 31 of 2013 – date of commencement: 12 December 2013.]
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