Page 83 - SAIT Compendium 2016 Volume1

s 8F INCOME TAX ACT 58 OF 1962 s 8FA
‘issue’, in relation to an instrument, means the creation of a liability to pay an amount in terms of that instrument;
‘interest’ means interest as de ned in section 24J (1); [De nition of ‘interest’ substituted by s. 9 (1) (b) of Taxation Laws Amendment Act, 2015 (‘24J’ replaced by ‘24J (1)’) – date of commencement: date of promulgation of Taxation Laws Amendment Act, 2015.]
‘redeem’, in relation to an instrument, means the discharge of all liability to pay all amounts in terms of that instrument.
(2) Any amount of interest that during a year of assessment—
(a) is incurred by a company in respect of a hybrid debt
instrument is, on or after the date that the instrument becomes a hybrid debt instrument—
(i) deemed for the purposes of this Act to be a dividend in specie declared and paid by that company on the last day of the year of assessment of that company; and
(ii) not deductible in terms of this Act; and
(b) accrues to a person to whom an amount is owed in respect of a hybrid debt instrument is deemed for the purposes of this Act to be a dividend in specie that is declared and paid to that person on the last day of the year of assessment of
the company contemplated in paragraph (a).
[Para. (b) substituted by s. 8 of Act 43 of 2014 – date of
commencement: 20 January 2015.]
(3) This section does not apply to any instrument—
(a) in respect of which all amounts are owed by a small business corporation as de ned in section 12E (4);
(b) that constitutes a tier 1 or tier 2 capital instrument referred to in the regulations issued in terms of section 90 of the Banks Act (contained in Government Notice R1029 published in Government Gazette 35950 of 12 December 2012) issued—
(i) by a bank as de ned in section 1 of that Act; or (ii) by a controlling company in relation to that bank;
(c) of any class that is subject to approval as contemplated
in the—
(i) Short-term Insurance Act in accordance with the
conditions determined in terms of section 23 (a) (i) of that Act by the Registrar de ned in that Act, where an amount is owed in respect of that instrument by a short-term insurer as de ned in that Act; or
(ii) Long-term Insurance Act in accordance with the conditions determined in terms of section 24 (a) (i) of that Act by the Registrar de ned in that Act, where an amount is owed in respect of that instrument by a long-term insurer as de ned in that Act; or
(d) that constitutes a linked unit in a company where the linked unit is held by a long-term insurer as de ned in the Long-term Insurance Act, a pension fund, a provident fund, a REIT or a short-term insurer as de ned in the Short-term Insurance Act, if—
(i) the long-term insurer, pension fund, provident fund, REIT or short-term insurer holds at least 20 per cent of the linked units in that company;
(ii) the long-term insurer, pension fund, provident fund, REIT or short-term insurer acquired those linked units before 1 January 2013; and
(iii) at the end of the previous year of assessment 80 per cent or more of the value of the assets of that company, re ected in the annual nancial statements prepared in accordance with the Companies Act for the previous year of assessment, is directly or indirectly attributable to immovable property.
[S. 8F inserted by s. 10 (1) of Act 32 of 2004 and substituted by s. 12 (1) of Act 31 of 2013 – date of commencement: 1 April 2014; the substitution applies in respect of amounts incurred on or after that date.]
8FA Hybrid interest deemed to be dividends in specie
(1) For the purposes of this section—
‘hybrid interest’, in relation to any debt owed by a company in terms of an instrument, means—
(a) any interest where the amount of that interest is—
(i) not determined with reference to a speci ed rate of interest; or
(ii) not determined with reference to the time value of money; or
(b) if the rate of interest has in terms of that instrument been raised by reason of an increase in the pro ts of the company, so much of the amount of interest as has been determined with reference to the raised rate of interest as exceeds the amount of interest that would have been determined with reference to the lowest rate of interest in terms of that instrument during the current year of assessment and the previous ve years of assessment;
‘instrument’ means any form of interest-bearing arrangement or debt;
‘issue’, in relation to an instrument, means the creation of a liability to pay or a right to receive an amount in terms of that instrument;
‘interest’ means interest as de ned in section 24J (1). [De nition of ‘interest’ substituted by s. 10 of Taxation Laws Amendment Act, 2015 (‘24J’ replaced by ‘24J (1)’) – date of commencement: date of promulgation of Taxation Laws Amendment Act, 2015.]
(2) Any amount of interest which during a year of assessment—
(a) is incurred by a company in respect of hybrid interest
must, on or after the date that the interest becomes hybrid interest—
(i) be deemed for the purposes of this Act to be a dividend in specie declared and paid by that company on the last day of that year of assessment; and
(ii) not be deductible in terms of this Act; and
(b) accrues to a person to which an amount is owed in respect of the hybrid interest must be deemed for the purposes of this Act to be a dividend in specie that is declared and paid to that person on the last day of that year of assessment of the company contemplated in
paragraph (a).
[Para. (b) substituted by s. 9 (1) of Act 43 of 2014 – date of
commencement deemed to have been 1 April 2014; the substituted paragraph applies iro amounts incurred on or after that date.]
(3) This section does not apply to any interest owed in respect of—
(a) a debt owed by a small business corporation as
(b)
de ned in section 12E (4);
an instrument that constitutes a tier 1 or tier 2 capital instrument referred to in the regulations issued in terms of section 90 of the Banks Act (contained in
SAIT CompendIum oF TAx LegISLATIon VoLume 1
75
Pendlex
[NB: Para. (d) has been deleted by s. 13 (1) (c) of Act 31 of 2013, a provision that is to come into operation on 1 January 2017 (‘1 January 2016’ replaced by ‘1 January 2017’ by s. 144 (1) of Taxation Laws Amendment Act, 2015) and is to apply iro amounts incurred on or after that date.]
INCOME TAX ACT – SECTIONS