Page 94 - SAIT Compendium 2016 Volume1

s 9D INCOME TAX ACT 58 OF 1962 s 9D
improvement of goods utilised within one or
more countries other than the Republic;
(bb) the service relates directly to the sale or marketing of goods of a connected person (in relation to that controlled foreign company) who is a resident and those goods are sold to persons who are not connected persons in relation to that controlled foreign company for physical delivery to custom- ers’ premises situated within the country of
residence of that controlled foreign company; (cc) the service is rendered mainly in the country of residence of that controlled foreign company for the bene t of customers that have premises
situated in that country; or
(dd) to the extent that no deduction is allowed of any
amount paid by that connected person to that
controlled foreign company in respect of the service; (iii) arises in respect of a nancial instrument—
(aa)unless that nancial instrument is attributable to the principal trading activities of the foreign business establishment and those principal trading activities—
(A) constitute the activities of a bank, nancial service provider or insurer; and
(B) do not constitute the activities of a treasury operation or captive insurer;
(bb) unless—
(A) that amount is attributable to any exchange
difference determined in terms of section
24I in respect of that nancial instrument;
(B) the exchange difference contemplated in subitem (A) arises in the ordinary course of business of the principal trading activities of
that foreign business establishment; and
(C) the principal trading activities contemplated in subitem (B) do not constitute the activities of a treasury operation or captive insurer; or
(cc) to the extent that the total of—
(A) those amounts arising in respect of nancial
instruments attributable to activities of that
foreign business establishment; and
(B) amounts arising from exchange gains determined in terms of section 24I attributable to activities of that foreign
business establishment,
other than amounts in respect of which para- graphs (c) to (f B) of subsection (9) apply or amounts derived from the activities of a treasury operation or a captive insurer, exceeds ve per cent of the total of all amounts received by or accrued to the controlled foreign company that are attributable to that foreign business establishment, other than amounts in respect of which paragraphs (c) to (f B) of subsection (9) apply or amounts derived from the activities of a treasury operation or a captive insurer;
[Words following subitem (B) substituted by s. 14 (1) (e) of Act 22 of 2012 and by s. 19 (1) (k) of Act 31 of 2013 – date of commencement: 1 April 2014; this substitution applies in respect of years of assessment commencing on or after that date.]
(iv) arises by way of rental in respect of any movable property, unless that movable property is leased by the controlled foreign company in terms of—
(aa) an operating lease; or
(bb) a lease that constitutes a nancial instrument; (v) arises in respect of the use or right of use of or permission to use any intellectual property as de ned
(aa)that controlled foreign company directly and regularly creates, develops or substantially upgrades any intellectual property as de ned in section 23I which gives rise to that amount; and
(bb)that intellectual property does not constitute property which constitutes tainted intellectual property as de ned in section 23I;
[Para. (v) substituted by s. 14 (1) (g) of Act 22 of 2012
– date of commencement deemed to have been 1 April 2012; the substitution applies in respect of foreign tax years of controlled foreign companies ending during years of assessment commencing on or after that date.]
(vi) isacapitalgaindeterminedinrespectofthedisposalor deemed disposal of any intellectual property as de ned in section 23I, unless that controlled foreign company directly and regularly creates, develops or substantially upgrades any intellectual property as de ned in section 23I which gives rise to that amount; or
[Para. (vi) substituted by s. 14 (1) (g) of Act 22 of 2012
– date of commencement deemed to have been 1 April 2012; the substitution applies in respect of foreign tax years of controlled foreign companies ending during years of assessment commencing on or after that date.]
(vii)is in the form of an insurance premium, unless that amount is attributable to the principal trading activities of the foreign business establishment and those principal trading activities—
(aa) constitute the activities of an insurer; and
(bb) do not constitute the activities of a captive insurer: Provided that if any amount which is attributable to a foreign business establishment of a controlled foreign company as contemplated in subsection (9) (b) is, solely as a result of the application of subparagraph (iii) of this paragraph, not taken into account in determining the net income of that controlled foreign company, that amount must be so taken into account—
(A) to the extent that a deduction is allowed in respect of any other amount incurred by a connected person (in relation to that controlled foreign company) who is a resident; and
(B) where that amount is attributable to that other amount.
(b) For the purposes of—
(i) . . . (ii) . . .
[Sub-paras. (i) and (ii) deleted by s. 13 (1) (d) of Taxation Laws Amendment Act, 2015 – date of commencement: 1 January 2016; the deletions apply iro foreign tax years of controlled foreign companies ending during years of assessment commencing on or after that date.]
Prelex
Wording of sub-paras. (i) and (ii) in force until 1 January 2016
(i) item (aa) of paragraph (a) (i), the aggregate amount
of tax payable contemplated in that item must be determined—
(aa)after taking into account any applicable
agreement for the prevention of double taxation and any credit, rebate or other right of recovery of tax from any sphere of government of any country other than the Republic; and
(bb) after disregarding any loss in respect of a year other than a year contemplated in that item or from a company other than a controlled foreign company contemplated in that item;
in section 23I, unless—
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SAIT CompendIum oF TAx LegISLATIon VoLume 1