1. an office, shop, factory, warehouse, farm or other structure which is owned by the controlled foreign entity or held by such entity under a lease which is concluded for a period of not less than one year;
2. a mine, oil or gas well, a quarry or any other place of extraction of natural resources, which is owned by such controlled foreign entity or held by such entity under a lease for a period of not less than one year; or
3. a site for the construction or installation of buildings, bridges, roads, pipelines, heavy machinery or other projects of comparable magnitude which lasts for at least six months,

1. such place of business is suitably equipped with on-site employees, equipment and other facilities for purposes of conducting such business;
2. such establishment has its place of effective management within the country where such establishment is located; and
3. the place of business is maintained in such country outside the Republic, for a bona fide business purpose (other than the avoidance, postponement or reduction of any liability for payment of any tax, duty or levy imposed by this Act or by any other law administered by the Commissioner);

'controlled foreign entity' means any foreign entity in which any resident or residents of the Republic, whether individually or jointly, and whether directly or indirectly, hold more than 50 per cent of the participation rights, or are entitled to exercise more than 50 per cent of the votes or control of such entity;

’designated country’ means any designated country as defined in section 9E;

’foreign entity’ means any person (other than a natural person) which is not a resident or which is a resident but where such entity is as a result of the application of the provisions of any agreement entered into by the Republic for the avoidance of double taxation, is treated as not being a resident of the Republic;

'participation rights' means the right to participate directly or indirectly in the capital or profits of, dividends declared by, or any other distribution or allocation made by, any entity.

1. the provisions of this subsection shall not apply where such resident (together with any connected person in relation to such resident in aggregate) holds less than 10 per cent of the participation rights in such controlled foreign entity; and
2. the amount of any income received by or accrued to such entity by way of foreign dividends, shall for the purposes of this section be determined in accordance with the provisions of section 9E, as if such entity had been a resident.

(a) any deductions or allowances which may be allowed, or any amounts which may be set off against, the income of such entity in terms of this Act shall be limited to the amount of such income;

(b) any amount whereby such deductions or allowances or amounts exceed the amount of such income, shall be carried forward to the immediately succeeding year of assessment and be deemed to be a balance of assessed loss which may be set off against the income of such entity in the such succeeding year for the purposes of section 20; and

(c) no deduction shall be allowed in respect of any interest paid by such entity to any other controlled foreign entity in relation to the resident, as contemplated in subsection (9)(fA).

(a) such capital arose from income received by or accrued to such controlled foreign entity in any previous year of assessment during which such resident had a contingent right to participate in such income; and

(b) such income has not been subject to tax in terms of the provisions of this Act,

such amount shall be included in the income of such resident in such year of assessment.

(4) … (This subsection contains an anti-avoidance measure to deal with foreign income which a residents divests by way of a donation, settlement or other disposition. This has the effect that such income is received by another person who is not a resident. This provision has been moved to section 7 which will apply now that the Act applies to worldwide income.)

(4A) …(This subsection deals with the deferral of tax on foreign income which may as a result of the currency or other restrictions imposed in terms of the laws of another country, not be remitted to the Republic. This provision has been moved to section 9F).

(5) … (This subsection relates to the donation, settlement and other disposition contemplated in subsection (4) and has been moved to section 7).

(6)  The amount included in the income of any resident under the provisions of this section, shall be converted to the currency of the Republic on the last day of the financial year of the controlled foreign entity and the ruling exchange rate at that date, or an average exchange rate determined for such year in such manner as the Commissioner may approve, shall be applied to determine the value of the amount to be included in the income of such resident.

(7)  Any resident who, at any time during any year of assessment, has a participation right contemplated in subsection (2) or a vested right contemplated in subsection (3), shall disclose such fact to the Commissioner in writing when submitting his return of income for such year and at the same time furnish such information as may be required by the Commissioner for the purposes of this section.

(8) …(This subsection relates to the determination of the taxable portion of the income of the controlled foreign entity, i.e. after taking into account the allowable deductions. This subsection has been deleted as subsection (2A) will now provide for this.)

(9)  The provisions of this section shall not apply—

(a) in respect of receipts and accruals, other than receipts and accruals from foreign dividends contemplated in section 9E, of any controlled foreign entity which is a company, where the receipts and accruals, after taking into consideration any deductions or allowances under the taxation provisions of such other country have been or will be subject to tax on income in a designated country at a statutory rate of at least 27 per cent without any right of recovery by any person (other than a right of recovery in terms of an entitlement to carry back losses arising during any year of assessment to any year of assessment prior to such year of assessment);

(b) where the net income of any controlled foreign entity which is a company is attributable to any business establishment of such controlled foreign entity in any country other than the Republic:

(i) derived from any sale or service transaction by such controlled foreign entity with any connected person in relation to such controlled foreign entity, who is a resident, unless the consideration in respect of such transaction reflects an arm’s length price that is consistent with the provisions of section 31; or

(ii) derived from—

(A) such controlled foreign entity purchased such goods from any person (who is not a connected person in relation to such controlled foreign entity) within the country of residence of such controlled foreign entity;

(B) the labour, overhead, leasing, machinery repair, depreciation, and similar production costs incurred by such controlled foreign entity to extract, produce, or assemble such goods amount to 20 per cent or more of the total costs; or

(C) such controlled foreign entity sells goods of the same or a similar nature to unconnected persons at comparable prices (after accounting for transportation and other bona fide costs of delivery) and such sales to unconnected persons constitute more than 50 percent of the total sales of such goods by such entity; or

(A) such goods, materials, parts or ingredients thereof purchased from connected persons who are residents amount to 20 percent or less of the total cost of such goods;

(B) the labour, overhead, leasing, machinery repair, depreciation and similar production costs incurred by such controlled foreign entity to extract, produce, or assemble the goods amount to 20 per cent or more of the total costs; or

(C) the products are sold by such controlled foreign entity to unconnected persons for delivery within the country of residence of such controlled foreign entity; or

(cc) any service performed by such controlled foreign entity to a connected person who is a resident, unless such service is performed outside the Republic and—

(A) in the case of any service other than commission sales or other selling services, such service relates to the creation, extraction, production, assembly, repair or improvement of goods utilised within one or more countries outside the Republic; or

(B) in the case of any commission sales and other selling services, such services relate to goods of a connected person who is a resident and such goods are sold to unconnected persons for delivery within the country of residence of such controlled foreign entity:

(a) the Minister may by way of general notice published in the Gazette—

(i) treat one or more foreign countries as one to the extent such foreign countries reflect a single economic market and such treatment will not lead to an unacceptable erosion of the tax base; or

(ii) waive the application of this paragraph to the extent the application of this paragraph will unreasonably prejudice national economic policies or South African international trade and such waiver will not lead to an unacceptable erosion of the tax base; and

(b) the Commissioner may by way of general notice published in the Gazette waive application of this paragraph for any form of transaction which is not exempt under this paragraph, to the extent that the Commissioner is satisfied that the form of the transaction will in all probability not involve pricing that will be inconsistent with the provisions of section 31;

(A) connected person who is a resident; or

(B) person who is a resident to the extent that such receipts and accruals are effected as part of a scheme for the purposes of avoiding the liability for any tax, duty or levy imposed in terms of this Act or any other Act administered by the Commissioner;

(c) …(The time period in this provision for the exemption has lapsed. It is, therefore, deleted).

(d) … (This is deleted as a designated country list is now being proposed.)

(e) to the net income of any controlled foreign entity to the extent that such income is included in the taxable income of the entity;

(f) in relation to the proportional amount of an amount equal to the net income attributable to any resident, to the extent that it relates to any foreign dividend contemplated in section 9E declared to or deemed to have been declared to a controlled foreign entity which is a company by any other company which is a controlled foreign entity in relation to such resident; or

(fA) in relation to the proportional amount of an amount equal to the net income of a controlled foreign entity which is attributable to any resident, to the extent that it relates to any interest, which is paid to such entity by any other controlled foreign entity in relation to such resident;

7. … (Income will only be imputed to a resident who holds more than 10 per cent of the shareholding in a company. This exclusion will, therefore, no longer be necessary.)

(10) The provisions of subsection (9)(b), (f) and (fA) shall not apply in respect of any resident, where such resident fails to fully comply with the provisions of section 72A(2).

1. is licensed or registered to perform as such within the country of residence of any controlled foreign entity carrying on such business;
2. generates more than 50 per cent of its total receipts and accruals from persons who are not connected persons in relation to the controlled foreign entity carrying on such business; and
3. in the case of insurance business, would have been taxed in terms of the provisions of section 28 or 29A, if such business had been performed in the Republic;

1. interest as contemplated in section 24J;
2. an amount as contemplated in section 24K; or
3. any other income which, by the laws of the Republic administered by the Commissioner, is subjected to the same treatment as income from money lent;

‘rental income’ means any amount received by or accrued to any person as consideration for the use of, or the right to use, any movable or immovable property;

‘royalty’ means any amount received by or accrued to any person as consideration for the use of, or the right to use, any copyright of literary, artistic or scientific work (including cinematograph films and films, tapes or discs for radio or television broadcasting), any patent, trade mark, design or model, plan, secret formula or process, or any other property or right of a similar nature, or for information concerning industrial, commercial or scientific experience.