Original Research

A critical investigation of the interaction between sections 8(4)(a), 9H and paragraph 40 of the eighth schedule of the income tax act No. 58 of 1962 versus the current practice of The South African Revenue Service

Carien Straus, Leonard Willemse
Journal of Economic and Financial Sciences | Vol 7, No 3 | a242 | DOI: https://doi.org/10.4102/jef.v7i3.242 | © 2014 Carien Straus | This work is licensed under CC Attribution 4.0
Submitted: 22 June 2018 | Published: 31 October 2014

About the author(s)

Carien Straus, Stellenbosch University, South Africa
Leonard Willemse, Stellenbosch University, South Africa

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Abstract

Section 9H and paragraph 40 of the Eighth Schedule of the Income Tax Act No. 58 of 1962 (‘the Act’) determines that a person is deemed to dispose of all of his assets (bar a few exceptions) at market value when that person ceases to be a South African resident or passes away, respectively. This deemed disposal is treated as a disposal event for capital gains tax purposes in terms of the Eighth Schedule of the Act. The question that arises is whether this deemed disposal event gives rise to a recoupment in terms of section 8(4)(a). In practice there currently seems to be uncertainty with regard to this issue, as there are different interpretations and applications of these provisions. This article investigates the interaction between sections 8(4)(a), 9H and paragraph 40 of the Eighth Schedule in order to determine whether a section 8(4)(a) recoupment should be included, or not, in the taxpayer’s gross income according to paragraph (n) of the gross income definition found in section 1 of the Act.

Keywords

Income Tax Act No. 58 of 1962 (as amended); recoupment; recouped; recovered; deemed disposal, proceeds

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