2.2 Gross Income – Types of Income (8)

Question 1

Types of income

Answer 1

• Income from services rendered
• Interest
• Retirement funds
• Royalties
• Rental income
• Special inclusions

Question 2

Payments for services rendered are of a

Answer 2

Revenue nature being the fruits of a person’s labour. An individual can either render services in their own capacity (sole proprietor) or as an employee. Where something is given to employee that does not have an ascertainable monetary value rules are contained in the Act to determine the value.

Question 3

Interest

Answer 3

Interest is the fruit of a capital sum and is therefore deemed to be income of a revenue nature. This includes investment income from companies, trusts, banks, building societies and unit trusts. Interest received from foreign investment of a resident must also be included. However, the Act does allow for an exemption of a set amount of annual local and foreign interest.

Question 4

Retirement funds

Answer 4

All amounts received from an applicable retirement fund in the form of a repetitive income will be included and taxed in full in year received. Lump sum payments are dealt with under special inclusions.

Question 5

Royalties

Answer 5

Received for the use or right of use.
* Paid to a resident the full amount must be included in gross income. The institution paying royalty will pay the gross amount and provide a statement of income which must be incorporated in income tax return of recipient.
* Paid to a non-resident, subject to 15% withholding tax. The institution will withhold 15% of full amount and pay to SARS and pay over the difference to non-resident.

Question 6

Types of royalties

Answer 6

Include any amounts received for the use or the right of the use within SA:
* Any patent, design, trademark, copyright, model, pattern, plan, formula or process
* Any motion picture film, video tape or disc of any sound recording or advertising matter
* Imparting any scientific, technical, industrial or commercial knowledge or information for the use in the Republic

Question 7

Rental income

Answer 7

From property or an asset is regarded as income of a revenue nature (fruits of a capital asset)

Question 8

Cryptocurrency

Answer 8

Proceeds from the disposal may be treated as either capital or revenue depending on the circumstances of the taxpayer.
* Where taxpayer trades in cryptocurrency proceeds will be treated as revenue. They may deduct expenditure incurred in carrying on this trade.
* Where a taxpayer holds cryptocurrency for investment purposes, the sale will be treated as a disposal and normal capital gains tax rules apply. The original cost will be the base cost.