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Companies tax Flashcards

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1
Q

Companies

(s1 of ITA) includes

A 
-Small Business Corporations
(SBC)
-Personal Services Providers
(PSP)
-Foreign company with RSA branch
-Remaining companies
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2
Q 
what rules?
-Small Business Corporations
(SBC)
-Personal Services Providers
(PSP)
-Foreign company with RSA branch
A

Special rules for each of the companies

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3
Q

what rules ?

Remaining companies

A

General rules

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4
Q

Special rules for each of the companies

A 
-Small Business Corporations
(SBC)
-Personal Services Providers
(PSP)
-Foreign company with RSA branch
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5
Q

which co’s follow general rules

A

Remaining companies ( doesn’t meet definition of each of the other co’s)

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6
Q

Definition of company (s 1 of ITA)

A

Association, corporation or company incorporated in RSA as well as a body corporate formed RSA
Company incorporated in foreign country or body corporate formed under such law
Close corporation
Co-operative
Association to serve specified purpose, beneficial to public
Foreign collective investment schemes
Portfolio of a collective investment scheme in property qualifies as REIT

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7
Q

Definition of company (s 1 of ITA) excludes a

A

foreign partnership

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8
Q

Is a foreign partnership a company

A

Definition of company (s 1 of ITA) excludes a foreign partnership

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9
Q

two classifications for companies

A

a public company or private company s 38 of the ITA

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10
Q

how are public company vs private company taxed

A

method of taxation for private and public companies are the same
(except for donations + Special rules apply to directors of private companies)

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11
Q

Donations made by public companies

A

exempt from donations tax

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12
Q

Donations made by private companies

A

private companies are liable for donations tax s 56(1)(n).

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13
Q

Donations made by private companies vs public companies

A
  • public companies are exempt from donations tax,

- while private companies are liable for donations tax s 56(1)(n).

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14
Q

Directors of private companies vs. directors of public companies

A

-Payments made by public companies and private companies to its directors is subject to employee’s tax.
-Special rules apply to directors of private companies.
-Under qualifying circumstances, employee’s tax in respect of private companies may be based on a deemed amount.
(par 11C of Fourth schedule – Chapter 13)

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15
Q

Directors of private companies

A

-Payments made by private companies to its directors is subject to employee’s tax.
-Special rules apply to directors of private companies.
-Under qualifying circumstances, employee’s tax in respect of private companies may be based on a deemed amount.
(par 11C of Fourth schedule – Chapter 13)

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16
Q

Directors of public companies

A

Payments made by public companies to its directors is subject to employee’s tax.

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17
Q

Year of assessment (“YOA”) of company

A

Year of assessment = company’s financial year end

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18
Q 
Conversion of CC to company
(S 40A)
-assessed losses?
-TV of assets?
-Year end ?
A

(S 40A)
Where a cc is converted to company, the company and CC are deemed to be one and the same taxpayer for purposes of the Act, therefore:
Any assessed loss prior to conversion may be carried forward after conversion
Tax values of assets unaffected
Tax year-end need not be changed

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19
Q

how are CC’s treated

A

as a company

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20
Q

Tax rate of co

A

Normal tax rate @ 28%
Flat rate of tax
Tax payable from first rand of taxable income

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21
Q

Date Dividend tax is effective from

A

Effective from 1 April 2012

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22
Q

Dividend tax is levied at

A

Levied at 15% (subject to DTA relief)

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23
Q

Dividend tax (who pays it)

A

on dividends paid by company (subject to the Dividend Tax provisions ss 64D – 64N)

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24
Q

Dividends tax only applies to dividends from

A

Dividends tax only applies to dividends from :

  • SA companies
  • all companies listed on the JSE.
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25
A dividend is deemed to be paid on which date by a listed company?
by a listed company on the date the dividend (other than an asset in specie distribution) is paid
26
A dividend is deemed to be paid on which date by a non-listed company?
by a non-listed company on the earlier of the date the dividend (other than an asset in specie distribution) is paid or becomes due and payable
27
A dividend is deemed to be paid on which date?
- by a listed company on the date the dividend (other than an asset in specie distribution) is paid - by a non-listed company on the earlier of the date the dividend (other than an asset in specie distribution) is paid or becomes due and payable - on the earlier of the date the dividend is paid or becomes due and payable in respect of an asset in specie distribution.
28
A dividend is deemed to be paid on which date by an asset in specie distribution?
on the earlier of the date the dividend is paid or becomes due and payable in respect of an asset in specie distribution.
29
Current effective tax rate assuming all profits are declared as dividends
38.80% = 28% + (72% x 15%)
30
Rebates for company
No primary / secondary /tertiary rebate
31
Is a company a Provisional taxpayer
Company is a provisional taxpayer
32
Public officer ???
‘representative taxpayer’ (s 246 of Tax Administration Act)
33
Assessed loss incurred for companies
- (s20) - the assessed loss may NOT reduce the non-trade income (e.g. interest) of the taxpayer - if the company has not carried on a trade during the year of assessment: the balance of an assessed loss may NOT be carried forward
34
Assessed loss incurred for For a taxpayer other than a company
Assessed loss incurred (s20) For a taxpayer other than a company, the assessed loss may reduce the non-trade income (e.g. interest) of the taxpayer, while this provision is not applicable to companies (subject to s 20A). For a taxpayer other than a company, the balance of an assessed loss may be carried forward even when the taxpayer has not carried on a trade during the year of assessment, while this provision is not applicable to companies
35
Calculation of taxable income of companies vs non-companies
The calculation of taxable income same as for persons other than companies, with certain exceptions: - assessed losses - interest exemption s 10(1)(i)
36
interest exemption s 10(1)(i) available to?
- persons other than companies | - No interest exemption s 10(1)(i) available for companies
37
interest exemption for a company
-No interest exemption s 10(1)(i) available for companies
38
2 types of distributions:
Cash dividend; or | ‘In specie’ dividend = distribution of an asset other than in cash
39
What is dividends?
Dividends = a distribution of a companies profits to its shareholders
40
‘In specie’
= Distribution of an asset other than in cash
41
Distributions by a company in specie in the form of:
- Trading stock [s 22(8)] | - Capital asset recoupment(asset other than trading stock [s 8(4)(k)]
42
Distributions by a company in specie: Trading stock at what value
@ market value [s 22(8)]
43
Distributions by a company in specie: Trading stock- included/excluded in income?
include in income
44
Distributions by a company in specie: Capital asset recoupment at what value
Recouped at market value
45
Deduction of dividend
No deduction allowed for dividends paid by a company (not an expense of the company, only a distribution of profits)
46
Dividends received - company | Gross income
Dividends received by a company is included in gross income (par (k) of gross income definition)
47
Dividend exemption- company
Dividends are generally exempt in terms of s 10(1)(k).
48
Expenditure incurred by a company in the production of exempt income (e. g. dividend income)
is not deductible (s 23(f))
49
Personal Service Providers (“PSP”) one of 3 Requirements (par 1 of Fourth schedule)
One the following 3 requirements must also be met: - The person would have been regarded an employee of the client if the service was provided directly or indirectly to the client (i.e. not on behalf of co or trust); or - Where duties must mainly be performed @ client premises; such co or trust is subject to control or supervision of the client as to manner of performance of service; or - >80% of income of co or trust from services from one client or an associated institution (associated company etc) in relation to client
50
PSP stands for
Personal Service Providers
51
PSP definition
- any trust or company - where any services provided by a trust or company to a client - is rendered personally by a connected person of such trust or company.
52
Excluded from PSP:
- Where co or trust throughout YOA employs ≥ 3 full-time employees - These employees exclude shareholders or members of the company, settlor or beneficiary of trust or a connected persons to those
53
Excluded from PSP is Where co or trust throughout YOA employs ≥ 3 full-time employees who is excluded as an "employee" in this case
These employees exclude: - shareholders or - members of the company, - settlor or - beneficiary of trust - or a connected persons to those
54
What is a PSP classified as as per the Fourth Schedule
PSP is classified as an ‘employee’ per the Fourth Schedule
55
Tax rate of PSP
Company is 28% | Trust is 41%
56
Deductions for PSP | s 23(k)
S 23(k) deductible expenses of PSP are – Amount paid / payable to an employee of the PSP (e.g. salaries) Legal expenses (s 11(c)) Bad debts (s 11(i)) Contributions to pension fund, provident fund & medical aid schemes (s 11(l)) Refunds of salary and voluntary awards etc (s 11(nA)) Refunds of restraint of trade payments (s 11(nB)) Expenses in respect of: -Premises -Finance charges -Insurance -Repairs -Fuel and maintenance if used wholly and exclusively for the purpose of trade
57
Are wear and tear allowances/ capital allowances allowed in a deduction of a PSP?
NO CAPITAL ALLOWANCES (wear and tear)
58
Employers making payment to PSP
Need to deduct employees’ tax at the abovementioned rates. The employees tax deducted may be off set against provisional tax payments of the co or trust
59
SBC stand for
Small Business Corporation
60
SBC: types of co. that can be a SBC
CC, co-operative or private company
61
SBC type of ownership
wholly owned by members or shareholders who are natural persons throughout the year
62
SBC gross income requirements
Gross income of entity does not exceed R20 million
63
SBC member/ SH requirements
No member or shareholder of the corporation has an interest or share in any other company, other than: (refer to Silke pg 505) listed companies /portfolio CIS in securities /body corporate / share block companies / non profit company as defined in s1 of Companies Act 2008 solely managing collective interest common to all its members/ R 5000/ terminating company, cc or co-operative
64
SBC requirements of total receipts & accruals (other than of a capital nature) + capital gains
Not more than 20% of the total receipts & accruals (other than of a capital nature) + capital gains consists collectively of ‘investment income’ and ‘income from rendering personal services’
65
SBC cannot be
Entity not a ‘Personal Service Provider’ per par 1 of Fourth schedule
66
‘Investment income’ =
- Dividends, - royalties , - foreign dividends, - rental received from immovable, - annuities and income of a similar nature. - Qualifying interest per s 24J (interest on instruments) and s 24K (interest on interest rate agreements) - Proceeds received from investment or trading in financial instruments, immovable properties and marketable securities
67
‘Personal services’
Any services relating to accounting, actuarial science, architecture, engineering etc; and If these services are provided personally by any person who has a share or interest in that company, co-operative or trust
68
services will not be considered ‘personal services’ should the company, co-operative or close corporation....
have employed at least 3 full-time employees during the entire year of assessment in its business. Furthermore, the employees are not shareholders or members of the company of cc (or its connected persons).
69
What Tax rate structure does SBC follow
no at 28% | special structure, refer to ledge
70
SBC s12E allowances: | Manufacturing
100%
71
SBC s12E allowances: | Non-manufacturing
50%, 30%, 20% or s11(e)
72
SBC s12E allowances: | Moving expenses of asset
refer Silke page 244
73
Definition of foreign company
Per s1 = foreign company = a company that is not a resident
74
From what source is a foreign company taxed?
- Non-resident is taxed on RSA source - If a company has its place of effective management outside the RSA (i.e. a foreign company), but carries on a trade within RSA through a branch/agency /business and ETC., the foreign company will be taxed on such profits as the profits are from a RSA source.
75
If Foreign company receives income from a source within the RSA, how taxed?
Co liable for normal tax on SA sourced income | Rate of normal tax is 28% of its SA taxable income
76
Dividends tax of Foreign company
Co not a resident, thus not liable for STC (or dividends tax)
77
requirements of Foreign company
Co carries on business or has an office in RSA must have an individual representative (public officer) in RSA Appointed within one month when co carries on business or has an office in RSA.
78
What is a PE
Foreign company that has a PE: carrying on a business/trade in RSA through e.g. a branch

Tax (7 decks)

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