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Tax > Companies tax > Flashcards

Companies tax Flashcards

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
Q

A dividend is deemed to be paid on which date by a listed company?

A

by a listed company on the date the dividend (other than an asset in specie distribution) is paid

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26
Q

A dividend is deemed to be paid on which date by a non-listed company?

A

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

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27
Q

A dividend is deemed to be paid on which date?

A
  • 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.
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28
Q

A dividend is deemed to be paid on which date by an asset in specie distribution?

A

on the earlier of the date the dividend is paid or becomes due and payable in respect of an asset in specie distribution.

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29
Q

Current effective tax rate assuming all profits are declared as dividends

A

38.80% = 28% + (72% x 15%)

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30
Q

Rebates for company

A

No primary / secondary /tertiary rebate

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31
Q

Is a company a Provisional taxpayer

A

Company is a provisional taxpayer

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32
Q

Public officer ???

A

‘representative taxpayer’ (s 246 of Tax Administration Act)

33
Q

Assessed loss incurred for companies

A
  • (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
Q

Assessed loss incurred for For a taxpayer other than a company

A

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
Q

Calculation of taxable income of companies vs non-companies

A

The calculation of taxable income same as for persons other than companies, with certain exceptions:

  • assessed losses
  • interest exemption s 10(1)(i)
36
Q

interest exemption s 10(1)(i) available to?

A
  • persons other than companies

- No interest exemption s 10(1)(i) available for companies

37
Q

interest exemption for a company

A

-No interest exemption s 10(1)(i) available for companies

38
Q

2 types of distributions:

A

Cash dividend; or

‘In specie’ dividend = distribution of an asset other than in cash

39
Q

What is dividends?

A

Dividends = a distribution of a companies profits to its shareholders

40
Q

‘In specie’

A

= Distribution of an asset other than in cash

41
Q

Distributions by a company in specie in the form of:

A
  • Trading stock [s 22(8)]

- Capital asset recoupment(asset other than trading stock [s 8(4)(k)]

42
Q

Distributions by a company in specie: Trading stock at what value

A

@ market value [s 22(8)]

43
Q

Distributions by a company in specie: Trading stock- included/excluded in income?

A

include in income

44
Q

Distributions by a company in specie: Capital asset recoupment at what value

A

Recouped at market value

45
Q

Deduction of dividend

A

No deduction allowed for dividends paid by a company (not an expense of the company, only a distribution of profits)

46
Q

Dividends received - company

Gross income

A

Dividends received by a company is included in gross income (par (k) of gross income definition)

47
Q

Dividend exemption- company

A

Dividends are generally exempt in terms of s 10(1)(k).

48
Q

Expenditure incurred by a company in the production of exempt income (e. g. dividend income)

A

is not deductible (s 23(f))

49
Q

Personal Service Providers (“PSP”)
one of 3 Requirements
(par 1 of Fourth schedule)

A

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
Q

PSP stands for

A

Personal Service Providers

51
Q

PSP definition

A
  • 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
Q

Excluded from PSP:

A
  • 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
Q

Excluded from PSP is Where co or trust throughout YOA employs ≥ 3 full-time employees
who is excluded as an “employee” in this case

A

These employees exclude:

  • shareholders or
  • members of the company,
  • settlor or
  • beneficiary of trust
  • or a connected persons to those
54
Q

What is a PSP classified as as per the Fourth Schedule

A

PSP is classified as an ‘employee’ per the Fourth Schedule

55
Q

Tax rate of PSP

A

Company is 28%

Trust is 41%

56
Q

Deductions for PSP

s 23(k)

A

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
Q

Are wear and tear allowances/ capital allowances allowed in a deduction of a PSP?

A

NO CAPITAL ALLOWANCES (wear and tear)

58
Q

Employers making payment to PSP

A

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
Q

SBC stand for

A

Small Business Corporation

60
Q

SBC: types of co. that can be a SBC

A

CC, co-operative or private company

61
Q

SBC type of ownership

A

wholly owned by members or shareholders who are natural persons throughout the year

62
Q

SBC gross income requirements

A

Gross income of entity does not exceed R20 million

63
Q

SBC member/ SH requirements

A

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
Q

SBC requirements of total receipts & accruals (other than of a capital nature) + capital gains

A

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
Q

SBC cannot be

A

Entity not a ‘Personal Service Provider’ per par 1 of Fourth schedule

66
Q

‘Investment income’ =

A
  • 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
Q

‘Personal services’

A

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
Q

services will not be considered ‘personal services’ should the company, co-operative or close corporation….

A

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
Q

What Tax rate structure does SBC follow

A

no at 28%

special structure, refer to ledge

70
Q

SBC s12E allowances:

Manufacturing

A

100%

71
Q

SBC s12E allowances:

Non-manufacturing

A

50%, 30%, 20% or s11(e)

72
Q

SBC s12E allowances:

Moving expenses of asset

A

refer Silke page 244

73
Q

Definition of foreign company

A

Per s1 = foreign company = a company that is not a resident

74
Q

From what source is a foreign company taxed?

A
  • 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
Q

If Foreign company receives income from a source within the RSA, how taxed?

A

Co liable for normal tax on SA sourced income

Rate of normal tax is 28% of its SA taxable income

76
Q

Dividends tax of Foreign company

A

Co not a resident, thus not liable for STC (or dividends tax)

77
Q

requirements of Foreign company

A

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
Q

What is a PE

A

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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