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Taxation 200 > Dividends tax, trading stock > Flashcards

Dividends tax, trading stock Flashcards

1
Q

What is the tax rate of a normal company or a CC

A

28%

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2
Q

What is a Small Business Corporation SBC

A
  • CC/Private
  • natural persons as shareholders
  • GI < 20mil
  • shareholders don’t have interest in other companies
  • < 20% of rev + capital gains = from investment income/personal services
  • not personal service provider
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3
Q

What is the tax rate of a SBC if its TI = 79000

A

Tax rate = 0%

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4
Q

What is the tax rate of SBC if it has a TI = 79000 - 365000

A

Tax rate = 7%

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5
Q

What is the tax rate of a SBC if it has a TI = 365001 - 550000

A

Tax rate = 20 020 +21%

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6
Q

What is the tax rate of a SBC if it has a TI = 550001 and +

A

Tax rate = 58 870 + 28%

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7
Q

Trading stock definition:

A 
Anything that is 
- produced
- manufactured
- purchase 
to be 
- used in manufacturing
-exchanged/ sold
Proceeds = included in GI
Revenue in nature
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8
Q

Trading stock purchases can not be deducted ito S11(a)

A

NO- deduction = allowed for trading stock purchased

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9
Q

What happens to the closing stock?

A

The closing stock gets added back to the TI-

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10
Q

What happens to the opening stock?

A

The opening stock gets deducted form the TI

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11
Q

Volkswagen SA (Pty) Ltd

A
  • trading stock included unsold vehicles
  • trading stock was carried at NRV
  • accounted for at NRV but this was < cost
  • Court = not agree = forward looking
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12
Q

What happens to spare parts if they are used, sold and on hand

A
  • used = deductable
  • if sold = recouped
  • on hand = added back
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13
Q

What happens to trading stock that are classified as work in progress?

A
  • valued

- included in closing stock

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14
Q

Ernst Bester Trust

A
  • sold sand from farm
  • wanted to deduct sand as part of opening stock
  • sand in ground = capital in nature
    sand taken out & sold = trading stock
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15
Q

What happens if we acquire trading stock for no consideration?

A
  • no S11(a) deduction
  • cost = MV
  • if not sold = include in closing stock
  • deduction = allowed from closing stock
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16
Q

Eveready Pty (Ltd)

A
  • bought business which included trading stock
  • stated that trading stock = acquired for no consideration
  • wanted deduction
  • just because cost price of trading stock is not stipulated = not mean it has no value
17
Q

What happens to trading stock that is taken for private/domestic use?

A
  • recouped at COST value
  • if written down previously- at WD value
  • cost not determinable = at MV
18
Q

When will trading stock be recouped at Market value?

A
  • distributed as dividend
  • disposed for consideration < MV
  • changed into capital asset
  • used in trade of business
  • donation w/o S18A certificate
19
Q

When will donations be recouped at cost?

A

When posses S18A certificate

20
Q

Can the company that issues a dividend claim a deduction?

A

No, it is not

  • expenditure
  • actually incurred
  • in the production of income
21
Q

What is impact on the shareholder that receives a dividend?

A

-Local dividend are included in GI and exempted
-Foreign dividends included and portion is exempted (if holds 10% >)
portion exempt:
- company= 8/28
- person = 25/45

22
Q

Definition of a dividend?

A
  • any amount
  • transferred/applied
  • by company (resident)
  • for the benefit/on behalf of
  • any person
  • by way of a distribution made
  • as consideration for the acquisition of any share in that company
23
Q

What is compulsory for it to be a dividend?

A
  • A SHARE
24
Q

Is the issue of capitalisation shares a dividend?

A

NOOOOO

25
Q

Dividends tax rate?

A

Tax rate = 20%

26
Q

Who is liable for the dividend?

A

The beneficial owner.

But company makes payment.

27
Q

What is a dividend in specie?

Who is liable for this dividend?

A
  • A dividend that is not cash

- The company is liable.

28
Q

Dividend exemptions apply if dividend is

  • not in specie
  • given to the following beneficial owners
A
  • SA company/CC
  • Gov/municipality
  • PBO
  • Pension/Provident/ Retirement Annuity Fund

Taxation 200 (9 decks)

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