Exempt Income

Question 1

Definition of income as defined term

Answer 1

Income = Gross income less exempt income

If the Act refers to “income” it means “gross income from which exemptions have been deducted”

Question 2

Why is it good to not tax these exemptions?

Answer 2

1. Special character of taxpayer
2. Special nature of income
3. To encourage savings by investing in certain securities
4. Prevent income from being taxed twice

Question 3

Dividends

Answer 3

Dividends declared by resident company = exempt

Non resident company declares foreign dividends - if shareholder hold 10% or more in company then dividends is exempt

Question 4

Interest

Answer 4

if you’re over the age of 65 = the first R34 500 is interest free, anything over that you will have to pay interest

Any other person = 23 800

Only applies to natural persons and no one else

Question 5

PBO

Answer 5

All their no trading income = exempt
Premises which they rent out = exempt
* The moment they start trading or receiving business income there are very strict rules that will apply to them.

Question 6

S18A deduction?

Answer 6

A person who donates to a PBO - their donation is exempt from donations tax