Final Exams Flashcards
total amount in cash or otherwise?
- every form of property w money value
- ascertainable monetary amount
onus of proving monetary amt?
SARS
if paid my non-monetary means?
include the market value of the asset
received by?
- own benefit, own behalf
- intended to receive amount
deposit received?
included, can claim deduction later
usufruct?
right to use an asset
bare dominium?
right to own asset
accrued to?
- unconditionally entitled to the amount
- amount incl at earlier of receipt or accrual
onus of proving non-taxability?
taxpayer
not of a capital nature?
- produces revenue or benefits
- income earning structure (tree vs fruit)
- look at intention upon acquisition
speculative intention?
purpose of making profit = revenue
investment intention?
to earn returns on inv = capital
changes of intention examples?
no change:
- realize at best advantage
- happen to sell profit
- mere intention to sell in future
change:
- profit motivated
- crossing the rubicon
realization company?
used to facilitate the realization of property which could not otherwise be dealt with satisfactorily. does not mean change in intention = capital
ipse dixit?
unproven statement
how to see if capital in nature?
subjective test. look at intention. if ipse dixit, use objective test.
damage and comp received?
loss of cap asset = capital
loss of profit = revenue
receipt from cancellation / variation of trade agreement?
- normally revenue
- capital if so crucial, loss would cripple
other examples of cap vs rev amounts?
capital:
- fortuitous gains
- sporadic gambling success (losses not deductible)
revenue:
- professional gambling (losses deductible)
testing for residency? (natural persons)
ordinarily resident OR ppt
ordinarily resident?
- where they return after their wanderings
- habitually and normally resident
- only 1 country at a time
(OR)
physical presence test?
- 91+ days in current year
- 91+ days in each of the 5 preceding years
- 915+ days in aggregate in the preceding 5yrs
(AND)
other info for ppt?
- when all met, person = res from beginning of year
- if absent for 330+ continuous days you will no longer be a resident from the day you left
residency for non-natural persons?
- inc, est, formed in SA
OR - effective place of mgmt in SA
source rule for imparting info?
- amount is received from res OR info is used in SA
source rule for dividends?
- from SA resident company
source rule for interest?
- paid by resident OR funds are used/applied in SA
source rule for royalties?
- paid by resident OR used in SA
source rule for services rendered?
- all amts for behalf of an employer listed in the SA public sector = SA source, regardless of where service is performed
source rule for pensions
SA source if services are rendered in SA; can apportion
source rule for disposal of immovable property?
- SA source if = property situated in SA = buyer is a resident and proceeds not taxed by any other country
if purchaser of immovable property is non-res?
then will be SA source if property is attributable to a private establishment in SA
list of special inclusions?
- annuities
- alimony and maintenance
- dividends
- restraint of trade pmts
- all amts from services rendered
- lump sum benefits
- know-how pmts
- fringe benefits
special inclusion for annuities?
allowed if:
- periodic repayment
- entitled to multiple pmts
- no principle sum reduced by each pmt
special inclusion for restraint of trade pmts?
from brokers, personal service providers, by virtue of employment
special inclusion for services rendered?
- regardless of who receives pmt
- causal relationship must exist between employment and receipt (case law)
special inclusion for lump sum benefits?
from variation of office, breach of emp contract, accumulated leave pay
special inclusion for dividends details?
- full amount
- share repurchase would also = dividends
local interest exemption?
- over 65 = R34500
- under 65 = R23800
(only for natural persons)
(only res)
foreign dividend exemption?
- fully exempt if more than 10% shareholding
- partially exempt for nat person = 25/45
- partially exempt for other persons = 8/28
local int exemption for non-residents?
if taxpayer has not, in the 12 months preceding accrual date:
- been in SA 183+ days
- carried on bus through SA private est
if you get exemption, subject to 15% WH tax
exemption for purchased annuity?
Y = A/B x C A = amt given to purchase B = total expected receipts C = amt incl in GI in this YOA
exemption for cancelled annuity?
X = A-D A = cash amount paid for annuity D = all exemptions received to date
tax free investment?
- earnings fully exempt
- contributions are limited = R36k per year, R500k aggregate; excess cont pays 40% tax but earnings always exempt
requirements for uniform allowance?
- required to be worn by employer and distinguishable from ordinary clothes
exemption for persons employed outside RSA?
fully exempt ltd to R1 million and if they were outside SA:
- 183+ days during any 12 month period AND
- 60 continuous days absent AND
- services rendered outside SA
bursary exemption for employee?
- fully exempt if they agree to reimburse employer if they don’t complete their studies
- must be at recognized educational institute
bursary exemption for relative of employee?
- full amount incl into gross income bc they benefit from not paying. not exempt if remuneration proxy > 600k.
- if < 600k, first 20k pre-matric, first 60k post matric
bursary exemption for someone with a disability?
- full amount incl into gross income bc they benefit from not paying. not exempt if remuneration proxy > 600k.
- if < 600k, first 30k pre-matric, first 90k post matric
fully exempt amounts?
- alimony and maintenance
- funeral benefits
- local dividends if not annuity
exemption for relocation allowances?
allowed for transport, acc for up to 183 days, costs incurred in selling previous residence and settling into new one
exemption for insurance benefits accruing to employees?
when contributions made by employer, contributions fully exempt, payout is incl in GI
fully exempt amounts for employment?
- unemployment benefits
- policy payouts of individual-owned insurance policy
- war, disability pension
- workman’s compensation
- comp from road accident fund
- amts from social security outside SA
exempt entities?
- government
- institution/trust established by law
- electoral commission
- from charter of ship / aircraft
- PBOs
- rehab trust/trust
- recreational clubs
- pensions fund, mutual loan, indemnity fund
- pensions payable to person/spouse who occupied office / VP
- body corp / share block company
two tests for general deductions?
- s11a positive test = what is allowed
- s23g negative test = not allowed
s11(a) preamble?
- trade must be carried on
- income must be derived from this trade
(look if the preamble is met first, before looking at whether business gets a deduction)
when are deductions allowed?
for expenditure and losses actually incurred during the YOA for the production of income that is not of a capital nature
what is trade?
- trade must be given widest possible interpretation
- excludes passive income unless specifically incl.
what are exp/losses?
cash outflows or liabilities which may be settled in cash or otherwise
actually incurred?
- unconditional legal obligation; only once conditions are met
- if expense is subject to an uncertain future event falling outside of the YOA = no expense
- exp that is claimed as a deduction must be incurred in the YOA that the deduction is claimed
the issue of shares for the acquisition of an asset?
not expense actually incurred
in the production of income?
- inevitable concomitant of trade
- closely enough connected with income producing actions
- apportionment allowed; be reasonable for circumstances
- incurred for purpose of earning income but does not actually have to
loan procured not for producing income?
not expense
non-contractual, non-policy retirement pmt?
- not expense, not in prod of income
- retired work = no more income produced by them
- only deductible if made to motivate employees & part of policy
capital in nature?
- gives rise to enduring benefit / adds to income earning structure = capital
example of capital in nature?
- exp from acquiring a capital asset
- fixed capital = income earning structure
example of revenue in nature?
- exp from working income-producing operations
- floating capital
- royalties to procure use of IP
section 23(g)?
- describes which deductions are not allowed and requires apportionment
- no deductions are allowed for moneys claimed as a deduction to the extent that the money was not laid out for the purposes of trade
case law principles for s23(g)?
- link between trade & exp must not be too remote
- expense does not have to produce profit in itself
- borrowing money and re-lending at a higher rate = trade
- entering into a loan to finance a dividend = not trade
pre-trade expenditure definition?
- money spent before business begins; generally capital in nature and spent setting up inc-earning structure
can pre-trade exp be claimed as a deduction?
- can be claimed in YOA that trading commences provided that they would have been deductible under s11, s11D or s24J but it was not allowed when incurred
- allowed for exp/losses actually incurred prior to the commencement of and in prep for carrying out trade
prohibited deductions list?
- family/home maintenance for an individual
- insured losses (direct link between loss and amt recoverable)
- provisions
- expenses incurred to produce exempt income; apportion
- RoT payments
- notional interest
- fines and corrupt activities
- expenses to earn foreign divs
deduction for expenses relating to employment / holding of office?
prohibited unless permitted. only for remuneration earners.
deduction for premiums paid on insurance policy?
if it covers person against illness, injury, death, disability, unemployment = prohibited
deduction for cost of domestic / private expenses?
prohibited; except for property acquired for the purpose of trade, where it is specifically equipped and occupied exclusively and regularly for trade;
AND
taxpayer is not entitled to deduction if their trade = employment, unless:
> income is mainly derived from commission and employee duties are performed mainly outside offices provided by employer
OR
> duties are mainly performed on such part
section 23B?
prohibits double deductions under more than one section of the ITA. no s11(a) deduction shall be allowed if a deduction is granted under any other section which may impose a limitation or be granted in a different YOA
specific deduction for interest exp?
any int exp incurred from carrying on a trade
specific deduction for legal expenses?
- in respect of any claim, dispute, action, NOT settlement
- not capital in nature
- for claims against taxpayer which would not receive a s11a deduction
- or for claims by taxpayer which would not be included into their income
specific deduction for RoT payments?
- allowed when payments are taxable in the hands of the recipient – amount is included in their gross income
- deduction shall not exceed the lesser of amt/3 or amt/number of years
specific deduction for bad debts?
s11(i)
allowed for debts which are due to the taxpayer, went bad during the YOA and in respect of amounts included into gross income this year
requirements for doubtful debts deduction?
s11(j)
- debts must qualify for s11(i) if they go bad
- reverse prior year allowance first (+)
specific deduction for doubtful debts for companies?
- must be using IFRS
- 40% for expected lifetime credit losses
- 25% for other allowances
specific deduction for doubtful debts for individuals?
- 25% for debts in arrears for more than 60 days
- 40% for 120+ days
specific deduction for employer contributions?
allowed for pension funds, providents, retirement annuity funds
specific deduction for registering intellectual property?
- fully deductible
- not incl. copyrights
- used in the production of income
specific deduction for acquisition of intellectual property?
- if more than 5000: 10% for patents, copyrights; 5% for designs
- if less than or equal to 5000: 100%
- not incl. trademarks
specific deduction for repaying employee benefits?
allowed if included into the gross income for that YOA for the employee and the amount was in respect of services rendered
specific deduction for refunding RoT payments?
fully deductible if included into the gross income of the recipient
specific deduction for annuities paid to former employees?
- if they retired because of old age, ill health, infirmity
- incl. payments to their spouses / dependants
specific deduction for annuities paid to former partner?
if:
- partner for at least 5 years
- retired because of old age, ill health, infirmity
- annuity is reasonable in relation to services rendered
- not in lieu of partnership interest
specific deduction for donations to PBOs?
s18A
- allowed for donations to approved PBOs only
- must obtain s18A receipt as evidence
- if cash, 100% is deductible
- limited to 10% of taxable income
what if there is leftover donations that are excluded bc taxable income?
carried over to next year
donations of trading stock?
- deduct the amount taken into account in the gross income for that YOA
donations of any other asset used for trade?
- deduct the lower of cost less allowances and MV
donations of any asset constructed for the purpose of donation?
- deduct lower of cost and MV
donations of immoveable property?
- deduct B + (C x D)
B = cost
C = capital gain had it been disposed of at MV
D = 60% for individuals, trusts; 20% for other
s23H?
- deferred deductions
- can only be claimed when goods rec/services rendered
- no deferral / limits if:
> exp paid due to legislation
> g/s will be supplied within 6 months of year end - aggregate of amounts subject to 23H does not exceed 100 000
trading stock definition?
anything manufactured, constructed, produced by the taxpayer for the purpose of manufacture, sale, exchange by him/his behalf and its:
- proceeds form / will form part of GI
- any cons stores / spare parts acquired to be used in the course of trade
case law principles for s22?
s22 is not applicable where the mining/separation of sand and disposal of sand take place in the same YOA. the sand deposits on the farm prior to mining = not trading stock
sale of assets similar to trading stock?
para jA
- will be specifically incl. into GI under certain circumstances – must be manufactured, constructed, produced by the taxpayer and similar to any other asset they manufactured, constructed, produced
spare parts?
- capital but deductible under s11(d)
cost of trading stock?
cost to acquire + further costs to get it to location and condition for sale
closing stock?
s22(1) - add to taxable income at lower of cost and MV
opening stock?
s22(2) - deductible from taxable income. use amount incl. in last year’s c/b. if disposed of at MV, value = MV
stock acquired for no consideration?
SARS practice deduction at MV of the asset
what is a recoupment?
amount is deducted from taxable income when purchased and when disposed of (not sale), it is added back to recoup the amount
recoupment of stock applied for domestic/private use?
- cost (ltd to carrying value if written down)
- MV if can’t find cost
recoupment is MV when?
- asset is disposed of other than in ordinary course of business
- distributed in specie
- applied for any other purpose
- ceases to be held as stock
(all OR)
recoupment of donations to PBO?
recoup at same amount taken into account for that YOA for trading stock
if stock is used for trade?
s22(8) recoupment
s11(a) proviso to s22(8)
at MV
recoupment of assets similar to TS which are applied as capital assets?
no deduction
recoupment of stock not disposed of in ordinary course of business?
MV or cost less amount received
no s11(a) deduction for stock acquired…?
- that is not disposed of by the end of the year
- that is not included in c/b for year end
- cost will be carried forward to the next YOA and will be claimed as a s11(a) deduction in the first YOA that it is disposed of / included in c/b / destroyed / for some other reason cannot be held or disposed of
annuities?
- specially included
- Y = A/B x C or X = A-D exemption
alimony and maintenance?
- specially included
- fully exempt
restraint of trade pmts?
- specially included
- prohibited 11(a) deduction
- specific deduction
local/foreign dividends?
- specially included
- exempt fully or partially
relocation allowances?
- specially included
- fully exempt
