Introduction to Income Tax Flashcards
Why do governments levy taxes?
To finance actions like welfare, education, healthcare and infrastructure maintenance
What are the 3 ways of grouping taxes?
By:
parameter of the tax
method of calculation
who is responsible for paying the tax
Who is the ‘Father of Economics’?
Adam Smith, the author of The Wealth of Nations, 1776
What is the residence basis of taxation?
Residents are required to pay tax on worldwide income
Non-residents are required to pay tax on income from a South African source
What are the 5 types of tax under the Income Tax Act 58 of 1962?
Normal tax
Turnover tax
Donations tax
Dividends tax
Withholding tax
What is the difference between tax for natural and legal persons?
Tax for natural persons is progressive
Tax for legal persons is proportional
When does the tax year of assessment end for natural persons?
The last day of February
What is the tax year of assessment for legal persons?
Usually the same as their financial year
What is taxable income?
The net income upon which tax will be levied
What is the formula for taxable income?
taxable income
gross income
-
(exempt income)
-
(allowable deductions)
+
taxable capital gains
When are tax rates amended?
Annually with effect from 1 March
What is the rate of taxation for trusts?
A fixed rate of 45%
What are deduction tables?
Special tax tables that combine the calculation of the tax liability and the subtraction of rebates
What is the marginal tax rate?
The tax rate of an additional rand of taxable income within a particular tax bracket
What are the 3 different allowable rebates?
Primary rebates - natural persons
Secondary rebate - natural persons 65 years and older
Tertiary rebate - natural persons 75 years and older
What is the average tax rate?
The actual tax rate someone pays after rebates
What are the two systems SARS has in place for individuals to prepay taxes?
Pay as you earn (PAYE) - employed individuals
Provisional tax system - non-employees
How often is PAYE paid?
Weekly or monthly repayments
How many payments does provisional tax system have?
Typically 3
Who uses ITR12?
Individuals
Who uses ITR14?
Companies
Who uses ITR12T?
Trusts
What is IT34?
The document SARS issues after tax assessment, outlining the components of and due date for the final net amount payable.
What is ADR1?
A notice of objection to a tax assessment
What is ADR2?
A notice of appeal to a disallowed objection
What are the 3 ways appeals are dealt with?
- To the Tax Board
- To the Tax Court
- Through the ADR process
When are non-compliance penalties leviable?
Every month that a taxpayer has more than one year’s tax return outstanding
