Learning Unit 2 - Gross Income Flashcards
What is the definition of Gross income?
Total amount in cash or otherwise received by or accrued to or in favor from a source within South Africa, excluding receipts and accruals of a capital nature
What where the three principles established in Cohen v CIR (13 SATC 362)(1946 AD 174)?
- A person’s ordinary residence would be the country to which he would naturally and a matter of course return from his wanderings.
- One should consider not only the person’s actions during the year of assessment to determine whether he is a ordinary resident, but also the person’s life outside the year of assessment.
- Physical absence during the full year of assessment is not decisive to determine residency status.
When is a person immigrating to the Republic of South Africa considered an ordinary resident?
The person will be treated as an ordinary resident from the day they immigrated to the Republic and not for the full year of assessment.
For ordinary residents emigrating from the Republic, when are they no longer taxed as ordinary residents?
A person emigrating from the Republic ceases to be a ordinary resident the day he emigrates (i.e boards the aircraft). The year of assessment ends immediately the day before the person emigrates.
Who does the physical presence test apply to?
The physical presence test applies to natural person that are not ordinary residents at any time during the year of assessment.
What is the “physical presence” test requirements?
The natural person is physically present in the republic for a period or periods:
1. Exceeding 91 days during the current year of assessment, and
2. Exceeding 91 days in aggregate during each of the five years of assessment preceding the current year of assessment, and
3. Exceeding 915 days in aggregate during the five years of assessment preceding the current year of assessment.
How long must a person who is a resident in terms of the physical presence test remain outside South Africa for their residency status to cease?
The period of at least 330 full days required to terminate a person’s residency, must be continuous.
When are persons other than natural persons (i.e companies) defined as being residence?
The company/trust/cc
- is incorporated in South Africa, or
- has a place of effective management in the Republic
Briefly summarize the tax framework for natural person.
Gross Income
Less: Exempt income
Equals: Income
Less: Deductions and allowances
Add: Taxable capital gain
Equals: taxable income
Less rebates and tax credits
Equals: normal tax payable
What is an important principle established in CIR v Kuttel 54 SATC 298 in terms of residency status?
A person is ordinary resident where his ordinary or main residence is, i.e what can be described as his real home.
What is an important principle established in CIR vs Butcher Bros (Pty) Ltd 13 SATC 21 regarding assets received as compensation?
The onus is firstly on the commissioner to establish a method to be used to value an asset received other than in cash. It is only after the commissioner has established the amount that the burden shifts onto the tax payer, in terms of section 102 of the Tax Administration Act, 2011, to show that the amount is incorrect
What is an important principle established in Lategan v CIR 2 SATC 16 in respect to gross income definition?
The court held that the term ‘amount” included not only money, but also the value of every form of property the taxpayer earned.
What important principle was established in Commissioner of South African Revenue Services v Brummeria Renaissance 69 SATC 205 (interest free loans)?
The court stated that where an interest free loan is given to a person in return for something (a quid pro quo), then the notional interest on interest free loans represents the total amount in cash or otherwise (included in gross income)
What important principle was established in Pyott Ltd v Commissioner for Inland Revenue 13 SATC 121 in respect to refundable deposits?
Deposited moneys are included in gross income unless they are deposited into a separate trust account set up specifically for the deposit received.
What important principle was established in Commissioner for Inland Revenue v Witwaterstrand Association of Racing Clubs 23 SATC 380 in terms of money received on by a principle?
Once an amount has been beneficially received by or accrued to a taxpayer, he is taxed on such amount even though he may have an obligation to pay it over to some other person. If there is a principle agent relationship it would be taxed in the principal’s name.
