Learning Unit 2 - Income tax Flashcards
Is the date the rate accepted into legislation enactment or substantive enactment?
Is the date the new rate announced enactment or substantive enactment?
The date the rate is accepted into legislation is the date of enactment whereas the announcement by the SA Minister of Finance is taken to be the date of substantive enactment because the announcement of the new rate was not inextricably linked to other changes to tax laws. In South Africa, ‘changes in tax rates should be regarded as substantively enacted from the time that they are announced in terms of the Minister of Finance’s Budget Statement. However, this only applies where the change in tax rates is not inextricably linked to other changes in the tax laws. To be regarded as substantively enacted there should be the required degree of certainty that the announced changes would be promulgated in a substantially unchanged manner.
Are income taxes always recognized in profit or loss?
No.
If the income tax arises on income and expenses that are recognised in profit or loss, then the income tax is also recognised in P/L.
If the income tax arises on income and expenses that are recognised in OCI, then the income tax is also recognised in OCI.
Income tax can arise on items of income and expenses that are recognised in profit or loss (P/L) or it could arise on items of income and expenses that are recognised in other comprehensive income (OCI):
P.S. Income tax can even arise on items that are recognised directly in equity, in which case the income tax is also recognised directly in equity.
What is a permanent difference in tax?
- the differences between taxable profit and accounting profit for a period.
- that originate in the current period and never reverse in subsequent periods.
These include exempt income (income per accountant that the tax authorities will never tax).
Also includes non-deductible expenses (the expenses per the accountant that the tax authorities will never allow as a tax deduction)
What is the formula for calculating capital profit on the sale of a non-current asset for tax purposes?
Proceeds on sale
Less original cost
Equal Capital profit on sale
What is the formula for calculating capital gain on the sale of a non-current asset for tax purposes?
Proceeds on sale
Less base cost
Equal capital gain on sale
What is meant by an assets: “tax base”? (Pg 281)
The future tax deductions relating to an asset are referred to as its tax base.
What is the definition of tax base of an asset (IAS12)?
An asset represents a future inflow of economic benefits that will be taxable and
An asset that represents a future inflow of economic benefits that will not be taxable.
What is the definition of tax base of an liability - income received in advance (IAS12)?
its carrying amount, less any amount of the revenue that will not be taxable in future periods.
What is a temporary difference?
The difference between the carrying amount and tax base.
When is the tax allowances calculated in respect to the tax base of an asset?
From when is depreciation calculated on the carrying amount of an asset?
Tax allowance is calculated from the time the asset is brought into use.
Depreciation is calculated from the time that the asset is available for use.
