Learning unit 9 - Taxation of companies and dividends tax

Question 1

In terms of the Act define what is a ‘group of companies’.

Answer 1

Two or more companies in which one company (the controlling company) directly or indirectly holds shares in at least one other company, to the extent that:

• at least 70% of the equity shares in each controlled group companies are directly held by the controlling group company, one or more other controlled group companies or any combination thereof; and
• the controlling group company directly holds at least 70% of the equity shares in at least one controlled group company

Question 2

Define what is a “small business corporation” as defined in the act (Section 12E)

Answer 2

Any close corporation, cooperative, private company or personal liability company in terms of the companies act, where all share holders are natural persons and

• gross income less than R20 mill
• none of the shareholders hold shares in other companies with the exception of investment and share block schemes.

Question 3

What is the current tax rate for companies which qualify as “personal service providers”?

Answer 3

• A personal service provider company pays a rate of 27% of taxable income and 45% in the case of trust.

Question 4

What is the ‘minimum amount’ where an estimate of taxable income does not attract underestimation penalty?

Taxpayers with a taxable income of R1 million or less

Answer 4

• The basic amount as assessed by SARS for the latest preceding year of assessment and for which a notice of assessment has been issued not less than 14 days before the date of submission of the the provisional tax estimate; or
• 90% of the actual taxable income for the year of assessment.

Question 5

What is the ‘minimum amount’ where an estimate of taxable income does not attract underestimation penalty?

Taxpayers with a taxable income of R1 million or more?

Answer 5

Where the estimated taxable income for the year of assessment is less than 80% of actual assessed taxable income, an underestimation penalty is raised by SARS of 20% on the shortfall in normal tax.

Question 6

What is the % percentage tax levied on dividend or dividend in specie?

(Reference to the relevant section in the Act)

Answer 6

Dividends tax (section 1 and 64D to 64N)

Dividends tax is levied at a rate of 20% on the dividends paid by a company.