Leases Flashcards
Gross income para h leasehold improvements
Included in lessors income if lease stipulates improvements are required. If voluntary, lessor not taxed. Amount included is amount in agreement or if no amount, the mv. If costs more than stipulated amount then include higher amount, unless amount relates to voluntary expenditure.
S11g and h leasehold improvements
g Lessee deducts improvements over lease period unless lessor not taxed on amount.
h lessor allow deduction of pv of improvement over 6%
S23C income tax effect of vat
If vendor. Vat input is not expense as it is refunded. Allowances will be allowed on mv amount net of vat.
For a finance lease, lease pmts must be reduced by input vat in ratio of rent payment to total rent. Input will be claimed on start of finance lease.
S7B leave pay and variable remuneration
Leave pay commissions bonuses
Only deductible when paid, taxed when received and subjected to employees tax when paid.
S23G sale and leaseback arrangements
Limits lease payment deduction where asset sold and leased back.
If purchaser is exempt from tax or receipts and accruals not income(non resident), lessee may only deduct interest portion, no capital allowance for lessor on asset. Difference between total payments and initial cost equals interest.
S23H pre paid expenditure
Limit deduction where benefit only arises partly in this year.
Applies to pre trade expenditure, legal expenses, repairs, general deduction 11a.
Spread over period benefits enjoyed.
Does not apply if g or s supplied within 6 months, aggregate does not exceed R100 000 excluding the 6month items and portion which can be expensed in current year.
S8(5) recoupment for leases
Where property acquired at end of lease at less than fmv, then discount deemed recoupment of pmts ltd to lease pmts. If acquired by someone other than lessee, recoupment wil be included in their income.
Para a does not apply if taxed as fringe benefit.
Section does not apply if lessor reclaims asset or mv rentals paid.
If asset not acquired
Returned to lessor: no tax
If asset immovable or movable if lessor could claim allowances, were abandoned or nominal rentals paid(10% of deemed fmv), recoupment of deemed fmv. Deemed fmv is cost reducing balance depreciation 20%.
Deemed base cost for cgt is mv(amount paid plus recouped) and also for 11e allowances
S23A limitation of allowance granted to lessors
Where tax payer is lessor of affected asset. Limit allowance to rental income from affected asset.
Affected assets are:
Machinery, plant, plane, which has been let and lessor can claim allowance in terms of s12 or 14bis, or can claim 11e,12B,12C,12DA
Excluding operating leases.
Rental income includes recoupment of affected asset allowances, capital gain of sale of affected asset, lease premium.
Apportion rent deductions between affected and non affected assets.
S23D sale and leaseback
Limits allowance lessor can claim on depreciable assets.
If asset let to lessee an was held by that lessee ,or connected person of lessee ,within previous 2 years, then
Cost of asset for deduction or allowance is cost to most recent lessee less allowances made by that person, plus recoupment of allowances and inclusion of capital gains in income.
Gross income para g lease premium
Include lease premium accrued or received by lessee in gross income for right of use of assets
Lesser gets deduction under 11f
