Module 1: World of Tax Flashcards
A natural person can earn income from/on, or a combination of which sources?
Remuneration
Trade/business
Passive income
Is income tax direct or indirect tax?
Direct tax.
Is VAT direct or indirect tax?
Indirect tax.
Direct tax can also be called a tax on…
Income
Indirect tax can also be called a tax on…
Consumption
What is ‘capital’?
Any interest earned from savings/dividends and capital gains.
Direct tax is levied in terms of the…
ITA (Income Tax Act 58 of 1962)
True or false: Indirect taxes are levied in terms of separate tax acts.
True.
In terms of the definitions contained in the ITA a “person” includes:
a. Insolvent estate
b. The estate of a deceased person
c. any trust
d. any portion of a collective investment scheme
What is a taxpayer?
any person who becomes liable for normal tax/income tax.
True or false: capital gains tax is not a separate tax.
True. It forms part of the income tax calculation
If an asset is sold at a loss, the capital loss can be…
Set off against other capital gains for the year or carried forward to a year where there are capital gains.
What is withholding tax?
A method of tax that involves paying an applicable individual only the amount calculated after deducting withholding tax.
True or false: gross income excludes capital nature
True.
What is income as defined?
Gross income less exemptions
General deductions are broken into what 2 parts?
Positive test and negative test.
What is the general deduction formula according to Section 11(a)
If an expense or loss is incurred in the ordinary course of business and in the production of income, provided it is not capital in nature
Which section describes prohibited deductions?
Section 23
What are special deductions?
Deductions that fall outside the scope of the general deduction formula but are specifically provided for to be deducted (including capital allowances)
True or false: you cannot go into a credit position by applying rebates.
True. You can only reduce the tax liability to 0.
What is the difference between deductions and credits/rebates?
Deductions = decrease taxable income
Credits/rebates = reduce tax
What does it mean to be ‘married in community of property’?
Both spouses share a joint estate - everything they own is pooled together unless specifically stated otherwise.
Name the 8 components to get to taxable income (in order)
- Gross income
- Add - Special inclusions
- Less - Exempt income
- Less - General deductions
- Less - Special deductions
- Add - Taxable portion of capital gains
- Less - Retirement fund contributions
- Less - Allowed donations deductions
