Module 1: World of Tax

Question 1

A natural person can earn income from/on, or a combination of which sources?

Answer 1

Remuneration
Trade/business
Passive income

Question 2

Is income tax direct or indirect tax?

Answer 2

Direct tax.

Question 3

Is VAT direct or indirect tax?

Answer 3

Indirect tax.

Question 4

Direct tax can also be called a tax on…

Answer 4

Income

Question 5

Indirect tax can also be called a tax on…

Answer 5

Consumption

Question 6

What is ‘capital’?

Answer 6

Any interest earned from savings/dividends and capital gains.

Question 7

Direct tax is levied in terms of the…

Answer 7

ITA (Income Tax Act 58 of 1962)

Question 8

True or false: Indirect taxes are levied in terms of separate tax acts.

Answer 8

True.

Question 9

In terms of the definitions contained in the ITA a “person” includes:

Answer 9

a. Insolvent estate
b. The estate of a deceased person
c. any trust
d. any portion of a collective investment scheme

Question 10

What is a taxpayer?

Answer 10

any person who becomes liable for normal tax/income tax.

Question 11

True or false: capital gains tax is not a separate tax.

Answer 11

True. It forms part of the income tax calculation

Question 12

If an asset is sold at a loss, the capital loss can be…

Answer 12

Set off against other capital gains for the year or carried forward to a year where there are capital gains.

Question 13

What is withholding tax?

Answer 13

A method of tax that involves paying an applicable individual only the amount calculated after deducting withholding tax.

Question 14

True or false: gross income excludes capital nature

Answer 14

True.

Question 15

What is income as defined?

Answer 15

Gross income less exemptions

Question 16

General deductions are broken into what 2 parts?

Answer 16

Positive test and negative test.

Question 17

What is the general deduction formula according to Section 11(a)

Answer 17

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

Question 18

Which section describes prohibited deductions?

Answer 18

Section 23

Question 19

What are special deductions?

Answer 19

Deductions that fall outside the scope of the general deduction formula but are specifically provided for to be deducted (including capital allowances)

Question 20

True or false: you cannot go into a credit position by applying rebates.

Answer 20

True. You can only reduce the tax liability to 0.

Question 21

What is the difference between deductions and credits/rebates?

Answer 21

Deductions = decrease taxable income
Credits/rebates = reduce tax

Question 22

What does it mean to be ‘married in community of property’?

Answer 22

Both spouses share a joint estate - everything they own is pooled together unless specifically stated otherwise.