Special deductions

Question 1

Legal expense

Answer 1

-applicable to only specific legal costs
-deduction for the following expensense are allowed:
 Fees for legal practitioner
 Expenses incurred to procure evidence or expert advice
 Court fees
 Taxing fees, witness fees and expenses
 Costs of sheriffs and messengers of the court
 Other similar costs

Question 2

Deduction and VAT

Answer 2

• If VAT can be claimed: Reduce amount of deduction with amount of VAT.
• If VAT can not be claimed: deduction = amount including VAT

Question 3

Restraint of trade

Answer 3

limited to:
-amount/number of years
-amount*1/3

Question 4

Doubtful debts

Answer 4

IFRS 9 Applied:
amount 40% for lifetime
amount25% for 12 months
IFRS 9 NOT applied:
40% allowance on debt due >/= 120 days
25% allowance on debt due >/= 60 days
what was deductible in prior years must be added back in gross income in current year.

Question 5

double debts

Answer 5

Are not allowed

Question 6

lease premium

Answer 6

deduction= (lease premium/years)*(mouths in current year YoA/12)
-number of years are limited to 25 years
-deduction for lessee

Question 7

lease improvement

Answer 7

-calculate from date when improvement are completed

Question 8

relief of lease

Question 9

trading stock

Answer 9

stock sold - stock purchased

Question 10

opening stock

Question 11

closing stock

Answer 11

deduct stock purchase + add back closing stock

Question 12

pre-trade expenditure and losses

Question 13

employer’s contribution to retirement funds

Question 14

donation

Question 15

repayment of employee’s benefits

Question 16

annuities to former employees and thier depends

Question 17

repairs section

Question 18

trading stock and VAT

Answer 18

amounts in Trial balance/stock count records- excluding vat
amount per invoice/bank statement-including VAT

Question 19

BAD DEBTS VAT

Answer 19

input tax claimable = (Amount written off/total consideration of the supply)*output tax levied

Question 20

BAD debts requirements

Answer 20

1. the debt must be owning to the taxpayer
2. the debt must have gone bad in the current year of assessment
3. the amount must have been included in the income of the taxpayer in the current year of assessment or prior year