Unit 1 - Individuals - Exemptions Flashcards
Unit 1
What is the exemption of Dividends ito s 10(1)(k) = Local dividends?
= 100% exemption
When is the exemption of Dividends ito s 10B(2) = Foreign dividends 100% exempt?
- Shareholder of dividends holds =>10% of equity in company
- Shareholder receives dividend from foreign company and the shareholder is a resident in the country of the foreign company
- Foreign dividend is on foreign share listed on SA stock exchange & is not dividend in specie.
When is the exemption of Dividends ito s 10B = Foreign dividends not 100% exempt?
NB**
s10B(3) = If shareholder of dividends holds <10% of equity in company
A = B x C
A = Amount to be exempted for YoA
B = 25/45 - natural persons, deceased/insolvent estate, a trust
C = Aggregate of foreign dividends received by/accrued to individual during YoA that is not exempt from normal tax ito s10B(2).
What does s23(q) disallow as a deduction?
Any expenditure incurred in the production of income in the form of foreign dividends.
s10B(5) - Annuities & pmts out of foreign dividends
Tax exemption does not apply iro any portion of an annuity/any other payment out of any foreign dividend.
s10B(6) - EE Share scheme dividend will not be exempt?
- Received by/accrued to person iro of
services rendered/to be rendered, or
iro/in virtue of Employ/holding of office,
unless:- Person holds the foreign share, OR
- The foreign share/interest in foreign
share is a restricted equity instrument
held by that person
- Foreign dividends that is an amount pd to
buy back/redeem restricted equity
instrument - Foreign dividend that is received/accrued
in anticipation/in course of the winding
up, liquidation, deregistration/final
termination of the company iro of
restricted equity instrument. - Foreign dividend on a restricted equity
instrument, if foreign dividend constitutes
any equity instrument that is not itself
restricted ito s8C.
S10(1)(i) - What is the local interest exemption?
Natural person, Resident in SA.
65 yrs =< = R34 500
< 65yrs = R23 800
Foreign interest = Not exempt
s12T - Tax free investments
Define a tax free investment?
Any financial instrument/policy that is administered by any person/entity designed by Min. of finance by notice of Gov. Gazette.
The investment must be owned by:
- Natural person.
- Deceased/insolvent estate of natural
person.
s12T - Tax free investments
Exemption?
Any amount (interest) received by/accrued to a natural person/deceased/insolvent estate, iro tax free investment. Incl income and any profit on the disposal of the tax-free investment.
- Tax on capital gains/loss is disregarded
- Dividends are exempt as well.
s12T - Tax free investments
What are the contribution limitations?
=< R36 000 in a 12-month period
=< R500 000 in aggregate over lifetime
Any contributions in excess will be subject to penalties = 40% of any excess amount contributed.
- Income/proceeds from tax free
investments do not affect the
contribution limits. - Any transfer from 1 tax free investment
to another does not affect the
contribution limits.
s10(2) - Dividends & Interest pd as an annuity
Exemptions on interest and dividends does not apply if they are received as an annuity.
s10(1)(u) - Alimony & Maintenace
Exempt in hands of recipient spouse.
Divorce/separation proceedings took place after 21/3/1962
What benefits are exempt from taxable income under s10(1)(n)
Fringe Benefits:
- Uniform allowance
- Relocation/transfer costs
- EE share schemes
S10(1)(nA) - Uniform allowance
Exemption?
Uniform given to EE by ER/any allowance for uniform = 100% exempt.
- Must be as a condition of employment
- Must be clearly distinguishable from
ordinary clothing
S10(1)(nB) - Relocation/Transfer costs
Exemption?
100% exempt
If EE is:
- Appointed, or
- Transferred, or
- Dismissed,
and moves @ insistence of his ER & ER
bears the cost, amount expended will not
be taxed in EE hands.
The transfer must involve a change in residence for the EE.
S10(1)(nC), (nD), (nE) - EE share scheme
Exemption?
100% exempts the following:
- Receipt of quality equity shares
- Receipt of equity instrument not yet
vested in EE - Receipt of proceeds on disposal of equity
instrument which is not yet vested in EE - Amount received on cancellation of share
scheme purch. transaction/on repurch. of
shares acquired under that scheme -
provided EE is only refunded what he
actually pd for shares/options
S10(1)(o)(ii) -Persons employed outside the republic.
Exemption?
Any remuneration received by/accrued to a person if it is iro services rendered outside the R for/on behalf of any ER provided the person was outside the R:
- For period/periods > 183 full days in
aggregate during any 12-month period
(for Covid-19 = period/periods > 117 full
days in aggregate during any 12-month
period btw 29/2/2020 - 28/2/2021), & - For a continuous period > 60 full days
during such period of 12 months, & - Such services were rendered during such period outside the R
- Exemption is limited to the first R1,25 mil of remuneration, excess of this is taxable
S10(1)(o)(ii) -Persons employed outside the republic.
Exemption - additional notes?
- Self-employed (independent contractors) may not claim exemption u under this section
- Pmt must merely relate to work done outside R.
- These provisions do not apply to government EE.
- Services do not need to be rendered during the whole time the EE is outside the R as long as he is in employment during that time
- A person who is in transit through R btw 2 places outside R & who does not formally enter R through a port of entry shall be deemed to be outside the R
Define Remuneration
Salary, leave pay, wage, overtime pay, bonus, gratuity, commission, fee, emolument, allowance, pension, Superannuation allowance, retiring allowance, cash/otherwise.
S10(1)(q) - Bursaries & Scholarships
Exemption?
100% exempt = Any bona fide scholarship/bursary granted to assist/enable a person to study @ recog, institution.
S10(1)(q) - Bursaries & Scholarships
Additional rules that apply if granted by ER to EE/relative s10(1)(q).
- ER to EE = EE must agree to reimburse ER
if EE fails to complete studies for reasons
other than death, ill-health/injury of EE. - No monetary limit of bona fide bursaries
given to EE - In case of relatives of EE, exemption is
limited to:- R20 000 p.a = GR R-12 (NQF 1-4)
- R60 000 p.a = NQF 5-10
- Provided that EE remuneration does not
exceed R600 000 for any YoA prior to
current year.
- If EE only worked for ER part of preceding year/only started working for EE in current year, remuneration proxy must be calculated and used where applicable.
- On/after 1/3/2021 - exemption does not apply if EE reduces/forfeits any remuneration(past/future) in return for grant of scholarship/bursary.
S10(1)(q) - Bursaries & Scholarships
Additional rules that apply if granted by ER to EE/relative ito s10(1)(qA) - EE relatives with disabilities
- In case of disabled persons related to EE:
- R30 000 p.a = GR R-12 (NQF 1-4)
- R90 000 p.a = NQF 5-10
- Provided that EE remuneration proxy
does not exceed R600 000 for any YoA
prior to current year.
- If EE only worked for ER part of preceding year/only started working for EE in current year, remuneration proxy must be calculated and used where applicable.
- On/after 1/3/2021 - exemption does not apply if EE reduces/forfeits any remuneration(past/future) in return for grant of scholarship/bursary.
