Unit 4 Flashcards
Exempt Income
What is the formula for Income?
Gross Income less Exempt Income = Income
What are the reasons for exempt income?
To incentivise investments
To prevent double taxation
Name 8 categories to which exemptions apply
Investments Employment Education Government Non-commercial activities Economic development Withholding tax Other
Are there exemptions on interest?
Yes, there are monetary exemptions to natural persons.
On different scales (change annually) dependent on age (>65)
Do exemptions on interest apply to non-residents?
Only from SA source included in Gross Income
What are key-person policies?
Insurance policies taken out for key personnel, in case something happens to them
Which insurance policies benefit the employer? (2)
Key-person policies
Proceeds included in employer’s Gross Income - para. m
Proceeds exempted ito s10(1)(gH) in employer’s hands if employer did not deduct premiums
Which insurance policies benefit the employee? (2)
Proceeds included in the employee’s Gross Income - para. (d)(ii) of GI
Proceeds exempted ito s10(1)(gG) in employee’s hands if premiums paid by employer is taxed in employee’s hands by way of fringe benefit
Is normal tax applicable to Unemployment Insurance Benefits?
No, ito s10(1)(mB) any benefit received ito the UIA is exempted from normal tax.
Name 7 employment-related exemptions
Uniforms and uniform allowances Relocation benefits Broad-based employee share plan "Stop-loss" provisions for share-incentive schemes Equity instruments Seafarers Employment outside SA (conditions apply)
What are the requirements for a bursary/scholarship to be exempted? (4)
- Bona fide bursary
- To further studies
- Acknowledged educational institution
- Additional requirements iro EEs/non-EEs
4a. To non-employees: Given on merit & not limited to employees or their family
4b. To employees: Must undertake to repay if studies not completed (except death, illness, injury)
Which section applies to bursaries/scholarships?
Section 10(1)(qB)
What are the limits for scholarships/bursaries to family members?
If employee salary > R600 000: no exemption
R 20 000 of bursary exempt for Grades R - 12 (R30 000 for person with disability)
R 20 000 of bursary exempt if NQF 1-4
R 60 000 of bursary exempt if NQF 5-10 (R90 000 for person with disability)
Name 3 exemptions related to government
- Non-residents employed by the SA gov.
- Pensions of former State Presidents, Vice Presidents, and their surviving spouses
- Foreign banks
What are the requirements for a foreign bank to be exempt?
Bank must not be resident in SA
Central bank of other country must be entrusted with custody of the principal foreign exchange reserves of that territory
Minister of Finance authorised exemptions to that bank for that specific YOA
What is exempted for bodies corporate, share block companies, and other such like associations?
Levies received from members
Other amounts
What is the condition for a body corporate or share block company to be exempt?
Must be incorporated ito its namesake act (Share Blocks Control Act, Sectional Titiles Act, etc.)
Which legislation provision applies to exemptions of Public Benefit Organisations?
Section 10(1)(cN)
What is required for a Public Benefit Organisation to be exempted?
Must be authorised by Minister of Finance (must appear on list)
Are micro businesses exempt from tax?
Yes, any amount received/accrued/in favour of a
Registered micro business
From business carried on in SA
Is exempted
Are government grants exempted?
Yes, grants-in-aid, subsidies, and contributions by government are exempted.
What exemption is available to film owners?
Section 12(O) provides that there is an Exemption of all income derived from exploitation right of a film
What are the requirements for a film exemption?
- Local production / co-production internationally
- Person entitled prior to filming or after filming started but before completion
- Income received within 10 years after completion
What is the position regarding withholding tax on royalties?
Section 10(1)(l) provides that an exemption applies if
- Non-resident has not been in SA > 183 (i.e. 184) days in 12 months before royalty received/accrued
- Non-resident should not be connected with PE [permanent employment?] in SA
What is the position on foreign sportspersons/entertainers?
Section 10(1)(A) applies Amount is subject to section 47A to K Not included in Gross Income Already paid withholding tax of 15% Can't claim any expenses either
What is the position on alimony & maintenance exemptions?
Section 10(1)(u)
After 21 March 1962
Exemption is only applicable on after-taxed income
