Unit 4

Question 1

What is the formula for Income?

Answer 1

Gross Income less Exempt Income = Income

Question 2

What are the reasons for exempt income?

Answer 2

To incentivise investments

To prevent double taxation

Question 3

Name 8 categories to which exemptions apply

Answer 3

Investments 
Employment 
Education 
Government 
Non-commercial activities 
Economic development 
Withholding tax 
Other

Question 4

Are there exemptions on interest?

Answer 4

Yes, there are monetary exemptions to natural persons.

On different scales (change annually) dependent on age (>65)

Question 5

Do exemptions on interest apply to non-residents?

Answer 5

Only from SA source included in Gross Income

Question 6

What are key-person policies?

Answer 6

Insurance policies taken out for key personnel, in case something happens to them

Question 7

Which insurance policies benefit the employer? (2)

Answer 7

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

Question 8

Which insurance policies benefit the employee? (2)

Answer 8

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

Question 9

Is normal tax applicable to Unemployment Insurance Benefits?

Answer 9

No, ito s10(1)(mB) any benefit received ito the UIA is exempted from normal tax.

Question 10

Name 7 employment-related exemptions

Answer 10

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)

Question 11

What are the requirements for a bursary/scholarship to be exempted? (4)

Answer 11

1. Bona fide bursary
2. To further studies
3. Acknowledged educational institution
4. 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)

Question 12

Which section applies to bursaries/scholarships?

Answer 12

Section 10(1)(qB)

Question 13

What are the limits for scholarships/bursaries to family members?

Answer 13

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)

Question 14

Name 3 exemptions related to government

Answer 14

1. Non-residents employed by the SA gov.
2. Pensions of former State Presidents, Vice Presidents, and their surviving spouses
3. Foreign banks

Question 15

What are the requirements for a foreign bank to be exempt?

Answer 15

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

Question 16

What is exempted for bodies corporate, share block companies, and other such like associations?

Answer 16

Levies received from members

Other amounts

Question 17

What is the condition for a body corporate or share block company to be exempt?

Answer 17

Must be incorporated ito its namesake act (Share Blocks Control Act, Sectional Titiles Act, etc.)

Question 18

Which legislation provision applies to exemptions of Public Benefit Organisations?

Answer 18

Section 10(1)(cN)

Question 19

What is required for a Public Benefit Organisation to be exempted?

Answer 19

Must be authorised by Minister of Finance (must appear on list)

Question 20

Are micro businesses exempt from tax?

Answer 20

Yes, any amount received/accrued/in favour of a
Registered micro business
From business carried on in SA
Is exempted

Question 21

Are government grants exempted?

Answer 21

Yes, grants-in-aid, subsidies, and contributions by government are exempted.

Question 22

What exemption is available to film owners?

Answer 22

Section 12(O) provides that there is an 
Exemption of all income derived from exploitation right of a film

Question 23

What are the requirements for a film exemption?

Answer 23

1. Local production / co-production internationally
2. Person entitled prior to filming or after filming started but before completion
3. Income received within 10 years after completion

Question 24

What is the position regarding withholding tax on royalties?

Answer 24

Section 10(1)(l) provides that an exemption applies if

1. Non-resident has not been in SA > 183 (i.e. 184) days in 12 months before royalty received/accrued
2. Non-resident should not be connected with PE [permanent employment?] in SA

Question 25

What is the position on foreign sportspersons/entertainers?

Answer 25

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

Question 26

What is the position on alimony & maintenance exemptions?

Answer 26

Section 10(1)(u)
After 21 March 1962
Exemption is only applicable on after-taxed income