Year Test 2 Flashcards
VAT and Gross Income (Special incl + Exemptions)
Provide the definition/elements of gross income
The elements of the gross income definition (s1) are as follows:
-The total amount
-in cash or otherwise
-Received by or accrued to a person or in favour of the person
-During the current year of assessment
-Not of a capital nature
Describe the elements/definition of gross income (w/ reference to case laws)
-The total amount
>In Butcher Bros it was held that
something must have an ascertainable
monetary value to be included in GI.
-in cash or otherwise
>In Lategan it was determined that an amount can be in a form other than cash
-received by, or in favour of
>Amount must be received or in favour of the resident
>In Geldenhuys it states that for an amount to be included in GI it muts be received by the taxpayer for their own benefit
>In Pyott case it staes that if a deposit is placed in a seperate bank account, which the taxpayer has no control over, the amount is not included in GI
>In People’s Stores case it states that amounts that the taxpayer is entitled to are included in GI
-or accrued to a person
> Illegal receipts are still taxable even if an illegal business is being conducted (CIR v Delagoa Bay Cigarette Co Ltd/MP Finance Group)
-During the year of assessment
>Amount should be received in the current YOA
-Not of a capital nature
>generating activities (fruit) and not
for assets (tree) (Visser) as they
were for services rendered
>Meaning money from an asset (tree that bares fruit) constitutes capital nature, but money from services rendered (fruit) is not
The elements of the general deduction formula s11(a) and s23(g) are as follows:
-Carrying on of a trade
-Expenditure/losses
-Actually incurred
-During the year of assessment
-In the production of income
-Not of a capital nature
What is the framework for calculating taxable income (For a natural person)
Gross income (General and specific incl.)
Less: Exempt income
Equals: Income (as defined in s1(1))
Less: Deductions and capital allowances
Less: Assessed loss brought forward
Add: Amounts included in taxable income
Add: Taxable capital gain
Equals: Taxable profit
Input Vat is claimable if…
…the purchased goods/serv will be used to create taxable supplies
What are the 2 types of accounting basis
Invoice basis
* VAT is accounted for when whichever of the following comes first;
>Invoice is issued or;
>When payment is received
Payment basis
* VAT is accounted for when
>Payments for purchases are made
>Payments for sales are received
When is VAT levied
When there is;
>a supply of goods/serv
>importation of goodsd into SA
>supply of importaed services
For a supply of goods/serv to be VAT(able) there should be
> a supply
of goods or services
by a vendor
in the course or futherance of an enterprise
Define goods (s1)
Goods are
»movable property
>foxed property
>any real right to foxed or movable property
>electricity
Provide examples of zero-rated supplies
-
Exported goods
>Direct and indirect exports -
Exported services
2.1. Transportation
>From a place outside SA to another place outside SA
>From inside SA to outside SA
>From outside SA to inside SA
2.2. Services rendered outside SA
>Services physically rendered outside SA are 0 rated
2.3.** Arranging services for non-residents**
>Arranging the supply og goods/serv to foreign ships/aircrafts
>Arranging transport of goods w/in SA
2.4. Services to non-residents
>Services directly supplied to non-residents outside SA are 0 rated - Fuel levy
- Certain basic foods
- supply of gold coins
- Paraffin
Provide example of supplies exempt from VAT
- Financial Services
- Residential accomodation
- Bus, train, taxi fares
- Education services provided by school/uni/college
- Memeership contributions to employee orgs (eg: Trade unions)
Goods and services denied VAT input
-Entertainment (to an extent)
-Club subcriptions
-Motor vehicles
Vendors cannot claim back input VAT on these
In Cohen vs CIR a person is ordinarily resident…
… in the country to
which he would naturally, and as a matter of course, return from his wanderings
In CIR vs Kuttel, it was held that a person is “ordinarily resident” where…
… he has his
usual or principal residence, in other words, what may be described as his real
home
Requirements of the physical presence test
-be present in South Africa for more than 91 days during
the current year of assessment
-be present in South Africa for more than 91 days during
each of the preceding five years of assessment
-o be present in South Africa for more than 915 days in total during the preceding 5 years of assessment
In Levene v IRC, it was held that ‘ordinary residence’ means…
…residence in a place with some degree of continuity, apart from
accidental or temporary absences
