CARMENVENTERWORKSHOPS FORCFP®EXAMINATIONS
2015
Page |1
Carmen Venter Workshops for
INCOMETAX
INCOME TAXACT
TheIncomeTaxAct[ITA]incorporatesthefollowingtaxeswhichisimperativeforyourstudies:DonationsTax: Section 56 –64
DividendTax:Section 64B –64N
Capital Gains:8th Schedule and Section26ARetirement Benefits andTaxation: 2ndSchedule
FringeBenefits:7th Schedule and various Sections in theITAEmployee’s Tax andProvisional: 4th Schedule and various Sections in theITAMicro Business and turnovertax: 6thSchedule
The other taxes which we will also discuss later in the workshopbeing:
Estate Duty, Transfer Duty andVAT[ Securities Transfer Tax –0.25%]
THE BASE OF OUR TAX SYSTEM
Our point of departure starts off by the understanding that our tax system is ‘residence-based’ and ,ifyou are not a ‘resident’ then we switch over to a source-based system oftaxation.
If you are a resident - you will be taxed on your WORLD WIDE income.
If you are not a resident – you will be taxed only on income that is derived fromRSA.DEFINITION OFRESIDENCE
Naturalpersons:defined as either ordinarily resident or physical resident. The first testis to establish whether you are ordinarily resident and, if this fails,wewill test for physical residency in terms of your presence inRSA.
Ordinarily resident: no definition but case law makes reference to ‘aresidence in a place with some form of degree ofcontinuity’
Physicalpresence:
ALL the following requirements have to bemet:Physically present in RSA for a period or periodsEXCEEDING
91daysinaggregateduringtheCURRENTyearofassessmentAND
91daysinaggregateduringEACHoftheFIVEyearsofassessmentPRECEDINGthecurrent year ofassessment AND
915daysinaggregateduringtheFIVEyearsofassessmentPRECEDINGthecurrentyearofassessment.
BUT: a person ceases to be a physical resident if – he is physically outside of RSA fora
continuous period of at least 330 fulldays.
PersonsotherthanNaturals:
ItisincorporatedorformedinRSAOR
Ithasit’splaceofeffectivemanagementintheRSA
NOTE: as from 1/1/2013 – in testing the ‘ effective place of management’ – younolonger include [ieEXCLUDE]:
ANY FOREIGN COMPANYIF:
1.it is incorporated, established or formed in a country other thanRSA
2.it has it’s place of effective management inRSA
3.qualifies as a CFC with a foreign businessestablishment
4.is subject to a high level of tax in a country other than RSA [75% of RSAtax]
FOREIGN INVESTMENTENTITY
as defined in S1 of the ITA –not taking into account any activity thatconstitutes:
1.Financial Services as per the FAISAct
2.services incidental to financial services where product is exempt fromFAIS
3.Financial Services provider as per the FAIS Act in terms of licence issuedunderS8 of the FAISAct.
PERSONSLIABLEFORTAX
ClassificationofTaxpayers
NaturalPersons
Individuals
partnershipSpecialTrusts(DeceasedEstates)
Non-NaturalPersons
Companies/CC’s
Trusts
Small Business (S12E of theITA)Micro Business (6th Schedule toITA)REIT (S 25BB as of1/4/2013)
Watch out for :- Personal Service Providers >80 % income from one‘client’(para 1 of the 4th schedule and Section 23(k) of theITA)
NaturalPersons / Sliding scale18-40%Trusts / 40%
Non NaturalPersons / 28%
Turnover tax for MicroBusiness / Scale
SmallBusiness / Scale
Now–tounderstandhowthetaxesareappliedforeachentity–weneedtofirstunderstandwhoqualifies.WeneedonlyexploreSmallBusinessandMicroBusinessrequirements:
SMALL BUSINESSCORPORATION
What is a Small Business Corporation?[s12E]
Any co-op, private company orcc
All shareholders must be natural persons & cannot own shares in any othercompany/cc(only listed company or CIS*/shareblock)
Gross income cannot exceed R20million
Investment income personal service income cannot collectively exceed 20% ofgrossincome {refer to microbusinessprofessional
servicedefinition}
Cannot be Personal ServiceProvider
Investmentincome?
Dividends, foreign dividends, royalties, rental derived fromimmovableproperty, annuities or income of a similarnature
interest as in 24J [interest bearingarrangements]
Proceeds derived from investment or trading in financial instruments(inclfutures/ options/ derivatives), marketable securities orimmovableproperty
IFYOUQUALIFYFORSBC–YOUTAKETAXABLEINCOMEANDAPPLYTHETAXTABLES
MICROBUSINESSFORTURNOVER
What is a MicroBusiness?[6thSchedule]
- natural person or company(requirements)
Qualifying Turnover does not exceed R1million
- Must have February yearend
[Vat requirement deleted as from1/3/2012]
Thought?
Qualifyingturnover
‘means the total receipts from carrying on business activities EXCLUDINGany:Amounts of a capital natureand
Amounts exempt from normal tax:Governmentgrants
Import incentive rebatesand
State subsidies for the promotion of filmproduction
Would I consider receipts of activities outside of SA for the purpose of theabove?
WhodoesnotqualifytoregisterasaMicroBusiness?
- Professional service: accounting; architecture; auditing; financial service broking;consulting;education; real estate; sport; research…to name afew!
- Personal service provider or non-exempt labourbroker
- IfproceedsfromdisposalofbusinessassetsusedmainlyforbusinesspurposesR1.5millover3years (orshorter)
- Personholds anyshares/interestinacompanyotherthanpermittedsharesandinterests (para4 of 6thschedule)
- Natural Person: Professional service: If more than 20% total receipts from renderingservice!
- In relation to acompany:
- Shareholders not a naturalperson
- Shareholders hold shares/equities in company other than permittedinvestments
(excludes not trading & > R5000 or windingup/liquidating
- Is aPBO
- Is a recreationalclub
- Where more than 20% of total receipts is investment income and incomefromrendering a professionalservice
- year end other than the last day of February of ayear
- In relation to apartnership
- If any partner in partnership are not naturalpersons
- That person is a partner in more than onepartnership
Page |6
Carmen Venter Workshops for
- Qualifying turnover of partnership exceeds R1million.
PermittedInvestments?
Sharesinlistedcompanies
Portfolio in collective investmentschemes
Interestinbodycorporatesandshareblocks
Interestinventurecapitalcompanies
5%interestinsocialconsumerco-op
5%interestinprimarysavingco-opbanks
Interestinfriendlysociety
Investment Income? in relation to a company for MicroBusinessIncludesonly:
incomeinformofannuities,dividends,interest,rentalderivedfromimmovable property, royalties or income of a similar nature and
Anyproceedsderivedfromthedisposaloffinancialinstruments
What amounts are included and or excluded from TAXABLE TURNOVER?
all amounts not of a capital nature, received from carrying on business activities inSA
BUT SPECIFICINCLUSION:
50% of proceeds on sale of a capitalasset
Investment income of acompany
TURNOVER SPECIFICALLYexcludes:
Investment income of natural persons(partnership/sole)Governmentgrants
Export incentive rebates and state subsidies for filmproduction
OutofInvestmentIncome–excludedividendsandforeigndividends[1/4/2012]foracompany
ie:investmentincomeisINCLUDED–butdonottakeintoaccountlocalorforeigndividends
Other important notes relevant to MicroBusiness
Dividend Tax – R200 000exemption
Received notaccrued.
Excessive Capital Receipts > R1 500 000 of assets mainly used forbusiness Voluntaryregistration
Voluntaryderegistrationmust be after 3years Compulsoryderegistrationcannot come backin
Thought?
How would we treat the deduction of retirement annuities and medical aid for anindividualwho is registered as a Micro Business for tradepurposes?
Could you have the situation where a natural/person has to submit two types ofassessment?
IFYOUQUALIFYFORAMICROBUSINESS–YOUDETERMINETURNOVERANDAPPLYTHETAXTABLES2012/2013 and 2013/2014 TaxTables AND2014/2015TABLES
R0 – R150000 / 0%R150 001 – R300000 / 1% of amount above R150000
R300 001 – R500000 / R1 500 + 2% of amount above R300000
R500 001 – R750000 / R5 500 + 4% of the amount above R500000
R750 001 andabove / R15 500 + 6% of the amount above R750000
INCOME TAX –PRINCIPLES
REVENUEVSCAPITAL
Revenue: amount, cash or otherwise, received /accrued, excluding capital receipts/accruals,butincluding specificamounts
Income Taxapplies
Capital: no real definition – comes down to intention – is the sale a realisation of capital orwasthe sale in the course of carrying on abusiness?
Capital Gainsapplies
During 2010 Mr Nkosi bought a house for R535 000 in JHB as he had relocated fromPortElizabeth . He lived in the house until 2013, then sold it for R1 385 000. He sold thehousebecause he had been offered a job with RMB to head up its KZN division in Durban. He movedtoDurban in March 2014 – and subsequently purchased another house to live in down inDBN.
You are required to discuss whether the purchase and sale of the house has any incometaxconsequences.
Thought?
What if Mr Nkosi decided to keep the house in JHB and rent it out. He now needs to paintthisresidence.
Would this be a revenue or capitalexpense?
INCOME TAX –FRAMEWORK
NONNATURALPERSONS-TRUSTS, COMPANIES, CLOSECORPS
INCOMERXXXXXXXX
EXEMPTIONS(RXXXXXXXX)
13/28 x dividendforeign
LESS EXPENSES AGAINST TRADEINCOME(RXXXXXXXX)ADD CAPITALGAINRXXXXXXXX
TAXABLEINCOMERXXXXXXXX
AT TAXRATE28% / 40% / SBCSCALER XXXXXXX = TAXLIABILITY
Page |10
Carmen Venter Workshops for
NATURALPERSONS
INCOME (S1)RXXXX= GROSSINCOME
Less Exemptions(S10)(RXXXX)= INCOMELess Deductions(S11)
Expenses(S11(a))(RXXXX)
Pension (S11(k))(RXXXX)= TAXABLEINCOME
RA(S11(n))(RXXXX)
–ADD ALLOWANCES(S8)RXXXX
–(add Capital Gain for calculationpurposes)Donations(S18A)(RXXXX)ADD capital gain to taxableincome RXXXX
=TAXABLEINCOMERXXXX
–Tax according toscale
–Lessrebates
–Less medical credit rebates (ifapplicable)= TAXPAYABLE
–LESS MEDICAL EXPENSESCREDITS
Althoughtheabove‘framework’lookssimpleandohsoneat!...itisthedetailundereachsection/componentabove–thatmatters!
So–letuslookalittlecloserandbreakdownindetailwhatisincludedineachsection…..
nextpage………….
THISISAMOREDETAILEDFRAMEWORKTOTHEONEABOVE!
INCOMESalaryCommission
MedicalAidFringeBenefitCompanyCarFringeBenefitInsurance FringeBenefitTradeIncome
LocalInterestForeignInterestLocalDividendForeignDividendInsuranceproceedsPensionincome
CompulsoryannuitiesLinkedannuitiesRestraintoftrade
etc
GROSSINCOME / R XXXXX
EXEMPTIONS
Local dividends10(1)(k)Foreign Dividends10B
25/40 x div receivednatural13/28xdivreceivednonnatural
Local interest (< 65 and > 65)10(1)(i)Voluntaryannuitycapitalelement10ACompulsory annuity exemption 10CInsurance proceeds 10(1)(gG)
CIS 10(1)(iB)INCOME / (R23 800 / R 34500)
R XXXXX
DEDUCTIONS
ExpensesagainsttradeS11(a)
Pensionfundcontributionss11(k)
>of 7.5% of RFIorR1750
ANDarrearcontributionsofR1800pa
Retirement Annuity contributions S11(n)
>of:
15% ofNRFIor
3500lesspensioncontributionsorR1750
AND arrear contributions of R1800paADDSection 8allowances:
Taxableportionofcarallowance
Entertainmentallowance
Taxableportionofsubsistenceallowance
=taxableincomeatthisstageLessDonationS18A
ADDTaxableCapitalGain / RXXXXX
RXXXXX
RXXXXX
RXXXXXX
RXXXXXX
RXXXXXX
RXXXXXX
RXXXXXX
TAXABLEINCOME / RXXXXXX
TAXASPERTHETABLES / RXXXXXX
LESSREBATES:Primary rebate(all) / 12726
+ Secondary rebate (>65) / 7110
+ Tertiary rebate (>75) / 2367
LESS MEDICAL CREDIT (contribution)
LESS MEDICAL EXPENSES CREDIT(>65OR < 65 OR DISABILITY) / R2571st Member & 2nd each
R172 for each additional dependant
TAXLIABILITY/CREDIT
ABOVE APPLIES TO THE 2014/2015 TAX FRAMEWORK
LETUSLOOKATTHEMEDICALCREDITSINMOREDETAILWITHACOMPARISONTOTHEDEDUCTIONSTHATTOOKPLACEINTHE2013/2014TAXYEARANDNEWTABLESWITHINFLATIONARYRELIEF
MEDICAL CREDITS: FOR….SOMEONE…
2013/2014 Year end of assessment [S18 ofITA] / 2014/2015 Year end of assessment [S6A & BofITA]Income: / 300000 / Income: / 300000
Medical deductionallowed: / TaxableIncome / 300000
Contributions thatexceed
4x creditrebate: / Tax onincome / 64147
56 000 -46 560 = 9440 / Less primaryrebate / (12726)
Less medicalcredit / (12360)
Plus medicalexpenses
9 440+ 15 000 = 24440 / Less additionalmedical
Expensescredits:
The amount thatexceeds
7.5% of 300000 / Contributions thatexceed
4 x creditrebate
24 440 – 22 500 = 1940 / 56 000 – 49 440] = 6560
(1940)
Plus medicalexpenses
Taxableincome / 298060 / 6 560 + 15000 = 21560
Tax onincome / 64889 / The amount thatexceeds
Less primaryrebate / (12080) / 7.5% of 300000
Less medicalrebate / (11640) / 21 560 – 22 500 =0
Taxpayable / 41169 / 25% of 0= / (0)
Taxpayable / 39061
TAXPAYABLE / 41169 / TAXPAYABLE41266
ADDITIONAL TAX OF R97 IF DIRECTCOMPARISONTO LAST YEARTABLES
MEDICALCREDITSFORSOMEONE:
Above the age of65
Jane and Tom, married with 3 children – are all on Tom’s medical aid plan. Tom is 66 years old .ThemedicalcontributionfortheyearhasbeenR56000andtheyhavehadoutofpocketexpenses,notrefunded by the medical aid, of R 15 000. Tom’s total earnings for the year is R400000.
2013/2014 Year end of assessment [S18 ofITA] / 2014/2015 Year end of assessment [S6A & BofITA]Income: / 400000 / Income: / 400000
Medical deductionallowed:
TaxableIncome / 400000
Full medicalcontributions / (56000)
Full medicalexpenses / (15000) / Tax onincome / 95274.50
Less primary rebate
Taxableincome / 329000 / Secondaryrebate / (19836)
Less medicalcredit / (12360)
Tax onincome / 74171
Less primary &secondary / Less additionalmedical
rebate / (18830) / Expensescredits:
33.3% ofcontributions
T axpayable / 55341 / That exceed 3 x creditrebate
56 000 – 37 080 =18920
X33.3% / ( 6300)
33.3% of medicalexpenses
33.3% x 15000 / (4995)
Taxpayable / 51783.50
TAXPAYABLE / 55341 / TAXPAYABLE55081
REDUCTION IN TAX OF R260 IFDIRECTCOMPARISON TO LAST YEAR’STABLES
MEDICALCREDITFORSOMEONEWHOIS:
DISABLED
Jane and Tom, married with 3 children – are all on Tom’s medical aid plan. Tom is 45 years old .Themedical contribution for the year has been R 56 000 and they have had out of pocket expenses,notrefunded by the medical aid, of R 15 000. 1 child is disabled as defined. Tom’s total earnings for theyearis R300000.
2013/2014 Year end of assessment [S18 ofITA] / 2014/2015 Year end of assessment [S6A & BofITA]Income: / 300000 / Income: / 300000
Medical deductionallowed: / TaxableIncome / 300000
Contributions thatexceed
4x creditrebate: / Tax onincome / 64147
56 000 -46 560 = 9440 / ( 9440) / Less primaryrebate / (12726)
Less medicalcredit / (12360)
Plus medicalexpenses
Infull / (15000) / Less additionalmedical
Expensescredits:
Taxableincome / 275560 / 33.3% ofcontributions
That exceed 3 x creditreb / ate
Tax onincome / 58139 / 56 000 – 37 080 =21080
Less primaryrebate / ( 12080) / X33.3% / ( 6300)
Less medicalrebate / ( 11640)
33.3% of medicalexpense / s
T axpayable / 34419 / 33.3% x 15000 / (4995)
Taxpayable / 27766
TAXPAYABLE / 34419 / TAXPAYABLE29736
REDUCTION IN TAX OF R4683 IFDIRECTCOMPARISON TO LAST YEAR’STABLE
2013/2014taxtables
SO–whatwewillbedoingnowislookingeveninmoredetailofsomeofthecomponents of above - ie when we look at income – there are some‘inclusions’ that require calculations to determine the rand value that isincluded:………
INCOME
All income received or accrued, whether in cash orotherwiseFringeBenefitsBasicSalary
CommissionRentalIncome
InterestConsultingfees/tradeincome
DividendsAnnuities
Restraint oftradeShares (if trading and incentiveschemes)and so on and soforth…
FRINGEBENEFITSOFIMPORTANCE
1.CompanyCar
Value of vehicle plusVAT
x 3.5% or 3.25% if maintenance = monthlyvalue
less consideration paid by employee - except if payment by employee isinrespect of the license, insurance, maintenance orfuel.
x 12 = annual cashequivalent
At end ofyear:
IF accurate records of business km were kept,then:
reduce the cash equivalent as follows: cash equivalent x business km / totalkm
IF the commissioner is satisfied that accurate records of private kms were kept–and the following payments were made by the employee, then thecashequivalent of the private use is also reduced bythe:
license cost paid by employee x pvt km / totalkminsurance cost paid by employee x pvt km / totalkmmaintenance cost paid by employee x pvt km / totalkm
private mileage x tariff per km in respect of fuel cost as a fixedrate
2.Accommodation
(A-B) XC/100 XD/12
A – remunerationfactorB – R67 111(2013 = 63556)C = 17or
18if at least 4 rooms & unfurnished & power/fuel supplied byemployerOR Furnished but power/fuel not supplied byemployer
19if at least 4 rooms if furnished and power/fuel supplied byemployer
EXEMPTIONS FOR2014/2015
LocalDividends[s10(1)(k)]
ForeignDividends 25/40fornaturaland13/28forotherpersons[s10B]
Interest65R 23 800 pa[S10(1)(i)]
65R 34 500pa
Voluntary Annuities - Capital element only[s10A]
Where:
A - cashconsideration
B - total payment expected from assurer of life of annuitant or term ofannuityC -the amount of theannuity
Y – capital element which isexempt
Male aged 69 purchases a life annuity for R60 000. Annuity received R7500pa.What is his life expectancy?: 11.37
What are the total payments that can be expected:? 11.37 x 7500 =85275
Apply formula to determine the capitalamount:
60 000 / 85275 x 7500 = 5277 capital element that isexemptOR
Cash consideration / life expectancy ortermApply short cut formula to aboveexample:
60 000 / 11.37 = 5277 capital element that isexempt
Page |18
Carmen Venter Workshops for
CommutationofVoluntaryAnnuities
Where:
A : the amount of the total cash consideration given by the purchaserunderthe contract;and
D : the sum of the capital elements of all annuity amounts payable undertheannuity contract prior to thecommutation
Mr purchased an annuity for R50 000. Annuity is R7000 of which capitalelementis R4000. After 3 years annuity is commuted and annuitant receivesacommuted value of R41 000. What amount is part ofGI?
Exemption:
50 000 – (4000 x 3 = 12000) = 38000
41 000 – 38 000 = 3000 taxedamount
Compulsory Annuities – Exemption of ‘non-deductible contributions’{1/4/2014}
Your client made the following contributions that did not rank for deductionsovertheyears:
Contributionsto
RA / 170000PENSION / 250000
PROVIDENT / 150000
TOTAL / 570000
Your client decided to retire and has followingvalues:THEFUND:
THE TOTAL 1/3RD VALUE FROM RAAND
PENSION TAKEN INCASH333333
PROVIDENT TAKEN INFULL175000
Page |19
Carmen Venter Workshops for
TOTAL508333
BUT LESS PREVIOUSCONTRIBUTIONS(570000)OBVIOUSLY LIMITED TO TAXABLEAMOUNT
IF ONLY R508 333 WAS TO BE TAXED BUT I HAD R570 000INCONTRIBUTIONS THAT COULD BE USED TO REDUCE THETAXABLE
- CAN YOU SEE THAT I HAVE EFFECTIVELY ‘LOST’ R61667?[ 570 000 - 508333]
NOW WE ASSUME THE THE 2/3RD'S FROM ABOVE GENERATES AN ANNUITYOF
OF R100 000 A YEAR. AT THIS STAGE THE FULL ANNUITY (IRRESPECTIVE THAT IHAVELOST' R 61 667 IN DEDUCTIONS) IS FULLY TAXED ASINCOME
AS FROM1/4/2014
IF WE TAKE THE ABOVE SCENARIO AND ASSUME THAT THERE ARE NOOTHERLUMP SUMS ETC THAT BECOMEPAYABLE
01/04/2014 / YEARLYANNUITY / 200000LESS 'non deductiblecontribution' / (61 667)
Tax forincome / 138333
IF FULL ANNUITY (IE NOTHING TAKEN AS CASH)
FULLANNUITY570 000 WERE CONTRIBUTIONS PREVIOUSLYDISALLOWED
ASSUMPTION THAT YEARLY ANNUITY WOULDBE:200000
LESS 'non deductiblecontribution'(570000)NIL to tax and R 370 000 carried over to nextyear
YEARLYANNUITY210000
LESS'NDC'(370000)
Nil to tax and R 160 000 carried over to nextyearetc
Page |20
Carmen Venter Workshops for
Overseaspensionstoresidents–ifasaresultofpriornon-residency[S10(1)(gC)]
InterestreceivedbyforeignpersonsifexemptunderS37K.[S10(1)(h)]**1July2013
{not physically present in SA for more than 183 days in aggregate in 12 monthperiodand nottrading}
SAresidentthatworksoutsideofourborders[S10(1)(0)]
‘for a period/s exceeding 183 full days in aggregate during any period of 12monthsAND for a continuous period exceeding 60 full days during that period of 12months
DEDUCTIONS
every =expenses
11(a)thegeneraldeductionformulabutlimitedbyS23(g).(23malsoimportant)
All expenses and losses incurred in the production of income – actually paid in thesameyear of assessment – not of a capital nature – whether in part or infull.
politician=pension
11(k)pensionfundcontributionsalloweduptothegreaterof7.5% of pensionable salary / non-retirement fundingincomeor R1750
limited to actualcontributionsAND Arrears max of R1800pa
receives=retirementannuity
11(n)retirementannuitycontributionstothegreaterof:15% of non retirement fundingincome
R3500 – pensioncontributionsORR1750
Arrears R1800pa
YOU CANNOT TAKE LUMP SUMS FROM RETIREMENT FUNDS AND OR SEVERANCEBENEFIT.
ALLOWANCESTHATHAVETOBEADDED
Car allowances: portion related to private is part of taxableincome:Entertainment allowances (if not commissionearner)
Subsistenceallowances
donated =donations
S18ADONATIONS
Limited to 10% of taxable income at thispoint- BUT includes capital gain andbusinessallowances
REBATES
Primary rebate forall / 2013/2014R12080 / 2014/2015
R12726
Secondary rebate >65<75 / R18830 / R19836
Tertiary rebate >75 / R21080 / R22203
Medical creditrebates
1stmember2ndmember
3rd memberonwards / R242R242R162 / R257R257R172
2012/2013 TAXTABLES
TAXABLEINCOME / RATES OFTAXR / R
0– 160000 / 0 + 18% OF EACHR1
160 001 - 250000 / 28 800 + 25% of amount > 160000
250 001 - 346000 / 51 300 + 30% of amount > 250000
346 001 - 484000 / 80 100 + 35% of amount > 346000
484 001 - 617000 / 128 400 + 38% of amount > 484000
617001ANDABOVE / 178 940 + 40% of amount
2013/2014 TAXTABLES
TAXABLEINCOME / RATES OFTAXR / R
0– 165600 / 0 + 18% OF EACHR1
165601 - 258750 / 29 808 + 25% of amount > 165600
258 751 - 358110 / 53 096 + 30% of amount > 258750
358 111 - 500940 / 89 904 + 35% of amount > 358110
500 941 - 638600 / 132 994 + 38% of amount > 500940
638601ANDABOVE / 185 205 + 40% of amount > 638600
TAXABLEINCOME / RATES OFTAX
R / R
0– 174550 / 0 + 18% OF EACHR1
174 551 - 272700 / 31 419 + 25% of amount > 174550
272 701 - 377450 / 55 957 + 30% of amount > 272700
377 451 - 528000 / 87 382 + 35% of amount > 377450
528 001 - 673100 / 140 074 + 38% of amount > 528000
673101ANDABOVE / 195 212 + 40% of amount > 673100
Examples forpractice
Example 1 – Residencytest
MrSmithisaBritishCitizenwhohasahouseinLondon.HeboughtahouseinCapeTownafterspendingaholidaythere.Inthe2014yearofassessmenthespentthewholeyearinhishouseinCapeTown.
Even though he spends a lot of time in CT he still regards London as ‘his home’ because he hadalwaysworkedthereonlystartedvisitingCTafterhehadretired.HispresenceinSAoverthelast5yearsisasfollows:
2013 / 200 days / 2012 / 85days2011 / 165 days / 2010 / 250 days
2009 / 30days
YouarerequiredtodeterminewhetherornotMrSmithisaresidentofSAfortaxpurposesforyearending2014
Example 2 – ResidencyTest
Darren Mansfield emigrated from SA 10 yrs ago but retained some of his business interest intheRepublicconsequentlyvisitshiscountryofbirthregularly.Overthepast10yrs,Darrenhasspentthefollowing number of days inSA:
2007: 982006:232 / 2007: / 144 / 2008: / 153
2009:191 / 2010: / 197 / 2011: / 238
2012: 132 / 2013: / 203 / 2014: / 92
Youarerequiredtodetermineforwhichofthelast4oftheabovementionedyearsofassessmenthewould NOT have been regarded as a resident for income taxpurposes? (6)
SalaryDividends / $40000
$2 000 derived fromRSA / Interest
Income / $5 000 derived fromUK
$12 000 derived from hisinvolvement
Interest / $1 000 derived fromRSA / within an established RSACompany.
Page |25
Carmen Venter Workshops for
Example 5 – Turnovertax
a)If I carry business activities outside of SA, would I qualify for turnovertax?
b)I operate a business through a trust – can I qualify as a microbusiness?
c)If I am a registered Micro Business – which taxes am I exemptfrom?
Example 6 – Turnovertax
On1/3/2013Mohammed,25yrsold,startedanewbusinessasacompanyproducingsellingcandles.He never registered as a vat vendor therefore qualifies as a Micro Business and registered as suchinMarch 2014.
Thefollowinginformationisrelevanttohis2014yearofassessment–calculatehisturnovertaxliabilityfor2014.
CashReceipts / R / 380000Interest – bankaccount / R / 25000
Dividends from listedshares / R / 250
Proceeds - sale of amixer / R / 20000
Expenses – purchase ofmixer / R / 35000
Normal Tradingexpenses / R / 105000
Example 7 – Turnovertax
Usethesamefactsasabovebut,assumethatheistradingasasoletrader=whatwouldbedifferent?
Page |26
Carmen Venter Workshops for
Example 8 – CompanyCar
Tom joined a company in March 2014. Part of the package is the use of a company car to the valueofR450000VATexcludedbutR45000financechargesareinclude.Thecompanyhoweverpurchasedthiscar in March 2012. There is no maintenanceplan.
In the 2014/2015 year of assessment – Tom noted the followingmileage:
Page |27
Carmen Venter Workshops for
Example 10 Retirement fundcalculations
Chris (40) ,a sales consultant with a large company received the following income during the yearofassessment:
Commission of R300 000 . This is retirement fundingincome
Expenses of R25 000 incurred in the production ofcommission.
He is a member of a pension fund- in terms of the rules he contributed 8.5% of hiscommissionincomeearned.
Interest of R20000
An annuity of R30 000 from a voluntary purchased annuity - the capital element of the annuityisR11000
Rental income of R100 000 in respect of farmproperty
During the year he incurred expenses of R30 000 in respect of the construction of soilerosionworks on the farm property. These expenses are deductable in terms of section17A
Dividends of R34000
He speculates with residential fixed property and made a profit of R150 000 on the sale ofahouse (no CGT as profit is taxable) . He had expenditure of R30 000 in the production ofthisincome
He also received a bonus of R45 00 from his employer - this is no retirement fundingincome
He contributed R3 000 to an RA during the year and his medical contributions were R19 000pa
He also donated R5000 to aPBO.
He made a taxable capital gain of R 40000
Page |28
Carmen Venter Workshops for
a)What is his maximum allowable RA deduction?
b)Calculate the amount of Pension Fund contributions allowed as a deduction?
Page |29
Carmen Venter Workshops for
Example 11 – Taxable portion of carallowance
Tom receives an annual allowance of R75000. He recorded total mileage of 35000km of which20000kmwas business. He has spend: R52 000 fuel, R450 licence, R62 000 lease, R23 000maintenance.
Calculate the taxable portion that has to be included into taxableincome.
a)as per the facts above
b)assuming no record of expenses werekept
Page |30
Carmen Venter Workshops for
Example 12- Medical AidCredits
John, 59 years of age, earns R650 000, has 7 members – himself, wife and kids. He isself-employedand does not belong to a medical aid at all! One of the children aredisabled.
He contributes R1000 to a pension fund, R3500 to a Retirement Annuity, Donated R800 totheSPCA, earns rental income of R45 000 and incurred rental expenses ofR5000.
He incurred medical expenses of R74 000 and made a capital gain of R30 000. Calculatethemedical credits applicable if taxable income was R 350000.
Example 13 - Medicalcredits
Tammy earns R 650 000, is 68 years old and has 7 members (herself, husband andkids).She is self employed, but does not belong to a medicalaid.
She contributes R 1 800 to a retirement annuity, earns rental income after expenses of R40000.She incurred medical expenses of R60 000 . She made a taxable gain of R30000.
Calculate the medical credits assuming taxable income is R 250000.
Page |31
Carmen Venter Workshops for
Example 14 Medicaldeductions
Chris earns R650 000, he is 66 years of age, has 7 members – himself, wife andkids.
His company contributed 50% of his total contributions - total contributions are R 64000.Chris contributes R 3 500 to a retirement annuity, 7.5% of his earnings to a pensionfund.He incurred medical expenses not refunded (out of pocket expenses) of R40 000 andmadeA capital gain of R30000.