Notes on South African Income Tax 2022

Description

Cover Title Page Contents chapter 01 - Introduction 1.1 Taxation in South Africa 1.2 Income Tax Act 1.3 Normal tax 1.4 Estate Duty 1.5 Indirect taxes 1.6 Interpretation of statutes 1.7 Court decisions 1.8 Interpretation Notes, Rulings and Guides 1.9 Exchange control chapter 02 - Gross Income 2.1 Gross income 2.2 Total amount 2.3 In cash or otherwise 2.4 Received by or accrued to 2.5 Residence 2.6 Source 2.7 Capital 2.8 Deemed capital profit on sale of shares 2.9 Tax on capital gains chapter 03 - Gross Income special inclusions 3.1 Introduction 3.2 Annuities 3.3 Alimony or maintenance 3.4 Services rendered 3.5 Restraint of trade 3.6 Lump sum benefits 3.7 Pension, provident and retirement annuity fund benefits 3.8 Transfers from State pension/provident fund 3.9 Lease premiums 3.10 Know-how payments accrued to a person 3.11 Leasehold improvements 3.12 Fringe benefits 3.13 Mines 3.14 Sale of assets similar to trading stock 3.15 Dividends 3.16 Farming and economic development subsidies 3.17 Sporting bodies 3.18 Government grants 3.19 Key-man insurance policies 3.20 Recoupments chapter 04 - Exempt income 4.1 General 4.2 Government and related exemptions 4.3 Receipts and accruals of certain funds, public institutions, clubs, societies and associations 4.4 Pensions and other employment-related benefits 4.5 Interest and banking 4.6 Dividends 4.7 Dividends and interest paid as an annuity 4.8 Royalties paid to non-resident persons 4.9 Non-resident sportspersons and entertainers 4.10 Alimony and maintenance 4.11 SMMEs 4.12 Fringe benefits 4.13 Ship crews and persons employed outside the Republic 4.14 Non-resident persons in South African government service 4.15 Bursaries and scholarships 4.16 Foreign owners or charterers of ships and aircraft 4.17 Rebates and subsidies exemptions 4.18 Purchases annuities 4.19 Qualifying annuities 4.20 Government grants 4.21 International shipping 4.22 Fruitless and wasteful expenditure chapter 05 - General Deduction Formula 5.1 Introduction 5.2 Trade 5.3 Pre-trade expenditure and losses 5.4 Requirements of section 11(a) 5.5 Deductions not allowed in determination of taxable income 5.6 Specific expenses and losses chapter 06 - Special Deductions 6.1 Introduction 6.2 Legal expenses 6.3 Restraint of trade payments 6.4 Patents, copyrights, designs and trademarks 6.5 Acquisition of intellectual property 6.6 Expenditure to acquire a license from the state 6.7 Bad debts 6.8 Doubtful debts 6.9 Deductions iro contributions to pension and retirement annuity funds 6.10 Contributions by an employer to pension, provident and benefit funds 6.11 Shares issued in terms of section 8B 6.12 Annuities paid to former employees on retirement 6.13 Refunds of salary and restraint receipts 6.14 Employer-owned life policies 6.15 Other deductions 6.16 Learnership allowance 6.17 Donations to public benefit organisations & deemed deductible donations 6.18 Credit agreements and debtors' allowance 6.19 Future expenditure on contracts chapter 07 - Capital Allowances 7.1 Introduction 7.2 Repairs 7.3 Wear and tear allowance 7.4 Allowance in respect of the disposal of assets 7.5 Special depreciation allowance 7.6 Process of manufacture 7.7 Similar Process 7.8 Plant 7.9 Building allowances 7.10 Deduction in respect of improvements not owned by the taxpayer 7.11 Recoupments 7.12 Unquantifiable amounts 7.13 Leasing 7.14 Sale and leaseback 7.15 End of chapter examples chapter 08 - Individuals 8.1 Introduction 8.2 Normal tax rebates 8.3 Taxation of minor children 8.4 The taxation of married persons 8.5 Antedated salary or pension 8.6 Interest exemption 8.7 Dividend income exemption 8.8 Deductions for individuals 8.9 Medical expenses tax credit 8.10 Tax computations 8.11 Divorced persons chapter 09 - Partnerships Companies and CCs 9.1 Introduction to partnerships 9.2 Legal principles of partnerships 9.3 Membership of partnerships 9.4 Taxation of a partnership 9.5 Connected persons - Partnerships 9.6 Capital gains tax - Partnerships 9.7 Value-Added Tax - Partnerships 9.8 Notes on partnerships 9.9 Comprehensive examples - Partnerships 9.10 Definition of company 9.11 Related definitions 9.12 Classification of companies 9.13 Connected persons - Companies and close corporations 9.14 Calculation of a company's tax liability 9.15 Small business corporations 9.16 Close corporations chapter 10 - Trading stock 10.1 General 10.2 Closing stock 10.3 Opening stock 10.4 Construction work-in-progess 10.5 Cost for the purpose of section 22 10.6 Cost of construction work-in-progress 10.7 Stock acquired for no consideration (for no cost) 10.8 Period of assessment 10.9 Private and domestic consumption 10.10 Transfer of trading stock between spouses 10.11 Securities lending arrangements & collateral arrangements 10.12 Anti-avoidance provision 10.13 Share dealers 10.14 Township developers 10.15 Value-added tax chapter 11 - Assessed losses 11.1 Assessed losses 11.2 Ring-fencing of assessed losses 11.3 Disallowance of assessed loss or capital loss in company or trust chapter 12 - Miscellaneous Deductions and Inclusions 12.1 Research and development 12.2 Scientific and technological research and development 12.3 Venture capital investments 12.4 Certified emission reductions 12.5 Allowance for energy efficiency savings 12.6 Post-retirement medical scheme coverage 12.7 Films 12.8 Other capital allowances 12.9 Royalties paid to non-residents and tax-exempt persons 12.10 Incurral and accrual: Equity shares 12.11 Communications licence conversions 12.12 Land conservation and environment expenditure chapter 13 - Employment and fringe benefits 13.1 Introduction 13.2 Gross income definition 13.3 Allowances, advances and reimbursements 13.4 Taxable benefits derived by reason of employment or the holding of any office 13.5 Exemptions & deductions 13.6 Share options 13.7 Broad-based employee share plan 13.8 Taxation of directors and employees on vesting of equity instruments 13.9 Value-added tax - Fringe benefits chapter 14 - Retirement benefits and planning 14.1 General 14.2 The taxation of amounts received as a result of retirement 14.3 Pension, provident, preservation and retirement annuity funds 14.4 Divorce chapter 15 - Employees tax and provisional tax 15.1 General 15.2 Employees' tax 15.3 The Employment Tax Incentive Act 15.4 Provisional tax 15.5 Penalties and interest 15.6 Labour brokers & personal service providers 15.7 End of chapter example chapter 16 - Dividends and dividends tax 16.1 General 16.2 Dividend definition 16.3 Share capital & contributed tax capital 16.4 Capitalisation shares 16.5 Share buy-backs 16.6 Taxation of dividends 16.7 Dividends deemed to be income 16.8 Dividends tax 16.9 Secondary tax on companies chapter 17 - Interest and financial instruments 17.1 Overview 17.2 General provisions 17.3 Section 24J - Accrual of interest 17.4 Interest-free loans 17.5 Interest deemed to be dividends 17.6 Debts owed to persons not subject to tax 17.7 Interest arising from acquisition and reorganisation transactions 17.8 Sharia compliant financing arrangements 17.9 Fair value taxation in respect of financial instruments 17.10 Interest rate swap agreements 17.11 Option contracts 17.12 Collateral arrangements 17.13 Loan waivers and debt benefits chapter 18 - Corporate restructurings, mergers and acquisitions 18.1 Introduction 18.2 Special corporate rules 18.3 Asset-for-share transactions 18.4 Substitutive share-for-share transactions 18.5 Amalgamation & merger transactions 18.6 Intra-group transactions 18.7 Unbundling transactions 18.8 Liquidation, winding up, and deregistration 18.9 Assets acquired for shares issued 18.10 Interest on acquisition transactions 18.11 Limitation of interest deductions chapter 19 - Foreign Income 19.1 Background 19.2 Taxation of foreign income, capital and foreign dividends 19.3 Foreign tax rebates and deductions 19.4 Interpretation note 18 - Foreign tax rebate 19.5 Currency conversion 19.6 Foreign exchange gains and losses 19.7 Transfer pricing and thin capitalisation - International transactions 19.8 Non-resident persons and withholding taxes 19.9 Limitation of interest deduction in respect of debts owed to persons not subject to tax 19.10 Controlled foreign companies 19.11 Foreign partnership 19.12 Foreign investment entities 19.13 Foreign trusts 19.14 Headquarter companies 19.15 Double tax treaties chapter 20 - Tax avoidance 20.1 Tax avoidance versus tax evasion 20.2 General anti-avoidance provision 20.3 Cases 20.4 Dividend/income swaps 20.5 Value-added tax chapter 21 - Capital Gains Tax 21.1 Introduction 21.2 Persons liable for CGT 21.3 Basic framework of CGT 21.4 Rates of CGT 21.5 Capital gain 21.6 Capital loss 21.7 Gains and losses extending over more than one year 21.8 Asset 21.9 Disposal 21.10 Deemed disposals and deemed acquisitions 21.11 Time of disposal 21.12 Proceeds 21.13 Base cost of asset 21.14 Part disposals 21.15 Exclusions 21.16 Primary residence 21.17 Fixed property situated in South Africa, acquired from a non-resident 21.18 Loss limitation rules 21.19 Roll-over relief 21.20 Trusts 21.21 Company distributions 21.22 Capital gain vesting in spouse or minor child 21.23 Acquisition and disposal of asset in a foreign currency 21.24 Foreign currency assets and liabilities 21.25 Sundry chapter 22 - Farmers 22.1 General 22.2 Stock - First Schedule 22.3 Capital expenditure 22.4 Forced sale 22.5 Drought relief provision 22.6 Plantation farming 22.7 Sugar cane 22.8 General rating formula 22.9 Lessors' expenditure on soil erosion works 22.10 Grants and subsidies 22.11 Transferring livestock between one enterprise and another 22.12 Game farming 22.13 Assessed losses 22.14 Value-added tax chapter 23 - Recreational clubs PBOs Sporting Bodies SBFEs 23.1 Introduction 23.2 Recreational clubs 23.3 Public benefit organisations (PBOs) 23.4 Sporting bodies 23.5 Small business funding entities chapter 24 - Estates and trusts 24.1 Insolvent Estates 24.2 Deceased Estates 24.3 Trusts 24.4 Special Trusts 24.5 Connected persons - trusts 24.6 End of chapter example chapter 25 - Other special taxpayers 25.1 Share block companies 25.2 REIT provisions 25.3 Collective investment schemes 25.4 Co-operatives 25.5 Hotels 25.6 Short-term insurers 25.7 Long-term insurers 25.8 Oil and gas companies 25.9 Mining companies 25.10 Shipping companies chapter 26 - Turnover tax for micro business 26.1 Introduction 26.2 The Income Tax Act 26.3 The Sixth Schedule 26.4 Exempt income - micro business 26.5 Dividends tax - micro business 26.6 Capital gains tax - micro business 26.7 VAT - micro business 26.8 End of chapter examples - micro business chapter 27 - Donations tax 27.1 General 27.2 Section 54 - Levy of donations tax 27.3 Section 55 - Definitions 27.4 Section 57 - Donations by a company 27.5 Section 57A - Donations made by spouses 27.6 Section 57B - Disposal of right to receive asset relating to services rendered by employee 27.7 Section 56 - Exemptions 27.8 Sections 59 & 60 - Liability and payment 27.9 Section 58 - Deemed donations 27.10 Section 62 - Valuation of donations 27.11 Section 7C - Deemed donation on loans and deemed loans to trust or company held by trust chapter 28 - Estate Duty 28.1 General 28.2 The Estate Duty Act 28.3 Property 28.4 Deemed property 28.5 Deductions 28.6 Section 4A abatement 28.7 Valuation of property in the estate 28.8 Summary of valuation provisions in the Estate Duty Act 28.9 Deduction: Transfer duty & foreign death duties 28.10 Persons liable for payment of estate duty 28.11 Date of payment of estate duty 28.12 Successive deaths rebate 28.13 Step-by-step calculation of estate duty chapter 29 - Estate Planning 29.1 General 29.2 Reduce or minimize the liability for estate duty 29.3 Liquidity on death chapter 30 - Value Added Tax 30.1 Introduction 30.2 Definitions 30.3 Registration 30.4 Deemed supplies 30.5 Time and value of supply 30.6 Zero-rating 30.7 Exempt supplies 30.8 Financial services 30.9 Imported goods and services 30.10 Accounting basis 30.11 Calculation of VAT payable 30.12 Input tax 30.13 Adjustments - VAT 30.14 Tax invoices, credit notes, debit notes 30.15 Irrecoverable debts 30.16 VAT clawback 30.17 Micro business 30.18 Agents 30.19 Record keeping 30.20 Late payment of VAT and interest on refunds 30.21 Value-added tax avoidance and evasion 30.22 Anomalies and incongruities 30.23 Prices to include VAT 30.24 Transfer duty and securities transfer tax exemptions 30.25 Income tax effects of VAT chapter 31 - Transfer Duty 31.1 Introduction 31.2 Definition of property 31.3 Value of property subject to transfer duty 31.4 Transaction 31.5 Acquired 31.6 Tripartite agreements 31.7 Residential property companies and trusts 31.8 Exemptions from transfer duty 31.9 Sharia compliant financing arrangements chapter 32 - Securities transfer tax 32.1 Introduction 32,2 Securities transfer tax chapter 33 - Tax Administration 33.1 Tax administration 33.2 Application of the Tax Administration Act 33.3 Arrangement of chapters and sections of the TAA 33.4 Chapter 1 - Definitions 33.5 Chapter 2 - General administration provisions 33.6 Chapter 3 - Registration of taxpayers 33.7 Chapter 4 - Returns and records 33.8 Chapter 5 - Information gathering 33.9 Chapter 6 - Confidentiality of information 33.10 Chapter 7 - Advance rulings 33.11 Chapter 8 - Assessments 33.12 Chapter 9 - Dispute resolution 33.13 Chapter 10 - Tax liability and payment 33.14 Chapter 11 - Recovery of tax 33.15 Chapter 12 - Interest 33.16 Chapter 13 - Refunds 33.17 Chapter 14 - Writeoff or compromise of tax debts 33.18 Chapter 15 - Administrative non-compliance penalties 33.19 Chapter 16 - Understatement penalty & voluntary disclosure 33.20 Chapter 17 - Criminal offences 33.21 Chapter 18 - Reporting of unprofessional conduct 33.22 Chapter 19 - General provisions 33.23 Chapter 20 - Transitional provisions 33.24 Schedule 1 - Amendment of tax acts 33.25 Automatic exchange of information 33.26 E-filing chapter 34 -Disaster Management Tax Relief 34.1 Introduction 34.2 Disaster Management Tax Relief Act 34.3 Disaster Management Tax Relief Administration Act Appendices APPENDIX A - Tax tables APPENDIX B - Wear and tear allowance APPENDIX C - Life expectancy table A APPENDIX D - Annuity table B APPENDIX E - Quick reference tables APPENDIX F - Interest rates APPENDIX G - Prime overdraft rates of South African banks APPENDIX H - Average exchange rates APPENDIX I - Exchange control discretionary & investment allowances Index - Cases Index - Court cases Index - Tax Court cases Index - Interpretation notes Index - Practice notes Index - sections Income Tax Act section index Estate Duty Act section index VAT Act section index Index - Word index