Training COTE TAX PRACTIONER EXAMS

Transcription

1 Training COTE TAX PRACTIONER EXAMS

2 Indirect Tax VAT

3 Tax periods s27 A Taxable supplies R Farmers > R monthly Jan, March, May B Taxable supplies R Farmers > R monthly Feb, April, June C Taxable supplies > R Or specific application D E F 1 monthly Farmers R or a vendor that is a registered micro business Bi-annually Annually last day of YOA February, August Taxable supplies R AND specific application 4 monthly June, October, February Deleted from 1 July 2015

4 Enterprise s1 Any enterprise or activity carried on continuously or regularly Ongoing Business owner selling private home? in South Africa or partly in South Africa by any person in the course or furtherance of which goods or services are supplied for a consideration whether for profit or not

5 Enterprise s1 Specifically includes: Anything done in connection termination of an enterprise with the commencement or The activities of a welfare organisation and foreign donor funded project. The supply of electronic services by a person from a place in an export country is specifically included in the definition of an enterprise. This specific inclusion applies where at least two of the following circumstances are present, namely the electronic services are supplied to a South African resident, or any payment for such services is made from a South African Bank, or the electronic services are supplied to a person with a business address, residential address or postal address in South Africa where a tax invoice will be delivered.

6 Enterprise s1 Specifically excludes: The supply of services by an employee to his employer (salaries & wages) A hobby An exempt supply Commercial accommodation not exceeding R for a period of 12 months ( from 1 April 2016 R ) Certain supplies made by branches or main businesses situated outside South Africa eg. Foreign Bank in US head office has a branch in Sandton branch in Sandton all supplies of the SA branch will be part of an enterprise however, supplies of head office outside SA will be excluded from the definition of enterprise.

7 VAT Admin Must be submitted and payment made within 25 days after the end of tax period. If 25 th falls on Saturday or Sunday or public holiday then last business day before 25 th If e-filing submit and make payment on last business day after the end of tax period as opposed to 25 th

8 Timing of a supply s9(1) General rule : Earlier of Invoicing; or Receipt of payment Deposit deemed to be consideration (i.e. reduce liability) OR Deposit that will be forfeited

9 Value of a supply s10(3) General rule If consideration = money If consideration money Value of supply = Rand value excludes VAT Value of supply = Open market value includes VAT

10 SECTION 20 WHERE THE SUPPLY EXCEEDS R5000, certain information must appear on the tax invoice and must be reflected in South African currency. S20(4). T The words tax invoice in a prominent place The name, address and VAT registration number of the supplier The name, address and VAT registration number (if the recipient is a vendor) of the recipient an individual serialised number and the date on which the tax invoice is issued a full and proper description of the goods or services supplied (including an indication that the goods are second-hand, if that is the case) the quantity or volume of the goods or services supplied either the value of the supply, the amount of VAT charged and the consideration for the supply, or where the amount of VAT charged is calculated by applying the tax fraction to the consideration, the consideration for the supply and either the VAT charged or a statement that it includes a charge for VAT and the rate at which the VAT was charged.

11 SECTION 20 WHERE THE SUPPLY DOES NOT EXCEED R5000, an abridged tax invoice may be issued. This abridged tax invoice should contain only the following particulars: the words tax invoice, VAT invoice or invoice in a prominent place the name, address and VAT registration number of the supplier an individual serialised number and the date on which the tax invoice is issued a description of the goods or services supplied (including an indication that the goods are second- hand, if that is the case) either the value of the supply, the amount of VAT levied and the consideration paid for the supply, or where the amount of VAT charged is calculated by applying the tax fraction to the consideration, the consideration for the supply and the VAT charged or a statement that it includes a charge for VAT and the rate at which the VAT was charged.

12 Output VAT is levied, Input VAT is claimed. If an item is inclusive of VAT, 14/114 is used to calculate the amount of VAT on that item. If an item is exclusive of VAT, 14% is used to calculate the amount of VAT on that item. 12

13 References: Section 23 to section 25 of the Act Compulsory vs. Voluntary registration See slides at the end for changes effective from 1 April 2014 Depends on value (exclusive of VAT) of taxable supplies. Separate branches may register as separate VAT vendors if: Maintain independent accounting records Separately identified: Nature of activities or Geographic location 13

14 Taxable Supplies: Standard Rated Zero Rated NB Certain deemed supplies Exempt Supplies non taxable supply Denied Supplies input is denied 14

15 The supply of goods (seed, feed, fertiliser, etc.) and services for use for agricultural or other farming purposes The supply of gold coins, such as Kruger Rands, which are issued by the Reserve Bank Certain basic foodstuffs; for example, brown bread, maize meal, samp, mealie rice, rice, pilchards, milk and milk powder, fresh fruit and vegetables (including mealies, but excluding popcorn), vegetable oil (excluding olive oil), eggs and lentils Dehydrated, dried, canned or bottled fruit and nuts would not qualify for the zero-rating. The supply of fuel levy goods (for example, petrol and diesel, including biofuels) and certain crude oil products used in the production of such goods. Illuminating kerosene (paraffin) marked as intended for use as fuel for illuminating or heating, and not mixed or blended with another substance Certain goods supplied to a customs-controlled area enterprise or Industrial Development Zone operator in a customs-controlled area

16 Goods supplied by a vendor to a foreign company, but delivered to a registered vendor (the recipient) in South Africa, and used by the recipient wholly for the purposes of making taxable supplies The supply of controlled animals or things by a vendor to a public authority, whereby the vendor receives compensation in terms of s 19 of the Animal Diseases Act 35 of 1984

17 Certain fixed property supplied is zero-rated, if it is supplied to the Cabinet member responsible for land reform or any person to the extent that the consideration is subsidised in terms of the Provision of Land and Assistance Act, 1993 (Act 126 of 1993) Services supplied directly in connection with land or any improvements to land or movable goods, where the land or movable goods are situated in an export country

18 The charging of municipal rates (property rates and taxes) by a municipality The zero-rating of municipal rates is, however, not applicable where such rate is a flat rate charged to the owner of the rateable property for rates and other goods and services (such as supplies of electricity, gas, water, drainage, disposal of sewage and garbage), or a flat rate charged to any person exclusively for the supply of the other goods and services as mentioned above, and such flat rate will be taxed at the standard VAT rate of 14%.

19 Services relating to intellectual property rights (including patents, designs, trade marks, copyrights, know-how, confidential information, trade secrets or similar rights) and the acceptance of an obligation to refrain from pursuing or exercising any such rights to the extent that the intellectual property rights are for use outside South Africa Services comprising vocational training of employees for an employer who is not a resident and a vendor

20 Sale of a going concern s11(1)(e) and 18A Zero Rated Seller = vendor Purchaser = vendor Agreement in writing Enterprise = going concern Supply of an enterprise

21 Exports Goods Services Direct: Documentary evidence to zero rate Indirect: Can be zero or standard rated Performed for non-resident outside RSA 21

22 Exports Exported Services - Transportation The rendering of a transport service to passengers or goods is zero-rated, according to s 11(2)(a), if transported from a place outside South Africa to another place outside South Africa, or a place in South Africa to a place in an export country, or a place in an export country to a place in South Africa. Any services comprising the insuring or arranging of insurance for any of the above passengers will also be zero-rated (s 11(2)(d)).

23 Exports Exported Services Ancillary services to exported good Where goods are exported and additional services are supplied, the additional services, such as the transport and insurance of goods, will also be zero-rated if supplied to a nonresident that is not a vendor (s 11(2)(e)).

24 Webinar: Zero-rated supplies are taxable supplies on which VAT is levied at a rate of 0%. Certain basic foodstuffs are zero-rated, provided it is not supplied for immediate consumption (that is, as a meal or refreshment) or added to a standard-rated supply. These include the following: brown bread dried mealies and mealie rice brown bread flour (excluding wheaten bran) samp hens eggs (that is, not from ostriches, ducks etc.) vegetables and fresh fruit dried beans lentils maize meal rice pilchards in tins or cans vegetable cooking oil (excluding olive oil) milk, cultured milk, milk powder and dairy powder blend edible legumes and pulses of leguminous plants (that is, peas, beans, peanuts etc.) 24

25 Webinar: The zero rate will not apply where Zero-rated foodstuffs are prepared for immediate consumption, for example - a glass of milk served in a restaurant; - a pre-packed salad with salad dressing purchased at a supermarket; - sandwiches and other take-away foods. - A standard rated product or ingredient is supplied together with a zero-rated foodstuff, for example - a punnet of vegetables seasoned with herbs and including a stick of butter; - a pack of rice or beans containing a sachet of flavouring; - a gift hamper consisting of a basket of fruit with chocolates and nuts; - peri-peri flavoured cooking oil 25

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27 This is a NON TAXABLE supply, therefore: NO Input VAT nor Output VAT consequences. Remember to look out for the exclusions applicable to each exempt supply ie.: Fee based financial services eg, transfer of shares, loans, interest, funds bank charges not exempt, standard rated Property developers (residential property) If a supply is EXCLUDED from being an exempt supply, it becomes a taxable supply. 27

28 Residential Accommodation - The supply of donated goods and services by an association not for gain is exempt. The exemption also applies if the goods being supplied were made or manufactured by the association, provided that at least 80% of the value of the materials used consists of donated goods.

29 Other The letting of leasehold land to the extent that it is used for accommodation in a dwelling erected or to be erected on that land The sale or letting of land situated outside South Africa The supply of services by a body corporate share block company, or housing development scheme where the costs of supplying such services are met out of the levies charged by them are also exempt supplies (s 12(f)). As from 1 April 2014 services by home-owners associations could also qualify for this exemption. Although provision is made for these supplies to be exempt, these persons can, however, apply to SARS for the levies to be taxable or partly taxable. This exemption is not applicable to the supply of services in connection with the management of a property timesharing Scheme.

30 Other The transport of fare-paying passengers (in a bus or taxi, but not a game-viewing vehicle) and their personal effects by road or railway, unless the service is subject to VAT at the zero rate (s 12(g)), provided that the transport is only by road and railway, but excluding a funicular railway (thus it is not applicable to air tickets) Local air travel is standard and overseas is zero rated not for the purpose of courier services, since the exemption applies to the transport of passengers and their personal effects, and not to goods, therefore goods by road or rail is standard or for fare-paying passengers (thus a supply of transport services by a hotel to and from the airport will not be an exempt supply if the residents of the hotel are not charged separately for such service).

31 Other The supply of qualifying educational services by the State, a school, a public higher education institution or certain institutions in South Africa that meet the definition of a public benefit organisation in s 30(1) of the Income Tax Act is an exempt supply. The exemption is not applicable to technical training provided by an employer to his employees or employees of an employer who are connected persons in relation to that employer. The supply by a school, university, technikon or college, solely or mainly for the benefit of its learners, of goods or services (including domestic goods or services) for a consideration in the form of school fees, tuition fees or payment for board and lodging, is exempt Membership contributions to employee organisations, such as trade unions, are exempt The supply of childcare services by a crèche or an after-school care centre are also exempt All supplies of goods or services by a bargaining council to any of its members to the extent that the consideration for such supply consists of membership contributions All supplies of goods or services by a political party to any of its members to the extent that the consideration for such supply consists of membership contributions

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33 Denied ito of INPUT VAT, therefore: If there are no Input VAT consequences, there can be no Output VAT consequences Acquisition of a motor car: Motor car as defined Denied ito ACQUISITION only ie. ancillary costs are not denied. Entertainment: Entertainment as defined There are many exclusions to the definition meaning that if a supply falls into an exclusion, it will have VAT consequences please read exclusions 2014 changes 1 April 2014 Amendment, vendors operating taxable transport services who supply entertainment to passengers and crew as part of those services(reworded). Club Subscriptions: Sport, social and recreational clubs only. Professional bodies and trade organisations are not denied. Trade unions are exempt 33

34 Webinar: DENIAL OF INPUT TAX The VAT Act provides that input tax is denied on certain expenses even if the expenses are incurred in the course of conducting an enterprise. These include goods or services acquired for purposes of entertainment; membership fees or subscriptions of clubs, associations or societies of a sporting, social or recreational nature; the acquisition of a motor car by a vendor (who is not a motor car dealer or car rental enterprise); and goods or services acquired by medical schemes or benefit funds for the purposes of health insurance or benefit cover. 34

35 Webinar: entertainment As defined in section 1 of the VAT Act means the provision of any food, beverages, accommodation, entertainment, amusement, recreation or hospitality of any kind by a vendor whether directly or indirectly to anyone in connection with an enterprise carried on by him; 35

36 Webinar: Club subscriptions of a recreational nature Input tax may not be deducted on VAT paid in respect of any membership fees to sporting, recreational and private clubs. For example, membership of a country club, soccer supporters club, amateur boxing club, holiday club, tea club, stokvel savings club etc. However, the VAT incurred on subscriptions to magazines and trade journals which are related in a direct manner to the nature of the enterprise carried on by the vendor may be deducted as input tax. 36

37 Webinar: VAT on membership fees paid to a professional body such as SAIPA The VAT on any fees or subscriptions to professional organisations paid by a vendor on behalf of its employees, may be deducted as input tax. Trade union subscriptions - exempt 37

38 Webinar: Professional Tax Technician (SA) Motor cars The term motor car is defined in the VAT Act and includes vehicles which have three or more wheels; are normally used on public roads; and are constructed or converted mainly or wholly for carrying passengers. As a general rule, an input tax deduction may not be made by a vendor if a vehicle falling within the definition of a motor car is acquired, even if it is used in the course of making taxable supplies and regardless of the mode of acquisition. For example, the motor car could be acquired by way of outright purchase, importation, ICA, operating rental agreement or casual hire. 38

39 Deemed for Output VAT purposes. Taxable supply therefore must provide: Time of supply and Value of supply Supply is deemed to have taken place therefore it is deemed to be inclusive of VAT: 14/114 is used to calculate Output VAT 39

40 Fringe Benefits To constitute a deemed supply: Employer Employee relationship Listed Seventh Schedule fringe benefit Taxable supply for VAT purposes 40

41 Time of Supply: End of the month of the receipt of the cash equivalent of the benefit (section 9 (7)). Value of Supply: 14/114 x Seventh Schedule fringe benefit value except for right of use of a motor vehicle x extent of taxable supplies. Motor Vehicle as defined is a denied supply (not taxable) but right of use of a motor vehicle is specifically provided for in the VAT act as a deemed supply for fringe benefit purposes. 41

42 Motor Vehicle Fringe Benefit Value of Supply: 1. Determined value always EXCLUDING VAT (reduced by 15% for each 12 month period held by employer before right of use was granted. 2. Multiply by: 0.3% if Input VAT was denied or 0.6% if Input VAT was not denied 3. Less R85 if employee bears full cost of maintenance 4. Multiply by number of applicable months 5. Multiply by tax fraction (14/114) 6. Apportion to extent of taxable supplies. 42

43 In summary, fringe benefits that are subject to Output VAT (only taxable supplies)- assuming employer registered VAT vendor: Sale of asset below market value Right of use of assets (excluding entertainment) Right of use of motor vehicle Free/cheap services Release by employer of employees debt to the employer where owing for trading stock NB If Fringe benefit relates to exempt, zero rated or supply of entertainment there is no deemed supply and thus no output VAT is payable on the fringe benefit 43

44 Indemnity Payments Deemed Supply per s 8 (8) if: Ito contract of insurance Loss incurred in course/ furtherance of enterprise Loss in relation to taxable supply Relates to Short term policy And not long term policy( exempt financial service) No deemed supply per s 8 (8) if: Goods constituted a non-taxable supply; or Total reinstatement (stolen or damaged beyond economic repair )of denied supply- motor car or goods relating to entertainment) Repairs to motor car - Input was denied at acquisition AND must be damaged beyond economic repair or theft But even though input was denied, it was not damaged beyond economic repair or stolen therefore deemed supply Value of supply: 14/114 x Consideration received x Extent of taxable supplies Time of supply: Date of receipt of payment 44

45 As long as the indemnity payment is made ito the insured s contract of insurance, there will be a deemed supply for the insured himself at 14/114: Insurer Pays Insured Insurer Pays Third Party If the insured pays the third party This is a payment ito a contract of insurance therefore there is a deemed supply amount received including VAT 14/114 45

46 Cessation of Business When a person ceases to be a vendor, there is deemed to be a supply of all the items in the business on which the vendor originally claimed Input Vat on. Time of Supply: Immediately before ceasing to be a vendor (section 9 (5)) Value of Supply: 14/114 x lower of cost and market value (section 10 (5)) 46

47 Excessive Payments Vendor receives payment in excess of debtor s debt: Initially, no VAT consequences (supply of money) If not refunded within 4 months = deemed supply Time of Supply: End of the Vat period in which the 4 months ends Value of Supply: 14/114 x excess portion of the payment If eventually refunded by the vendor: Vendor can claim Input VAT on the amount 47

48 Rental Agreements ICAs 48

49 The second hand goods rule is a rule relating to the amount of notional Input VAT claimable on a purchase of second hand goods as defined from a non-vendor. This rule applies to all second hand goods other than second hand fixed property. Remember: This is a notional Input VAT claim, as no amount was actually paid as the item was purchased from a non-vendor. 49

50 Requirements: Previously owned and used (s 1 definition) Used to generate taxable supplies Seller = Resident Non Vendor No actual VAT charged Goods located in RSA 50

51 No deemed input tax on second-hand goods is available if the goods were acquired from a person on a diplomatic or consular mission of a foreign country established in South Africa that was granted a VAT refund as contemplated in s 68. Second-hand goods are defined in s 1 as goods that were previously owned and used, or in respect of the transfer of a unit (referred to in Item 8 of Schedule 1 to the Share Blocks Control Act), such a unit, and certain prospecting and mining rights. Second-hand goods do not include animals, gold coins, gold and goods containing gold.

52 If requirements are met: Time of Supply: To the extent of payment Value of Supply: 14/114 x Lower of cost and market value If a vendor exports a good on which notional Input VAT was originally claimed, there will be no zero-rating available to the extent that notional input was claimed. Remember: There are NO VAT consequences for a new goods bought from a non vendor and if second hand motor car or relates to entertainment- input is denied therefore still no notional input. 52

53 Extracts from the Explanatory Memorandum to the VAT Act: While the acquisition of gold and jewellery by VAT vendors from non-vat vendors should allow for the deduction of notional input VAT, in practice this provision significantly contributes to creating an enabling environment to obtain fraudulent input tax deductions. Jewellery is smelted along with gold coins and illegally acquired raw gold. Explanatory memorandum to Bill

54 VAT Updates: Second hand goods Do not include animals and gold coins. Amendment Second-hand goods made from precious metals (goods containing gold) is excluded from obtaining notional input Effective date: The amendment will come into operation on 1 April 2015.

55 Fixed Property Non - Vendor Vendor New No VAT 2 nd hand Notional VAT New + 2 nd hand Actual VAT 55

56 Fixed property from a vendor: Value of supply: Consideration paid Time of supply: Earlier of registration or any payment made (s 9 (3) (d)) However to the extent of payment Fixed Property from a non vendor: New: No VAT consequences 2 nd hand: Value of supply: 14/114 x Lower cost and market value Time of supply: Earlier of registration or any payment made with the pre-requisite of registration having taken place AND to the extent of payment (s 16 (3) (a) (ii) (bb) (A)) 56

57 Where commercial accommodation is supplied with domestic goods and services at an allinclusive charge for: An unbroken period of greater than 28 days, then Consideration in money is deemed to be at 60% of the all-inclusive charge. Therefore, provided that the above requirements are met, Output VAT will be levied at only 60% of the all-inclusive charge. 57

58 Importation of Goods Output VAT levied Importation of Services Output VAT levied Done on a gross basis Done on a net basis 58

59 Output VAT levied on importation of any good by any person whether they are a vendor or non vendor (s 7 (1) (b)). Principle: The price levied by the foreign seller excludes VAT as they are not a registered VAT vendor. Output VAT is therefore levied on the importation of the good in order to equate the treatment of imports to that of the supply of local goods. 59

60 The importer is liable for the Output VAT levied. Imported via an agent Direct import Agent calculates Output VAT Output VAT not on importer s Output VAT calc Importer calculates Output VAT Output VAT does go on importer s Output VAT calc 60

61 Value of Supply Non BLSN Country BLSN County Customs Duty Value 10% Customs Duty Value Non Refundable taxes and duties Customs Duty Value Non Refundable taxes and duties 61

62 Output VAT = Value of supply x 14% The Output VAT levied is a cost incurred on importing that good and therefore is added to the cost of that good. If the good is used in the production of taxable supplies: Input VAT IS claimable to the extent of taxable supplies. The cost of the good which includes Output VAT as calculated above is therefore REDUCED by the value of Input VAT claimed. Cost + Output VAT paid Input VAT claimed 62

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64 Output VAT is levied on the supply of imported services as defined by any person, whether they are a vendor or a non vendor. Imported Services:..supply of services that is made by a supplier who is a non resident or carries on business outside the Republic to a recipient who is a resident of the republic to the extent that such services are utilized or consumed in the Republic otherwise than for the purpose of making taxable supplies non taxable supplies. 64

65 Principle: Output VAT is only levied when the services will be utilised for non taxable purposes (thus meeting the definition of imported services). Meaning: Output VAT is only levied when it can NOT be claimed back. Services are only utilised for non taxable purposes when: They are used by a non vendor. They are used by a vendor for non taxable purposes ie. in the production of exempt supplies. 65

66 Therefore: If Output VAT is only levied on imported services to the extent that they are utilised for non taxable purposes, And Input VAT is only claimable to the extent that the item is utilised in the production of taxable supplies Then No Input VAT is claimable on the importation of a service on which Output VAT has been levied. 66

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68 The connected person provision per s 10 (4) is a rule affecting the value of supply. It applies to the seller - vendor only therefore looking at Output VAT and not input VAT Principle: Supply made for consideration less than market value and Supplier and recipient are connected persons and The buyer would not be able to claim a full Input VAT deduction ie: The buyer is a non vendor or The buyer will not use the good in the production of 100% taxable supplies Value of supply is deemed to be market value. 68

69 Allocation of input VAT-s17 Per cost or asset Taxable use General use Nontaxable use 100%?% 0%

70 95% rule s17 95% or more supplies = taxable supplies No apportionment, claim 100% input

71 Allocation of output VAT s7(1)(a) Per cost or asset Taxable use General use Nontaxable use 100% 100% 100%

72 Adjustments to input and output VAT - Output Tax No apportionment s8(16) - Exceptions Fringe Benefits and Indemnity Payments

73 Registration of E-commerce From 1 April 2014 suppliers Foreign suppliers of electronic services, at the end of the month where the total value of taxable supplies made by that person has exceeded R

74 Registration as a vendor Compulsory Registration From 1 April 2014 A person is required to register: - at the end of the month which the total value of the taxable supplies for the preceding 12 months exceeded R If it is anticipated that the total value of the taxable supplies would exceed R1 million, if it exceeds this amount ito a written contractual agreement. Therefore the removal of the predictive element of the previous compulsory registration requirements - E-commerce suppliers as per previous slide 74

75 Registration as a vendor Voluntary Registration From 1 April 2014 A person is may register: - if the value of the taxable supplies is more than R during a previous 12 month period - He is acquiring an enterprise of which the value of taxable supplies exceeded R during the previous 12 months as a going concern - Total value of taxable supplies has not exceeded R but can reasonably be expected to exceed that amount within 12 months from date of registration as a vendor register on payments basis until value of taxable supplies exceeds R If that person continuously and regularly carrying on activity listed in a regulation to be made by the Minister. The consequences of the nature of that activity are that it is likely to make taxable supplies. 75

76 The Taxation of Retirement Benefits

77 Overview 1. What is a Lump sum vs. annuity? 2. Why do we have separate tax laws upon Retirement? 3. What are the different types of lump sums one can receive? 4. Value and form of Lump sums 5. Concept of cumulative tax 6. s10c exemption

78 Lump sums vs. Annuity Employee can choose Lump sum paid out once off Fixed amount, paid out repetitively, ito a contract Second Schedule Gross Income def par (a)

79 Types of lump sums Lump sums Received Lump Sums from an Employer Lump sum from a Fund Paragraph (c) or (ca) Paragraph (d) or (f) Paragraph (e) and (ea)

80 Lump sums from employer: ca) Restraint of Trade Received: Amounts received from an employer on termination of employment, to NOT undertake/ engage in certain occupation/ trade/ employment for a defined period of time. Although the amounts are capital in nature they will be taxed in Gross Income in terms of par (ca). The payment received is NOT a lump sum for these purposes of the second schedule and is taxed in full in the hands of the individual who received the restraint payment. par (d) or (f)- Severance Benefits Any voluntary reward or amount received or accrued for, in respect of: the relinquishment, termination, loss, repudiation, cancellation or variation of any office or employment of any appointment AND The recipient has attained the age of 55 years OR Employee suffers from ill heath, is incapable, or infirmity of holding office OR Termination is due to: Employer ceasing to carry out trade for which the taxpayer was employed for Redundant (See later for additional checks!) IF above requirements are met then the amount received is TREATED AS A LUMP SUM FROM A FUND.

81 Lump sums from funds Lump sums from funds Retirement lump sum Withdrawal lump sum Retirement Death Resignation Withdrawal Type of event = NB

82 Lump Sums from Funds paragraph (e) and (ea) Paragraph (e) per Gross Income definition Retirement fund lump sum benefit or Retirement fund lump sum withdrawal benefit, other than included in par (ea) (Public Sector Pension Funds) Retirement fund lump sum benefit Refer to par 1, Second Schedule for full definition 5 types of Funds affected by Second schedule: 1) Pensions Fund 2) Pension Preservation Fund 3) Provident Fund 4) Provident Preservation Fund 5) Retirement Annuity Fund

83 The value and form of Lump Sums Calculating the inclusion into gross income Amount received from Fund Rxxx Less deductions in terms of paragraph 5/6 (Rxxx) Inclusion in Gross income Rxxx PLEASE NOTE: Deductions in terms of paragraph 5/6 are limited to the actual lump sum benefit received. The deductions can t create a loss in the gross income of the recipient. Calculating the TAXABLE portion of lump sum received from FUND LS received (actual) deductions permitted per par 5/6 = Taxable portion of lump sum in Gross Income (Therefore, the net portion is the only amount to be included in Gross Income and NOT the actual Lump Sum received.)

84 S10C exemption S10C now allows for the non-deductible portions of the contributions once made toward these funds by the taxpayer, as a deduction against this annuity income received Disallowed contributions i.t.o s11(k) or (n) netted off against annuity income Previously not allowed as a deduction under par 5 or 6 of 2 nd Schedule Applicable to contributions from any fund

85 New Legislation 2016 Budget Proposal A two year postponement of the annuitisation requirement for provident funds and tax free transfers from pension to provident funds.

86 EMPLOYEES TAX

87 Definitions Remuneration Par 1 Amount of Income Paid or Payable To any person whether in cash or otherwise whether or not for services rendered By way of any Salary and wages Leave pay and allowances Bonus and gratuity Overtime pay Commissions and fees Emoluments and pensions Superannuation allowance Retiring Allowance or stipend

88 Remuneration (Par 1) Continued Remuneration specifically includes: Gross Income Paragraphs: (a) - Annuities (c) - Any Amount including Voluntary rewards received for services rendered or to be rendered or any amount received by virtue of employment. (ca) and (cb) Restraint of Trade (d) Lump sums received from Employers (e) Retirement Lump Sums and Retirement Lump Sum Withdrawal benefit (ea) Amounts from Public Sector Pension Funds (f) Amounts received in commutation of amount under employment contract (i) Fringe Benefits (Cash Value as determined in the 7 th Schedule

89 Remuneration (Par 1) Fringe Benefits (paragraph (i)) Cash Equivalents of Fringe Benefits in terms of right of use of Company Car 80% of the Fringe Benefit Value determined per paragraph 7 of the 7 th Schedule. If the employer is satisfied that at least 80% of the use of the motor vehicle in a yoa will be for business purposes. Only 20% of the Fringe Benefit Value will be Remuneration.

90 Remuneration (Par 1) Continued Remuneration specifically includes: Allowances in full, other than travel, or subsistence or holder of public office If subsistence allowance not used by month end, it is remuneration. 50% of public holder officer allowance. Section 8B or 8C gains. Amounts in terms of s 7(11)

91 Remuneration (Par 1) Continued Remuneration specifically includes: 80% of travel allowance referred to in s8(1)(b) If the employer is satisfied that at least 80% of the use of the motor vehicle in a yoa will be for business purposes. Only 20% of the Allowance will be Remuneration. BUT A Reimbursive Travel allowance in terms of s8(1)(b)(iii) is NOT INCLUDED in definition of remuneration.

92 Remuneration Continued Remuneration specifically excludes: Payments to independent traders Disability pensions. Reimbursements Paid by employer to employee in course of his employment of Expenditure Actually incurred. Annuity in terms of a divorce order. other annuities, purchased or earned are included paragraph (a) above Subsistence allowance Unless he receives an allowance but does not spend at least one night away from home by month end then is deemed to be remuneration and not subsistence allowance

93 Employees Tax The Amount of Employees Tax to be withheld is calculated on the balance of remuneration in terms of Par 2(4) of the 4 th Schedule.

94 Balance of Remuneration (Par 2(4) Remuneration Less: Deductible contributions to a Pension Fund Limited to allowable deductions in terms of s11(k) Deductable contributions to a Retirement Annuity Fund Limited to allowable deductions in terms of s11(n) (proof to be provided to the employer) NB 1 March 2016, deductions under new s11k Donations by the employer on behalf of the employee to s 18A recognised institutions Limited to 5% of the employees remuneration after deducting the above

95 Annual Equivalent Employees tax must be deducted from remuneration of an employee in a specific month. Rebates and Prescribed Tax Tables are based on Annual Taxable Income The Annual equivalent of the balance of remuneration must be calculated before employees tax can be calculated.

96 Definitions Employer (Par 1) Any person who pays or is liable to pay to any person any amount by way of remuneration. It includes an executor or an administrator of a benefit fund, pension fund, RA fund or any other fund. Employee (Par 1) A person, other than a company, who derives remuneration (taken to include directors of public companies) A person who receives remuneration by reason of services rendered by that person to/on behalf of a labour broker A labour broker (LB) A personal service provider Director of a private company

97 Labour Broker The definition of an Employee includes: A Labour Broker A Labour Broker is defined as follows (Para 1): NATURAL PERSON who conducts or carries on business Providing clients with persons to perform work, for reward or Procuring (obtaining) workers for clients, for reward. Providing workers, rather than a service. Distinction between a labour broker and an independent trader. client pays labour broker who then pays employees

98 Labour Brokers Are specifically excluded from independent traders Definition of employee includes a labour broker Clients must thus pay employees tax (PAYE) according to the tables if no exemption certificate is held. If held, no employees tax withheld The tax withheld can be set-off against provisional tax payments. S 23(k) limits deduction of expenses incurred by Labour Broker other than salaries i.e. can not try to avoid s 23(m) by changing structure of what is effectively a employment relationship.(income Tax Purposes)

99 S23(k) Income Tax Deductions S23 No deduction shall in any case be made i.r.o. the following matters (k) Any expense incurred by labour broker or personal service provider, Other than expenses incurred on: Amounts paid or payable to employees, and amounts included in TI of employees Any expense or deduction in S11(c) Legal Expenses S11(i) bad debts S11(l) employer contributions to funds S11(nA) refunds of salaries S11(nB) refunds of restraint of trade payments Expenses for premises Finance charges Insurance Repairs, Maintenance, fuel iro assets used wholly or exclusively for trade.

100 Labour Brokers IRP 30 (Par 2(5) Client must withhold PAYE when they pay the labour broker his fees Unless labour broker has an IRP30 exemption certificate, which details: Independent trade Registered as a provisional taxpayer Must be a registered employer Tax affairs up to date Does not derive >80% of GI from one client (the 80% test does not apply if LB employs 3 or more full time employees not connected persons) May not provide the services of another labour broker to a client Must not be contractually obliged to provide a specified employee to the client.

101 Personal Service Provider A personal service company from this date is only subject to employees tax if it is a personal service provider. Any remuneration paid to it is taxed at a rate of 28% for a psp company and 41% if a psp trust.

102 Personal Service Provider Definition Par 1 Any company or trust (note NOT an individual), where any service rendered by the company or trust to a client is personally rendered by any person who is connected in relation to such company or trust. And one of the following requirements must be met:

103 Personal Service Provider Definition Par 1 Continued The person rendering the service to the client would have been regarded as an employee of the client if the service was rendered directly to that client; or Where the duties of the service must be performed mainly at the premises of the client, the person or company or trust is subject to the control or supervision of the client relating to the manner in which the services are performed; or Where more than 80% of the income of the company or trust during the year of assessment, from services rendered, consists or is likely to consist of amounts relating to one client.

104 Personal Service Provider Definition Par 1 Continued A company or trust is excluded from the definition of a PSP where, throughout the year of assessment, three or more employees who are on a full-time basis engaged in the business of such company or trust are employed. These employees may not be holders of shares in the company or a settlor or beneficiary of the trust or be a connected person in relation to that person. Where the definition is met and remuneration is paid to a PSP and is subject to the deduction of employees tax, the employees tax withheld may be set off against the company or trust s provisional tax payments (paras 21 and 23).

105 Personal Service Provider Once defined as a personal service provider, certain deductions are denied to the company or trust in terms of s 23(k) of the Act. This provision prohibits the deduction of any expense incurred other than any expense constituting an amount paid or payable to any employee of such a labour broker. However in terms of s23(k) the following deductions are still available: S 11(c) legal expenses S 11(i) bad debts S 11(l) contributions to funds by employer S 11(nA) and (nb) refunds Expenses relating to premises, finance charges, insurance, repairs and fuel and maintenance in respect of assets used wholly and exclusively for the purposes of trade.

106 Independent Trader Definitions of remuneration excludes any amount paid or payables for services rendered or to be rendered by any person in the course of a trade Carried on Independently of the person whom the amount is paid or payable (Par 1 Definition of Remuneration (ii) ) Therefore these amounts are not subject to employees tax

107 Independent Trader The following are not Independent Traders: A person who is not residents An employee who is a labour broker or who works for a labour broker or Personal Service Provider

108 Independent Trader A person will be deemed NOT to be carrying on a trade independently if: Person carries out the trade mainly at the premises of the service recipient; and Person is subject to control or supervision of any other person as to the manner in which the services are performed. However if: Person employed more than 3 full time employees (excluding connected persons) then IS an independent contractor. Interpretation Note 17

109 Variable Remuneration NB s7b covered slides under Part 1

110 Case Law applicable to Gross Income Definitions Cases applicable Principle learnt in the case Amount CSARS v Brummeria If a taxpayer receives a benefit and that benefit has an ascertainable value that accrues to the taxpayer. The taxpayer must include that benefit in their Gross Income, generally at market value. (quid pro quo) CIR v Butcher Bros (Pty) Ltd The Commissioner failed to establish the amount that represented the value of leasehold improvements made by a lessee to a leasehold property. As no amount was established by Commissioner, therefore no amount was included in gross income of lessor. (Subsequent inclusion Para (h)- leasehold improvements of Gross income) 110

111 Case Law applicable to Gross Income Definitions Cases applicable Principle learnt in the case Amount CIR v Lategan The term amount does not only include money but also value of every form of property earned by taxpayer, whether corporeal or incorporeal, which has a monetary value. Lace Properties Mines Ltd v CIR The general principle is that, if cash not received, the market value of such asset(as valued on the date of receipt or accrual) should be included in gross income 111

112 Case Law applicable to Gross Income Definitions Cases applicable Principle learnt in the case received by Geldenhuys v CIR The court held that for an amount to be received by taxpayer, it should be received by him for his own benefit and on his behalf. MP Finance Group CC (In Liquidation) v CSARS (2007) Pyott Ltd v CIR (1944) and Brookes Lemos Ltd v CIR If a taxpayer intends to retain amounts received for their own benefit, these amounts will then constitute their gross income. Deposits should be kept in a separate trust account and not utilised for the general purposes of the business, then they would not constitute gross income and would not be subjected to tax. 112

113 Case Law applicable to Gross Income Definitions Cases applicable Principle learnt in the case accrued to CIR v People's Stores (Walvis Bay) Pty Ltd CIR v Witwatersrand Association of Racing Clubs Ochberg v CIR or Mooi v SIR Accrued to means Entitled to the amount, even if the amount is only due and payable in the following year of assessment it will form part of gross income. The fact that it is throughout contemplated that no portion of the profits would remain with the taxpayer and that there was a moral obligation to hand over the proceeds to the charities does not destroy the beneficial character of the receipt of those proceeds by the taxpayer. Taxpayer should be unconditionally to the amount, to be deemed to be accrued to. 113

114 Income v capital Remember Gross Income excludes receipts of capital in nature. Therefore we need to determine by what they mean when they say capital in nature. Section 82 of the Income Tax Act, Section 102 of the Tax Administration Act states the burden of proof that an amount is capital in nature rests with the taxpayer Change NB!!!! Note: Intention of the taxpayer should always be considered when determining if an amount is capital in nature 114

115 Case Law applicable to Income v Capital Definitions Cases applicable Principle learnt in the case Intention CIR v Richmond Decision to sell an asset does not mean change in intention. scheme of profitmaking mixed or dual intention COT Southern Rhodesia v Levy CIR v Pick n Pay Employee share purchase trust CIR v Stott CIR v Nel If taxpayer has mixed intentions look at the main or dominant purpose of which asset was acquired. The trust had no intention of carrying on business in shares but operated primarily as a conduit for the acquisition of shares by employees. Look at the primary intention, subdivision of plots could be to realise the asset to the best advantage. If something was purchased for keeps and an unusual or unexpected event happens, does not necessitate change in intention 115

116 Case Law applicable to Income v Capital Definitions Cases applicable Principle learnt in the case change in intention nature of the asset Damages and compensati on CIR v Nussbaum Natal Estates Ltd v SIR CIR v Visser CIR v George Forrest Timber Fourie Beleggings v CSARS ZASCA 37 (31 March 2009) Scheme of profit making, change intention. Look at the history and activities of the taxpayer, to see if intention is capital in nature. Determine if something more has been done to proof that the intention has changed to revenue in nature. Income is what capital produces, the fruit tree principle. Indicates the fixed v floating principle. If they are to fill a whole in profits then they are revenue in nature. But if they are to fill a whole in capital assets then they are capital in nature. 116

117 Case Law applicable to GDF Definitions Cases applicable Principle learnt in the case Carrying on trade Production of income Burgess v CIR Port Elizabeth Electric Tramway Co Ltd v CIR Joffe & Co (Pty) Ltd v CIR C:SARS v BP South Africa (Pty) Ltd (2006) BP South Africa (Pty) Ltd v C:SARS (2007) Trade should be given wide meaning and motive for trade is irrelevant. Expenditure and income must be closely related Expenditure must be necessary concomitant of the business operations. Loan incurred to continue income producing activities is deductible. Royalties can be deductible under the general deduction formula. 117

118 Case Law applicable to GDF Definitions Cases applicable Principle learnt in the case Actually incurred Edgars Stores Ltd v CIR Only expenditure you have unconditional legal obligation can you claim deduction. Nasionale Pers BPK v KBI Provision for bonuses is not deductible, not yet incurred. CIR v Golden Dumps (Pty) Ltd Expenditure can only be regarded as incurred once a court case has been resolved. C:SARS v Labat An allotment or issue of shares does not involve a shift of assets of the company even though it might, but not necessarily, dilute or reduce the value of the shares in the hands of the existing shareholders and that it can therefore not qualify as an expenditure 118

119 Case Law applicable to GDF Definitions Cases applicable Principle learnt in the case Not of a capital nature New State Areas Ltd v CIR Rand Mines (Mining & Services) Ltd v CIR If expenditure is incurred to create permanent asset is capital in nature Expenditure creates an enduring benefit and it adds to the income earning structure of taxpayer, it is capital in nature. 119

120 Trading Stock (Section 22) Section 22(2): Opening stock deduction: Lower of Cost and Market Value. Section 22(1): Closing stock addition: Lower of Cost and Market Value. Section 22(8): Recoupments: At Cost: If taken for private or domestic use or consumption OR donated to a PBO, or At market value in any other case. Section 23F(1) anti-avoidance provision: Stock which has been given a s11(a) deduction, but which is not on hand at year end will not be included in the s22(1) closing stock addition, hence, there will be a deemed addition of the s11(a) amount in gross income per Section 23F. Section 23F(2): Where the full amount will not accrue, the amount by which the s11(a) deduction exceeds the amount received will be disallowed and carried forward to the next year of assessment.

121 Trading Stock (Section 22) Acquisition for no consideration: Deemed acquisition at market value (s22(4)). Practice deduction of market value. Will be included in s22(1) closing stock addition at market value if not disposed of. Shares held as trading stock are always at cost, no write-down. If the taxpayer is a share-dealer, then the shares will be his/her trading stock and section 22 will apply. Consider Section 9C. Qualifying share proceeds will be capital in nature. Else, if not held for at least 3 years, then revenue in nature.

122 ICAs Instalment credit agreement= ICA and is defined in s1 of the VAT act (pg 1099 silke). Instalment credit agreement corporeal movable goods / machinery or plant movable or immovable: Suspensive sale par a - stated or determinable sum of a stated or determinable future date or in whole or in part in instalments over a period in the future - Sum includes finance charges stipulated in the agreement - Aggregate of amounts payable exceeds cash value of supply - Purchaser conditional owner seller can take back if P fails to comply with any terms of the agreement

123 ICAs Financial lease- par b - stated or determinable sum of a stated or determinable future date or in whole or in part in instalments over a period in the future - Sum includes finance charges stipulated in the lease - Aggregate of amounts payable and residual value on termination of lease (if any) exceeds cash value of supply - Lessee entitled to use for a period of at least 12 months - Lessee accepts full risk but no ownership (destruction/loss/insurance/maintenance /repairs)

124 ICAs The VAT consequences of both the ICA as defined in par a and par b are the same. s8(11) deems the supply of the use or the right to use to an asset under an ICA to be a supply. s9(3)(c) determines the time of supply to be the earlier of the delivery of goods or the payment of consideration. S10(6) determines the value of supply to be the cash value.

125 ICAs Cash value is defined in s1 of the VAT act Seller/lessor banker/financier cost including cost of erection /construction /assembly /installation include VAT (excl. interest / finance charges) Seller/lessor dealer price : cost normally sold for cash including cost of erection /construction /assembly /installation include VAT (excl. interest / finance charges)

126 Income Tax and ICAs ICA- par a (sale) - buyer ICA- par b (lease) - lessee s24j interest No s24j interest (unless s23g sale and leaseback agreement) Claim certain capital allowances (s11(e), s12c, s12b and s12e) Payments made in terms of arrangement are not deductible o The input VAT claimable must be excluded from the cost of the asset (s23c of the ITA) Cannot claim capital allowances Lease payments are deductible o The input VAT claimable by the lessee shall be excluded from each rental payment made by him in the same ratio as such rental payment bears to the sum of all rental payments in connection to the lease (s23c of the ITA). Formula -Input VAT claimable X current payments/ total payments

127 Income Tax and ICAs ICA- par a (sale) - seller CGT consequences and possible recoupment ICA- par b (lease) - lessor No CGT consequences Cannot claim capital allowances Can claim capital allowances Instalments received each month are not taxed. The cash value (excluding VAT) of the sale will form the proceeds on sale Rental received gross income s24j interest No s24j interest (unless s23g- sale and leaseback agreement) VAT is excluded from the proceeds amount VAT is excluded from the rentals received (s23c)

128 Rental agreements and VAT Rental agreement is defined in s1 of the VAT act. Rental agreement (s 1) Agreement for letting of goods (other than per instalment credit agreement) s8(11) deems a rental agreement to be a supply s9(3)(a) determines the time of the supply to be the earlier of the payment and when the rental becomes due and payable. S10(3) the consideration paid for the rental.

129 Income tax and rental agreement lessor lessee Rental income- gross income Rental payments are deductible Claim the capital allowances (see requirements of relevant section) Remove the output VAT from rental received- s23c No s24j interest (unless s23g sale and leaseback agreement) Cannot claim capital allowances Remove the input VAT from the rental paid s23c No s24j interest (unless s23g sale and leaseback agreement)

130 Lease premium Lessor Lessee Special inclusion in the gross income (para (g) definition.) section 11(f) deduction - over the lease term (limited to 25 years), -apportioned for months the leased asset is used in production of income

131 Leasehold improvements Lessor Lessee Special inclusion in Gross income (para (h) of the definition). Special s 11(h) allowance: - Cost less PV of improvements over the s11(g) period at 6% interest * If the Commissioner deems necessary Section 11(g) deduction on the contracted costs of improvements - over the lease term (limited to 25 years) - Lease term calculated from date of completion - Apportion for months the asset is used in production of income If actual costs exceed contracted costs: - S 13(1) allowance on the excess if the lessee uses the leased asset in the process of manufacture - No s 13quin allowance (do not own the property).

132 Used in Manufacture Section 13 Used for Purpose of Trade Section 13quin Building Residential Buildings Section 13sex Purchase of assets Low Cost Residential Housing Loans Consider Small Business Corporation Section 13sept S12E Other Depreciable Assets Used in Process of Manufacture Used for Purpose of Trade Section 12C Section 11(e) Used for Renewable Energy Purposes Section 12B

133 Moveable manufacturing assets s12c Machinery & Plant Used directly in the process of manufacture By the taxpayer or lessee 2 nd Hand: 20:20:20:20:20 New & Unused: 40:20:20:20 Not available to the lessor if the asset is used by the lessee Allowance is attached to legal ownership

134 Moveable manufacturing assets s12c Allowance is based on the lower of: Cost Market Value What happens if there is VAT included? Includes: Installation Moving Foundation Only applicable if brought into use for the first time Not apportioned for time

135 Moveable assets s11(e) Wear & Tear allowance for moveable assets used for the purpose of trade. Written off over a straight line basis Interpretation Note 47 Apportioned for time The default allowance for moveable property if other provisions are not applicable

136 Moveable assets s11(e) Allowance is based on the market value However, if a cost is given then the cost is the best indication of a market value. Only use market value if a cost has not been determined If an asset is used partly for trade purposes, the allowance must be apportioned to the extent of trade. Small items Interpretation Note 47 (4.3.5) Cost of Asset less than R7000 Full write down allowed in the year of purchase Small item must function on its own must not be part of a set.

137 Small Business Corporations s12e Small Business is defined as: (All requirements must be met) (Pty) Ltd, CC or co-operative All shareholders are natural persons Gross income is not greater than R20 million Not a personal service provider Shareholders do not hold any other interest in another company subject to exemptions 20% of total receipts is not derived from passive income

138 Small Business Corporations s12e Manufacturing Plant New and unused By the taxpayer after 01/04/ % allowance Non-Manufacturing Plant Elect 50:30:20; or s 11(e) Small items Allowance based on the lower of: Cost; or Market Value

139 Buildings used for manufacture s13 S 13(1) provides for an annual allowance of 5% on manufacturing buildings This is an allowance based on the cost of buildings used in the Process of manufacture or Building used for research and development (s11d)

140 Buildings used for manufacture s13 Capital allowance on any new and unused building or any new and unused improvements to buildings Erected and used wholly or mainly (>50%) used in the process of manufacture or similar process. Allowance is granted on the COST of the BUILDING only Less Leasehold improvements in terms of s11(g) If paid a lump sum payment for Land & Buildings together, need to find a reasonable basis of apportionment to isolate the cost of the buildings. Allowance is subject to a recoupment

141 Buildings used for manufacture s13 There are two instances in which purchased buildings qualify for s 13 allowance Used buildings s 13(1)(d) Where the building is purchased from a person or entity which is entitled to the allowance in terms of s 13 and the building is used by the taxpayer in the process of manufacture If the previous owner was not entitled to an allowance the new owner is not entitled to an allowance The allowance is based on the cost to the purchaser and not on the original cost to the purchaser New Buildings s 13(1)(dA) Where the purchased building is new and unused, the taxpayer may claim a s13 allowance Therefore: If purchased, only claim s13 if: The building is new and unused; or If the seller previously claimed a s13 allowance

142 Buildings used for manufacture s13 S13(3) deferral recoupment, The recoupment as calculated is deducted from the cost of the replacement building. Deduction on replacement asset: (Cost of new - recoupment of old) X applicable % Deferral available for recoupment only, not on any capital gain (taxed immediately).

143 5% allowance New & unused Immoveable commercial Propertys13 quin Owned and used wholly or mainly in the production of income of the taxpayer Construction commenced post 1 April 2007 Allowance is based on the lower of: Cost; or Market value Not apportioned for time

144 Immoveable commercial Property s13 quin If purchased building/improvement, then cost is deemed: 55% of purchase price of building 30% of purchase price of improvement

145 Immoveable residential Property s13 sex 5% allowance 5 or more residential units New & unused Used for trade situated in South Africa Construction commenced post 21/10/2008 Not Apportioned for time Allowance is based on the lower of: Cost; or Market Value

146 Immoveable residential Property s13 sex If units meet the definition of low cost housing in terms of s 1 Additional 5% allowance If purchased building/improvement, then cost is deemed: 55% of purchase price of building 30% of purchase price of improvement

147 Learnership allowances s12h s 11(a) deduction for expenditure actually incurred R annual allowance (apportioned for time) from commencement date On completion: R x no. of completed 12 months, Provided: The learnership contract is not less than 2 years R if the employee is disabled

148 Intellectual Property Intellectual Property s 11(gB) Registration, extension, renewal, etc Deduction on total expense incurred Intellectual Property s 11(gC) - Acquired Brought into use for the first time Excludes trademarks IP > % Design 5% Other <= %

149 Research & Development s11d Revenue in nature 100% allowance Additional 50% allowance if approved by Department of Science & Technology Capital in nature No special allowance Use standard allowances s 11(e), s 12C, s 13(1)

150 Recoupment s8(4)(a) Recoup previous allowances claimed when dispose of a capital asset Excludes: s 11D & s 13ter Special inclusion in Gross Income: paragraph (n) Recoupment = Selling Price (limited to cost) - Tax Value Tax Value = Cost All allowances

151 Recoupment s8(4)(k) Deemed to be sold at Market Value if asset was: Donated Sold to connected person Dividend in specie Recoupment Market Value (Limited to Cost) Tax Value