100% satisfaction guarantee Immediately available after payment Both online and in PDF No strings attached
logo-home
Summary Taxation (BEL200) - Semester 1 R105,00   Add to cart

Summary

Summary Taxation (BEL200) - Semester 1

2 reviews
 73 views  7 purchases

This document contains a summary of the textbook: Silke: South African Income Tax as well as lecture notes. It encompasses Learning Area 1 - 3 which is the full curriculum for the 1st semester.

Preview 8 out of 60  pages

  • No
  • La 1 - 3: chapter 1 - 6, 12, 13
  • January 27, 2022
  • 60
  • 2021/2022
  • Summary
book image

Book Title:

Author(s):

  • Edition:
  • ISBN:
  • Edition:
All documents for this subject (7)

2  reviews

review-writer-avatar

By: bmw125iadventures • 1 year ago

review-writer-avatar

By: tyralouwrens • 8 months ago

avatar-seller
tanyah1
Taxation 200 – Semester 1


Contents
LA 1: Chapter 1 + 2: Tax in context ....................................................... 2
LA 2: Chapter 3: Gross Income ........................................................... 19
LA 2: Chapter 4: Specific Inclusions .................................................... 29
LA 2: Chapter 5: Exempt Income........................................................ 35
LA 3: Chapter 6: General deductions ................................................ 41
LA 3: Chapter 12: Special deductions and assessed losses ............48
LA 3: Chapter 13: Capital Allowances and recoupments .............. 52




1

,LA 1: Chapter 1 + 2: Tax in context

1. TAX SPECIALIST
Definition of  Compulsory with purpose to raise revenue for government
tax  where the revenue is intended for funding general
expenditure
 in the provision of public goods and services,
 to the shared benefit of the public as a whole
What our Constitution
country  Highest legal status
consists of  Supported by:
 Legislative branch: people working in courts
 Executive branch: government creates legislation/ approved
 Judicial branch: executing legislation

Legislative branch
 Fiscal policy and Monetary policy
 Consist of SA economy – Primary/ Secondary/ Tertiary
 All of the sectors flow into money – we want to earn income
– source of taxes

Executive branch
 National treasury designs tax legislation
 Approved by Minister of Finance and then executives
 To administrate legislation – SARS – will collect taxes on
behalf of government

Judicial branch
 Tax court – designed to hear tax cases
 Judges that are tax proficient


2. ROLEPLAYERS OF TAX




2

,3. HISTORY OF TAX
4000BC  Clay cones show people of Sumer were heavily taxed
 Means for Ancient Kings to provide safety/ justice/ welfare
3500BC  Tax in form of offerings/ voluntary gifts e.g., compulsory labour
 Egyptians taxed from slaves to agricultural goods
 Payments of grain at 20%
1750BC  Kings in Mesopotamia/ China introduced tax-farming
 State delegated its collection to cities which would delegate
this task to council of elders who would then delegate its power
to tax-farmers:
 prosperous businesspeople who collected taxes
 Payments of 25 – 50% of crop
1400BC  Pharaoh enslaved Israelites
 Israelites were freed/ lived without paying taxes for 400 years
 But gave up freedom for a king
500BC  Confucius developed guiding principles in China
 Only 10% of tax should be collected
200BC  Rosetta Stone inscription confirm amnesty to temples
30BC  Emperor Augustus: master tax strategist
 Negotiated collection of taxes with each provincial town
 New system decentralized collection of taxes
 Resulted in more taxes flowing into tax bureau
 Lower taxes – better living conditions
180AD  Greatest period of peace/ prosperity
 Marcus Aurelius canceled all taxes
 Decreased revenue of Rome
 His successor had to reinstate extreme taxation
600 – 900AD  Brought relief from taxation to who converted to Islam
 Income of Sultan in Spain diminished
 Royal revenues were collected for privilege of farming
 New towns were created where tax was collected
1200AD Champagne
 Fairs were held to increase revenue
 Rulers increased taxes to pay for warfare
 People lost livelihood/ property/ lives
 Magna Carta was an example of people’s rejection

England
 King John began transition from feudal  modern fiscal state
 Collection of taxes was unsuccessful due to resistance
 Magna Carta: King could not levy taxes without consent of
parliament
1700 –  Wars were greatest expense
1800AD  Finance minister, Turgot wanted to implement shifts in tax
assessments from poor to rich
 Thirteen colonies in British North America objected tax
 Tax-farming came to an end with French Revolution
 Sin tax was implemented

Adam Smith’s four points – a bad tax

3

,  requires a large bureaucracy for administration
 destroys funds needed for maintenance/ employment
 encourages evasion
 puts people through unnecessary examinations/ exposes them
to trouble/ vexation/ oppression

First income tax
 British levied tax on income in 1799
 Enough money to pay for/ win war against Napoleon
 Adams: income tax corrupts social order – people justify tax
evasion through illegal means
1900AD  first attempts at manipulating environmental behaviour through
tax policies
2000AD  Denmark was the first country in the world to implement a “fat
tax” on 1 October 2011 – repealed in 2012
 Sugar tax was implemented 2018
 Proposed at 2.29c per gram of sugar that equates to a 20% tax
incidence on 1; of soft drinks
 tax will be levied from June 1 2019 on greenhouse gases


5. PRINCIPLES OF GOOD TAX SYSTEM
Equity  Tax imposed according to taxable ability/ capacity
 Unfairness could impact taxpayers’ willingness to comply
 Equity is underpinned by:
 Ability to pay principle
 Benefit principle

Vertical Equity
 Taxpayer with greater economic capacity bears greater
burden of tax

Horizontal Equity
 Taxpayers with equal economic capacity bear equal tax
burden
Certainty  Timing/ amount of tax payments should be certain
 Uncertainty may impact economy of a country
 Legislative provisions/ procedures should be transparent/
consistent
Convenience  Tax should be imposed in a manner/ at a time that is
convenient for taxpayers- would increase compliance
Economic  Doesn’t influence person’s economic decision-making
Efficiency  E.g. if interest income is more taxed than dividend income –
taxpayers may rather invest in dividend-bearing investments
 Could encourage desired behaviour – reduced alcohol
consumption because of taxes levied on alcohol
Administrative  To not impose unreasonable administrative burden
Efficiency  Tax system should cost less to implement/ maintain than tax
revenue is able to generate


4

, Revenue authority perspective:
 Number of internal controls required
 Design of organisational structure
 Number of personnel required

Taxpayers’ perspective:
 Keeping supporting documents in prescribed format
 Frequency with which tax has to be submitted
 Hiring of tax practitioner
Flexibility  Accounts for changing economic circumstances
 Tax buoyancy:
 Measure if responsiveness of tax revenue to changes
Simplicity  Should be designed so that it is easy to understand/ apply


6.TYPES OF TAX
Normal/ Pre-payments
income tax 1. Employees tax/ PAYE – deducted from salary
2. Provisional tax – paid to SARA twice a year
Capital Gains  Liable when you dispose of an asset
tax  = proceeds (sales price) – Base cost (cost price)
 R40 000 exemption (deduct from capital gain)
 Inclusion rate
 Individual – 40%
 Companies – 80%

E.g., R300 000 – R160 000
= R140 000 – R40 000
= R100 000 x 40%
= R40 000
Withholding a) Remuneration by employers to employees
tax (ss 10(1)(i))  employer must withhold employees’ tax from remuneration
and pay it to SARS
 Prepayment of normal tax
 Deducted from normal tax payable in calculation of final
normal tax
 Amount subject to Employee Tax incentive Act 26 of 2013

b) Dividends by companies to beneficial owners
 Payable on amount of any dividend paid
 By resident/ non-resident company listed on recognized
stock exchange in SA
 Dividends tax is a final tax
 Final tax

c) Payments to non-residents
 By resident paying non-resident and paid over to SARS
 Tax liability is that of non-resident
 No withholding tax on service fees paid to non-resident
 Payments subject to withholding tax:

5

, 1. Non-resident sellers of immovable property -7.5/10/15%
Not final tax – reduces normal tax payable
2. Non-resident who receives royalties – 15%
Final tax
3. Interest received by non-resident – 15%
Final tax
4. Received by foreign entertainer/ sportsperson – 15%
Final tax
Turnover tax  For businesses of annual turnover of R1mil or less
(ss48-48C)  Calculated on taxable turnover of registered micro business
 Not on taxable income
Dividends tax  Can be considered withholding tax
(ss 64D – 64N)  Payable at 20% on amount
 Exceptions: headquarter/ oil-gas/ international shipping
companies
 Beneficial owner remains liable
 Dividend in specie: resident company remains liable
 Final tax – needn’t submit annual return of income if dividends
are only income received
Donations tax  To prevent avoidance of estate duty through gratuitous
(s54) distribution of wealth while resident is still alive
 Tax on gratuitous transfer of wealth – not income
 20% on cumulative value not exceeding R30mil
 25% on cumulative value exceeding R30mil
 Natural person exemption on R100 000 in tax year
 Company exemption on R10 0000 in tax year
Value-added  Value-Added Tax Act 89 of 1991
tax  15% on supply of goods/services by registered VAT vendor
 Quoted/ advertised prices deemed to include VAT
 Vendor may claim tax it has paid as input tax
 Indirect tax – total direct cost borne by final consumer
Transfer duty  Transfer Duty Act 40 of 1949
 Levied on cost price of fixed property
 0%/ 3%/ 6%/ 8%/ 11%/ 13%
 Wealth tax payable by purchase of property in SA
Estate Duty  Estate Duty Act 45 of 1955
 Levied on dutiable value of estate of deceased
 20% on value not exceeding R30mil
 25% on value exceeding R30mil
 Abatement of R3.5mil available against net value
 Deceases spouse’s unused abatement may be carried
forward to surviving spouse
 Estate/ beneficiaries liable for duty
Securities  Securities Transfer Tax 25 of 2007
transfer tax  0.25%
 Payable by purchaser on transfer of
 listed/ unlisted shares
 shares of foreign companies
 members’ interests in close corporation




6

,Customs/  Customs and Excise Act 91 of 1964
excise duties/  Customs duties on importation – protecting local market
levies  Excise duties/levies on luxury/ non-essential goods
Unemployment  Unemployment Contributions Act 4 of 2002
insurance  Provide relief to employees during short periods of
contributions unemployment
 Deducted from gross remuneration
 Employee and employer make 1% contribution
Skills  Skills Development Levy Act 9 of 1999
development  Paid by employers only
levies
Taxpayers  Natural persons
 Companies
 Trusts
 SBC and micro businesses
 Partnerships
 Not for profit organisations


7. ELEMENTS OF TAX SYSTEM
7.1 Politics
 What the government is doing – make decisions which impact tax impact
 Happening in Parliament with regards to tax legislation
 E.g., Government needed money in Covid times to sustain economy – diverted
income to health sector



7.2 Law
Definition The system of rules which a particular country or community
recognizes as regulating the actions of its members and which it
may enforce by the imposition of penalties.
Legislative 1. Issuing of Green Paper
process  Policy document intended for public discussion
 Sets out government department’s (National Treasury) view
 Public comments are considered
 Elects to adjust green paper

2. White paper
 Refined version of green paper
 Subjected to further discussions/ commentary

3. Draft money bill
 Prepared/ submitted to Minister of Finance
 Once approved - reviewed by State Law Advisors to ensure:
 It doesn’t contradict Constitution
 There are no technical errors



7

,  Once approved – minister of finance must present to National
Assembly/ National Council of Provinces
 Then published in Government Gazette
 Amendments made where required

4. Act of Parliament
Becomes binding on one of following dates:
 Act is published in Government Gazette
 Determined in accordance with Act
 Indicated in Government Gazette
Common law Audi alteram partem
 "let the other side be heard as well"
 no person should be judged without a fair hearing in which
each party is given the opportunity to respond to the evidence
against them

In pari materia
 statutes must be interpreted in light of each other since they
have a common purpose for comparable events or items

Casus Omissus
 a situation omitted from or not provided for by statute or
regulation and therefore governed by the common law

Tax Regulations (s107(1))
legislation:  Duties of all engaged in administration of Act
Interpretation  Limits of such persons
Act  Nature/ contents of accounts to be rendered by taxpayer
 Method of valuation of annuities/ fiduciary/ usufructuary/ other
limited interests in property
Double taxation agreements
 Has effect of law once published/ approved by Parliament
 Must be considered as it forms part of provision
 Conflicting – DTA takes preference over Act
Definitions
 If definition is in TAA, but not Act – definition in TAA will also
apply for purposes of Act
 If definition is in Act, but not TAA – definition in Act also applies
for purposes of TAA
 Inconsistencies between Act and TAA – Act prevails
Interpretation Act 33 of 1957
 Provisions only apply if Income Tax Act doesn’t define term/
ambiguities exist
 Definition in ITA takes precedence
 If not defined within primary legislation/ Interpretation Act –
dictionary may indicate meaning
 Meaning still uncertain/ incomplete – case law is examined
Interpretation notes
 Don’t form part of legislation
 Sets out interpretation of various provisions
 Serve as guidelines

8

The benefits of buying summaries with Stuvia:

Guaranteed quality through customer reviews

Guaranteed quality through customer reviews

Stuvia customers have reviewed more than 700,000 summaries. This how you know that you are buying the best documents.

Quick and easy check-out

Quick and easy check-out

You can quickly pay through EFT, credit card or Stuvia-credit for the summaries. There is no membership needed.

Focus on what matters

Focus on what matters

Your fellow students write the study notes themselves, which is why the documents are always reliable and up-to-date. This ensures you quickly get to the core!

Frequently asked questions

What do I get when I buy this document?

You get a PDF, available immediately after your purchase. The purchased document is accessible anytime, anywhere and indefinitely through your profile.

Satisfaction guarantee: how does it work?

Our satisfaction guarantee ensures that you always find a study document that suits you well. You fill out a form, and our customer service team takes care of the rest.

Who am I buying this summary from?

Stuvia is a marketplace, so you are not buying this document from us, but from seller tanyah1. Stuvia facilitates payment to the seller.

Will I be stuck with a subscription?

No, you only buy this summary for R105,00. You're not tied to anything after your purchase.

Can Stuvia be trusted?

4.6 stars on Google & Trustpilot (+1000 reviews)

80467 documents were sold in the last 30 days

Founded in 2010, the go-to place to buy summaries for 14 years now

Start selling
R105,00  7x  sold
  • (2)
  Buy now