Summary of International Accounting Standard 12 (IAS 12) - Income Taxes
IAS 12, Income Taxes, provides guidelines for accounting for income taxes in financial statements. It sets out the recognition, measurement, presentation, and disclosure requirements for income taxes. This summary aims to pr...
Total amount - Butcher Bros: Onus is on the commissioner (SARS) to determine the amount.
in cash or otherwise - Lategan: An amount does not include money but also the value of every form of property; tangible or intangible,
earned by the taxpayer during YOA
received by, accrued Received by
to or in favour of a - Geldenhuys: An amount is received by a taxpayer if it is received on his own behalf & for owns his benefit.
person - Delegoa Bay Cigarette Co: To decide if an amount is GI or not no consideration is given to the fact that the
activity involved is illegal, immoral or ultra vires
- MP Finance: Receipts from illegal activities are included in GI if the taxpayer's intention is to use the receipts for
his own benefit.
- Pyott: Deposits received are included in gross income except if kept in a separate account established specifically
for deposit
Accrued to
- Peoples stores: Accrued means to become entitled to payment even if the amount is due & payable.
- Mooi : Accrued means to become unconditionally entitled to the payment
during the year of - An amount is subject to Tax in the YOA it is received or accrued by the taxpayer.
assessment
from anywhere in - Residents are taxed on worldwide receipts.
case of a resident
From a SA source in - Lever Bros: what is the originating course? (Activity leading to the receipt) and where is the originating course
case of a Non- located? (location the activity took place)
resident
other than receipts - Only receipts of a non-capital nature constitute gross income. Exception: Specific inclusions and taxable capital
or accrual of a gain.
capital nature - In deciding whether a receipt (accrual) is of income or capital nature the intention of the taxpayer should be
investigated.
Intention
- Pick a pay: where the taxpayer participates in a profit-making scheme the proceeds are revenue in nature and
constitute gross income.
Mixed intentions
- Stott: The intention of the taxpayer at the date of acquisition is important unless the intention changed prior to
sale. Every taxpayer is entitled to realise an asset to his best advantage without it being considered a change in
intention.
Change in intention
- Natal estates: The taxpayer changed his intention from holding an asset as a capital asset to embark on a profit-
making scheme. “crossed the Rubicon”
Special Inclusions
Par(a): Annuities ▪ Ordinary annuities: Full amount
▪ Living annuities: Purchased by the RAF for the member after employment; 2/3 of member’s value. Exempt
s10(c)
▪ Purchased annuities: Purchased from the insurer; full amount. Exempt capital amount s10A
Par(b): Alimony or ▪ Alimony: Under any judicial order, divorce order or written agreement of separation
maintenance ▪ maintenance: Under a maintenance order for child
allowance ▪ Recipient = GI and exempt s10(1)(u). Payer: No deduction
Par(c): Services ▪ Employment or voluntary awards other than s8(1) travel allowance
rendered
Par(cA): Restraint of ▪ Imposed on a labour broker without exception certificate, personal service provider, personal service
trade payments company/trust
▪
Par(cB): Restraint of ▪ Imposed on any natural person by virtue of employment
trade payments
, Par(d) Lumpsum ▪ In respect of relinquishment, termination, loss, repudiation, cancellation or variation of employment.
from employer
Par(e): Lumpsum ▪ Retirement fund Lumpsum benefit or withdrawal benefit
from retirement
fund
Par(f) commutation ▪ Accumulated leave pay, breach of contract by employer etc.
of amounts due
under a contract of
employment
Par(g) Lease ▪ lessor: include GI in full exc. VAT
premiums
Par(gA) Royalties ▪ For imparting any scientific, technical, industrial or commercial information or knowledge used or applied in SA
Par(h) Lease ▪ If lessee was obliged to effect improvements & included @ amount stated in the contract.
improvements
Par(jA) Trading stock ▪ Applied for a purpose other than disposal in the ordinary course of a taxpayer's trade
applied in ordinary ▪ Include in GI if asset is manufactured, produced, constructed or assembled by taxpayer
activities
Par(k) dividends ▪ SA and foreign dividends
Par(m) Receipts ▪ Employer = policyholder & Policy relates to death, disability or severe illness of an employee or director
from Key man
insurance policies
Par(n) Recoupments ▪ s8(4) recoupments
▪ Omnia fertilizer: To recoup means to return to the taxpayer’s pocket something which had been claimed as a
deduction
▪
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