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Summary - Taxation of business activities and Individuals (Tax3761)
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Value Added Tax:General:
1. If the taxpayer can claim VAT then cost price excludes VAT
2. If taxpayer can’t claim then include VAT
3. Market value = Inclusive of VAT reduce by actual input not 14/114
4. VAT exemption takes preference over zero rating
5. Input VAT is on purchases (outgoing money)
6. Output VAT is on sales (Incoming money)
Registration For VAT:
Compulsory:
Voluntary:
1. Taxable supplies more then R 1 000 000
1. Taxable supplies more than R50 000 and less
2. Prior 12 month period from the end of the
than R 1 000 000
month
2. During prior or next 12 month period
3. Next 12 month period from the beginning
of the month
“Supply” excludes VAT
4. Foreign electronic services > R50 000
Accounting Basis:
Invoice Basis: Earlier of invoice and payment date. Automatic on any supply more than R100 000
Payments Basis: Account for VAT on payment only if:
1. Association is not for gain
2. Public authority/ municipality
3. Foreign exchange service provider
4. Person is voluntarily registered and taxable supplies are < 50 000
5. Natural person and taxable supplies < 2,5 million in 12 months
Time and Value of Supply:
Time: Earlier of date invoice is issued and date payment is received
Value: Consideration = money = amount of money
Consideration = not money = open market value at time of supply including VAT
VAT Levied:
1. S7(1)(a): Supply of goods/services:
Output VAT at 14% or 0% unless exempt
2. S7(1)(b): Importation of goods:
Non BLNS: (Customs + 10% customs duty value + customs duty value) x 14%
BLNS: (Customs duty value x14%)
In Bond Supply: Vat is levied at the greater of consideration for in bond supply x 14%
And [Customs duty value + 10% Customs duty value + Customs duty] x 14%
(Input Vat)
3. S7(1)(c): Importation of services:
Value of supply is the greater of consideration for supply and open market value
May only be claimed on non taxable supplies only
Page 1
,Zero Rated Supplies:
1. Exported goods:
• Direct Export ( 0%): • Indirect Export (14%):
- Movable goods - Second hand goods where notional
- Consigned/delivered in export input tax was claimed levy 14% VAT
country but only the difference may be
- And documentary proof claimed as a refund by the recipient
- Own baggage/transport/ cartage
contractor
- Second hand goods where notional input tax was previously claimed
- 90 days to get all documentation together or taxed at 14% from earlier of payment or
invoice date
2. Exported Services: 3. Sale of a Going Concern:
• Transportation Agree in writing that:
• Ancillary services to exported goods • Income earning activity at time of transfer
• Services rendered outside SA • All assets necessary for carrying on the
• Services rendered in SA to non residents enterprise are disposed of
• At time of contract agree that
4. Other Zero Rated Supplies: consideration is inclusive of VAT at 0%
• Supply of goods/services for agricultural/ • Both parties are registered VAT vendors
farming use
• Supply of gold coins (Kruger rands) issued
by the Reserve bank
• Certain basic foodstuffs
• Fuel levy goods (petrol and diesel and certain crude oil products - not aircraft fuel
Exempt Supplies:
1. Financial Services: 3. Residential Accommodation:
• Excluding: (VAT will be levied on:) • Excludes commercial accommodation:
- All fee based financial services - Lodging together with domestic
- Underwriting issue of a share/ goods/services
members interest - For an unbroken period of 28+ days
- Supply of a cheque book - Attract VAT on 60% of the value of
- Merchants discount supply
The zero rating of financial services when - If resides for less than 28 days =
performed outside SA or to a non resident supply x 14%
takes precedence over the exemption
2. Donated Goods and Services:
• Supply of goods/services not for gain
• Supply of goods made/ manufactured from material of which 80% of the value was donated
Notional Input Tax: Input VAT:
• Aquire second hand goods from person making non
taxable supplies • >95% for taxable supplies - claim 100%
• Input tax = 14/114 x lesser of cost and open market input tax
value • <95% apportion input tax
• Only claim notional inout tax to the extent that
payment has been made
• No documentary proof is required for purchases less
than R50
Page 2
,Deemed Supplies:
1. Fringe Benefits:
• Not a Company Car = Cash equivalent of
the fringe benefit x 14/114 x taxable supply 2. Indemnity Payments:
• Company Car • Payment is deemed to be
a) Motor car = 0.3% x determined consideration received for a supply
value of a service to the extent that it
b) Other vehicle = 0.6% x determined relates to a loss incurred in the
value course of carrying on an enterprise
c) Determined Value: Excluding VAT • Only applicable when:
and finance charges - payments are not related to
- 0.3%/0.6% x determined value taxable supplies
- Less costs paid by employee - Insurer pays out cash
(R85 per month in employee • Not applicable to:
bears all maintenance) - Payments received by the
- x 14/114 vendor that relates to:
- x Taxable use a) Total reinstatement
- x Months used
3. Cease Being A Vendor:
• Output tax is levied on unpaid balances
4. Supplies to a Branch or Main Business
owing to suppliers or creditors
Outside SA:
• Only on amounts less than 12 months old
• Vendor is deemed to make a supply of
• Only to the extent that output tax has not
goods and services in the course of
been raised
enterprise if:
• Value of deemed supply of goods and
a) Branch/ main business is
rights = Lesser of cost and open market
separately identified
value on date of cessation
b) And has an indépendant
• Relief: Deregister as taxable supplies are
accounting system
less then R1 mil or R 50 000. Must be paid
c) Supply is then zero rated
within 6 months
•
4. Payments Exceeding Consideration:
• Vendor receives payment exceeding consideration amount
• Output VAT must be levied on the excess amount
• Unless repaid within 4 months
• Time of supply - 4 month period
• If the excess is later refunded - claim as input tax
Denial Of Input Tax:
3. Motor Car:
1. Entertainment:
• Includes any minibus double cab light
• Provision of any food, beverages,
delivery vehicle
accommodation,entertainment
• And any other motor vehicle of any kind
• Of any kind
• Normally used on public roads
• By a vendor
• Has 3 or more wheels
• Directly/ indirectly
• Constructed/ converted wholly/ mainly for
• To anyone
the carriage of passengers
• In connection with an enterprise carried
on by him • Exceptions:
- Vehicles capable of carrying only 1
and more than 16 passengers
2. Club Subscriptions: - Vehicles with an unladen mass of
• Membership fee of sporting social 3500kg +
and recreational clubs
Page 3
, Income and Source:
Gross Income Definition:
1. Total Amount:
• Lategan: Amount does not only include cash, but any form of asset
• Butcher Bros: If asset does not have a monetary value it is not included in gross income
• CIR vs People Stores: ‘Amount’ includes any property with monetary value
2. In cash or otherwise
3. Received by/ accrued to
Received by: Accrued To:
• Geldenhuys vs CIR: Amount must be received • Lategan: Accrue to = entitled to =
by person for own benefit included in gross income in the year of
• Pyott Ltd: Deposits received placed in account assessment it is accrued
out of the taxpayers control is not included in • People Stores Wallis Bay: Confirms
gross income Lategan decision
• MP Finance Group vs SARS: Amount • Mooi vs SIR: Accrued to means
received with the intention of retaining them for unconditionally entitled to
own benefit notwithstanding that in law they are
immediately repayable - receipts
4. In favour of such person:
• CIR vs Witwatersrand Association of Racing Clubs
•
5. From a source within the republic
6. Not of a capital nature Objective Tests:
Subjective Tests: • Manner of acquisition
• CIR vs Stott: Intention is the most dominant test, mere • Manner of disposal
fact that asset is sold at a profit does not indicate a • Period held
change in intention • Continuity
• Natural Estates, Richmond Estates, Founders Hill: • Occupation of taxpayer
Something more is required to indicate a scheme of • No change in ownership
profit making • Legal nature of transaction
• Levy: Mixed intentions: find dominant intention • Nature of asset
• Nussbaum: If neither purpose is dominant - dual • Carrying on a trade: Scheme of
purpose is included in gross income profit making
7. In the year of assessment
Special Inclusions:
1. Annuities: Exemption when taxpayer purchases annuity. Normal annuities are included
2. Alimony/ Maintenance: Receiving spouse receives the exemption
3. Services: For rendering of services regardless of account paid into
4. Restraint of Trade: Receiving - Include in income, Paying - Deduction
5. Lease Premium: Receive- Include, Paying - Deduction at lower of x/ 25 and x/lease period
6. Leasehold Improvements: Fair value 100% inclusion for receiver, payment x/ remaining
useful life
7. Dividends: local and foreign
9. Fund Benefits
8. Compensation for Loss of Office:
10. Fringe Benefits
11. Subsidies and Grants Page 4
12. Recoupments
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