Technical FAQs:April 2013
05 May 2013
Posted by: Author: Dieter van der Walt
Source: Dieter van der Walt
Business Corporation - s 12E
Q: We have
a client, who, the shareholder of is a non-SA resident and is the only
shareholder of a SouthAfrican
company. He does hold shares in German companies but no other South African
companies. Does this business - if all other requirements are met - qualify for
small business rate of tax; with the shareholder then not holding any shares in
any other SA companies?
12E(4)(a)(ii) of the Act requires that none of the shareholders should hold any
shares or interest in the equity of any other company as defined in s
1 of the Act. The definition of company includes any association, corporation
company incorporated under the law of any other country other than the Republic.
Business Corporation (Definition of "Person")
Q: We would
like to get confirmation with regards to the requirement that a business has to
meet to be a small business corporation. One of the requirements is that the
member should be a natural person. Our query is whether the business will still
qualify as a SBC if the shareholder is a trust (as we have it that a trust is
also considered as a natural person).
definition of "person” in section 1 of the Income Tax Act includes a trust. The
term "natural person” is not defined in the Act, and one therefore has to look
at its ordinary meaning – living breathing person. A trust is therefore not a
of tax pending objection or appeal s 164 Tax Administration Act
Q: I would
like to find out what remedies my client has at his disposal. SARS removed a
sum of money directly from his bank account. SARS records indicate that they
had left a voice-mail on the client’s phone and then subsequently
removed amount directly from the account. We have corresponded directly with
the collections agent. The matter has been objected to on numerous occasions
with no luck. How should the matter be dealt with formally?
A: In terms
of section 164 of the Tax Administration Act an objection or appeal does not
defer or delay the payment of normal taxes unless a senior SARS official
suspends such payment pending the outcome of the objection or appeal.
164. Payment of tax pending objection or appeal.—(1) Unless a senior SARS
official otherwise directs in terms of subsection (3)—
obligation to pay tax; and
right of SARS to receive and recover tax, will not be suspended by an objection
or appeal or pending the decision of a court of law pursuant to an appeal under
(2) A taxpayer may request a senior SARS
official to suspend the payment of tax or a portion thereof due under an
assessment if the taxpayer intends to dispute or disputes the liability to pay
that tax under Chapter 9.
mentioned that you have objected on numerous occasions. Do you not agree that a
person can only object once to a specific assessment? For now I can only
suggest that you request in writing that the matter be brought before a senior
SARS official and that you request that the matter be deferred until the
objection or appeal has been finalised. At least this will stop SARS from
taking any further amounts from your client’s bank account.
of Motor car s 1 Income Tax Act
Q: We would
like to get confirmation that if our client purchases a "panel van” which will
be used as a delivery vehicle only, whether our client will be able to claim
the input VAT back on the transaction or not.
please find the definition of "motor car” as found in section 1 of the Value
Added Tax Act. Input VAT will be denied in the event that the ‘panel van” falls
within this definition.
"motor car” includes a motor car,
station wagon, minibus, double cab light delivery vehicle and any other motor
vehicle of a kind normally used on public roads, which has three or more wheels
and is constructed or converted wholly or mainly for the carriage of
passengers, but does not include—
capable of accommodating only one person or suitable for carrying more than 16 persons,
of an unladen mass of 3 500 kilograms or more; or
constructed for a special purpose other than the carriage of persons and having
no accommodation for carrying persons other than such as is incidental to that
viewing vehicles (other than sedans, station wagons, mini-buses or double cab
light delivery vehicles) constructed or permanently converted for the carriage
of seven or more passengers for game viewing in national parks, game reserves,
sanctuaries or safari areas and used exclusively for that purpose, other than
use which is merely incidental and subordinate to that use; or
( f ) vehicles, constructed as
or permanently converted into hearses for the transport of deceased persons and
used exclusively for that purpose;
Capital Gains Tax Primary residence exclusion par 47 of the 8th Schedule
to the Income Tax Act
property was bought for R 1 500 000 on 14 December 2009. Taxpayer (owner)
resided in the property from 14 December 2009 to 31 October 2010 (11 months).
rented out from 1 November 2010 to 31 October 2011 (12 months) and the rental
income and expenses declared as a local trade on the owner’s income tax return.
was unoccupied (to fix to sell) from 1 November 2011 to 17 January 2012 when
ownership was transferred to new owner.
selling price was R 1 825 000.
opinion is that the seller does not qualify for the full R 1 500 000 primary
residence exclusion but it must be apportioned as the seller only resided in
the property for 11 months, rented out for 12 months and vacant for just over 2
months (and he did not himself vacate the property to fix and sell as it was
rented out at that stage) out of the 26 months he owned the property.
taxpayer referred the matter to a SARS consultant who advised that the gain
must be disregarded as a primary residence exclusion.
disagree with the SARS advice.
uninterrupted rule in par 47 of the Eight Schedule to the Income Tax Act
requires that the taxpayers’ stay in the residence must have been
uninterrupted. The exception to the rule is when the primary residence was
offered for sale and the taxpayer vacated the property due to the acquisition
or intended acquisition of a new primary residence (par 48).
with your interpretation of the Act.
on Duty Free Shops ss 11(1)(m) of the VAT Act
Q: Can you
please explain to me how the vat system of a duty free shop works regarding
input tax and output tax( standard and zero rates).
A: In terms
of ss 11(1)(m) and (mA) of the Value added Tax Act, certain goods supplied to a
customs-controlled area enterprise (for example a duty free shop) or Industrial
Development Zone shall be zero-rated. Good supplied to a customs-controlled
area by a South African vendor in terms of a sale or credit sale agreement
shall in most instances be zero-rated as the supplies are effectively treated
as an export. The movement of goods by a vendor situated in a
customs-controlled area to a person in South Africa will be subject to VAT at
the standard rate in terms of s 7(1)(a). VAT would also not be levied on the
direct importation of goods into the customs-controlled area from an export
of the supplies will be regarded exports and VAT charged at a rate of zero, the
vendor may claim input VAT on expenses incurred in the furtherance of the
Expenses deductible from Commission income s 11(a) and s 23(m)
Q: When may
expenses be deducted from commission income and what expenses are included.
Also, may expenses be deducted from incentive income?
expense actually incurred in the production of the income is tax deductible
provided that it is not of a capital nature in terms of section 11(a) of the Income
Tax Act. The negative test on the other hand, section 23(m) of the Act however
prohibits expenditure in terms of section 11(a) of the Act in the event that
the taxpayer’s remuneration is not primarily (more than 50%) derived from
commission. The commission must be directly attributable from that person’s
sales or turnover attributable to that person. In other words, say for example
a sales manager is paid a profit share on sales made by his sales persons, then
that profit share will not qualify as commission for purposes of section 23(m).
Rental deductible s 11(a) and s 23(g)
Q: One of
my client’s primary residence’s is in one of his CC's. He rented it out while
he lived overseas and when he moved back to SA he had to pay accommodation for
4 months because the rental agreement was still valid, may we claim the
accommodation for the 4 months against the rental income?
expense does not relate to any form of trade i.e. the expense was not incurred
in the production of income and is of a capital nature – section 11(a) read
with section 23 (g) of the Income Tax Act.
Donations Tax s 55(3) of the Income Tax Act
Q: When is
a donation made or deemed to have been made for Donations tax purposes?
A: It is my
understanding that a donation (disposal of the property) will take
effect (or be deemed to
- On the date that all the legal formalities for a legal
donation have been complied with.
- An oral
donation takes effect on the date of delivery.
it is my understanding that the disposal will take place or be deemed to have
taken place on the date that the donation "takes effect” (s 55(3)) hence, this
will be the date when the property was disposed of for
purposes of Donations Tax.