FAQ - September 10
10 September 2013
Posted by: Author: SAIT Technical
Author: SAIT Technical
Question : Section 12B
I am dealing with a client who in
interested in purchasing a fairly large Photovoltaic (PV) Solar power
generation system.I need some clarity on
the Interpretation of Section 12 B, (H) (ii), which is where I am dealing
with them.Firstly , can any
enterprise that spends money on a system to supplement their electricity usage
apply for the 50/30/20 depreciation allowance as per (h).. generation of
electricity from.... solar energy. Or as per (h) ...for the purpose of his
or her trade ...
How does subsection
(2) relate to this and I am not sure what the intention of SARS is with regard
the supporting structure to be included?How does Leasing of
the Asset affect the eligibility of the Enterprise to claim the deduction
contemplated by 12B. I would appreciate
your input or perhaps to put me in touch with someone who is versed in the
Energy Saving aspect of Allowances and Deductions with SARS.
S 12B of the Income Tax Act (the Act), specifically section
12B(2), provides an accelerated capital allowance over a three year period, on
a 50/30/20 basis, for assets used in the generation of electricity from
sunlight, wind, hydro or biomass. A requirement of sub par (h) of this
section is that the asset must be brought into use for purpose of his trade. If
the taxpayer uses the electricity generated to supplement his existing
electricity for purposes of his trade, this requirement should be met. To qualify as a depreciable asset for
purposes of s 12B, the asset must have either be owned by the taxpayer, or
acquired by the taxpayer in terms of paragraph (a) of the definition of
an "instalment credit agreement” as defined in s 1 of the Value Added Tax Act
(this refers to an instalment purchase, as opposed to a lease).
in terms of this s of the Act will not be available to the taxpayer in the
event that of a lease agreement if the requirements of para (a) of the
definition of an "instalment credit agreement” are not met - in this
case, the lease payments may be deductible as incurred under section 11(a). Sub section (3) includes in the cost of the
assets; "…the direct cost of the installation or erection thereof…”. Any cost
of the installing or constructing the asset will therefore also qualify for the
section 12B allowances. THe proviso to section 12B(1) also makes provision for
an allowance in respect of the foundation or structure that the asset is
I have a client
who is not sure if the following transaction should be zero rated or not. They
develop educational software which they sell to schools. They also have a
monthly newsletter which is web based. A company in London who represents
Disney, are advertising on this newsletter for teachers positions available in
China. In essence – an overseas company are advertising for overseas positions
on our client’s web based newsletter. The charge that this SA company makes to
the London company, should it be zero rated?
think that firstly one has to consider as to the nature of the supply which
your client makes to the London company. "Goods” are defined as:
- Corporeal moveable things
- Fixed property
- Any real right in such thing or fixed
is also widely defined and includes the granting, cession or surrender of any right
or the making available of any facility or advantage. Ss 8 and 18(3) of the VAT
Act furthermore has certain deeming provisions, none of which would have any
bearing on the transaction described below.
the advertisement cannot be regarded "goods”, and is also not specifically
in this definition, one has to accept that the supply constitutes a
supply of "services” as advertising space (a facility) is made available.
terms of s 11(2)(l) of the Act, the supply of a service will be zero rated if
the services are directly supplied to that non-resident (as defined for VAT
purposes (please note this differs from income tax)). The zero-rating does not
apply if, amongst other, (1) the non-resident (or any other person to whom the
service is rendered) is in the Republic at the time the services are rendered
(refer section 11(2)(l)(iii) or (2) the service is directly connected to
movable property situated in the Republic at the time when the service is
rendered (refer section 11(2)(l)(ii)).
may be two problems in this case in applying the zero-rating. Firstly, it
appears as if the service (advertising space) is made available in a South
African newsletter (i.e. possibly movable incorporeal property in South
Africa). Case law in New Zealand however suggests that the advertising medium
may be a step removed from the service rendered (i.e. no longer directly in
connection with the medium/property) and would not necessarily result in the
service directly being in connection with movable property in South Africa. An
argument may also exist that the electronic newsletter does not constitute
'property' and that section 11(2)(l)(ii) should therefore not apply. Given the
uncertainty and interpretation involved in applying section 11(2)(l)(ii), it is
recommended that your client consider obtaining a tax opinion from a tax
practitioner in this regard.
is submitted that a foreigner who advertises in a local publication which is
read by persons in South Africa should not fall within section 11(2)(l)(iii) as
the benefit derived by these persons reading the advertisement is incidental to
the service supplied to the foreigner (refer Explanatory Memorandum on the
Taxation Laws Amendment Bill, 1998, p 37) (also refer Juta Commentary on the
My client is employed and his wife is unemployed. However,
the medical aid is in the name of the wife and the medical tax certificate is
obviously issued in the name of the wife. Can I deduct the medical deduction
from the husband’s taxable income?
qualifying expenditure incurred and paid in respect of yourself and certain
other persons may be taken into account in the determination of the medical
allowance. These other persons are your spouse, your children and your
dependants, as described.
term "spouse”, defined in section 1 means –
in relation to any person, a person who is the partner of such
(a) in a marriage or customary union recognised in terms of the
laws of the Republic;
(b) in a union recognised as a marriage in accordance with the
tenets of any religion; or
(c) in a same-sex or heterosexual union which the Commissioner
is satisfied is intended to be permanent.
clients wife would therefore qualify as his spouse. The deduction is only claimed in respect of expenditure paid and
is claimable by the person who
pays the expense. S 18 of the Income Tax Act.
I have a client whose son has severe Epilepsy.
the child is in a special school
with only 8 kids in a class because he needs special attention. He also
needs to be watched 24/7 because he can have a seizure anytime.
He is on Epilim as chronic medication.
Does Epilepsy count as a
disability/ impairment medical deduction on the IT12. The
specialist who treats the patient does not want to complete the prescribed
Sars form as he says the child is not disabled, he only suffers from
A disability, as defined in section 18(3) means
a moderate to severe limitation of a persons ability to function or perform daily
activities as a result of a physical, sensory, communication, intellectual or
mental impairment, if the limitation
(a) has lasted or has a
prognosis of lasting more than a year; and
(b) is diagnosed by a duly registered medical practitioner in accordance with
criteria prescribed by the Commissioner.
A physical disability can be described as a
condition or dysfunction, of a permanent nature, which requires the person who
has such a condition or dysfunction to use special equipment or receive medical
treatment in order to perform general life functions. A temporary condition or
illness that can be treated with, for example, medication or exercise is not
regarded as a physical disability. It is not a requirement that the condition result from physical injury. Medical conditions such as diabetes can
also result in a physical disability.
Physical disabilities include
- bad eyesight;
- hearing problems;
- paralysis of a portion of the body;
- multiple sclerosis;
- asthma; and
- brain dysfunctions such
as dyslexia, hyperactivity or lack of concentration.
The term physical impairment is not defined in
the Act but in the context of s 18(1)(d) it has been interpreted as a
disability that is less restraining than a disability as defined. In order for
a person to be disabled, as defined in section 18(3), the person's ability to function or
perform daily activities must have been impaired moderately to severely by the
physical, sensory, communication, intellectual or mental impairment. For a
person to be viewed as disabled for tax purposes, a prognosis by a medical
practitioner is required (ITR-DD form). An impairment would therefore exist
where a persons ability to perform daily activities suffers a restriction which
is less than moderate or severe. In order to qualify for the deduction in
section 18(1)(d), the expenditure must further be necessarily incurred in
consequence of this impairment that affects the person's ability to function.
A qualified medical doctor
would be in the best position to determine whether the child does in fact
suffer from a "disability" vs a "physical impairment". If
not a "disability", the condition would rather be a
"physical impairment". It might well be the case that the child
suffers a "disability” rather than a "physical impairment” and you might once
again want to discuss with your doctor.