FAQ - 25 October
25 October 2013
Posted by: Author: SAIT Technical
Author: SAIT Technical
1. Deductibility of medical expenses of disabled child
If a doctor signs the ITR-DD form on a certain date, does that mean that medical expenses for a child with a disability may only be claimed after that date?
The form ITR-DD serves as a confirmation of a disability and you will note on the form that it is required that the medical practitioner who completes the form is requested to enter the date from which the taxpayer first met the requirements of s 18(3).
"disability” means a moderate to severe limitation of a person’s 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.
Therefore, firstly the prognosis has, or will last for more than a year and secondly, a diagnosis must be made by a registered medical practitioner in a manner as prescribed by SARS (ITR-DD).
My understanding is that the date on which the registered medical practitioner first made the diagnosis, and determined from that date that the prognosis will or has lasted for more than a year will be the effective date provided that this is confirmed as per form ITR-DD. It is therefore not the date on which the form ITR-DD is completed.
2. Deemed dividends during 1960
An interest free loan made by
company to connected person during 1960. SARS assessed grantor of loan for
deemed dividend. Does deemed dividends apply to interest free loans made
to connected person during 1960? When was the concept of "deemed
dividend" introduced? Does deemed dividends on interest free loans apply
to loans granted during 1960? Applicable section is section 64 (c) (2)
(g) - act 58 of 1962.
Section 64C was introduced into the Income Tax Act from 17 March 1993 - at that time section 64C did not refer to deemed dividends on loans to shareholders. Section 64C(2)(g) was introduced into the Act by by s. 59 (1) (b) of Act No. 45 of 2003. The transitional provisions to this section states the following: "Subsection (1) shall come into operation on the date of promulgation of this Act and shall apply in respect of any cash or asset distributed, any obligation relieved, any debt settled, any amount applied, any adjustment or any loan or advance granted on or after that date." (emphasis added)
It is therefore submitted that section 64C(2)(g) would not apply to a loan that was advanced in 1960.
Section 64E(4) (dividends tax deemed dividend provision) is deemed to have come into operation on 1 April 2012. This provision however deems the following to be a dividend: "Where, during any year of assessment, any amount is owing to a company...". It is submitted that this deemed dividend provision is not triggered by the grant date but rather by the fact that the loan remains outstanding. Section 64E(4) could therefore apply to the loan advanced in 1960.
3. Business sold as going concern, valuation of assets
My clients assets include equipment that was purchased by her from a person who sold the business to her as a going concern. The price paid was R90000.00, which according to my client was for equipment in the beauty salon that was purchased. Unfortunately my client does not have any documentation to prove that the business was sold to her ,as the original owner has emigrated. Money was exchanged on the basis thet my my client worked for the previous owner and that there was mutual trust between them. My dilemma is that for the year ended 28/2/2013 i can record the asset at its cost of R90000.00.(less depreciation-if that will be allowed). Going forward ,will i be able to claim depreciation and declare these assets at Net Book Value?
Paragraph (vii) of the proviso to section 11(e) provides that when the value of an asset must be determined having regard to its cost, the cost would be the cost which in the opinion of the Commissioner a person would, if he or she had acquired such an asset in terms of a cash transaction concluded at arm’s length on the date on which the transaction was in fact concluded, have incurred on the direct cost of the acquisition of the asset, including the direct cost of installation or erection thereof. This cost is also known as the market value of the asset.
The onus to prove that a valuation is correct is on the taxpayer in terms of s 102(1)(e). I suggest that you get an independent valuation of the equipment as from what I understand your client has no proof that the assets where acquired for the sum of R 90,000. This should help to substantiate your claim in the event that SARS requires proof.
4. SARS refused to pay refund to taxpayer due to her providing her husband's bank details on an account which she has full authority with the bank.
Taxpayer's 2013 return was assessed. R 17,000 refund due. No audit done. Refund was not paid out after 10 days. On enquiry to SARS, was informed that bank details had changed. Upon our provision of the bank details which we had, which matched that on the ITR12 for 2013 and for 2012 (for which the refund was paid out without any issues), the consultant confirmed that all was the same on their system.
However, it still stated that the bank details had changed. The taxpayer had to go in to sort this out. As the taxpayer could not get off work, her husband went in with proof of banking details, certified copies of their ID's, proof of address & affidavit signed by his wife giving him authority to attend to this. Consultant confirmed that all was in order and the wife had to come in personally to sign this off. Later that same day husband and wife returned to SARS, and they were told that the paperwork was no longer in order, and that the only solution is that she open a separate bank account for herself. They have been using this bank account for the entire time that they have been married (over 30 years) and been living at the same address for over 20 years. Previous refunds have not been a problem. How can we sort this out without her having to open the 2nd bank account, which will incur additional bank charges?
"JOINT BANK ACCOUNTS
Where two taxpayers hold a joint bank account, both taxpayers will be required to go to a SARS branch in person so that both parties’ details can be confirmed before the change to banking details will be accepted.
A joint bank account is an account that is in the name of two taxpayers. This means that both taxpayers are equal members of the account.”
The guide suggests contrary to the relevant SARS branch. I suggest that your clients go to their nearest branch together with all the required documents to update their banking details once again and if once again denied, they should present the guide to the relevant SARS official.