Q: It seems to be
the current practice to amortise goodwill. I cannot find anything to suggest
this is a requirement of the tax act. Can you please advise whether this is a
A: We accept that
you refer to the IFRS treatment when you refer to amortising goodwill.
From a normal tax point of view goodwill is not a
depreciable asset – refer to section 1(1) of the Income tax Act – as no section
specifically provide for a deduction or allowance in respect of the cost of
goodwill. It is generally accepted that
goodwill is capital in nature and therefore a deduction in terms of section
11(a) would also not be possible.
The only deductions allowed for immaterial property are the
ones related to intellectual property, such as patents etc. It doesn’t include goodwill.
Disclaimer: Nothing in this query and answer should be construed as
constituting tax advice or a tax opinion. An expert should be consulted for
advice based on the facts and circumstances of each transaction/case. Even
though great care has been taken to ensure the accuracy of the answer, SAIT do
not accept any responsibility for consequences of decisions taken based on this
query and answer. It remains your own responsibility to consult the relevant
primary resources when taking a decision.
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