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FAQ - 11 May 2016

11 May 2016   (0 Comments)
Posted by: Author: SAIT Technical
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Author: SAIT Technical

1. Can a travel allowance be claimed on a car given as a gift?

Q: A car valued at R100 000 was given to me and I use it for business travel. What cost value should I use for the 2014 or 2015 tax year?

A: For purposes of the guidance that follows we accept that the ‘claim’ that you mention refers to the determination of the portion of the allowance deemed to have been actually expended on travelling on business.  We also accept that with ‘was given the car’ you mean you became the owner thereof. 

If you want to use the actual data (cost) in doing so, and in terms of section 8(1)(b)(iiiA) of the Income Tax Act, "the wear and tear must be determined over a period of seven years from the date of original acquisition and the cost of the vehicle must be limited” (not applicable in this instance).  The Act refers to the ‘cost of the vehicle’ and doesn’t qualify it by requiring that the cost of the vehicle must have been actually incurred by the taxpayer.  As SARS, when they review the return, requires proof of the cost of the vehicle to the taxpayer it appears that they would only allow the wear and rear if the cost was actually incurred by the taxpayer.  

The Regulation refers to "the original cost thereof to him” where that motor vehicle was acquired by that recipient under a bona fide agreement of sale or exchange concluded by parties dealing at arm's length, but in any other case, the market value of that motor vehicle at the time when that recipient first obtained the vehicle or the right of use thereof, plus an amount equal to value added tax which would have been payable in respect of the purchase of the vehicle had it been purchased by the recipient at that time at a price equal to that market value.  

2. What are the rules in regards to income earned outside South Africa?

Q: Will a government employee sent to Sudan qualify for the allowance in terms of section 10(1)(o)? 

A: From your reference to section 10(1)(o) and to ‘government employees’ we accept that the issue is whether or not the individual qualifies for the exemption provided for in section 10(1)(o)(ii).  The provision includes an allowance.  

In terms of proviso (B) the provisions of section 10(1)(o)(ii) do not apply in respect of any remuneration—

(AA) derived in respect of the holding of a public office contemplated in section 9(2)(g); or

(BB) received by or accrued to any person in respect of services rendered or work or labour performed as contemplated in section 9(2)(h). 

Section 9(2)(g) requires that the remuneration must be in respect of the holding of a public office to which that person has been appointed or is deemed to have been appointed in terms of an Act of Parliament; and section 9(2)(h) where it is in respect of services rendered to or work or labour performed for or on behalf of any employer—

(i) in the national, provincial or local sphere of government of the RSA;

(ii) that is a constitutional institution listed in Schedule 1 to the Public Finance Management Act;

(iii) that is a public entity listed in Schedule 2 or 3 to that Act; or

(iv) that is a municipal entity as defined in section 1 of the Local Government: Municipal Systems Act.  

As the work was done in a country where the treaty is not in force yet, the section 6quat rebate would be available for any tax levied there.  

Disclaimer: Nothing in these queries and answers 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 answers, SAIT do not accept any responsibility for consequences of decisions taken based on these queries and answers. It remains your own responsibility to consult the relevant primary resources when taking a decision.  


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