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Technical FAQs

07 June 2012   (0 Comments)
Posted by: SAIT Technical
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VAT: PRE INCORPORATION EXPENSES

Question:

I recently formed a company and registered as a VAT vendor. Prior to incorporation I personally incurred certain expenses on behalf of the enterprise in my personal capacity. May I claim input VAT on those expenses?

Answer:

Where a company reimburses a person for the costs and purchases incurred before it was formed, the company is deemed to be the recipient of the goods or services and to have paid any VAT component. Accordingly the company can deduct that VAT as input tax in the tax period during which the reimbursement is made. This will only be allowed if the person was reimbursed by the company for the whole amount paid; and acquired the goods or services for the purpose of an enterprise to be carried on by the company and has not used the goods or services for any other purpose.

VAT: PRE REGISTRATION EXPENSES

Question:

I have a retail business and it recently became a requirement for me to register as a VAT vendor. May I claim input VAT on assets and other goods held by my prior to date of registration?

Answer:

You may claim input on all assets and goods held by you on the date that you became liable to register as a VAT vendor. The input VAT is calculated as the lesser of the fair market value or cost.

CGT/DT: DISPOSAL OF A RESIDENCE FROM A COMPANY OR TRUST

Question:

I have a second residential property which is held in a trust. The property is rented out to a person whom in no way is connected to me. If the trust disposes of the property, and it is transferred to my personal capacity, will I qualify for the relief offered in terms of par 51A of the Eight Schedule to the Income Tax Act? 

Answer:

A requirement is that the natural person who uses the residence mainly for domestic purposes has to be a "connected person” in relation to the company or trust at the time of disposal by the company or trust of the residence.  Therefore, in the event that the tenant is not a "connected person”, the relief will not apply. 

CGT/DT: DISPOSAL OF A RESIDENCE FROM A COMPANY OR TRUST

Question:

I have a holiday home which is registered in a company. My family and I use it on a regular basis as holiday accommodation. If the company disposes of the property, and it is transferred to my personal capacity, will I qualify for the relief offered in terms of par 51A of the Eight Schedule to the Income Tax Act?

Answer:

Prior to the Taxation Laws Amendment Bill of 2011, the company would not have qualified for the relief. A requirement of par 51A of the Eight Schedule to the Income Tax Act was that the connected person who used the property for residential purposes had ordinarily resided in that residence. The wording; "...ordinarily resided in that residence during that period..” has been removed from par 51A which means that a holiday home may well qualify for the relief provided that the other requirements of par 51A have been met.

DIVIDENDS TAX: FOREIGN DIVIDENDS

Question:

I receive dividends from a foreign company who has no business interests, directly or indirectly in South Africa. Will these dividends be considered as dividends for dividends tax purposes, and will I pay 15% tax on these dividends?

Answer:

Where a foreign dividend is received or accrued on or after 1 April 2012, it is specifically included in a person’s gross income under par (k) of the definition of gross income. Foreign dividends (unless listed on the JSE) do not qualify for "dividends tax”, and the taxable dividend (after exemptions/exclusions/rebates) will be subject to tax at the normal statutory rates for individuals. 

INCOME TAX: INDEPENDENT CONTRACTOR

Question:

I am regarded as an independent contractor who receives ‘remuneration’ (common law test) for purposes of the Fourth Schedule to the Income Tax Act. Will the fact that I receive ‘remuneration’ mean that the provisions of section 23(m) of the Income Tax will apply, and that I would be unable to claim certain expenses in terms of section 11 of the Act?

Answer:

Even though you are in receipt of ‘remuneration’, section 23(m) will not apply as the provisions of section 23(m) will only limit deductions in the event that the ‘remuneration’ is derived from employment, or the holding of an office.

INCOME TAX: DOMESTIC TAX LAW V DOUBLE TAX AGREEMENT

Question:

In the event that the Income Tax Act is in conflict with a Double Tax Agreement, which law will apply?

Answer:

A double-taxation agreement, once approved and adopted, has the force and law and will prevail over the Income Tax Act.

SKILLS DEVELOPMENT LEVY: DIRECTOR DEEMED REMUNERATION

Question:

I am a director of a company and am of the opinion that my remuneration is not subject to SDL as the "deemed remuneration” in terms of Paragraph 11C of the Fourth Schedule to the Income Tax Act is specifically exempt from SDL in terms of section 3(5)(c) of the Skills Development levies Act. Is this correct? 

Answer:

No, the exemption in terms of section 3(5)(c) of the Skills Development levies Act is for purpose of ensuring that the levy is charged on the actual amount of "remuneration” received by the director/member rather than the "deemed remuneration” in terms of Paragraph 11C of the Fourth Schedule to the Income Tax Act. 


 

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