Print Page
News & Press: Institute News

FAQ - 9 July 2014

Wednesday, 09 July 2014   (0 Comments)
Posted by: Author: SAIT Technical
Share |

Author: SAIT Technical

1. Apportionment of expenses for Income Tax Purposes

Q: When apportioning expenses between interest income and dividend income do you use net dividends after dividends tax or not?

For example

Gross dividends:   R115 000
Net dividends R100 000
Interest income R20 000
Accounting fees R10 000

Which one is correct?

R115 000/135 000 * R10 000 = 8 518.52 non-deductible expense


R100 000/120 000 * R10 000 = R8 333.33 non-deductible expense

A: You request assumes that the deduction is available in the first place.  Based on the facts we are not certain that the taxpayer is carrying on a trade or that the expenses were laid out or expended for the purposes of trade.  If we assume that the taxpayer will be able to meet the onus of proof in this regard the following comments with regard to apportionment is appropriate. 

The Income Tax Act does not prescribe how the apportionment must be done.  The issue of the apportionment of expenses was considered recently by the Supreme Court of Appeal – CSARS v Mobile Telephone Networks Holdings (Pty) Ltd.  Judge Ponnan commented as follows:

"Where - as here - expenditure is laid out for a dual or mixed purpose the courts in South Africa and in other countries, have, in principle, approved of an apportionment of such expenditure…”

"Over time, the courts have applied various formulae to achieve a fair apportionment.”

"Apportionment is essentially a question of fact depending upon the particular circumstances of each case (Local Investment Co v Commissioner of Taxes (SR) 22 SATC 4). As Beadle J put it in Local Investment Co (at II):


"It does not seem possible to me to lay down any general rules as to how the apportionment should be made, other than saying that the apportionment must be fair and reasonable, having regard to all the circumstances of the case. For example, in one case an apportionment based on the proportion which the different types of income bear to the total income might be proper, as was done in the Rand Selections Corporation’s case, supra. In another case, however, such an apportionment might be grossly unfair;” 

It seems that SARS favours the apportionment on the basis of gross income – they argued that in the MTN case.  See also Interpretation note 64 where they state (in paragraph 7.2) that "general expenditure must be allocated to the various sources of income on a logical, fair and reasonable basis. For example, depending on the facts it may be acceptable to allocate the general expenses pro rata by applying the ratio that a particular source of receipts and accruals bears to the total receipts and accruals derived by the entity.” 

2. Subsistence allowance for work performed abroad

Q: I would like to find out what is the maximum amount of days per annum, as well as maximum consecutive days overseas before Foreign Subsistence Allowance becomes taxable.

A: We assume that with "Subsistence Allowance” you are referring to the allowance or advance in respect of accommodation, meals and other incidental costs, as contemplated in section 8(1)(b).  It must then be noted that where the accommodation, to which that allowance or advance relates, is outside the RSA (we assume that it is because you referred to "foreign”) it is only in respect of meals and incidental costs – see also Government Notice 114 (the determination of the daily amount in respect of meals and incidental costs for purposes of section 8(1) for 2015). 

The principle in this instance is that such an allowance or advance is given the person to defray the costs.  The allowance will then only be included in taxable income to the extent that the allowance (or advance) exceeds any portion of the allowance or advance actually expended by that recipient on meals and other incidental costs.  The portion expended is then either the actual cost or the deemed costs (as published in the notice – as the one referred to above). 

It is possible that your request (or concern) relates to the fact that person is receiving the allowance for a long period may be an indication that the recipient is no longer by reason of the duties of his or her office or employment obliged to spend at least one night away from his or her usual place of residence in the RSA as envisaged.  SARS in their Interpretation Note 14 (issue 3) uses the words "on a temporary basis”, but the matter of the fact is that this is not determined on the basis of a number of days.  We submit that as long as the parties can prove that the recipient is away from his usual place of residence the section 8(1) treatment would apply. 




Section 240A of the Tax Administration Act, 2011 (as amended) requires that all tax practitioners register with a recognized controlling body before 1 July 2013. It is a criminal offense to not register with both a recognized controlling body and SARS.

  • Tax Practitioner Registration Requirements & FAQ's
  • Rate Our Service

    Membership Management Software Powered by YourMembership  ::  Legal