Taxation Tax structure: Who pays? Direct and indirect taxes - - PDF document

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SBSA FINANCIAL COURSE

Module: Taxation Welcome to the session

Thought for the session

Personal vision gives purpose to life, Godly vision gives life in abundance

Taxation

Tax structure:

Who pays? Direct and indirect taxes Provisional tax payers (First -31 Aug, and second-

28 Feb payments, optional third payment) Tax fundamentals:

Capital vs. Income (Intention) Residence based tax Source?

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Taxation

Types of tax – direct vs. indirect Donations tax Capital Gains tax:

Inclusion of certain percentage of capital

gain in income tax calculation

Effective rates Basic calculation format:

Calculation of capital gain:

Proceeds at disposal – base cost = Gain (profit)

Taxation

What is a disposal? Proceeds

Sales price or deemed market value Sale of foreign assets (Convert at time of sale)

Base cost:

Actual purchase price (after 1 Oct 2001) Valuation on 1 Oct Time based apportionment (Before 1 Oct 2001,

and after; year = full portion of year)

20% Rule

Taxation

CGT:

Exclusions Rollover relief

Example:

• Mr. A Sold the following during March 2012:

His primary house for R 3,2 m, the cost of the house was R1m

during Dec 2001; and

His holiday home on 1 March 2012 for R 1,55m which he

bought on 1 May 1998 for R 350 000. No valuation was made

• n 1 Oct 2001, and he chooses to calculate the base cost on

the time based apportionment method; and

He sold Sasol shares for R 100 000, which he bought 1 month

earlier for R 85 000. He buys and sells shares on a regular basis as a trader

Calculate how much he will pay due to capital gains tax if his marginal tax rate is 40%. Calculate how much tax would have been paid had the above assets been in a CC.

3 Taxation

• Mr Brink is winding up his CC and sold the

following out of the CC during 2012/13 (all prices are quoted excluding VAT):

1.

His primary house for R 3,5m. He bought the house for R1.9m during 2003 and spent R100000 on building a granny flat for the house.

2.

Machinery which was used to produce furniture, for R 2.2m. The cost of the machinery was R1.2m. He had already written of depreciation of R 350 000 on these machines for tax purposes.

3.

Investment in Anglo American shares sold for R600 000. He bought the shares in 1998 for R100 000. On 1 Oct 2001 they where valued at R170 000.

• Calculate the income tax implications for the CC
• Example 1.

Taxation

Transfer Duty & VAT Dividend tax

Replacing STC, rate 15% on div Co withholds but it is a tax on shareholder Exempted, i.e. RSA companies What about foreign div’s?

Taxation

Tax entities:

Individuals (including partnership income) Trusts

Who gets taxed and at what rates? Special & testamentary trusts

Companies (including CC’s)

Micro Businesses

Based on turnover

Small businesses

Reduced rates for the first R 350 000

Ordinary companies

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Taxation

Comparison with other tax entities Four fund approach of insurance

companies

Taxation

Individual tax:

Components and calculation

Gross income Less: Exempt income = Income Less: Deductions = Taxable income from revenue activities Plus: Capital Gains tax = Total taxable income

Taxation

Individual tax:

Gross Income:

Source vs. residence based Excluding capital gains Special inclusions Exercise 2, 3, 4

Exempt income

Examples of exempt income Exercise 5

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Taxation

Individual tax:

Exempt income

Calculate exempt interest foreign dividend if:

Mr A (43) earned R 10 000 local interest and R 3700

foreign div

Mr A (43) earned R 18 900 local interest and R 3900

foreign div

Mr A (43) earned R 20 000 local interest and R 3500

foreign div

Mr A (43) earned R 18 000 local interest and R 3900

foreign div

Taxation

Individual tax:

Deductions:

Examples Exercise 6

Fringe Benefits:

Travel allowances Right of use of motor vehicle – Exercise 7 Medical aid contributions Residential accommodation

Rates and tables

Exercise 8, 9

Taxation

Company tax:

Basic structure and calculation Expenses and deductions

Capital allowances Example 10 Other allowances Example 11

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Taxation

Ring fencing of losses Tax avoidance (vs. tax evasion) Collection of taxes:

Withholding tax e.g. PAYE, Dividend tax Provisional tax system Returns and exempted entities

Assignment