2018-08-30 Taxation - Summary Intro Individual Tax – General Formula Individual Tax Components Trust Tax Business Tax Tax Collection & Prov. Tax Intro Tax Quote: Tax & fishing have made our nation the greatest liars Why do we pay tax? To achieve policy objectives/ aims What are they? Which obj is undisputedly the responsibility of tax? 1
2018-08-30 Intro Tax Who pays taxes? RSA Res – WW Income Non-Res – RSA Income DTAs’ roles Tax – generally when money/wealth changes ownership Direct Indirect Complexity of Tax = Defin; in/excl/exemptions; rates; etc = Disputes with SARS = Tax Ombud Individual Tax – General Formula Gross Income − Exempt Income − Allowable deductions before Retirement Contr & PBO donations + Taxable Capital Gains = Taxable Income (for 27.5% Retirement Contr limit) - Retirement Contr - PBO Donations = Taxable Income (before rebates) = Tax (from Tax Tables) − Various Rebate s (Primary, Secondary, etc.) − Various Medical Rebates (Credits) = Income Tax payable + Donation Tax ( non-PBOs ) + Tax on foreign dividends (inward foreign listed) + Retirement Lump sum withdrawal Taxes (before/on retirement/ death ) + E/Duty = Total Tax payable See Template in notes 2
2018-08-30 Individual Tax Components Income vs. Capital Capital Trees (B/S) Income Fruits (I/S) CGT < Income Tax disputes with SARS Example 1 Criteria for Capital (Intention, 3-yr rule, etc.) Example 2 Some Gross Income Items (see Template) Individual Tax Components Exempt Gross Income Items (see notes) Example 3B Dividend T Local Divs = 20% DWT Foreign Divs JSE listing = 20%, Show on tax return Non-JSE listing = Show on tax Return (Example 4) DWT Exemptions Onus on T payer Refunds within 3 yrs Admin obligation div payer List of exemptions (see notes) Companies/Retirement Funds NOT exempt from foreign div Tax ! 3
2018-08-30 Individual Tax Components Deductions Have limits! Why? Specific Order Tvl Claim & others (see notes) Retire ment contr. 2 nd last deduction PBO donation last deduction = 10% Tvl Claim (Example 5) Retirement Contr limit = Min imum of 3 amounts (A to C) A = R350 000 B = Taxable income ex cl. Cap Gains & ex last two deductions C = 27.5% of the greater of PAYE Taxable Income in cl. Cap Gains, but ex last two deductions Individual Tax Components Retirement Calcs: Examples 6 & 7 Calc of CGT Capital Gain = Mkt P – Base Cost Losses are carried fwd after annual exclusion Triggers of CGT (i.e. disposals) Sale Emigration (formal) Donation Death, etc Base cost (purchase price, improvements, portion donat T, etc.) Example 8 Operating Farm (non-arms length) Base cost = Land Bank values Disposal P = 30% below Mkt P Base Cost = Mkt P; Disposal P = Mkt 4
2018-08-30 Individual Tax Components Calc of CGT Pre-2001 acquisitions of assets Valuation on 1/10/2001 Time based apportionment (≈ Interpolation) 20% rule gains = 80% Example 9 Exclusions from CGT (see notes) Rollover relief Individual Tax Components CGT offshore investments Base cost & sales P @ same exchange rate, on disposal Example 10A Calc Taxable income from Tax Tables Example 11 Some other calcs on T Tables (Examples 10B & 10C) Rebates Primary, Secondary, Tertiary No Medical Expenses deductions – only Rebates Medical Aid Rebate Medical Expense Rebate 5
2018-08-30 Individual Tax Components Other Taxes : Non-PBO Donation Tax in general @ 20%, after exemptions for natural persons Inter vivos spouse donations free of 20% tax Example 12 Listed comp donations free of 20% tax Other Taxes : Retirement Fund withdrawals (see notes) Example 14 Other Taxes : Transfer Duty & VAT Other Taxes : E/duty Trust Tax Trust defin Income tax = Flat 45% Local Trust CGT Incl 80% CGT Effect = 36% Local beneficiary Offshore beneficiary Beneficiary is taxed if: Trust is taxed # Non-discretionary trust # Discretionary trust distributes all taxable receipts For foreign trust/ local benf, conduit apply ( as above ) Trusts could retain divs without further tax Lender pay tax on zero or low interest charged to trust Testamentary trust taxed at marginal of natural person (not flat 45%) until youngest benef is 18 yrs 6
2018-08-30 Business Tax Income Tax Comp/CC = 28% Mining Comps = Special formula SBC = Variable Micro businesses = Turnover based Labour brokers = 33% CGT = 80 % inclusion rate for Cap Gain 22.4% Effective CGT rate Tax Collect & Prov. T Gvt needs T income immediately! Hence, SARS collects T via: Regularly via PAYE, Vat, etc. Provisionally All Comps (excl. gold) register as Prov. T payers Some indiv register as Prov. T payer (see thresholds) 3 Prov. T Pmts – natural persons 1 st = 31 Aug 2 nd = 28/29 Feb 3 rd (optional) = within 6 mths 20% penalty on under paid Prov. T amount Avoid penalty by: Within 80 - 90% of finally assessed T 90% = (Taxable Income < R 1 mil) 80% = (Taxable Income > R1 mil) 7
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