This is a typed summary of all the semester content for Taxation1. It is done in the outline method. These are my own personal notes and all abbreviations used are available at the end of the document.
Module One: Introduction to Taxation, Tax landscape and strategy
• Taxation is when the state collects funds to pay for
o Administration
o Benefits for residents
• Maxims of Taxation
o Equity o Convenience
o Certainty o Economy
• Role players that influence the tax landscape in SA
o Legislation o Professional bodies (give tax
o Parliament (make legislation) assistance to public)
o SARS (collects tax) o Taxpayers
o National treasury (manages o International tax policy
gov finances[budget]) organisations (help
o Tax review committees development of tax policies)
(assess SA tax policies)
• Normal tax is the focus of this course
• Other types of taxes
o Direct o Indirect
▪ Normal ▪ VAT
▪ Estate duty ▪ Transfer duty
▪ Donations ▪ Securities transfer tax
▪ Dividends ▪ Customs and excuse
▪ Skills development duty
levies
• Tax strategies are important to help you pay tax
o Tax avoidance > Tax evasion
Taxable Income framework
Rebates: primary- 14 958, 65+ 8 199, 75+ 2 736
Gross income
Less: exempt income
Income
Less: deductions
Add: taxable capital gain
Taxable income
Tax per tax tables
Less: rebates
, Normal tax
Less: provisional tax
Less: employees’ tax
Normal tax Liability
Module Two: Interpretation of statute and Gross income
Submodule One: Interpretation of statute and the general gross income definition
• Gross income is the first line of the taxable income framework.
• Gross income: In any YOAi
o The total amount in cash or otherwise
o Received by or accrued to
▪ Worldwide (resident)
▪ From an SA source (non-resident)
o Not of a capital nature
• Total amount in cash or otherwise
o Amount includes incorporeal things (SARS has onus of proving what that amount
is)
o Amount has ascertainable monetary amount
• Received by
o Amount received by taxpayer for their own benefit and on their own behalf
o If illegal, received by if it was intended to be received for their own benefit
o Incl deposits that are received (not in a separate account)
▪ Can get deduction if they are refunded
o Not incl receipts from gift cards unless they are used or have expired
▪ Benefit is for the owner of the gift card and not the issuer
• Accrued to
o To be entitled to payment
o To accrue means to be unconditionally entitled to something
o Value of accrual is the market value of the asset received or the face value of a
debt (PV)
• If income is disposed after accrual (not on a legal obligation), it is still included in gross
income
• Use SIOPAC when answering discussion questions
o Note there may be more than one issue
, o You get one onus mark
o Conclude in a way that makes sense with your argument
Submodule Two: The general gross income definition, Residence and Source
• Not of a capital nature
o Determined by intention of taxpayer
▪ Intention at acquisition can either be speculative (profit making scheme)
or investment (to earn a return)
▪ Intention can change does NOT include
• Realizing at best advantage
• Selling at a profit
• Selling an asset
o Using a realization company does not change intention
o Onus on taxpayer to prove something is capital in nature
o Damages for capital asset = capital in nature, for loss of profits = revenue in
nature
o If contract is so crucial it would cripple company, amount received to cancel it is
capital (even though such amounts are usually revenue)
o Fortuitous gains such as gifts, inheritance, prizes and donations are capital in
nature.
o Sporadic gambling is capital, professional is revenue (can also get deductions)
• Illegal business
o If amount was received for their benefit falls under gross income
o If income was taxable, should also allow deductions as if income was legal
• Residence – use IPAC
• Natural person can be resident by being ordinarily resident or meeting PPT.
o Can only be ordinarily resident in one country
▪ Intention to return from wanderings
▪ Habitually and normally resident
▪ If met, apportion for time in country
o PPT only applied when someone is no longer ordinarily resident
▪ >91 days in current year AND
▪ >91 days in each of the preceding 5 years AND
▪ >915 days on aggregate in the preceding 5 years
▪ If PPT met, treat as resident from beginning of YOA
▪ Cease to be resident if leave for 300+ days (YOA ends day before leaving
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