EXAMS

TAXABLE INCOME
Resident is taxed on his/her worldwide income
GI: gross income TI: taxable income
GDF: General deduction formula
Description Section Reason Amount
Gross Income:
Sales [SA] S1 GI def Complies with GI def Xxx
Sales [international] S1 GI def-WWI Complies with GI def Xxx
Rental Income Received S1 GI Def Complies with GI def Xxx
Local dividends received S1 GI def par [k] Special inclusion Xxx
Foreign dividends S1 GI def par [k]-WWI Special inclusion Xxx
Interest received:
Interest received local S1 GI def Complies with GI def Xxx
Interest received foreign S1 GI def-WWI Complies with GI def Xxx
Compensation received:
Personal injury: does not comply with GI def ---
Loss of profits S1 GI def Complies with GI def Xxx
Bad debts recovered: first Not previously recorded
S8[4][a] Xxx
time recordings
Prizes: close connection S1 GI def Complies with GI def Xxx
between price and income-
earning operations.
Example: journalists wins a
literary price
Annuities: fixed annual S1 GI def par [a] Special inclusions Xxx
payments, repetitive. No
final amount
Lease premium received: S1 GI def par [g] Special inclusions Xxx
addition to rental
consideration; lump sum; in
the lesser GI. Everything is
included in current year
Leasehold improvements: S1 GI def par[h] Special inclusions Xxx
lowest amount between
contract price and
improvement amount. Only
for the current year.
Recoupments: when S8[4][a] Previously deducted but Xxx
calculating take out vat if now recouped.
there is. Then you take cost
[excluding vat] less wear and
tear=tax value.
Then you take proceeds less
tax value= to recoupment if
the answer is positive, if the
answer is negative it is
scrapping allowance.
Know how payments S1 GI def par[gA] Special inclusions Xxx

Less exempt income

Interest received: not - Not deductable for legal ---
deductable for legal person person
only natural person.
Dividends local: S10[1][k] dividends fully exempt (xxx)
Foreign dividends: amount x S10[B][3] (xxx)
8/28
Government grants S12[P] (xxx)
Closing stock: lowest value S22[1] Write down the one Xxx
between cost and market that is chosen
price/value.

Income: Xxx

Less deductions:
Purchases S11[a] Complies with GDF (xxx)
Opening stock S22[2] Deductable from TI (xxx)
Stock in Transit S24[1] Was received (xxx)
Pre trade expenditure S11A Complies with GDF (xxx)
Provisions for doubtful S11[j] Special deductions Xxx
debts[previous year]: add
back previous year
provision;
Amount x 25%; remember
it’s a addition not deduction
Provisions for doubtful S11[j] Special deductions (xxx)
debts( current year):
Less than 60 days=0%
Between 60 and 120 days=25%
More than 120 days=40%
Amount x %
Bad debts:
Trade debts: S11[i] Special deductions (xxx)
 The amount must be
included in GI
previously
 Become bad during
year of assessment.
If it is in the question it
most probably complies
with the above
mentioned requirements
Loan to employee: not S11[i] Capital of nature ----
deductable because capital
of nature.
Staff expenses:
Salaries and wages S11[a] Complies with GDF (xxx)
Bonus paid to employee S7B In terms of Bonuses (xxx)
Pension fund S11[l] Specific deduction (xxx)
Medical aid contribution S11[a] Complies with GDF (xxx)
Payment to ex-employee: 2 S11[cA] Special deduction (xxx)
ways of calculating it;
Way 1: amount / 3
Way 2:amount / years
Use the lowest amount
between the 2 ways.
Special awards:
Lump sum: not allowed as S11[m] Not allowed ---
deduction.
Annuity: S11[m] Special deduction (xxx)

Insurance: only for current S11[a] Complies with GDF (xxx)

year
Rent: S11[a] Complies with GDF (xxx)
Bank charges: S11[a] Complies with GDF (xxx)
Bribes/fines: S23[o] Prohibited deduction ---
Pre paid expenses: S23[H] Special deductions (xxx)
1. Less than 6months->
deduct whole amount
2. More than 6months and
less than R100 000 ->
deduct the given amount
3. More than 6months
and more than
R100 000-> don’t
deduct anything
Tax penalties S23[d] Prohibited deductions ---
Insurance pay out: amount S23[c] (xxx)
recovered from insurance
Registration of S11[gB] Specific deduction (xxx)
design/patent/trademark:
fully deductable
Patent/copyright: amount x S11[gC] Special deduction (xxx)
5% per year
Design: amount x 10% per S11[gC] Special deductions (xxx)
year
Legal Fees S11c Special deductions (xxx)
Trademarks S11[gC] Excluded from deductions ---
Trademark renewals: S11[gB] Special deduction (xxx)
deducted between the
shortest of the period or 3
years
Interest paid:
For business purposes: S11[a] Complies with GDF (xxx)
To purchase asset: expense S23[f] For capital of nature ---
not incurred for income

Assessed loss: assessed S20 Carried over from (xxx)

carried over from previous previous years
year.
Assets used in S12C Used in manufacturing (xxx)
manufacturing process: process
New:40%;20%;20%;20%
Used:20%;20%;20%;20%;20
%
Cost includes: installation,
erection cost, foundation
cost and moving cost.
Excludes: interest and
finance charges
Movable assets: cost including: S11[e] Not used in (xxx)
installation, erection cost, manufacturing process
foundation cost, moving cost.
Excluding: interest and finance
charges.
If it is less than R 7 000 you
write off to R1.
Example if a computer cost
R5 000 we only deduct R4
999, and the amount will be
written of fully in the year of
purchase.
If it is more than R7 000 you
write it off over the
following period:
years
Furniture and fittings: 6
Office equipment
-electronic 3
-mechanical 5
Delivery vehicles 4
Trucks(other than heavy 4
Duty)
Computers(other than 3
main frame)
Computers(main frame) 5
Textbooks used by 3
professionals
Manufacturing buildings: S13[1] Used mainly for (xxx)
Used more than 50% for manufacturing purposes
manufacturing purposes.
Amount x 5% annual
allowance rate.
Commercial buildings: S13quin (xxx)
Amount x 5%
Residential units: must be 5 S13sex More or equal to 5 units (xxx)
or more units.
Amount x 5%
Scrapping allowance: when S11[o] Scrapping of previous (xxx)
calculating take vat out if allowance
there is. Then you take cost
[excluding vat] less wear and
tear= tax value.
Then take your proceeds –
tax value= scrapping
allowance, if answer is
negative [ if answer is
positive it is recoupment]
Repairs and improvements: S11[d] Special deduction (xxx)
Deductable
 Restoration by renewal
or replacement of
subsidiary parts
 Not necessary that
materials should be
identical with materials
replaced.
 If increase in capacity of
production.
Not deductable: if its only purpose
is:
 Addition to existing
structure
 Improving of
appearance, usefulness
or increase the income
earning capacity.
Lease premium: write off S11[f] Special deduction (xxx)
over contract period but its
limited to 25 years. if
contract is cancelled cannot
deduct remainder
Leasehold improvements: S11[g] Special deduction (xxx)
written off over contract
period but its limited to 25
years. Use lowest amount
between contract amount
and actual amount.
Capital gains: if it’s a loss S26A Xxx
you write 0. If it’s a profit
you take the amount x 80 %

Taxable income: Xxx

Donations: limited to 10% of S18A - to a registered NGO (xxx)

taxable income. -s18A receipt is
Must be to a registered NGO obtained
and must obtain a s18A
receipt
Donations without receipt S18A No s18A receipt ---
obtained

Taxable income Xxx

Normal tax payable Taxable income x 28% Xxx