Agenda

1. Amendments (revision)

TAX WEBINAR 1 2. Example (revision and exam technique)

MUNEER HASSAN
Queries: Mypal

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VAT: Imported electronic services VAT: Adjustments

Section 23(1A): foreign electronic services provider NOT  Section 18D: Temporary letting residential
required to register as vendor accommodation: s18D
total value of taxable supplies of R1 million in any 12-month
period exceeded solely as a consequence of abnormal
circumstances of a temporary nature

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Types of supplies Change in use (s18)

INSIDE VAT CIRCLE OUTSIDE VAT CIRCLE INSIDE VAT CIRCLE OUTSIDE VAT CIRCLE

OUTPUT (s18(1))
Taxable
Exempt Supplies 15% Exempt Supplies
supplies (15%;
0%
0%)
OUPUT TAX Mixed supplies
OUPUT TAX
INPUT TAX INPUT TAX INPUT (s18(4))

Mixed supplies ?
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 Change in use (s18) Change in use (s18): Value

Output tax (s18(1)) Input tax (s18(5))

Time:
15/115 X OMV AxBXCXD
On the day A = 15/115
B = < Cost (incl. VAT) or
OMV
C = % use
D = X extent of payment
(2nd hand)

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Change in use (s18) Change in use: s18(2) & s18(5)

INSIDE VAT CIRCLE OUTSIDE VAT CIRCLE
 Scope
Applies to capital goods ONLY
OUTPUT (s18(2))
INPUT (s18(5))

15% Exempt Supplies

0% Exclusions:
Mixed supplies 1. Value < than R40 000 (excl. VAT)
2. Change in use is = < 10%

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Change in use (s18) Change in use (s18)

Time: Value:
Year-end Output tax (s18(2)) and Input tax (s18(5))
 15/115
 X < Cost (incl. VAT) or OMV
X % use

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Temporary letting residential accommodation: s18D Temporary letting residential accommodation: s18D

Scope:  Time (s9(13)):

Developer temporarily lets a dwelling previously Earlier of:
held as trading stock as residential accommodation agreement date; or
Implication: Output tax adjustment occupation
Value (s10(29)):
Cost incl. VAT to the developer
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Temporary letting residential accommodation: s18D Temporary letting residential accommodation: s18D

 Developer temporarily lets for a period of more  Developer claim input tax deduction = the value of the
than 12 months? previous output tax adj. (s16(3)(o) read with s10(29))
1. property is sold within ‘temporarily applied’ period; or
 Apply s18(1) and NOT s18D 2. brought back into VAT net at the end of ‘temporarily applied’ period,
 Output tax adj. (s18(1) and proviso to s18D(1)(b))) or
3. was deemed to be supplied under s18(1)
 Value: OMV x 15/115

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Temporary letting residential accommodation: s18D Temporary letting residential accommodation: s18D

 Sold within ‘temporarily applied’ period Taken back into VAT net at end of ‘temporarily applied’
period
Developed in use adj. 1. Input tax (b)
Input tax (a) Output tax b 2. Output tax on sale c
Developed in use adj. 1. Input tax (b)
Input tax (a) Output tax b 2. Output tax on sale c
1. Input tax deduction = value of the previous output tax
adj. (b) 1. Input tax deduction = value of the previous output tax adj.
(s16(3)(o) read with 18D(5)(b)) (b)
2. Levy output tax on sale at 15% c
2. Subsequent sale… levy VAT at 15% c
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Temporary letting residential accommodation: s18D Income Tax: Corporate Tax Rate

 Supplied in terms of s18(1) The tax rate for companies and close corporation is
reduced from 28% to 27% for tax years ending 31
Developed in use adj. 1. Input tax (b)
Input tax (a) Output tax b 2. Output tax adj on OMV c March 2023 or later.

1. Input tax deduction = value of the previous output tax adj.

(s16(3)(o) read with s18D(5)(c)) (b)
2. Apply s18(1) (proviso to s18D(1)(b)) raise output tax adj. on
OMV x 15/115 c
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Income Tax: Assessed losses (s20) Assessed losses: Scope & Implication

Scope:
For tax years ending 31 March 2023 or later section
 In determining, the “taxable income” from “trade” the taxpayer can set off against
20 is amended to limit the assessed losses for “income” any balance of assessed loss brought forward from the previous year limited to
the greater of:
companies and close corporations.  R1 million; or
 80% of the current year’s taxable income (ignore the current year’s AL and/or AL
brought forward from the previous year).
Implication:
 AL carried forward by companies and close corporations is subject to a limitation rule.

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Assessed losses: Example Income Tax: Debtors Allowance (section 24)

Assessed loss carried forward from previous year: R 6 000 000

Section 24 was amended to specify that the relief
Taxable income in current year: R 5 000 000
 Assessed loss limited to the greater of: also applies to lay-by agreements less than 12
 R 1 000 000; or months (for years of assessment ending on or after 1
 R 5 000 000 x 80% = R 4 000 000 January 2023).
 The company will be able to utilise R 4 000 000 of the assessed loss against
taxable income. The remaining assessed loss of R 2 000 000 will be carried
forward to the next year. Thus, the company will be taxed on R 1 000 000 in the
current year.
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Suspensive sale (s24) Suspensive sale (s24)

Principle: Trading stock sold under a contract,

 Creates problem & ownership passes after whole amount or part of the
 Provides solution whole amount is paid,
whole amount,
Problem
excluding finance charges,
deemed gross income.
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Suspensive sale (s24) Suspensive sale (s24)

≥ 25% x total amount is due and payable 12 months after N/A …

the conclusion of the agreement Sales on extended credit terms without suspensive
Relief: taxed on a cash-flow basis (GP%) excl. interest and sale agreement terms
VAT and after s(11)(j) allowance
Sales subject to resolutive condition
Relief: added back following year
Solution Finance leases
Lay-by less than 12 months
Capital assets

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Suspensive sale (s24) Future expenditure on contracts (s24C)

VAT Capital Interest
SELLER ICA par (a) Sale s24J Principle:
Full output tax earlier of: •Gross income
•Delivery; or •S11(i) and (j) Relief
•Pmt •Relief S24

BUYER ICA par (a) Owns asset s24J

Full input tax earlier of: Trading stock or
•Delivery; or capital asset
•Pmt

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Future expenditure on contracts (s24C) Future expenditure on contracts (s24C)

COST AS PERCENTAGE
Advance payment
Future expenditure [(Total costs / Total revenue) × Income received or
Contract accrued to date] – Actual expenses incurred to date
relating to that income

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Future expenditure on contracts (s24C) Exam Technique

Examples Score
some of
Assessed loss Score the
most of difficult
Score the marks!!!
all easy medium
marks!!! marks!!!

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