Expenses must be intended to produce taxable income
To successfully deduct an expense, there must be a link to earning taxable income. Section 11(a) of the Income Tax Act, the so-called ‘general deduction formula’, seems to have produced more court cases than virtually any other Section of the Act. And each time, the courts tell us the same thing: In order for you […]
Wear-and-tear allowance
Capital expenditure incurred in the production of income and in carrying on of a trade does not qualify for a deduction under the so-called general deduction formula in section 11(a) of the Income Tax Act No 58 of 1962 (the Act). The Act does, however, grant deductions or allowances for specific types of capital expenditure […]
Understand your tax liability when selling a residence
The Eighth Schedule of the Income Tax Act, which deals with capital gain tax, allows for exclusion from liability on any gains realised on the sale by a taxpayer of a primary residence on the first R2 million of such gains. There are, however, several more complex matters that often arise in the determination of any gain, and we examine some of those in more […]
Disputing SARS decision and assessments
A taxpayer who is aggrieved by an assessment or decision of SARS against that taxpayer has the right to dispute that assessment or decision. If an original assessment has not been issued, SARS may request a taxpayer to submit an amended return to correct an undisputed error made in the prior return. In the case […]
“Booking” capital losses on shares is not that easy
There is a number of techniques that taxpayers use to reduce their capital gains tax (CGT) exposure on long-term share investments. A common practice is to utilise the annual exclusion of R40 000 provided for in paragraph 5 of the Eighth Schedule of the Income Tax Act[1] by selling shares that have been bought at a low […]
Intra-group transactions: how it works
The South African Revenue Service (“SARS”) issued a private binding ruling (BPR329) on 27 September 2019 on the tax implications of intra-group transactions and the subsequent sale of the relevant assets to a third party outside the group of companies. The taxpayer in this regard wants to implement a Broad-Based Black Economic Empowerment transaction in terms of which immovable […]
Intra-group transactions: how it works
The South African Revenue Service (“SARS”) issued a private binding ruling (BPR329) on 27 September 2019 on the tax implications of intra-group transactions and the subsequent sale of the relevant assets to a third party outside the group of companies. The taxpayer in this regard wants to implement a Broad-Based Black Economic Empowerment transaction in terms of which immovable […]
What to do when the taxman comes?
With the tax filing season for individuals now closed, taxpayers may find themselves with tax debt that is due. This may be due to administrative penalties as a result of the non-submission of tax returns, the submission of a return without payment, only partial payment or debt arising from an audit assessment. The South African […]
Is there tax on gift cards?
The Cape Town Tax Court delivered a judgement on 17 April 2019 on the timing of income tax in relation to gift cards issued by a retailer.[1] Here, the taxpayer “sold” gift cards to its customers to be redeemed at any of the taxpayer’s stores. The question under consideration was whether the revenue from the […]
SARS interest on provisional tax
As with various other business transactions, taxes in their various forms also attract interest, either payable by the taxpayer to SARS, or due to the taxpayer from SARS. Apart from knowing which of the various SARS interest rates are applicable (which is often a challenge in itself), knowing in which circumstances interest is applicable and […]