Tax Consequences of ITR14 and IT14SD forms · 2018. 4. 14. · Tax Consequences of ITR14 and IT14SD...
Transcript of Tax Consequences of ITR14 and IT14SD forms · 2018. 4. 14. · Tax Consequences of ITR14 and IT14SD...
Tax Consequences of ITR14 and IT14SD forms
Presented by
Diane Seccombe
(B Com, LLB, LLM (Taxation)
Di Seccombe is an admitted attorney with a Masters degree in taxation. Di started her tax
career as a full time academic with the University of KwaZulu Natal before moving into practice.
She is currently the National Head of Tax Training with Mazars and in this capacity trains and
consults on Income Tax matters including, Corporate, Individual and International tax as well as
VAT.
Programme: 08:15 – 08:55 Registration 09:00 – 10:30 Tax Consequences of ITR14 and IT14SD forms 10:30 – 10:50 Tea Break (20 mins) 10:50 – 13:00 Tax Consequences of ITR14 and IT14SD forms
13:00 Conclusion
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Welcome2016 Tax Consequences of ITR14 & IT14SD forms
Presented by Diane Seccombe
Upcoming CPD Events
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Upcoming CPD EventsRefer to our website for all upcoming events
October• 2016 Accounting & Reconciliation• Tax Administration ActNovember
• Tax Legislative
2016 Tax Consequences of ITR14 and IT14SD forms
ITR14 AND IT14SD Disclaimer
The information in these notes is for general information purposes only and is not a substitute for professional advice,
legislation or textbooks on the relevant subject matter. Neither Mazars, SAIT nor the presenter accept any
responsibility for any actions taken or not taken on the basis of the information in these notes.
NB: The information contained in the notes is specifically drafted, worded and used to illustrate only the key concepts
presented, and as such is not to be regarded as a technical reference source by attendees.
CONTENTS INTERNATIONAL TRANSACTIONS ..................................................................................................... 2
The s 6quat rebate and section 6quat (1C) deduction ...................................................................... 2
Section 31 transfer pricing and thin capitalisation ............................................................................ 8
Uniform cross-border withholding regime to prevent base erosion .......................................... 13
DEDUCTIONS, ALLOWANCES AND RECOUPMENTS .................................................................... 19
Particular deductions ......................................................................................................................... 19
capital allowances .............................................................................................................................. 27
Recoupments ...................................................................................................................................... 29
LOANS .................................................................................................................................................. 35
Anti-hybrid debt instrument re-characterisation rules ................................................................... 35
VENTURE CAPITAL INVESTMENTS SECTION 12J ......................................................................... 40
DEBT REDUCTION .............................................................................................................................. 45
TAX ADMINISTRATION ACT (TAA) ................................................................................................... 52
Personal liability for tax debts ........................................................................................................... 53
Chapter 15 administrative non-compliance penalties ..................................................................... 55
chapter 16 understatement penalty .................................................................................................. 57
chapter 17 criminal offences ............................................................................................................. 61
DIVIDENDS AND DIVIDEND WITHHOLDING TAX ............................................................................ 63
DIVIDEND WITHHOLDING TAX .......................................................................................................... 67
FOREIGN DIVIDENDS: Section 10B .................................................................................................. 72
CAPITAL GAINS TAX (CGT) ............................................................................................................... 74
CONNECTED PERSONS ..................................................................................................................... 77
SECTION 18A DONATIONS TO PUBLIC BENEFIT ORGANISATIONS ........................................... 79
VALUE ADDED TAX ............................................................................................................................ 80
Deemed supplies ................................................................................................................................ 80
adjustments ........................................................................................................................................ 83
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INTERNATIONAL TRANSACTIONS THE S 6QUAT REBATE AND SECTION 6QUAT (1C) DEDUCTION
The s 6quat rebate
Section 6quat provides a special rebate, or unilateral tax credit, for foreign taxes payable by residents (natural
persons and legal entities) in respect of income from non-Republic sources.
Where a foreign country levies tax on income derived from a source in South Africa, s 6quat allows relief not as a
rebate but in the form of a deduction for the foreign taxes paid.
The rebate will reduce normal tax payable by a resident whose taxable income includes any of the following
amounts:
(a) Income, other than foreign dividends dealt with separately in item (c) below, received by or accrued to a
resident from a source outside, and not deemed to be within the Republic.
(b) The proportional amount of the net income referred to in s 9D. Section 9D is an anti-avoidance measure
which has the effect of including as income in the hands of residents, who hold more than 50% of the
participation rights or voting rights in a CFC, a proportional amount of its net income.
(c) Foreign dividends.
(d) Taxable capital gains derived from a source outside and not deemed to be within the Republic.
Section 26A includes in the taxable income of a person for a year of assessment his taxable capital gains
for that year, as determined in terms of the Eighth Schedule to the Act. It follows that when a resident
makes a taxable capital gain from a foreign source, which is not deemed to be within the Republic, but the
gain is subject to tax in the foreign country, the rebate provided by s 6quat would be available against
South African tax payable on the gain.
(e) Amounts referred to in items (a), (b) and (c) received by or accrued to any ‗other person‘, but deemed to
have been received by or accrued to a resident in terms of s 7. Section 7 contains specific anti-avoidance
provisions that aim to nullify, for fiscal purposes, schemes intended to shift the incidence of tax. More
specifically, the various provisions apply to particular and expressly defined transactions in terms of which
certain categories of income diverted by one person to another, are deemed to have accrued to the
person concerned Effectively, therefore, the resident will qualify for the s 6quat rebate in respect of the
income deemed to have been received by or accrued to him.
(f) A capital gain from a source outside and not deemed to be within the Republic, which is attributable to a
resident in terms of paras 68 (attribution of capital gains to a spouse), 69 (attribution of capital gains to
parent of minor child), 70 (attribution of capital gains subject to conditional vesting), 71 (attribution of
capital gains subject to revocable vesting), 72 (attribution of capital gains vesting in non-residents) or 80
(attribution of capital gains vesting in resident beneficiaries of a trust) of the Eighth Schedule.
(g) Amounts referred to in items (a), (b), (c) and (d) above representing capital of a trust and included in the
income of a resident beneficiary by virtue of s 25B(2A) or taken into account in determining his aggregate
capital gain or aggregate capital loss in terms of para 80(3) of the Eighth Schedule. Section 25B(2A)
establishes a special rule when a resident beneficiary, during a year of assessment, acquires a vested
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right to an amount representing the capital of a non-resident trust, if the capital arose from income
accrued to the trust in a prior year of assessment. The rule states that the amount must be included in the
income of the resident beneficiary in the year in which he acquires the vested right. And, in the context of
capital gains, para 80(3) of the Eighth Schedule achieves a similar result in relation to non-resident trusts.
Thus, when a resident beneficiary acquires a vested right to an amount representing the capital of a non-
resident trust, and the amount arises from a capital gain of the trust determined in a prior year, the amount
must be taken into account for the purposes of calculating his aggregate capital gain or aggregate capital
loss for the year in which he becomes entitled thereto.
In both situations the resident beneficiary will be entitled to the s 6quat rebate, even if, in the second
situation immediately above, the foreign tax has been paid by the non-resident trust.
The following is a summary of the legal nature of the income to qualify for the rebate:
• The income received or accrued by the resident must be from a source outside and not deemed to be
within the Republic, unless specifically indicated otherwise.
• The amount received or accrued must be included in the taxpayer‘s taxable income, that is, it must not
constitute exempt income.
• The amount must have been subject to foreign tax.
The foreign taxes
The rebate will be an amount equal to the sum of the foreign taxes on income proved to be payable to any
sphere of government of any country other than the Republic, without any right of recovery by any person (other
than a right of recovery in terms of an entitlement to carry back losses arising during any year of assessment to a
prior year of assessment).
The foreign taxes are those payable by the following persons:
• A resident in respect of
–income from sources outside and not deemed to be within the Republic (see item (a) above);
–‗foreign‘ dividends (see item (c) above);
–taxable capital gains (see item (d) above).
• A CFC in respect of a proportional amount referred to in item (b) above. In other words, even though the
foreign tax is borne by the CFC, the rebate may be claimed against the foreign tax relative to the
proportional amount of the CFC‘s net income imputed to the resident. The entitlement to the s 6quat
rebate is subject to s 72A(3), however, which denies a taxpayer the deduction if he fails, without
reasonable grounds, to submit a return reflecting the participation rights held in a CFC or a copy of its
financial statements.
The term ‗income‘ in the context of taxes on income includes ‗profits, income and gains and taxes imposed by
national and certain lower tiers of government [that is, state, provincial, local and any other level of government]
in a foreign country and capital gains taxes . . . qualify for the rebate‘.
The rebate may be claimed only if the foreign income is included in the resident‘s taxable income. Where the
resident is a member of a partnership or a beneficiary of a trust and the partnership or trust is liable for tax as a
separate entity in the foreign country, a proportional amount of any tax payable by the entity that is attributable to
the resident‘s interest in the partnership or trust is deemed to have been paid by the resident (proviso to
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s 6quat(1A)). In other words, where a foreign partnership or non-resident trust has paid tax in a foreign country,
the tax may be apportioned to the resident partners or beneficiaries.
Amount of rebate
The maximum amount available as a rebate or rebates for any foreign tax proved to be payable is limited in
aggregate to an amount that bears to the total normal tax payable the same ratio as the total taxable income
attributable to the included income, proportional amount, foreign dividend or taxable capital gain or amount bears
to the total taxable income (s 6quat(1B)(a)). In other words, the rebate must be determined on the
‗apportionment‘ or ‗pro rata‘ basis. This approach is in accordance with the dictates of Interpretation Note 18
issued by SARS.
Expressed as a formula, the rebate will be calculated as follows:
Section 6quat
rebate =
taxable income derived from all
foreign sources × Normal tax payable on taxable income
from all sources total taxable income from all sources
Since the taxable income attributable to the included income (that is, the total taxable income from all foreign
countries) must be aggregated, as must the normal tax payable on this income, for the purposes of calculating
the rebate, it is clear that the rebate is not ‗ring-fenced‘ relative to each foreign country. Instead it is calculated on
what can be described as a ‗pooled basis‘, which means that there is no need to link each amount of foreign tax
to a specific amount of income.
For example, say a South African company has the following income and tax liability for a year of assessment:
Income – South Africa R500 000
– Country A R250 000
– Country B 100 000 350 000
Taxable income 850 000
South African tax (28% × R850 000) 238 000
Less: Section 6quat rebate
Foreign tax(assumed) – Country A 112 000
– Country B 22 000
134 000
Limited to
R350 000 × R238 000
R850 000
98 000
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Carry forward of excess credits
Where the foreign taxes exceed the rebate determined above (hereafter referred to as the ‗excess amount‘), the
excess amount may not be refunded but is carried forward to the immediately succeeding year of assessment,
when it will be deemed to be an amount of foreign tax paid in that year. It may then be set off against the normal
tax payable by the resident during that year on foreign income that is included in his taxable income under
items (a) to (g) above.
The amount of ‗normal tax payable by [the] resident‘, for this purpose, is the amount remaining after the
deduction of the rebate for any tax payable to the government of a foreign country on any amount included in the
resident‘s taxable income in the succeeding year (proviso (ii)(bb) to s 6quat(1B)(a)). This means that the resident
may deduct the excess amount from the normal tax payable in the succeeding year, but only after the deduction
of the s 6quat rebate attributable to the foreign income in that succeeding year.
The excess amount may not be carried forward for more than seven years of assessment, reckoned from the
year of assessment when the excess amount was carried forward for the first time (proviso (iii) to s 6quat(1B)(a)).
Conversion of foreign tax
The foreign tax must be translated to the currency of the Republic on the last day of the relevant year of
assessment by applying the average exchange rate for that year. The amount translated must be rounded off to
the nearest rand.
Revised assessments
Section 6quat(5) provides for the situation where a rebate or deduction was allowed to a resident in a previous
year of assessment which is subsequently proved to be incorrect. It applies if
• the resident proves that the amount of the foreign tax actually payable exceeds the amount of the rebate
or deduction determined; or
• the Commissioner is satisfied that the amount of the foreign tax actually payable is less than the amount
of the rebate or deduction.
The Commissioner may then issue a reduced or additional assessment reflecting the correct amount of the
rebate or deduction in respect of the amount of tax actually payable in the other currency translated to rands at
the average exchange rate applicable for that previous year of assessment.
But the Commissioner may not issue a reduced or additional assessment more than six years from the date of
the assessment in terms of which the rebate or deduction was originally allowed. If, however, the amount of the
foreign tax was incorrectly reflected due to fraud, misrepresentation or non-disclosure of material facts, no time
limit applies.
Amendment In Respect Of Timing Of Foreign Tax Rebates Section 6quat
The foreign tax rebate can be matched against the year in which the South African tax system recognises the
underlying foreign taxable income. This matching ensures that the rebate will apply when these rebates are of the
greatest practical use for South African taxpayers.
Example: South African Holding Company owns all the shares of Foreign Subsidiary (located in Foreign Country
X. A cross-border of R5 million loan exists between the two entities with South African Holding Company acting
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as the creditor and with Foreign Subsidiary acting as debtor. In 2014, R750 000 of interest accrues on the loan in
respect of the South African tax system. The interest is paid in 2015 with Foreign Country X imposing withholding
in 2015.
Result: South African Holding Company can re-open the 2014 year of assessment due to the withholding tax
imposed by Foreign Country X in 2015. This foreign withholding tax can then be applied as a foreign rebate
against South African taxes otherwise due for the 2014 year of assessment.
The foreign tax deduction: section 6quat(1C)
Where a South African resident is subject to tax in a foreign country, but the originating cause (or source) of the
activities giving rise to the income received is in South Africa, he is entitled to deduct from the income so derived
the sum of any foreign taxes payable. The deduction will be an amount equal to the sum of the foreign taxes on
income proved to be payable to any sphere of government of any country other than the Republic, without any
right of recovery by any person other than a right of recovery in terms of any entitlement to carry back losses
arising during any year of assessment to any year prior to such year of assessment (s 6quat(1C)).
The deduction must not in aggregate exceed the total taxable income attributable to the foreign income before
taking into account the deduction of the foreign tax. The effective consequence is that the resident will not be
able to create a loss in relation to the foreign income, which loss would then be used to shield other income from
South African tax. If the taxpayer has paid foreign taxes but has no South African taxable income, for example,
as a result of having an assessed loss, the foreign taxes may not be utilized to further increase the assessed loss
nor may the deduction be carried forward to a succeeding year of assessment.
So, for example, assume that a South African company renders technical services to an entity in a foreign
country. The services are rendered from South Africa and the Brazilian entity makes payment of the amount due,
R10 000, less a withholding tax of R2 500. The South African company is entitled to deduct the withholding tax
from the fee and pay tax on the net amount of R7 500 (R10 000 less R2 500).
Section 6quin
Special credit for foreign taxes on South African sourced income
Until 1 January 2016 if the taxable income of a South African resident included any South African source income
arising from services rendered in South Africa and this income was subject to:
a withholding tax levied in a foreign country (whether in terms of that country‘s domestic law or
otherwise), with which South Africa has concluded a Double Taxation Treaty; or
any tax properly imposed in any foreign country with which no such treaty has been concluded.
A unilateral credit was available equal to the lesser of the normal tax attributable to the amount received and the
tax withheld or imposed.
The credit applied even if the double taxation treaty deems the source of the service income concerned, to be
located in the foreign territory.
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The provision recognised that the general restriction of double tax credit to situations where the income
concerned is from a foreign source, can lead to inequitable double taxation. It also dealt to some extent with the
reality that certain treaty countries impose withholding taxes in contravention of their domestic law and/or their
treaties with South Africa.
No rebate was granted if the SA resident taxpayer does not submit a return to the Commissioner within 60 days
from the date on which the amount of foreign tax was withheld, stating the amount of tax levied and withheld. The
form ―FTW01 Declaration of Foreign Tax Withheld‖ is available on the SARS website, and is specific to
section 6quin only. The form was only required to be submitted when the tax was withheld by a country with
which SA has a DTA.
No credit was available if there was an illegitimate withholding of tax by the foreign country (ie. the withholding is
not provided for in terms of its domestic law) and no treaty exists with South Africa.
In the event that in a subsequent year, the tax against which a credit has been claimed is recovered or the liability
is discharged, the amount of the recovery/discharge is deemed to be an amount of normal tax payable in that
year.
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SECTION 31 TRANSFER PRICING AND THIN CAPITALISATION
Section 31 is an anti-avoidance provision. The section provides special anti-avoidance rules with regard to
identified international transactions involving transfer pricing and thin capitalisation to ensure that international
transactions are based on arm‘s length principles. Thin capitalisation is seen as a category of transfer pricing
relating to the funding of a business with a disproportionate amount of debt.
A draft IN was issued by SARS in respect of section 31 on April 2013, but the IN has not been finalised to date
Definitions
In its latest form section 31 applies where any transaction, operation, scheme, agreement or understanding
constitutes an affected transaction and
any term of condition of that transaction, operation, scheme, agreement or understanding is different
from any term or condition that would have existed had the persons been independent persons dealing
at arm‘s length, and
the non-arm‘s length term or condition results in any tax benefit being derived by any party to the
transaction, operation, scheme, agreement or understanding
the taxable income or tax payable by each party to the transaction, operation, scheme, agreement or
understanding that derives a tax benefit must be calculated as if the transaction, operation, scheme, agreement
or understanding had been entered into on an arm‘s length basis without the intervention of SARS.
Affected transaction
(section 31(1)(a))
An affected transaction means any transaction, operation, scheme, agreement or understanding that has been
entered into (directly or indirectly) between (or for the benefit of) either
a resident and a non-resident or,
between a non-resident and a PE in SA of another non-resident to which the transaction, operation,
scheme, agreement or understanding relates, or
between a resident and a PE of another resident outside of SA to which the transaction, operation,
scheme, agreement or understanding relates, or
between a non-resident and any CFC in relation to a resident,
And
the parties are connected persons in relation to each other,
And (section 31(1)(b))
any term or condition of that transaction, operation, scheme, agreement or understanding is different
from any term or condition that would have existed if those persons had been independent persons
dealing at an arm‘s length.
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SARS does not have any discretion when applying section 31, however before the section can be applied
the following must both apply:
There must be a lack of an arm‘s length term or condition (this may be subjective)
A tax benefit must have been derived (after an investigation of the overall tax position of the parties
involved)
The parties must be connected persons, and essentially a resident and a non-resident.
Taxpayers are therefore required to account for transfer pricing on an arm‘s length basis, without
SARS intervention. SARS also has the power to adjust the terms and conditions of a transaction,
operation, scheme, arrangement or understanding to reflect the terms and conditions that would
have existed at arm‘s length.
Non arm‟s length
As stated a requirement of an ―affected‖ transaction is that any term or condition of the transaction be different
from any term or condition that would have existed had the parties to the transaction been independent persons
acting at arm‘s length.
The OECD has published transfer pricing guidelines and according to these guidelines there are 5 methods
taxpayers can use to determine an arm‘s length price
Comparable uncontrolled price method
Resale price method
Cost plus method
Transactional net margin method
Transactional profit split method
The OECD transfer pricing guidelines for Mutinational Enterprises and Tax Administrations can be found on the
OECD‘s website and are continually updated.
No hierarchy or preference for particular methodologies is suggested. The suitability and reliability of a particular
method is dependent on the facts and circumstances of each case. In addition, the availability of data is
considered to be key in determining the taxpayer‘s choice of method. As the South African market is small,
however, the availability of reliable comparables may be difficult to identify.
The Commissioner‟s approach to transfer pricing reviews, audits and investigations
The Commissioner may obtain information on transfer pricing practices from various sources including:
the taxpayer;
other taxpayers within the same or similar industry;
financial databases and publicly available industry information;
other jurisdictions, through the exchange of information provisions contained in the double tax
agreements.
SARS does not utilise non-publicly available information in attempting to substitute an alternative measure of the
arm‘s length price, although this possibility has not been entirely ruled out.
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SARS Draft Public Notice: Section 29 Tax Administration Act
SARS has issued a draft public notice, citing the ―records, books of account or documents‖ that are required to be
kept by persons entering into an ―affected transaction‖. Of great significance is the fact that the para (b) of the
section 31(1) definition of ―affected transaction‖ is specifically excluded in the public notice. The effect of this is
that the documentary obligations of the public notice have to be fulfilled whether the relevant transactions are
concluded on an arm‘s length basis or not.
Thin capitalisation
Section 31 does not deal specifically with thin capitalisation any longer. The general arm‘s length provisions will
be used to determine whether a company is thinly capitalised.
Application
Primary adjustment
Where any non-arm‘s length term of a cross-border transaction results or will result in a tax benefit being derived
by any party to the scheme of which that transaction forms a part, the taxable income of or tax payable by that
party must be calculated as if the transaction had been entered into on arms-length terms and conditions.
This rule applies equally to transfer pricing of goods and services and to the determination of interest rates and
royalties, with only minor variations, as noted below.
Financial assistance
In the case of financial assistance, therefore, it is necessary to apply the arms-length standard to determine
whether interest bearing loans from connected parties are greater in aggregate value, or bear different terms,
than would be the case where the loans to be made by an unconnected party transacting at arms-length with the
company concerned. To the extent that debt taken on by the company is in excess of that arms-length standard,
the interest would not be deductible and must be reversed in the preparation and filing of the taxpayer‘s return.
The calculation is not an adjustment which SARS is empowered to make on assessment through the exercise of
its discretion. Instead, the taxpayer is required to make the adjustment in filing his tax return, so that a very much
higher burden of responsibility rests on taxpayers than was the case under earlier versions of s 31, in which the
Commissioner was responsible for making any adjustment.
Financial assistance and intellectual property transactions
Where the cross-border transaction under examination is the granting of financial assistance or the use of
intellectual property, two special rules apply.
Firstly, the definition of connected person is amplified to ignore the requirement that in the case of a 20% equity
holding in a company, a connection exists only if no other person holds a majority of the voting rights.
Secondly, if the grantor is a resident (other than a headquarters company) and the recipient is a CFC either in
relation to the resident or to any company in the same group, no adjustment must be made if:
the CFC has a foreign business establishment (presumably, to which the transaction relates); and
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the CFC pays taxes to a foreign government during the existence of the transaction, of at least 75% of
the amount of normal tax that would have been payable if the CFC had been a resident. The taxes paid
must be determined after taking into account any DTA, any right of recovery, credit or rebate of taxes
and must ignore any foreign tax losses from other years or other companies which might be applicable
under the foreign tax code.
Secondary adjustment – loan, dividend or donation rules
Where, in order to arrive at an arms-length recalculation of the taxable income of a resident, an amount is
presumed to accrue or to be incurred which is different from the amount actually accrued or incurred, the
difference is used to make a secondary adjustment to the taxpayer‘s tax liability, over and above the adjustment
of the accrual or expenditure itself.
Up to 1 January 2015
the adjustment amount is deemed to be a loan which itself constitutes an affected transaction. The consequence
of this ‗loan‘ being an affected transaction is that, because it cannot bear interest, an arms-length adjustment
must be made in the determination of the taxable income of the ‗creditor‘.
Example
Assume A, a resident, has disposed of trading stock to a non-resident connected person B, for
R1000 when its arms-length value is R1500.
On the basis of s 31(2) there is an immediate adjustment to A‘s taxable income of R500.
On the basis of s 31(3) there is a loan made from A to B, a connected person, of R500.
Accordingly, an adjustment must be made to A‘s taxable income which reflects an arms-length
interest charge on the R500 for the period for which it is outstanding.
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From 1 January 2015
The amount of the adjustment is treated as follows.
If the taxpayer is a resident and the counterparty to the transaction is either a non-resident or the non-South
African PE of a South African resident, then:
if the taxpayer is a company, the difference is deemed to be a dividend of an asset in specie declared by
the taxpayer (and thus potentially subject to dividends tax), or
if the taxpayer is not a company, the difference is deemed to be a donation (and thus potentially subject
to donations tax).
The date of the deemed dividend or donation is six months after the end of the tax year in respect of which the
primary adjustment was made.
In the case of a deemed loan arising before 1 January 2015, any amount still outstanding on 1 January 2015 is
treated as a dividend or donation, as the case may be, on that date.
Exclusions for back-to-back transactions by headquarter companies
Where a headquarter company enters into a transaction with a non-resident who grants financial assistance or
the right of use of intellectual property to the headquarter company, no adjustment need be made to the extent
that the grant is made back-to-back with a grant by the headquarter company to any of its foreign company
holdings of 10% or greater (the 10% being made up by direct or indirect holdings together with other companies
in the same group).
Exemption for certain loans to connected non-resident companies
A specific exemption from the application of the basic rule exists where a debt is granted by a resident company
(or by a company, resident or not, in the same group of companies as a resident company) to a connected non-
resident company, if the creditor (together with any group company) holds at least 10% of the equity and voting
rights of the debtor, provided:
o that foreign company is not obliged to redeem that debt within 30 years from the date it is incurred;
o the redemption of the debt in full is contractually conditional upon the market value of the debtor‘s
assets exceeding its liabilities; and
o no interest accrued in respect of the debt during the tax year concerned
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UNIFORM CROSS-BORDER WITHHOLDING REGIME TO PREVENT BASE EROSION
SERVICE FEES WITHHOLDING TAX
In terms of the 2016 draft Taxation Laws Amendment Bill the proposed withholding tax on services fees will be
withdrawn as of 1 January 2017 (the original intended implementation date)
DIVIDEND WITHHOLDING TAX
Section 64D – 64N
A resident company (or regulated intermediary) that pays a cash dividend to a beneficial owner (the party entitled
to the dividend stream) is generally required to withhold the amount of dividend tax the beneficial owner is liable
for, from the dividend paid. Dividend tax is levied at a rate of 15% of the dividend paid.
Written declaration and undertaking
The company (or regulated intermediary) may have to withhold tax at a lower rate if the beneficial owner is a non-
resident. A lower rate of dividend tax must be withheld if the non-resident beneficial owner has by the date set by
the company (or regulated intermediary) or if no such date was set, by the date the dividend was paid, furnished
the company (or regulated intermediary) with a written declaration and undertaking. In the written declaration and
undertaking the non-resident beneficiary will indicate their country of residence and refer to the relevant DTA SA
has with that country and the reduced rate of dividend tax as set out in the DTA.
Exemption from normal tax (section 10(1)(k)
In terms of section 10(1)(k) the dividend will be generally be exempt in the hands of the non-resident.
Date of payment of dividend
In the case of a listed company, on the date the dividend is paid
In the case of a non-listed company the earlier of when the dividend is paid or becomes due and
payable
Date of payment of dividend tax
Dividend tax must be paid to SARS by the end of the month following the month that the dividend was paid.
INTEREST WITHHOLDING TAX (WTI)
Section 50A-H
With effect from 1 March 2015 a 15% withholding tax will be applied to South African sourced amounts of interest
paid to a non-resident.
Exemption from normal tax (section 10(1)(h)
In terms of section 10(1)(h) the interest will be exempt in the hands of the non-resident unless:
The non-resident is a natural person and is physically present in the Republic for more than
183 days during the 12 months before the interest was received or accrues, or
The debt claim in respect of which the interest is paid is effectively connected to a permanent
establishment of that non-resident in the Republic.
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Date of payment
The deemed date of the payment of the interest amount to the non-resident will be the earlier of the date of
payment and the date the amount is due and payable.
The withholding tax is a final tax and the tax withheld must be paid over to SARS by the last day of the month
following the month in which the interest is regarded as paid.
WTI can only be paid to SARS electronically via eFiling, A payor must submit the Return for Withholding Tax on
Interest (WT002), which is a summary of the total of all interest payments made and tax withheld during a month,
to SARS. The WT002 and the payment must be submitted to SARS before the end of the month after the month
in which the interest was paid
Double taxation agreement relief
The withholding of the tax at 15% is subject to double taxation agreement relief and the non-resident must submit
a written declaration in this regard.
Exemption from withholding tax (section 50D(1))
Amounts of South African sourced interest paid to non-residents that will not be subject to the 15% withholding
tax include interest paid to the non-resident by:
The government
SA Bank
Interest paid in respect of listed debt
Exempt Non-residents (section 50D(3))
Non-resident who is a natural person and who was physically present in SA for more
than 183 days in the 12 month period before the date on which the interest is paid
If the debt claim respect of which the interest is paid is effectively connected to a
permanent establishment of that non-resident in the Republic.
WTID – Withholding Tax On Interest Declaration form
A WTID form must be completed by an exempt non-resident recipient (section 50D(3)) and a non-resident
recipient seeking DTA relief.
ROYALTY WITHHOLDING TAX SECTION 49A-G
With effect from 1 January 2015 the rate of withholding tax was increased from 12% to 15%.
―Royalty‖
Any amount that is received or accrues in respect of:
The use or right of use of or permission to use any IP as defined in section 23I or
The imparting of or the undertaking to impart any scientific, technical, industrial or commercial
knowledge or information, or the rendering of or the undertaking to render any assistance or service in
connection with the application or utilisation of such knowledge or information.
Levy of the withholding tax
A 15% tax must be levied on the amount of any royalty that is paid by any person to any foreign person, where
the royalty is regarded as having been received by or accrued to that foreign person from a source within SA in
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terms of section 9. The withholding tax is a final tax.
Section 49D Exemption
A foreign person is exempt from the royalties withholding tax if:
The non-resident is a natural person and is physically present in the Republic for more than
183 days during the 12 months preceding the date on which the royalty is paid, or
The property in respect of which the royalty is paid is effectively connected to a permanent
establishment of that non-resident in the Republic.
Payment date
The royalty is deemed to be paid at the earlier of the date on which the royalty is paid or becomes due and
payable.
Where withholding tax on royalties was withheld by a withholding agent, a Return for Withholding Tax on
Royalties (WTR01) form must be submitted to SARS with the proof of payment.
The same treatment in respect of a DTA and timing of the payment of the tax withheld apply as with section 50A-
H.
WTRD – Withholding Tax On Royalty Declaration form
A WTRD form must be completed by an exempt non-resident recipient (section 49D) and a non-resident recipient
seeking DTA relief.
SERVICES RENDERED: EMPLOYEES‘ TAX
Employees‘ tax is deductible in respect of any remuneration payable to an ‗employee‘ as defined in the Fourth
Schedule to the Act. It follows that any remuneration payable to a non-resident in respect of remuneration from a
source within the Republic is subject to the deduction of employees‘ tax, as is the case with a resident of the
Republic.
Independent contractors
The definition of remuneration excludes an amount paid or payable for services rendered or to be rendered by a
person in the course of a trade carried on by that person, where the trade is carried on independently of the
person paying for the service so rendered. These are often referred to as services rendered by an independent
contractor, and the amount paid for the services rendered is excluded from being remuneration.
The above exclusion does not apply to a non-resident and as such a non-resident cannot be regarded as being
an independent contractor, and amounts paid to a non-resident for services rendered will be regarded as
remuneration.
In the case where an employer is not resident in the Republic, any agent of the foreign employer, who has the
authority to pay remuneration will be regarded as a ―representative employer‖ for the purposes of the Fourth
Schedule and will have the attendant employee‘s tax responsibilities as a resident employer.
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RESIDENCE OF PERSONS OTHER THAN NATURAL PERSONS
A person other than a natural person, for example, a company (which includes a close corporation) or trust, will
be regarded as a resident if
it is incorporated, established or formed in the Republic or
has its place of effective management in the Republic
The definition excludes any person that is deemed to be exclusively a resident of another country for purposes of
the application of any tax treaty.
It follows that if a company or close corporation is incorporated, established or formed in the Republic, it will be
regarded as a resident, regardless of where it is, or becomes, effectively managed. Similarly, if a trust is
established or formed in the Republic it will remain a resident. But if the company or trust is not incorporated,
established or formed in the Republic, it will be regarded as a resident only if, and for so long as, it is effectively
managed in the Republic.
PLACE OF EFFECTIVE MANAGEMENT (POEM)
The Act does not define the expression ‗place of effective management‘.
SARS INTERPRETATION NOTE 6 (ISSUE 2, 3 NOV 2015)
SARS has issued Interpretation Note 6 (issue 2) setting out its view of the meaning of the term.
Importantly SARS‘s interpretation of the meaning of POEM has been adjusted from what was set out in IN 6
(issue 1)
The term ―place of effective management‖ is not defined in the Act and must be ascribed its ordinary meaning,
taking into account international precedent and interpretation. It does, however, not have a universally accepted
meaning and various countries, including members of the OECD, continue to attach different meanings to it.
The purpose of this Note is to discuss the principles and guidelines that will be applied for purposes of
considering the definition of ―resident‖ in section 1(1). These principles and guidelines are consistent with the
determination of the place of effective management when that term is used as a tie-breaker rule in a tax treaty
that adheres to paragraph 3 of Article 4 of the condensed version of the OECD Model Tax Convention as at 15
July 2014 and its accompanying Commentary.
Although this Note deals with effective management in the context of companies, the underlying principles will
generally apply to other entities and bodies of persons that are not natural persons. For example, with a trust
the structures involved and terminology used may require some adaptation but the determination of the place of
effective management would take into account the same considerations as those discussed in the Note.
Depending on the facts applicable there may be additional considerations that need to be taken into account.
Many countries have introduced legislation creating a variety of hybrid entities that combine traditional features of
partnerships and companies. A number of countries have also enacted legislation creating new types of trusts.
These new business vehicles may present unique issues that are not specifically addressed in this Note.
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The place of effective management must be supported by the facts. Under section 102 of the Tax
Administration Act No. 28 of 2011 a company bears the onus of proving its place of effective management and
must, under section 29 of that Act, retain the necessary evidence to support the view taken.
General principle – the meaning of place of effective management
A company‘s place of effective management is the place where key management and commercial decisions that
are necessary for the conduct of its business as a whole are in substance made. This approach is consistent
with the OECD‘s commentary on the term ―place of effective management‖. The place of effective management
is used in paragraph 3 of Article 4 of the OECD‘s Model Tax Convention on Income and on Capital as a tie-
breaker when a person other than an individual is considered, before the application of the tie-breaker, to be a
resident of both the Contracting States which are parties to the tax treaty. The application of the tie-breaker
results in the person being deemed to be a resident only of the State where its place of effective management is
located.
A company may have more than one place of management but it can only have one place of effective
management at any one time. If a company‘s key management and commercial decisions affecting its business
as a whole are made at a single location, that location will be its place of effective management. However, if
those decisions are made at more than one location, the company‘s place of effective management will be the
location where those decisions are primarily or predominantly made.
Experience has shown that the application of these principles does not present serious problems in the majority
of cases. For example, it is relatively easy to determine a company‘s place of effective management if that
company operates in several countries through branches with local managers, but has its head office in South
Africa where most of its senior management are located and where most, if not all, of its board meetings take
place. In contrast, the determination in the case of a company that is part of a global group that operates on a
divisional as opposed to a separate legal entity basis with senior management teams that are responsible for
different aspects of the business being based in different locations, and whose senior management teams travel
frequently, would be more complicated. This complexity can be compounded when overlaid with modern
technology such as video- conferencing and electronic mail. Notwithstanding the potential levels of complexity,
the determination of the place of effective management still involves an application of the same core principles.
Key facts and circumstances
There are normally multiple facts that need to be taken into account, often involving multiple locations, and from
those facts and locations it is necessary to determine a single dominant place where effective management is
located. The determination looks at where the key management and commercial decisions are regularly and
predominantly made. It is not a snapshot requiring an assessment at a particular moment in time.
Although the determination of the place of effective management is not based on a snapshot at a particular
moment in time, when a company changes its place of effective management the change in residence occurs on
a particular date and is not in relation to a year of assessment.
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Relevant facts and circumstances
Definitive rules cannot be laid down in determining the place of effective management and all relevant facts and
circumstances must be examined on a case- by-case basis.
The place of effective management test is one of substance over form. It therefore requires the identification of
those persons in a company who actually ―call the shots‖ and exercise ―realistic positive management‖.
Otherwise stated, a company‘s place of effective management must be determined by ascertaining what are and
who makes the key management and commercial decisions for the conduct of the company‘s business as a
whole. Once this determination has been made, it is necessary to determine where those decisions are in
substance actually made.
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DEDUCTIONS, ALLOWANCES AND RECOUPMENTS
PARTICULAR DEDUCTIONS
( c) Legal expenses
(cA) Restraint of trade payments
(d) Repairs
(e) Wear and Tear
(f) Lease premium
(g) Leasehold improvements
(h) Present value of improvements
(i) Bad debts
(j) Doubtful debts
(l) Employer contributions to fund
(m) Annuity to former employees and partner
11A Pretrade expenses
Pre-trade expenditure and losses (start-up costs) (section 11A)
The section 11A deduction applies to all expenditure actually incurred which would have been allowed as a
deduction in terms of section 11 (other than section 11(x)) or section 11B, and 11D had the expenditure been
incurred after commencement of the carrying on of that trade.
The section 11A deduction is limited to the trade income prior to the deduction of section 11A (after deducting
any amounts deductible in that year of assessment in terms of any other provisions of this Act) and may therefore
not create a loss in respect of the relevant trade.
Furthermore the excess is ring-fenced and it may not be set-off against income from a different trade. The Act is
silent on whether or not the excess may be carried forward for possible deduction in a subsequent year of
assessment. It appears as if section 11A can again be applied in a subsequent year as the Act reads as follows:
―For purposes of determining the taxable income derived during any year of assessment by a person from
carrying on any trade…‖ It is considered that the excess can be carried forward to the subsequent year of
assessment for possible set-off against income from that trade.
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Legal expenses in respect of claims, disputes or actions at law
Certain legal expenses are deductible in terms of the general deduction formula, but s 11(c) provides for the
deduction of certain legal expenses which might not rank for deduction in this way. The legal expenses referred
to in s 11(c) are—
(a) fees for the services of legal practitioners;
(b) expenses incurred in procuring evidence or expert advice;
(c) court fees;
(d) witness fees and expenses;
(e) taxing fees;
(f) the fees and expenses of sheriffs or messengers of the court; and
(g) other expenses of litigation which are of an essentially similar nature to any of the fees and expenses
mentioned.
Any legal expenses of this nature actually incurred by the taxpayer during the year of assessment in respect of
any claim, dispute or action at law arising in the course of or by reason of the ordinary operations undertaken by
the taxpayer in the carrying on of his trade, are deductible. The amount of the deduction is limited, however, to so
much of the legal expenses as—
(a) is not of capital nature
(b) is not incurred in respect of any claim made against the taxpayer for the payment of damages or
compensation if, by reason of the nature of the claim or the circumstances, any payment which is or might be
made in satisfaction or settlement of the claim does not or would not rank for deduction under the general
deduction formula;
(c) is not incurred in respect of any claim made by the taxpayer for the payment to him of any amount which does
not or would not constitute income in his hands; and
(d) is not incurred in respect of any dispute or action at law relating to any claim referred to in (b) or (c) above.
The requirement of s 11(a), namely that an expense is deductible only if it has been incurred in the production of
income, does not apply to s 11(c). For the application of s 11(c) it is necessary that there exists a causal
connection between a taxpayer‘s trading operations and the claim, dispute or action in respect of which legal
expenses are incurred. This argument applies to all legal expenses covered by s 11(c).
The deduction of legal costs under s 11(c) is not limited to disputes or actions which come before the ordinary
courts. Therefore s 11(c) also applies to legal costs in respect of disputes or actions before statutory bodies such
as water courts, licensing courts and industrial conciliation councils. The section does not apply, however, to
proceedings before such bodies when no dispute exists. Legal costs incurred in this connection are deductible, if
at all, in terms of the general deduction formula.
It is important to note that legal expenses which are not deductible under s 11(c) can be deducted under the
general deduction formula where the requirements of ss 11(a) and 23(g) are satisfied. Similarly, s 11(c) does not
cover the actual payment of damages or compensation, which is deductible only under the general deduction
formula.
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Most problems in the interpretation of this section have arisen in relation to the requirement that the legal
expenses for which a deduction is sought must not be of a capital nature. The following cases are examples of
legal expenses which passed this hurdle and fulfilled the other requirements of the section:
(a) expenses incurred in defending the taxpayer, a registered accountant and auditor, against charges of fraud
and of contraventions of certain statutes arising from the insolvency of a company in which the taxpayer, as part
of his professional practice, held office as secretary, director and public officer;
(b) expenses incurred in connection with the termination of an agency agreement, where the taxpayer sold
products through agents and associated companies;
(c) expenses incurred in claiming damages arising out of alleged false advertising, including seeking an interdict
restraining those advertisements;
(d) expenses incurred in resisting an order to remove machinery from a piece of land, since the machine was
operating profitably and time was needed to find an alternative site;
(e) expenses incurred in opposing an interdict preventing the infringement of copyright by manufacturing and/or
selling certain products.
By way of contrast, legal expenditure incurred in respect of legal action aimed at securing an interdict preventing
manufacture and sale of a competing product, and thus eliminating the resulting competition, was held to be of a
capital nature.
Wear and tear allowance Section 11(e)
In terms of s 11(e) a deduction is allowed of such sum as the Commissioner may think just and reasonable as
representing the amount by which the value of any machinery, implements, utensils and articles used for
purposes of trade has been diminished by reason of wear and tear or depreciation during the year of
assessment.
The words ‗machinery, plant, implements, utensils or articles‘ are wide-ranging. Although the words refer only to
inanimate objects. The allowance may be claimed only if the asset is owned by the taxpayer or if ownership will
be acquired as purchaser under an instalment credit agreement. Furthermore, no allowance can be claimed by a
person who remains the owner of an asset which has been sold by him in terms of an instalment credit
agreement. These two restrictions prevent the claiming of allowances by both parties.
The deduction is subject to the certain qualifications, including, most relevant for this seminar are the following
in no case is an allowance made for the depreciation of buildings or other structures or works of a
permanent nature;
where any machinery, plant, implement, utensil or article qualifying for the wear and tear allowance
is mounted on or affixed to a concrete or other foundation or supporting structure, that structure is
not regarded for this purpose as a structure or work of a permanent nature, and is deemed to be a
part of the article mounted on or affixed to it. This applies only if the Commissioner is satisfied
that—
(i)the foundation or supporting structure is designed for the article concerned and constructed in such a manner
that it is, or should be regarded as being, integrated with that article;
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(ii)the useful life of the foundation or supporting structure is or will be limited to the useful life of the article
concerned
No allowance can be made in respect of depreciation of buildings or other structures or works of a permanent
nature. It would appear that the distinction between movable and immovable property is used as the basis for the
distinction between buildings or other structures or works of a permanent nature on the one hand, and
machinery, implements, utensils and articles on the other.
The provision requires that the assets concerned be used by the taxpayer for the purposes of his trade, not
wholly and exclusively for that purpose. As a result the practice is to calculate the allowance with reference to
the proportion of time for which an asset is used for the purposes of trade, if also used for some other purpose.
Small items, for example loose tools, which cost less than R7000 per item may be written off in full during the
year of acquisition. A small item is regarded as an item which normally functions in its own right and is not an
individual item that forms part of a set. Accordingly, a set cannot be divided into individual independent items,
each costing less than R7000.
Repairs Section 11(d)
The cost of repairs is deductible to the extent that it is expenditure actually incurred during the year of
assessment on—
(a) repairs to property occupied for the purpose of trade or in respect of which income is receivable (including any
expenditure so incurred on the treatment against attack by beetles of any timber forming part of such property);
and
(b) the repair of machinery, implements, utensils and other articles employed for purposes of trade.
It is not necessary that the taxpayer be the owner of the premises, or the machinery, implements, utensils or
articles concerned.
The prohibition on the deduction of expenditure of a capital nature contained in s 11(a) does not apply to the cost
of repairs claimed as a deduction under s 11(d). The cost of improvements or additions to property is not,
however, deductible under s 11(a), because such expenditure is of a capital nature. The meaning of the word
‗repairs‘ as used in s 11(d) is therefore of particular importance. The enquiry is usually whether an expense
relates to the repair of an asset as opposed to additions or improvements to the asset.
From the nature of things it is very difficult in a borderline case to determine whether an expense relates to one or
the other. It is not surprising, therefore, that in so many decisions it has been emphasised that in borderline cases
the question is one of degree.
Various cases have created some general principles as follows:
(1)Repair is restoration by renewal or replacement of subsidiary parts of the whole. Renewal as distinguished
from repair is reconstruction of the entirety, meaning by the entirety not necessarily the whole but substantially
the whole subject matter under discussion.
(2)In the case of repairs effected by renewal it is not necessary that the materials used should be identical with
the materials replaced.
(3)Repairs are to be distinguished from improvements. The test for this purpose is — has a new asset been
created resulting in an increase in the income-earning capacity or does the work undertaken merely represent the
cost of restoring the asset to a state in which it will continue to earn income as before?
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In view of the rather grey aspect of the distinction between repairs and improvements, there is a large body of
case law on this subject, which is not always consistent. However, the following may be regarded as general
principles in this connection:
(a)unless the structure or article on which repairs are deemed to have been done was damaged or had
deteriorated and replacement was required, no repair for the purposes of s 11(d) has taken place, and no further
inquiry need be made. Replacing something which is serviceable solely for aesthetic reasons, or in order to
improve the service provided, does not constitute a repair;
(b)in judging whether a renewal or repair has been carried out, regard must be had to the extent of the restoration
work in relation to the whole of which the portion restored forms a part. The greater the restoration work in
relation to that whole, the less likely it is that a repair has taken place;
(c)the fact that the materials used in making the repair are different and possibly better than the materials used
originally does not mean that a repair within the meaning of s 11(d) has not taken place but if better materials are
voluntarily used the work will not constitute a repair as the work will not constitute a ‗restatement‘ but a voluntary
improvement;
(d)the cost of an improvement as distinct from a repair does not rank for deduction, and an improvement may
have been made although work has only been carried out on a subsidiary part of the whole. Where, however, the
work constitutes a repair with elements of improvement, this does not disqualify identifiable elements of the work
as a repair, the costs of which are deductible in full (including any portion of these costs which may relate to the
improvement);
(e)work that results in an addition to the original structure will not constitute a repair;
(f)where a reconstruction is effected, the taxpayer is not entitled to make a claim in respect of the notional cost
that could have been incurred had repairs been carried out in place of a reconstruction.
The cost of repairs is deductible if incurred in respect of a property occupied for the purpose of trade or in respect
of which income is receivable. Expenditure on repairs incurred before the property concerned is occupied for
purposes of trade or before income is receivable is not, therefore, deductible under s 11(d).
Structured leases (section 11(f), (g) and (h))
A lease premium is a consideration paid by a lessee to a lessor that is over and above rental. It must be
distinguished from the amount paid to an existing tenant for the assignment of the lease rights to the payer. Any
lease premium paid by a tenant to a property-owner is tax deductible by the tenant over the period of the lease or
twenty-five years (whichever is shorter) in terms of section 11(f). Conversely, it is fully taxable in the hands of
the landlord in the year of receipt or accrual in terms of paragraph (g) of the definition of ‗gross income‘.
Any improvements effected to the leasehold property by the tenant of his own volition have no normal tax
implications for the property-owner. But improvements in terms of an obligation imposed on the tenant by the
lease agreement impact on both the landlord and the tenant provided the landlord is a tax-paying entity.
The tenant is entitled under the provision of section 11(g) to write-off the value of the obligatory improvements in
equal instalments over the period of the lease or twenty-five years, (whichever is the shorter period) commencing
in the year when the improvements are completed and used for trade purposes.
The property-owner is taxable on the value of the obligatory improvements in the year that the lease is concluded
in terms of paragraph (h) of the definition of ‗gross income‘. He should then qualify for the special allowance
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under section 11(h). This allowance has the effect of discounting the amount included in his gross income to the
present value of improvements at 6% over the period of the lease.
Bad Debts (section 11(i)
Section 11(i) permits the deduction from his income of the amount of any debts due to a taxpayer to the extent to
which they have during the year of assessment become bad, provided that the amount was included in the
taxpayer‘s income in either the current or some previous year of assessment.
As regards the requirement that the debts be due to the taxpayer, it is submitted that a debt must belong to him
on the last day of the year of assessment. Consequently, when, during the year of assessment, he sells his
business including all his debts, whether good, bad or doubtful, he cannot claim an allowance for bad debts.
On this principle, it must also follow that when a taxpayer compromises with one of his debtors during the year
and waives his right to claim portion of the debt owing by the debtor, the portion that he has waived his right to
recover cannot rank as a bad debt, since it does not belong to him at the end of the year of assessment. In
practice, however, the Commissioner permits a taxpayer to write off as a bad debt any loss sustained in the event
of a compromise.
It has been held that, in order to rank as a bad debt in a particular year of assessment, a debt must have become
irrecoverable for the first time during that year. Therefore debts proved to have been irrecoverable prior to the
year of assessment in which the deduction is claimed are not deductible. A taxpayer is therefore not entitled to
accumulate bad debts for the purpose of writing them off in a later year. This approach is confirmed by the
current wording of the deduction, which specifically refers to debts that have become bad during the year of
assessment, that is, the year in which they are claimed as a deduction. For example, if a debtor goes insolvent in
a particular year of assessment, the taxpayer cannot claim a deduction under s 11(i) for that debt in a later year
of assessment. If he has neglected to claim the deduction in the year in which the debtor went insolvent (or an
earlier year if the debt went bad before insolvency), his only remedy is to seek a revision of the assessment or a
refund of tax overpaid for the year in which the debt went bad.
It has been held that a taxpayer is entitled to claim the deduction of bad debts up to and as at the time when he
finally regards them as being bad, and if evidence can be adduced that he came to the conclusion that they were
bad and irrecoverable only in a particular year of assessment, their amount may properly be deductible in that
year. But is it is unlikely that it is the taxpayer‘s subjective assessment of the quality of a debt that is critical to its
deduction or time of deduction.
As regards the requirement that the amount of debts written off have been included in the taxpayer‘s income, the
debt must be in the nature of income before it may be allowed as a bad debt. A bad debt arising out of the sale of
goods is deductible since the amount of the debt will have been included in the seller‘s income. On the other
hand, a bad debt arising out of money lent, for example, to an employee, is not deductible in terms of s 11(i),
since the amount of the debt would never have been included in the lender‘s income.
On the purchase of a business, debts taken over and subsequently found to be bad are not allowable, since the
amounts of these debts would never have been included in the income of the buyer of the business. The loss is
clearly one of a capital nature. The same principle applies to an inherited business. The heir is not entitled to
deduct any bad debts outstanding at the date of death of the deceased. When a taxpayer carrying on business
on his own account admits a partner, the partner is not entitled to deduct his share of the bad debts written off
relating to debts incurred prior to the commencement of the partnership. The original owner is, however, entitled
to such a deduction.
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It is not uncommon for the seller of a business who has included in the sale debts due to him to guarantee
payment of those debts to the buyer in the event of their proving to be irrecoverable. It has been held that the
seller cannot deduct an amount subsequently payable under his guarantee, since it is a capital loss. The
agreement usually provides that if the seller is compelled to make any payment to the buyer under his guarantee
for irrecoverable debts, he is entitled to re-cession of the debts. If these debts are re-ceded to the seller, it is
submitted that they are deductible, since they now belong to him and were previously included in his income and
therefore comply with s 11(i).
Section 11(i) does not prevent a finance company or a money-lender from writing off any moneys lent that prove
to be bad. Such losses are deductible in terms of s 11(a) as losses incurred in the production of income and not
of a capital nature. Similarly, when it is satisfactorily established that it is the custom of a business or profession
to make advances to customers or clients as an integral part of the business carried on for the purpose of
securing or retaining business, losses arising from these advances, if the advances are found to be irrecoverable,
are allowable deductions in terms of s 11(a).
Section 11(i) does not require as a prerequisite to the deduction of bad debts the continued existence of the
taxpayer‘s business out of which the debts arose. Therefore a taxpayer is allowed to deduct from his income from
trade in a particular year any bad debts incurred in a previous business, provided that all the other requirements
of s 11(i) are satisfied. In practice SARS also permits a taxpayer to deduct his cost of collecting such debts.
If amounts allowed as bad debts are subsequently recovered, they form part of the gross income in the year of
receipt, and previous assessments cannot be reopened. Section 8(4)(a) is also authority for the inclusion of these
amounts in the income of the taxpayer in the year in which they are recovered.
In practice it may happen that a debt is secured by a pledge of an asset of the debtor. If, upon realization of the
security, the amount received by the creditor is less than the amount owing to him by the debtor, the
irrecoverable portion is deductible in terms of s 11(i) as long as the other requirements of the deduction are
satisfied. If the creditor himself buys the property for an amount that is insufficient to discharge the amount owing
by the debtor, the balance irrecoverable is deductible in terms of s 11(i), and the Commissioner cannot claim that
the creditor must first realize the property. If the creditor acquired the property by public auction, the price paid
must be regarded as its fair market value, and his loss is to be measured in terms of this value.
The question whether a debt is bad or not must be decided at the time when the bad debt is claimed and
according to the then existing circumstances of the debtor; subsequent events cannot influence the determination
made for that year of assessment. In practice the taxpayer is permitted to make his determination at the time
when his financial statements are prepared and not necessarily on the last day of his year of assessment.
The Commissioner may be entitled to refuse the allowance when the amount of a debt is recoverable from some
other person under a guarantee or suretyship agreement, since s 23(c) prohibits as a deduction any loss that
would otherwise be allowable to the extent to which it is recoverable under a contract of insurance, guarantee,
security or indemnity.
Doubtful Debts section 11(j)
Section 11( j) authorizes the Commissioner to make an allowance each year for so much of any debts due to the
taxpayer that he considers to be doubtful, but only if those debts would have been allowed as a deduction under
any other provision of Part I of Chapter II had they become bad. The amount of the allowance granted must be
included in the taxpayer‘s income in the following year of assessment.
The taxpayer is required to render a detailed list of all doubtful debts.
26
The question whether a debt is doubtful must be decided at the time when the debt is returned as doubtful and
according to the then existing circumstances of the debtor; subsequent events cannot influence the determination
made for that year of assessment. In practice the taxpayer is permitted to make his determination at the time
when his financial statements are prepared and not necessarily on the last day of his year of assessment.
The Commissioner will grant an allowance only for debts belonging to the taxpayer on the last day of the year of
assessment. He will not grant the allowance on the amount of any debts that have not been included in the
taxpayer‘s income, either in the current year of assessment or in any previous year of assessment, although,
unlike s 11(i), s 11(j) does not restrict the allowance to debts the amounts of which were included in the
taxpayer‘s income.
In practice SARS makes an exception with professional money-lenders, and allows them to deduct an allowance
for doubtful debts under s 11(j), despite the fact that no amount will have previously been included in their income
on account of their loans.
Contributions by employers to funds (section 11(l)
In terms of section 11(l) employers may deduct contributions to a pension, provident or benefit fund, in an
amount at least equal to 10 per cent of the ―approved remuneration‖ of covered employees. In addition,
SARS has the discretion to allow a greater percentage, and in practice, a 20 per cent threshold is accepted
without specific SARS permission.
Unlike other 'in kind' (fringe) benefits, employer contributions to pension and provident funds for the benefit of their
employees have not been subject to employees‘‘ tax (PAYE) and did not form part of the taxable income of
employees.
WEF 1 March 2016
With effect from 1 March 2016 employer contributions to all approved retirement funds will be deductible
against income of the employer. The deduction will effectively be unlimited
Annuities paid to former employees or partners and their dependants
Section 11(m) permits a taxpayer to deduct from his income a reasonable amount paid by way of an annuity
during the year of assessment to a qualifying recipient. Qualifying recipients for this purpose are listed below:
• A former employee who has retired from his employ on the ground of old age, ill health or infirmity
• A person who was for a period of at least five years a partner in an undertaking carried on by the
taxpayer who retired from the partnership ‗in respect of‘ the undertaking on grounds of old age, ill health
or infirmity, provided that the amount paid is reasonable if one has regard to the services rendered by
the person concerned as a partner in the undertaking prior to his retirement and to the profits made in
the undertaking, and provided that the amount paid does not represent a consideration payable to him
for his interest in the partnership.
• A person who is dependent for his maintenance upon a former employee or former partner in an
undertaking carried on by the taxpayer or, should the former employee or partner be deceased, was so
dependent upon the former employee or partner immediately prior to his death, for example, a widow of
a former employee or partner.
The words ‗amount paid by way of annuity‘ clearly rule out voluntary pensions terminable at the will of the payer
or lump-sum gratuities. Such payments made to former employees or partners on retirement or to their
dependants are not deductible in terms of s 11(m). The taxpayer must bind himself to pay an annuity.
27
CAPITAL ALLOWANCES
The allowances granted in terms of the Income Tax Act in terms of buildings are dependent on the nature of the
building, how it is acquired and the use to which it is put.
The Act does not allow any deductions in respect of the cost of land.
Tax allowances in respect of owned buildings
Manufacturing buildings s 13
Hotel buildings - s13bis
Residential housing projects s 13ter
Urban development zones s 13quat
Commercial buildings - s 13quin
Repairs to building - s 11(d)
Section 12C
Manufacturing plant and Machinery
New and unused: 40/20/20/20
Used: 20/20/20/20/20
Section 13
Manufacturing buildings: 5%
Section 13quin
Commercial Buildings and improvements (new and unused): 5%
Section 13sex
Residential accommodation: 5%
―Low cost‖ residential accommodation 10%
28
Leased land and buildings
The following sections of the Act apply to leased land and/or buildings:
Rental costs s 11(a)
Lease premiums s 11(f)
Leasehold improvements s11(g)
Repairs s 11(d)
Assessed losses section 20
Section 20 applies for the purpose of the determination of the taxable income derived by a person from carrying
on a trade, and allows to be set off against the income derived by him from carrying on such a trade:
• A balance of assessed loss incurred by him in any previous year that has been carried forward from the
preceding year of assessment.
• An assessed loss incurred by him during the same year of assessment in carrying on any other trade
either alone or in partnership with others, otherwise than as a member of a company whose capital is
divided into shares.
Section 20 envisages a continuity in the setting-off of an assessed loss against income in every year succeeding
the year in which it was originally incurred, so that in each succeeding year a balance of assessed loss can be
determined, which can be carried forward until the assessed loss is exhausted.
An ‗assessed loss‘ means any amount by which the deductions admissible under s 11 inclusive, exceeds the
income in respect of which they are so admissible.
The set-off is against income derived by the taxpayer. In practice this fact is recognized by SARS with the result
that as long as there is continuity in trading all assessed losses are brought forward for set-off against income.
Taxpayers must be aware of the anti-avoidance provisions contained in section 103(2) dealing specifically with
tax avoidance due to the use of an assessed loss.
29
RECOUPMENTS
Section 8(4)(a)- general recoupment provision:
Recoupment= Proceeds – Tax value.
Tax Value = Cost – Tax Allowances claimed
The recoupment to be included in gross income is limited to allowances claimed on the asset.
Example
A second hand machine acquired in year 1 for R100 000 is sold in year 3 for R140 000.
Allowances are claimed at 20% per annum in terms of s12C.
Sum of allowances (100 000 x 20% x 3) 60 000
Tax value (100 000 – 60 000) 40 000
Recoupment (140 000 – 40 000) = 100 000 (limited to 60 000) 60 000
Taxable Capital Gains {([140 000 – 60 000*] – [100 000 – 60 000*]) x 66.6%} 26 640
The Income Tax Consequences
Year 1
S12C Allowance (100 000 x 20%) (20 000)
Year 2
s12C Allowance (100 000 x 20%) (20 000)
Year 3
s12C Allowance (100 000 x 20%) (20 000)
Recoupment 60 000
Taxable Capital Gain 20 000
* Proceeds for CGT purposes cannot include amounts (the recoupment) already included in income
** Base Cost for CGT purposes cannot include expenses already deducted against income
Rollover provisions may apply in respect of the involuntary disposal of assets and replacement of certain
depreciable assets in terms of para 65 and 66 of the Eighth Schedule.
30
Section 8(5) Recoupments — acquisition of hired assets
Section 8(5)(a) comes into operation when
• an amount has been paid by a person for the right of use or occupation of any movable or immovable
property, for example, by way of rent or a premium as envisaged by s 11(f);
• that amount has been allowed as a deduction in the determination of that person‘s taxable income; and
• it or its equivalent is upon the subsequent acquisition of the property by that or any other person
applied in reduction or towards settlement of the purchase price of the property.
The amount must then be included in the income of the person who acquires the property for the year of
assessment during which he exercised his option to acquire it or for the year of assessment during which he
concluded the agreement to acquire it.
The operation of s 8(5)(a) is suspended by a proviso, which ensures that this provision does not apply when, in
consequence of the acquisition of property to which s 8(5)(a) refers, the person who acquires it or any other
person has derived a taxable benefit and the cash equivalent of that taxable benefit has been included in his
gross income in terms of para (i) (fringe benefits) of the definition of the term ‗gross income‘ in s 1. The ‗taxable
benefit‘ referred to is defined in para 1 of the Seventh Schedule, and the situation envisaged is that in which such
a benefit is deemed to be granted by an employer to his employee in the form of an asset acquired by the
employee either for no consideration or for a consideration less than its determined value and the cash
equivalent of the value of the taxable benefit thus arising is fixed by para 5 of that Schedule. The purpose of this
proviso clearly seems to be to prevent the same acquisition of the same asset from generating both a taxable
recoupment and a taxable fringe benefit.
But these alternative inclusions in gross income need not necessarily be equal in amount, since they are
determined under entirely different rules.
But, in the absence of circumstances bringing this proviso into play, if X, the lessor, agrees to sell the hired
property to Y, the lessee, or to any other person at an agreed price less whatever amount has been paid by way
of rent by Y, say R3 000, Y or whoever else has acquired the property is liable to tax on the amount of the rent
previously allowed as a deduction to Y, namely, R3 000.
SARS will also apply this provision when a lessee of premises undertakes improvements at a certain cost, being
given an option to purchase the premises during the currency of the lease at a price that must be reduced by the
cost to the lessee of the improvements undertaken. To the extent to which the cost of the improvements has
been allowed as a deduction to the lessee in terms of s 11(g) (leasehold improvements), it must be included in
his income in the year of assessment during which he exercised the option to purchase.
It may happen that there is no reduction in the purchase price by the amount of rental paid by the lessee but the
property is acquired by the lessee or some other person for a consideration that in the opinion of the
Commissioner is not an adequate consideration or for no consideration. In such a situation the fair market value
of the property as determined by the Commissioner less the amount of the consideration, if any, not exceeding
the amount paid for the right of use or occupation of the property, must be deemed to have been applied in
reduction or towards settlement of the purchase price of the property and is taxable, unless the Commissioner,
having regard to the circumstances, otherwise decides (s 8(5)(b).
31
Example
If A, the lessor, has given B, the lessee, an option to acquire property at any time during the currency of the lease
at a price of R10 000 and B exercises the option at a time when the market value is R15 000, B may be subject
to tax in the year in which he exercises the option on the difference between R15 000 and R10 000, that is, on R5
000, or the aggregate amount he has paid for the right of use or occupation and allowed to him as a deduction in
previous years, whichever is the lesser.
For example, if R3 000 has been allowed to him by way of deductions, only R3 000 is taxable. If R8 000 has
been allowed to him, R5 000 is taxable. If B has ceded all his rights under the lease to C, who exercises the
option, it is C who may be subject to tax on the recoupment in terms of s 8(5)(a) even though C enjoyed no
deductions from his taxable income in respect of prior rentals paid.
A lessee is deemed to have acquired the property for no consideration for the purposes of s 8(5)(b) in certain
circumstances (s 8(5)(bA). This deeming provision applies if after the termination of a lease ‗by the effluxion of
time or otherwise‘ the person who was the lessee under the lease (referred to as the ‗former lessee‘) is, with the
express or implied consent or acquiescence of the person who was the lessor under the lease (referred to as the
‗former lessor‘) or of the owner of the property, allowed to use, enjoy or deal with the property as he (the former
lessee) may deem fit
• without the payment of any consideration; or
• for a lease entered into on or after 1 September 1983, without the payment of any rental or other
consideration or subject to the payment of a consideration that is nominal in relation to the fair market
value of the property.
Section 8(5)(bA) applies only to a lease of property consisting of corporeal movable goods or of machinery or
plant on which the former lessor was entitled to any allowance under the Act. Since there is no express
requirement that the machinery or plant be movable, the provision would presumably apply also to machinery or
plant that is or has become immovable, perhaps through annexure to the building in which it is housed, provided
that it qualified for any allowance under the Act.
In terms of s 8(5)(bA) the former lessee is deemed to have acquired the property for no consideration for the
purposes of s 8(5)(b). If the property was owned by the former lessor, its fair market value will, unless and until it
is otherwise determined to the satisfaction of the Commissioner, be deemed to be
• the cost to the former lessor of the property; or
• when the lease was a ‗financial lease‘ as defined in s 1 of the Sales Tax Act 103 of 1978, the ‗cash
value‘ of the property ‗contemplated in‘ para 2 of Schedule 4 to the Sales Tax Act
less a depreciation allowance calculated in accordance with s 8(5)(bB)(i) for the period from the commencement
to the termination of the lease.
Section 8(5)(bB)(i) requires the depreciation allowance to be calculated at the rate of 20% a year on the
‗reducing-balance‘ method. More specifically, it provides that the depreciation allowance be calculated as an
aggregate of annual allowances for the years in the period for which it may be made.
For the first year in that period it is calculated at the rate of 20% of the cost or cash value of the property, and for
each succeeding year in that period it is calculated at the rate of 20% on the balance of the cost or cash value
remaining after the deduction of the allowance or allowances calculated for the preceding year or years.
32
It should be observed that this basis of determination of the fair market value of the property applies only if the
property was owned by the former lessor. Provision is not expressly made in this connection for the situation
contemplated elsewhere in s 8(5)(bA) in which there is an owner other than the former lessor, for example, when
there is a sublease. In this situation the fair market value would presumably have to be determined by the
Commissioner under s 8(5)(b).
A consideration payable for the property after the termination of the lease is deemed to be nominal in relation to
the fair market value of the property for the purposes of s 8(5)(bA) if, in relation to the period for which it is
payable, it amounts to less than 10% a year of the fair market value (s 8(5)(bB)(iii)).
For example, if after the termination of the lease the former lessee is permitted to continue to use property that
has a fair market value of R2 000 for a consideration of less than R200 a year, the consideration will be nominal
and the former lessee will be deemed to have acquired the property for the purposes of s 8(5)(b) for no
consideration. He will be liable to tax on a recoupment of R2 000 (or, if less, the amounts previously paid for the
right of use of the property that have been deducted). He will be able to claim a deduction of the current rentals
under s 11(a).
The former lessor or the owner of the property will, unless and until the contrary is proved, be deemed to have
consented to the former lessee‘s using, enjoying or dealing with the property for the purposes of s 8(5)(bA) if, at
the end of a period of three months reckoned after the date on which the lease terminated, the former lessor has
not instituted proceedings to compel the former lessee to return the property to him, to relinquish possession of it
or to dispose of it in accordance with the terms of the lease. For a lease that terminated on or before 31
December 1983, the period of three months is reckoned from that date. (Section 8(5)(bB)(ii).
In certain circumstances a lease is deemed to have terminated: It is deemed to have terminated when the former
lessee is, after the termination of a lease referred to in s 8(5)(bA), required to pay a consideration in respect of
his right to use, enjoy or deal with the property but ceases to pay that consideration, or, if the lease was a ‗rent-
free‘ or ‗nominal-rent‘ lease entered into on or after 1 September 1983, he pays a consideration for the right that
is ‗nominal‘ (see above) in relation to the fair market value of the property. The lease is deemed to have been
terminated on the date from which the former lessee is no longer required to pay the consideration or, for such a
lease entered into on or after 1 September 1983, from the date on which the consideration payable by the lessee
becomes nominal. (Section 8(5)(bB)(iv)
It is submitted that no recoupment can arise under s 8(5) of any portion of an allowance or advance paid towards
an employee‘s transport expenses not included in a taxpayer‘s taxable income by virtue of s 8(1)(a) and (b)
should the vehicle used by the employee be first hired and then acquired, since s 8(5) applies to past deductions
determining taxable income, while s 8(1)(a) and (b) merely measure inclusions in taxable income. Any effective
reduction of such inclusions they might achieve cannot be equated with deductions from taxable income.
33
Section 23A Section 23D
Limitation of allowances granted to lessors
Limitation of allowances granted to lessors in sale and leaseback arrangements or a
licenser who licenses a depreciable asset back to the person who disposed of it to
him/her (now the licensee).
Applicable to Lessors of affected assets Lessors (in sale and leaseback arran- gements) or licenser of depreciable assets.
Limitation Sections 11(e), 11(o) & 12C allowances claimed by lessor in respect of affected assets that are let, are limited to taxable rental income.
Disallowed portion carried forward to sub- sequent year.
Any deductions or allowances claimed by the lessor or licenser will be calculated on the purchase price of the depreciable asset, but always limited to
the cost to the lessee or licensee
less
all deductions allowed to the lessee or
licensee
plus
any recoupment on the sale by the lessee or
licensee
plus
the taxable capital gain included in the
taxable income of the lessee or licensee.
Definitions Affected asset
Any machinery, plant, implement, uten- sil, article or aircraft
which has been let
Lessor entitled to an allowance under section 11(e), 12C or 37B(2)(a) (allow- ance on environmental treatment and recycling assets – 40%/20%/20%/20%)
But excluding
assets leased out under an operating lease (see definition below)
assets used by the lessor mainly in a trade other than leasing (i.e. incidental letting)
Operating lease means a lease of movable property where the
asset may be hired by general public directly
from lessor for < 1 month
maintenance cost is borne by the lessor
risk of loss or destruction remains with the lessor
Depreciable asset (section 1)
An asset as defined in the Eighth Schedule (property of whatever nature, excluding currency, and a right or interest in any property) that qualifies for a deduction or allow- ance that is in whole or partially based on its cost or value,
but excluding trading stock or any debt.
34
Rental income means income
derived by way of rent
from the letting of movable property, plant and machinery in respect of which a section 11(e) or 12C allowance is or has been granted to the lessor
(NB - the income from the letting of fixed property is excluded, as the asset will not qualify
for an allowance.)
Apportionme
nt
Apportion any deduction if it relates to both rental income and other income in the calculation of taxable rental income.
Only the portion in respect of rental in- come is deductible in determining the taxable rental income.
35
LOANS ANTI-HYBRID DEBT INSTRUMENT RE-CHARACTERISATION RULES
Sections 8F and 8FA
In the area of corporate financing, there are three basic sources of finance:
equity,
debt and
retained profits.
For commercial purposes, debt and equity are the key sources of external finance. As a general matter, debt is
redeemable with a yield based on the time value-of-money (e.g. interest), and payment obligations exist without
regard to the performance of the debtor company (i.e. payments are required without regard to profits or cash
available). On the other hand, equity is typically non-redeemable with the yield (i.e. dividends) depending on the
performance of the company (i.e. profits), and payment obligations are discretionary or can be deferred without
giving rise to legal claims.
For tax purposes, interest on debt is generally deductible in the hands of the payor (e.g. if incurred in the
production of income) and included as ordinary revenue in the hands of the recipient. On the other hand,
dividends are not deductible by the payor nor are they includible in the hands of the shareholder. However,
dividends may be subject to the Dividends Tax.
In order to reduce the scope for the creation of equity that is artificially disguised as debt, a two-fold regime is
proposed for domestic company issuers:
Section 8F: This provision focuses on features relating to the nature of the instrument itself (i.e. the
corpus);
Section 8FA: This provision focuses on the nature of the yield.
In making these rules, it is understood that the features distinguishing debt from equity are varied and are often
contextual. Nonetheless, the provisions take aim at companies that issue stated debt instruments so as to
artificially generate interest deductions if clear-cut equity features exist when viewed in isolation.
36
Section 8F: Instrument focused re-characterisation
Features
The re-characterisation rules target certain mechanisms commonly used to avoid required redemption. These
anti-avoidance rules take into account not only the instrument itself, but side arrangements as well
Conditions to be considered are:
1. conditions allowing the company in a particular year of assessment to repay the debt in the form of
shares whose market value is less than the outstanding amount of debt. (Repayment must generally
come in the form of cash or shares equal to the value of the outstanding debt).
2. the obligation to repay any amount owing in respect of the debt instrument is conditional upon the
market value of the assets of the company not being less than the market value of the liabilities of the
company.
3. the company owes the amount to a connected person in relation to that company and is not obliged to
redeem the instrument within 30 years, where the instrument is not payabe on demand.
A key feature of debt is the holder‘s ability to redeem the capital amount loaned within a reasonable
period. Instruments without this key feature operate more like equity (i.e. shares), and the yield on
these instruments will accordingly be treated as equity yields (i.e. dividends in specie). This is
particularly an issue between related parties who are indifferent to the redemption of their
capitalisations into companies that form part of the same economic unit. In order to avoid the re-
characterisation, the debt instrument (i.e. the corpus) must be fully redeemable within 30 years from
the date of issue (taking into account the terms of the instrument itself or any side arrangement).
However, this treatment will not apply to financial instruments payable on demand.
The test for whether a debt is commercially real or artificial must be tested continuously, not merely from the date
of issue or modification. If the conditions of the debt change, the debt becomes subject to the avoidance rules at
the time of the change (and not before)
Impact of re-characterisation
Debt instruments falling under the reclassification rules will remain within the debt paradigm. Only the
interest in relation to the instrument will be treated as a dividend in specie in the hands of the payor as well as the
payee for the period during which the debt instrument constitutes a hybrid debt instrument. As a result, the payor
will be denied the deduction for the stated interest. The stated interest will be treated as a dividend in specie
(potentially subject to the Dividends Tax depending on circumstances), and the interest incurral rules (e.g.
section 24J) will no longer be relevant to the existence of the instrument.
37
Section 8FA Yield focused re-characterisation
In some circumstances, the debt/equity re-characterisation will focus on the yield of the instrument without
looking to the whole. Under these rules, the re-characterisation will similarly deem the particular yield at issue to
be a dividend in specie in the hands of both the payor and the payee without converting the instrument as a
whole (or even without converting other yields that lack equity features). In order to breach this standard, the
yield at issue (taking into account all agreements) must have one of the following features:
1. The yield must not be determined with reference to time-value-of-money principles or a specified
rate of interest (e.g. instead being based on company profits); or
2. The interest rate is raised with reference to the increment in the profits of the issuer.
As a result, the payor will no longer obtain any deduction for the stated interest. So much of the interest as is
dependent on the increase in the profits of the issuer will be treated as a dividend in specie (potentially subject to
the Dividends Tax depending on circumstances), and the interest incurral rules (e.g. section 24J) will no longer
be relevant to the existence of the instrument. The instrument itself will retain its debt characterisation and other
payments will have to be tested separately for debt/equity recharacterisation.
Exemptions from reclassification
The anti-hybrid rules will be subject to certain exemptions as a matter of policy. In particular, exemptions will exist
for small business companies as well as certain regulated debt issued by banks and insurers.
Relief for small businesses
Small business companies (see section 12E) will not be subject to the hybrid recharacterisation rules. In most
cases, the differences between debt and equity have little overall impact on the fiscus.
Relief for regulated bank capital
Banks often issue various forms of capital, including Tier I (straight equity) and Tier II (debt with equity features)
capital. Increased pressure is being placed on the banks to increase these forms of capital via the international
banking Basel standards. While it is understood that certain forms of Tier II capital will probably be in violation of
the hybrid recharacterisation rules, these rules will be waived for Tier I and Tier II capital issued by banks and
controlling companies in relation to those banks so as not to place further pressure on the cost of banking capital
given the global regulatory uncertainties in this regard. It is also understood that tax systems of other countries
similarly exempt these forms of debt from potential recharacterisation on similar policy grounds.
Relief for regulated insurer capital
Short-term and long-term insurers are required to maintain a sound financial condition by maintaining adequate
levels of assets to cover their regulated liability and capital requirements. As a safeguard mechanism, the
redemption of certain classes of debt instruments issued by short-term and long-term insurers are subject to
approval by the Registrar of short term and long term insurance (respectively). These forms of debt operate
roughly similar to Tier I and Tier II debt and will accordingly be exempt from the hybrid debt reclassification rules.
38
Linked units held by Pension Funds, Provident Funds, REITs, Long-Term Insurers and Long Term Insurers
It is also understood that there are certain companies partly owned by pension funds, provident funds, REITs,
Short-term insurers and Long-term insurers (―Insurers‖) that issue linked units (constituting of a share and a
debenture) to these funds. Profits distributed by these subsidiaries often have a dividend element (for example, 1
per cent as a dividend and 99 per cent as interest). Interest payments in respect of these linked units (the
debenture part) will therefore be potentially reclassified in these rules. As a consequence, the subsidiary will not
be able to claim a deduction in respect of the yield paid to the funds in respect of these instruments.
Interest paid in respect of the linked units held by a pension fund, provident fund, REIT or Insurers will be
excluded from the application of the reclassification rules. However, this exclusion will only apply if the fund
acquired the shares before 01 January 2013 and the instrument was also issued before that date.
Effective date
The proposed hybrid instrument re-characterisation rules will come into effective in the case of amounts incurred
or accrued on or after 1 April 2014.
39
DISCOUNTED LOANS OR ADVANCES (SECTION 64E(4))
Where during any year of assessment any amount is owing to a company by
A person that is
o not a company,
o a resident; and
o a connected person in relation to that company (or a connected person to a connected person
in relation to the company)
in respect of that debt, the company must be deemed to have paid an in specie dividend, if the debt arose by
virtue of any share held in the company by the persons listed above and the company has not charged a
sufficient amount of interest on the debt.
Deemed dividend in specie
The amount of the in specie dividend that is deemed to have arisen from the loan or advance will be equal to the
market-related amount of interest in respect of the loan or advance less the amount of interest that is actually
paid. The market-related interest rule is similar to the rules for an interest-free or discounted loans contained in
the Seventh Schedule, and the ―official rate‖ of interest is used. Moreover, even with regard to the proposed
deeming rules, a dividend could still be deemed to occur under the general facts-and-circumstances analysis if a
borrower has no intention to repay the capital amount borrowed.
The official rate
With effect from 1 August 2012 the official rate of interest was 6%, from 1 February 2014 6.5%, from 1 August
2014 6.75%, from 1 October 2015 7%, from 1 December 2015 7.25%, from 1 February 2016 7.75%, from 1 April
2016 8%.
Example
Facts: A Trust owns 100 percent of the equity shares in Company X. Company X provides a loan of R 100 000 to
A trust at an interest rate of 4 percent. Assume the corresponding current ―official interest rate‟ at the time of the
loan as fixed by the Minister is 6 percent.
Result: A Trust intends to repay the loan over a period of 5 years. The amount to be treated as a dividend will be
equal to R 2 000. [R 100 000 (6 percent - 4 percent) = R 6 000 – R 4 000]. However if, based on the facts and
circumstances, A Trust does not have any intention to repay the loan, the loan capital can be treated as a
dividend upfront (that is, when the R 100 000 is made available to A Trust).
Payment date
The dividend in specie is deemed to have been paid by the company on the last day of the year of assessment of
the company, and as such the dividend tax that the company is liable for must be paid over to SARS by the end
of the month following the end of the company‘s year of assessment.
STC
If the debt in question, or part of it, has already been deemed a dividend and subject to the pre-1 April 2012
secondary tax on companies (STC) then section 64E(4) will not apply to that debt or part of the debt.
40
VENTURE CAPITAL INVESTMENTS SECTION 12J
The small- and medium-sized business sector in South Africa has traditionally experienced difficulty in accessing
venture finance, which is an integral component for formation and growth. This is partly due to a lack of expertise
in locating potential investors, and partly because the business risks in this sector of the economy have tended to
discourage investors. In addition to these impediments, expenditure incurred in the acquisition of shares in a
company, in terms of general principles, is not deductible by the purchaser (unless the latter is a sharedealer,
that is, a taxpayer using shares as its trading stock, buying and selling shares with the purpose of earning profits
in a profit-making scheme, in which event the expenditure is deductible under s 11(a)). Nor, of course, is the
company issuing the shares taxable on receipt of the moneys as a contribution to its share capital, in
consideration for the share issue.
In order to assist small- and medium-sized companies, including junior mining companies, in gaining access to
capital, s 12J establishes an incentive for such investment. The incentive is available to taxpayers who invest in
approved venture capital companies that will, in turn, provide finance to small and medium companies.
A ‗venture capital company‘ is defined essentially as a company that has been approved by the Commissioner
and in respect of which such approval has not been withdrawn (definition of ‗venture capital company‘ in s
12J(1)).
The tax incentive takes the form of a deduction (subject to certain anti-avoidance provisions) of the amount
invested, in other words, the expenditure actually incurred, in acquiring shares in the venture capital company
(s 12J(2)).
The venture capital company must be approved by the Commissioner as such after application by the taxpayer
and, once approved, it is required to channel its investment capital into shares into qualifying companies, as
defined (s 24J(5) read with the definition of ‗qualifying company‘ in s 24J(1)).
Meaning of qualifying shares
With effect from 1 January 2012 and in respect of years of assessment commencing on or after that date, a
‗qualifying share‘ is defined as follows:
A qualifying share (see s 12J(1) means an equity share held by a venture capital company which is issued to that
company by a qualifying company (or, presumably, by more than one qualifying company) but does not include
• any share which that venture capital company has an option to dispose of or the qualifying company has an
obligation to redeem for an amount other than the market value of the share at the time of disposal or
redemption; or
• that would have constituted a hybrid equity instrument (as defined in s 8E(1) but for the three-year period
requirement in that definition (s 12J(1)).
Venture capital share — definition
As with a ‗qualifying share‘, a ‗venture capital share‘ is accorded two definitions, operative for two different
periods.
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With effect from 1 January 2012 and as from years of assessment commencing on or after that date, a venture
capital share means an equity share held by a taxpayer in a venture capital company which is issued to that
taxpayer by a venture capital company and does not include a share which
• the taxpayer has an option to dispose or, or the venture capital company has an obligation to redeem, for an
amount other than the market value of the share at the time of that disposal or redemption; or
• would have constituted a hybrid equity instrument but for the three-year period required in para (b) of that
definition.
With effect from 1 October 2012, a ‗venture capital share‘ means an equity share held by a taxpayer in a venture
capital company which is issued to that taxpayer by a venture capital company and does not include a share
which
• would have constituted a hybrid equity instrument (as defined in s 8E(1) but for the three-year period
required in para (b) of that definition;
• constitutes a third-party backed share (as defined in s 8EA(1)).
Anti-avoidance provisions
The deductibility of expenditure incurred by a taxpayer in acquiring shares in a venture capital company is subject
to anti-avoidance provisions.
Firstly, where the taxpayer has used any loan or credit to finance such expenditure, in whole or in part, the
amount of the deduction is limited to the amount for which the taxpayer is deemed to be at risk on the last day of
the year of assessment (s 12J(3)(a)). A taxpayer is deemed to be so at risk to the extent that (having regard to
any transaction, agreement, arrangement, understanding or scheme in this regard) the incurral of expenditure or
the repayment of the loan or credit would result in economic loss to the taxpayer were no income to be derived by
the taxpayer in future years from the disposal of any venture capital share issued to him as a result of that
expenditure (s 12J(3)(b)). This deeming provision is subject to provisos which deem a taxpayer not to be at risk if
the loan or credit is not repayable within five years or if such loan or credit is granted to the taxpayer by the
venture capital company itself (provisos to s 12J(3)(b)).
If, during any year of assessment, a taxpayer incurs expenditure in acquiring any venture capital share issued to
that taxpayer by a venture capital company and, as a result of or immediately after such acquisition, that taxpayer
is a connected person in relation to that venture capital company, no deduction is allowed in respect of such
expenditure (s 12J(3A)).
Modus operandi of an approved venture capital company
In general, an approved venture capital company would open a fund (that is to say, a pool of money provided by
persons who subscribe for its shares) which is then invested in other companies, referred to as ‗qualifying
companies‘. Typically, it would invest its entire fund in a spread of qualifying companies within a chosen profile in
the expectation of liquidating all of its investments in a given period, in other words, within the usual time frame
that a successful business will experience substantial growth, and hence an escalation in the value of its shares.
It may take a measure of control over a qualifying company by appointing persons to the board of directors, or by
contractual arrangements in which large transactions will need the venture capital company‘s approval. But in
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many instances, a venture capital company offers expertise by way of advice, or business contacts, as well as
just money.
The general intention is that an approved venture capital company cannot itself carry on an active business, save
as advisers to the companies in which it invests, and that its sole object will be the management of investments in
qualifying companies (s 12J(5)(b)). This notwithstanding, a venture capital company is permitted to engage in
other activities ancillary to its sole purpose, such as leasing office space, investing in short-term debt instruments
or preference shares with its temporarily liquid capital.
Criteria for approval as a venture capital company
The Commissioner is obliged to approve a venture capital company if it has applied for approval and he is
satisfied that
• the company is a resident;
• the sole object of the company is the management of investments in qualifying companies. (Note, however,
that a venture capital company may engage in other activities ancillary to its sole object, such as the leasing
of excess office space or investing in short-term debt instruments or preference shares with temporarily
liquid capital);
• the tax affairs of the company are in good order and the company has complied with all the relevant
provisions of the laws administered by the Commissioner;
• the company is licensed in terms of s 7 of the Financial Advisory and Intermediary Services Act 37 of 2002.
Withdrawal VCC status
If the Commissioner is satisfied that a company that was approved, has during a year of assessment failed to
comply with the provisions, the Commissioner may, after due notice, withdraw the approval from the
commencement of the year if corrective steps suitable to the commissioner have not been taken.
If at the end of any year of assessment after the expiry of a period of 36 months commencing on the first date of
the issue of venture capital shares—
less than 80% of the expenditure incurred by the company to acquire assets held by it, was incurred to
acquire qualifying shares issued to the company by qualifying companies each of which immediately
after the issue, held assets with a book value not exceeding—
–R500m where the qualifying company was a junior miner;
–R50m where the qualifying company was any other company; or
more than 20% of any amounts received in respect of the issue of shares in the company was utilised to
acquire qualifying shares issued to the company by any one qualifying company,
the Commissioner must after due notice, withdraw the approval if no corrective action has been taken.
If the Commissioner withdraws the approval under the circumstances above, then an amount equal to 125% of
the expenditure incurred by the person for the issue of shares held in the company must be included in the
income of the company in the year of assessment in which approval was withdrawn.
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The scheme of s 12J requires that an approved venture capital company, as noted, must channel its investment
capital into ‗qualifying shares‘. The expression ‗qualifying share‘ is defined as an equity share held by a venture
capital company which is issued to it by a qualifying company, unless the venture capital company has an option
to dispose of the share, or the qualifying company has a clear and unequivocal obligation to redeem that share,
for an amount other than the market value of the share at the time of that disposal or redemption (s 12J(1)).
A qualifying company
A ‗qualifying company‘ is defined as a company which has the following characteristics:
The company is a resident.
It is not a controlled group company in relation to a group of companies.
Its tax affairs are in good order and it has complied with all the relevant provisions of the laws
administered by the Commissioner.
It is an unlisted company (as defined in s 41(1)) or a ‗junior mining company‘, which is taken to mean a
company that is solely carrying on a trade of mining exploration or production and is either an unlisted
company or listed on the alternative exchange division of the JSE Limited (definition of ‗junior mining
company‘ in s 12J(1)).
It is not carrying on any ‗impermissible trade‘.
The sum of its investment income derived during any year of assessment does not exceed 20% of its
gross income for that year.
Impermissible trade
In order to ensure that venture capital companies provide finance to sectors of the economy that the state wishes
to encourage, s 12J(1)(e), as noted, excludes as a qualifying company any company carrying on an
‗impermissible trade‘. The term ‗impermissible trade‘ is defined as any trade carried on
• in respect of immovable property, other than a trade carried on as a hotel keeper;
• by a bank as defined in the Banks Act 94 of 1990, a long-term insurer as defined in the Long-term Insurance
Act 52 of 1998, a short-term insurer as defined in the Short-term Insurance Act 53 of 1998, and any trade
carried on in respect of money-lending or hire-purchase financing;
• in respect of financial or advisory services, including trade in respect of legal services, tax advisory services,
stock broking services, management consulting services, auditing or accounting services;
• in respect of gambling;
• in respect of liquor, tobacco, arms or ammunition; or
• mainly outside the Republic.
The concept ‗impermissible trade‘ clearly embraces not only companies carrying on the kinds of business typical
of the wealthier sector of the populace who need no state support or encouragement, such as legal services, tax
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advisory services, auditing and banking, but also those types of businesses which the state does not particularly
wish to promote, such as gambling and the supply of liquor.
Also included in the definition of ‗impermissible trade‘ is a trade carried on in respect of immovable property other
than as a hotelkeeper. Thus, a venture capital company that seeks approval as a qualifying company cannot
acquire shares in property companies save for those that operate hotels.
Venture capital company tax regime
An approved venture capital company is a taxable entity and no special dividend or other tax rules apply. But a
tax benefit is extended to any taxpayer (the previous restriction to natural persons and certain companies has
been lifted) who invests in such approved venture capital companies, which takes the form of a tax deduction for
the ‗expenditure actually incurred . . . in acquiring shares‘ issued by a venture capital company (s 12J(2)).
Notwithstanding the provisions of s 8(4), no amount shall be recovered or recouped in respect of the disposal of
a venture capital share if that share has been held by the taxpayer for a period longer than 5 years
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DEBT REDUCTION TAX CONSEQUENCES FOR THE DEBTOR Para 12A (CGT consequences) and section 19 (recoupment via section 8(4)(a))
Section 19 and para 12A contain ordering rules for dealing with debt relief and replace the previous rules that
were contained in s 8(4)(m), the proviso to s 20(1)(a) and para 12(5).
Assets and expenses financed by debt
The new ordering rules apply to trading stock, other tax deductible expenditure, allowance assets and capital
assets financed by the debt which is then subsequently reduced.
Briefly the rules provide as follows upon a reduction of such debt:
Trading stock still on hand – Any s 11(a) deduction or the value of opening stock as well as any closing
stock is reduced by the debt reduction. Any excess is treated as a recoupment.
Trading stock disposed of and other deductible expenditure excluding capital allowances – The debt
reduction is treated as a recoupment to the extent that the expenditure was allowed as a deduction.
Allowance assets – The debt reduction first reduces any base cost expenditure after which any excess
is treated as a recoupment. Future capital allowances will be limited to the cost of the asset less the
reduction amount and any previous allowances claimed on the asset.
Capital assets that are not allowance assets – The base cost of the asset is reduced by the debt
reduction. Any excess reduces any assessed capital loss (an assessed capital loss is not the same as
an assessed tax loss in terms of section 20).
Para 12A(6)
In terms of para 12A(6), the paragraph (and therefore consequences for the debtor that the paragraph would
trigger) must not apply to any debt owed by a person
a) that is an heir or legatee of a deceased estate to the extent that
(i) the debt is owed to that deceased estate
(ii) the debt is reduced by that deceased estate , and
(iii) the amount by which the debt is reduced by the deceased estate forms property of the
deceased estate for the purposes of the Estate Duty Act
b) to the extent that the debt is reduced by way of
(i) donation as defined in section 55(1); or
(ii) any transaction to which section 58 applies,
c) to an employer of that person, to the extent that the debt is reduced in the circumstances
contemplated in para 2(h) of the seventh schedule (that is, the reduction of the debt is taxed as a
taxable fringe benefit in the hand of the debtor employee);
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d) to another person, where that person and that other person are companies that form part of the
same group of companies as defined in section 41 (subject to a host of anti-avoidance provisions
listed para 12A)
The above exclusions are largely mirrored in section 19(2), but not para 12A(6)(d).
Reduction amount
Both section 19 and para 12A calculate the tax effect on the debtor in terms of the ―reduction amount‖. This is
essentially the amount by which the debt was reduced less any amount applied by that person as considerations
for that reduction.
It should be noted that the.paradigm will apply whenever debt is reduced or cancelled for less than full fair market
value consideration. This debt reduction or cancellation can occur within insolvency, business rescue, similar
statutory proceedings or informal workouts. The reduction or cancellation also need not explicitly result from the
inability to pay.
An essential consideration for the debtor is to examine what the monies, obtained when the debt was originally
incurred, was used for. The purpose for which the funds were applied will determine how the reduction amount
will be treated for taxation purposes.
Three types are expenses that may have been incurred are envisaged, namely:
1. The purchase of a non-depreciable capital asset (capital debt relief)
2. The purchase of a depreciable asset
3. The purchase of trading stock, or payment of other expenditure which would have resulted in a full
normal tax deduction of the expense. (ordinary debt relief)
Debt previously incurred in respect of depreciable assets
If debt was used to fund the acquisition of a depreciable/allowance asset:
the reduction or discharge of the debt will initially be viewed as funding the capital expenditure
to the extent of the remaining base cost (tax value) of the depreciable asset so held.
the residual (i.e. any amount of debt reduction or cancellation exceeding base cost) will be
viewed as having funded the depreciation/allowances and will be recouped in terms of section 8(4)(a).
In summary, the net effect will be to initially reduce the base cost of depreciable assets so held. If the base cost is
reduced to nil, the reduction or cancellation will then trigger a recoupment of allowances claimed thereby the
triggering of ordinary revenue.
If the depreciable asset is no longer held at the date of the debt reduction, the total ―reduction amount‖ will be
subject to the normal tax recoupment provisions as contained in section 19 and section 8(4)(a).
Example 1
Facts: Company X borrows R3.5 million. Company X applies all of the borrowed funds to acquire a plant.
Company X ―depreciates‖ the plant by R800 000, leaving R2.7 million of base cost (R3.5 million less the R800
000 allowances previously claimed). The lender subsequently cancels R2 million of the debt.
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Result: The R2 million of the cancelled debt will be applied towards the capital portion (reducing the base cost of
the plant from R2.7 million to R700 000). None of the reduction will be viewed as having been applied against the
allowances previously claimed.
Example 2
Facts: Company Y borrows R3.5 million. Company Y applies all of the borrowed funds to acquire a plant.
Company Y ―depreciates‖ the plant by R3 million, leaving R500 000 of base cost (R3.5 million less the R3 million
allowances previously). The lender subsequently cancels R3 million of the debt.
Result: The R3 million of the cancelled debt will initially be applied towards the remaining base cost of R500 000
(reducing the base cost of the plant to R500 000 to zero). The remaining R2.5 million will be viewed as having
been applied against previously claimed allowances (resulting in ordinary revenue).
―Capital‖ debt relief
1. Two-tier system
If the initial debt was not used to finance deductible expenditure or allowances the reduction of the debt will have
the following two-tier impact:
Base cost reduction: the debt reduction or cancellation will firstly reduce the base cost of the
capital assets so held by the debtor. However, this base cost reduction will apply only to the extent to
which the borrowed funds were used to acquire those capital assets still held by the debtor and only to
the extent that the capital assets have any remaining base cost.
Reduction of assessed capital losses: If the debt reduction or cancellation cannot be traced to
an asset so held (or the base cost in the asset is fully depleted to zero), the excess reduction or
cancellation will be applied against any assessed capital losses that the debtor may have. (para 12A(4))
If the ―capital‖ debt reduction or cancellation falls outside the above parameters, the debt reduction or
cancellation has no further impact. In other words, if the debtor‘s base cost and assessed capital losses are fully
reduced to nil in accordance with the above, no capital gains arise.
Example
Facts: Debtor borrowed R5 million to acquire two vacant lots. Vacant Lot 1 was purchased for R3 million, and
Vacant Lot 2 was purchased for R2 million. Vacant Lot 2 was sold for R1.2 million, generating an R800 000
capital loss. Due to circumstance outside Debtor‘s control, Vacant Lot 1 is has significantly declined in value.
Debtor also used the R1.2 million of proceeds from Vacant Lot 1 for personal consumption. In order to alleviate
Debtor‘s circumstances, the lender of the debts cancels R3 million of those debts. Of this amount, R2 million of
the debt reduction is attributable to formerly held Vacant Lot 2, and R1 million of the debt reduction is attributable
to Vacant Lot 1.
Result: The R1 million amount of debt cancelled that is attributable to Vacant Lot 1 reduces the base cost in that
lot from R3 million down to R2 million. The other R2 million cancelled cannot be applied against Vacant Lot 1
because the debt was not initially applied to acquire that lot. Instead, the R2 million is applied to eliminate the
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R800 000 of assessed capital losses. No further impact arises (i.e. the R1.2 million of unallocated debt reduction
does not give rise to capital gain).
Special relief for cancelled tax debts
Reduced or cancelled tax debts are excluded from the base cost/capital loss reduction regime by way of
definition (i.e. are excluded from the definition of debt for purposes of para12A).
―Ordinary‖ debt relief
Two-tier system
An ―ordinary‖ treatment for debt reductions and cancellations will apply as long as the initial debt was used to
finance deductible expenditure. Ordinary treatment will have the following two-tier impact:
Trading stock cost price reduction:
the debt reduction or cancellation at issue will firstly reduce the cost price of trading stock so held by the debtor.
However, this cost price reduction will apply only to the extent to which the borrowed funds were used to acquire
the trading stock still held by the debtor and only to the extent that trading stock has any remaining cost price.
Ordinary recoupment
If the debt reduction or cancellation is viewed as falling within an ordinary paradigm and the amount falls outside
the trading stock cost price reduction rules, any residual will be viewed as giving rise to ordinary revenue in terms
of a section 8(4)(a) recoupment.
Example 1
Facts: Company X owes debt of R1 million which was utilised to purchase trading stock. The trading stock held
by Company X has a cost price of R400 000, and Company X has assessed losses of R350 000. Company X‘s
creditors discharge all R1 million of the debt owed due to Company X‘s inability to pay. Of the debt owing, R400
000 stems from trading stock currently held and R150 000 stems from previously held trading stock.
Result: The amount of the discharged debt (R1 million) will first be applied to reduce the cost price of the trading
stock (R400 000) to zero. The remaining amount (R600 000) will included in the income of Company X as
ordinary revenue but reduced by the assessed losses of R350 000.
Allowance limitations and exclusions
Going forward, allowances on assets in respect of which a debt was reduced or cancelled may not exceed the
aggregate of the expenditure incurred by a taxpayer in respect of an allowance asset, less the sum of
(i) the allowances previously claimed on that allowance asset, and
(ii) the amount of the debt reduced.
Example
Facts: Company X acquired a machine in respect of which expenditure of R800 000 was incurred. For tax
purposes, Company X may claim allowances in respect of the machine on the basis of a 40 per cent allowance in
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the first year and 20 per cent in each of the subsequent three years. In year 1, Company X accordingly claims an
allowance of R320 000. Subsequently, the supplier of the machine, forgives R300 000 of the cost price.
Result: The amount of the discharged debt (R300 000) will be applied to reduce the cost price of the machine. In
the subsequent year of assessment, allowance Company X may claim on the machine will be limited to a cost
price of R180 000 (R800 000 less R320 000 prior allowance less R300 000 debt reduction). Of the R180 000
remainder, Company X can claim R160 000 of allowances in Year 2 and the final R20 000 in Year 3.
Effective date
Para 12A and section 19 will apply with effect from 1 January 2013 and applicable to years of assessment
commencing on or after that date
TAX CONSEQUENCES FOR CREDITOR
Donations Tax
Donations tax is levied in terms of Part V of the Income Tax Act. Section 54 subjects to donations tax donations
made by any ―resident‖. Donations tax is levied at a flat rate of 20%.
Deemed donation
Section 58 provides that donations for this purpose include property disposed of for what, in the opinion of the
Commissioner, is an inadequate consideration, to the extent of that inadequacy.
Meaning of ―donation‖
A donation is defined as:
“Any gratuitous disposal of property including any gratuitous waiver or renunciation of a right”
(section 55(1)).
Property in the definition of ―donation‖ means:
“any right in or to property movable or immovable, corporeal or incorporeal, wheresoever
situated”.
Deemed donation: Property disposed of for any inadequate consideration
Section 58 reads as follows:
“Where any property has been disposed of for a consideration which, in the opinion of the Commissioner, is not
an adequate consideration that property shall for the purposes of this Part be deemed to have been disposed of
under a donation: Provided that in the determination of the value of such property a reduction shall be made of an
amount equal to the value of the said consideration.”
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For section 58 to apply, the consideration must be inadequate. It is not necessary that the consideration be less
than market value. ―Adequate consideration‖ is not necessarily synonymous with ―market value‖. So, for example,
a disposition by a father to his child could be for an adequate consideration even though the consideration is less
than market value.
Section 56: Exemptions from donations tax
Specific exemptions
The exemptions from donations tax are broken down into two categories essentially. In terms of section 56(1)
specific exemptions are created that apply to specific types of donations.
Certain categories of donations are exempt from donations tax, and two are of specific relevance to companies:
• donations by any company recognised as a public company for tax purposes (section 56(1)(n)); and
• property disposed of to any other company that is a resident and is a member of the same group of companies
as the company making that donation (section 56(1)(r)).
General exemptions
Once it has been determined that none of the specific exemptions apply, the value of the donation after the
deduction of the general exemption will be subject to donations tax.
Donor other than a natural person
If the donor is not a natural person, the general exemption is R10 000 per annum, of all the casual gifts made by
the donor during the year of assessment.
SARS regards gifts such a birthday, Christmas and wedding gifts as casual gifts.
Natural person donor
Donations made by a natural person up to a maximum of R100 000 in respect of each year of assessment are
exempt from donations tax. These donations are not limited only to casual gifts as in the case of non-natural
persons. It should be noted that this R100 000 per annum threshold is available to each spouse. Accordingly, a
married couple may freely dispose of property worth up to R200 000 per annum without being subject to
donations tax.
Where the donated property formed part of the joint estate, each spouse is deemed to have made half the
donation. Where the donated property is excluded from the joint estate, the donation is deemed to have been
made solely by the donor spouse (section 57A).
Liability for and payment of donations tax
The tax is payable by the donor. However, if the donor fails to pay within the stipulated time period, both the
donor and the donee become jointly and severally liable for the tax (section 59).
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Where any property is disposed of under a donation by any body corporate at the instance of any person, the
person at whose instance the donation is made is deemed to have made the donation (section 57(1)). Thus the
latter is liable for the tax.
Donations tax shall be paid to the Commissioner by the end of the month following the month in which a
donations takes effect or such longer period as the Commissioner may allow.
CGT IMPLICATIONS
There are also CGT implications for the creditor when a debt, or a portion of a debt is written off:
8th Schedule Summary and application
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Losses
When a creditor disposes (includes the reduction of that debt) of a debt owed by a debtor who
is a connected person, any loss on that disposal must be disregarded by that creditor. This
paragraph will not apply if par 12A applies (applied to the debtor), which will be if there is an
under- lying asset linked to the debt.
Par 56(2)(a) therefore applies to the creditor. From an accounting perspective, the amount
disposed of (or written off) will represent a debit amount (hence a loss) in the books of the
creditor.
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Clogged losses
This paragraph ring-fences a capital loss between ―connected persons‖. Such losses may only
be off-set against future capital gains arising from disposals between the same connected
persons. This is called clogged-losses. If par 56(2)(a) applies, then par 39 will not apply.
Par 39 therefore applies to the taxpayer that disposes of the asset.
20(3)
Base cost
This paragraph is only applicable if the base cost of the asset is reduced or recovered. If the
asset is no longer on hand, there will be a capital gain. If the reduction or recoupment of
expenditure relates to a debt reduction, par 12A applies.
Par 20(3) applies to the purchaser of the asset.
35(1)(a)
Proceeds
If for some reason the selling price of an asset is reduced, the seller of the asset must reduce
the ―proceeds‖ of this asset with that amount.
Par 35(1)(a) applies to the seller of the asset.
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TAX ADMINISTRATION ACT (TAA)
The TAA deals with a number of administrative issues and this chapter will deal only with those most relevant to
this presentation.
CHAPTER 10
New categories of persons liable to tax (sections 151 to 159)
This Chapter includes new categories of persons liable to tax in order to simplify and clarify the tax liability of
different persons, and the capacity in which they may be liable for tax debts. The circumstances when a tax
liability in respect of each category of person will arise both in representative capacities and personal capacities
are then described.
The categories are:
(a) Persons (primary) chargeable to tax
(b) Representative taxpayers
(c) Withholding agents
(d) Responsible third parties
(e) A person who is the subject of a request to provide assistance under an international tax arrangement.
Measures are introduced to combat instances where the collections process is frustrated which extend SARS‘s
authority to recover tax debts beyond the actual taxpayer - the person originally chargeable to tax. Powerful
interventions are now also available when taxpayers divest themselves of assets, conduct business with no
regard for the tax consequences, or retain assets off-shore to avoid paying what is due.
Debt relief is also provided to taxpayers, for example:
Under certain circumstances the payment of tax may be suspended if a taxpayer intends to pursue a valid
objection and possible appeal, provided an application has been made in terms of section 164 to suspend
the payment of the taxes in dispute has been made.
In order to recognise legitimate circumstances where a taxpayer suffers a temporary liquidity problem, SARS
may extend the date for paying a tax debt or enter into an instalment payment arrangement with the
taxpayer.
SARS is also authorised to compromise a tax debt that is not disputed, and SARS may also write tax off
temporarily or permanently.
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PERSONAL LIABILITY FOR TAX DEBTS
The circumstances when a tax liability in respect of each category of person will arise both in representative
capacities and personal capacities are prescribed.
Requirements for personal liability
Category Requirements for personal liability
Representative taxpayers A representative taxpayer becomes liable in terms of TAA section155 if the tax could have
been paid to SARS but was not; or the amount in respect of which the tax was chargeable
was disposed of.
Withholding agents Liability arises in terms of TAA section157 if tax is withheld but not paid to SARS, or if the tax
could have been withheld but was not.
Responsible third parties
Under TAA section159 a responsible third party is personally liable to the extent described in Part D of Chapter 11
Person in control of
financial management
TAA section180 provides that a person who controls or is regularly involved in the
management of the overall financial affairs of a taxpayer is personally liable if the person was
negligent or fraudulent in the payment of the tax debts of the taxpayer
Shareholders of a
company in liquidation
TAA section181 provides that when a company is wound up while having a tax debt, a
shareholder who received a company asset within one year is personally liable.
The section does not apply to listed companies.
It is important to note that the tax debt also includes tax that would have existed had the
company complied with its tax obligations; and the shareholder has the same rights
against SARS as the company had.
The section applies to a company that is a principal taxpayer, a representative taxpayer, a
withholding agent, and any category of responsible third party
A transferee of assets TAA section182 provides that if a connected party to the taxpayer receives a taxpayer‘s
asset for free or below market value, the person becomes personally liable to pay a tax
debt that existed at the time the asset was transferred.
The liability is the lesser of the tax debt at the time of receipt and the difference between
the fair market value and the consideration paid.
The tax debt is the actual tax debt at the time or what the tax debt should have been had
the taxpayer complied with tax obligations.
Liability is triggered in respect of assets received less than a year before SARS notifies
the transferee of personal liability.
Person assisting to
dissipate assets
TAA section183 provides that a person who obstructs collection assists in dissipating a
taxpayer‘s assets is jointly liable with the original taxpayer.
This person is liable to the extent that their assistance reduces the taxpayer‘s assets.
Liability of person
appointed to satisfy a tax
debt
If SARS appoints a person to pay tax from money held for the taxpayer, and the person
ignores the appointment, then in terms of TAA section179 the person becomes personally
liable for the money
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Representative taxpayers
Duties, entitlements and liabilities of representative taxpayers (sections 154 and 155)
A representative taxpayer is in such capacity
subject to the duties, responsibilities and liabilities of the taxpayer represented
entitled to any abatement, deduction, exemption, right to set off a loss and other items that could be
claimed by the person represented
liable for the amount of tax specified by a tax Act.
The above duties, responsibilities, entitlements and liabilities of a representative taxpayer are, however, limited to
the following:
The income to which the representative taxpayer is entitled;
Moneys to which the representative taxpayer is entitled or has the management or control;
Transactions concluded by the representative taxpayer; and
Anything else done by the representative taxpayer in such capacity.
A representative taxpayer may be assessed in respect of any tax but such assessment is regarded as made
upon the representative taxpayer in such capacity only.
Section 1 of the Income Tax Act “Representative taxpayer”
A ‗representative taxpayer‘ means a natural person who resides in South Africa and
• for the income of a company, its public officer (para (a)),
• for the income under his management, disposition or control, the agent of a person (para (b)),
• for income that is the subject of a trust or for the income of a minor or mentally disordered or defective
person or another person under legal disability, the trustee, guardian, curator or other person entitled to
the receipt, management, disposal or control of this income or remitting or paying to or receiving
moneys on behalf of the person under disability (para (c)),
• for income paid under the decree or order of a court or judge to a receiver or other person, this receiver
or person, whoever may be entitled to its benefit, and whether or not it accrues to a person on a
contingency or an uncertain event (para (d)),
• for the income received by or accrued to a deceased person during his lifetime and the income
received by or accrued to his estate, the executor or administrator of his estate (para (e)), and
• for the income received by or accrued to an insolvent estate, its trustee or administrator (para ( f )).
There is a proviso to the definition of a ‗representative taxpayer. It states that for the purposes of this definition,
‗income‘ includes an amount received or accrued or deemed to have been received or accrued in consequence
of the disposal of an asset envisaged in the Eighth Schedule.
55
CHAPTER 15 ADMINISTRATIVE NON-COMPLIANCE PENALTIES
Financial sanctions consist of the administrative non-compliance penalty and the understatement penalty regime
which, together with the criminal sanctions, provide a comprehensive framework to deter non-compliance. The
TAA sets out that the purpose of the administrative non-compliance penalties is to ensure the widest possible
compliance of the tax Acts in a way that is impartial and which is proportional to the seriousness and duration of
the incidence of non-compliance.
Administrative non-compliance penalties
These penalties comprises of fixed amount-based and percentage-based penalties. A fixed amount-based
‗penalty‘ is charged when an administrative obligation is not complied with, and the percentage-based ‗penalty‘ is
imposed when an amount of tax is not paid.
Fixed-amount penalties
There are a number of obligations that a taxpayer is legally required to comply with, and a fixed amount ‗penalty‘
is imposed when a taxpayer does not comply with an obligation. If the taxpayer does not remedy the default
within a month, the administrative non-compliance penalty automatically increases by the same amount for every
month that the default is not corrected, up to a maximum of 35 months.
The amount of the ‗penalty‘ imposed in a ‗penalty assessment‘ will increase automatically for each month, or part
thereof, that the person fails to remedy the non-compliance within one month after:
the date of the delivery of the ‗penalty assessment‘, if SARS is in possession of the current address of the
person and is able to deliver the assessment, but limited to 35 months after the date of delivery; or
the date of the non-compliance if SARS is not in possession of the current address of the person and is
unable to deliver the ‗penalty assessment‘, but limited to 47 months after the date of non-compliance.
A ‗penalty assessment‘ must be duly delivered in one of the prescribed manners to constitute a valid assessment.
SARS may, however, issue a reminder of the automatic increase every month that the default continuous which
may be communicated in any form, including sms, as this is not a new imposition or ‗penalty assessment‘.
Fixed amount administrative non-compliance penalties may only be imposed in respect of non-compliance listed
in a public notice by the Commissioner, and not any non-compliance with an obligation under a tax Act. The
purpose of the notice is to only target impactful or more serious non-compliance and only when SARS‘s systems
are in place to do so effectively.
Govt Gazette 35377 Notice 790 (1 October 2012)
In terms of the above notice the only act of non-compliance currently listed, that will trigger the fixed amount
penalty, is in respect of a natural person who has failed to submit an income tax return by the required date, as
determined by the ITA, for years of assessment commencing on or after the 1 March 2006, where that person
has two or more outstanding income tax returns for such years of assessment.
56
Reportable arrangements
A ‗penalty‘ will be imposed on a participant of a reportable arrangement who fails to report the reportable
arrangement to SARS.
Taxpayers are required to constantly monitor the type of transactions regarded as reportable arrangements, as
the definition contained within the TAA can be extend by way of Government Gazette
Percentage based penalties
In terms of section 213, percentage based penalties are imposed under the TAA if SARS is satisfied that an
amount of tax that was not paid as and when required under a tax Act. SARS may impose a ―penalty‖ equal to
the percentage, as prescribed in the relevant tax Act, of the amount of unpaid tax. The procedures for the
imposition and remittance of a percentage based penalty are regulated by the TAA.
Examples when the percentage-based penalty will be imposed
Tax Incident
Income tax
[ITA
section35A]
When a SA resident buys immovable property from a non-resident seller and does not withhold
and pay the fixed percentage to SARS, a penalty of 10% is imposed
Turnover tax
[ITA 6th
Sched.
par 11(6)]
A late payment penalty will be imposed if a micro-business doesn‘t pay VAT, or a vendor that
deregistered because the value of supplies no longer exceeds R1million doesn‘t pay VAT.
Provisional
tax
[ITA Fourth
Sched.]
A 10% penalty is imposed on the late or non-payment of provisional tax [par 27]
A 20% penalty is imposed if a taxpayer fails to file an estimate [par 20A] Deleted wef yoa
commencing on or after 1 March 2015
A 20% penalty is imposed if the taxpayer understates a provisional tax estimate by a particular
percentage of the taxable income [par 20]
Employers &
employees‘
tax
[ITA Fourth
Sched.]
If an employer fails to file a return (reconciliation) SARS can levy a maximum of 10% penalty
per month
If employees‘ tax is not paid the employer must pay a 10% penalty
A 10% penalty is imposed if UIF contributions are not paid
Failure to indicate taxable fringe benefits in employees‘ tax certificates triggers a penalty equal
to 10% of the cash equivalent of the taxable benefit.
Value-Added
Tax
[VAT Act
section39]
Failing to pay by the 25th
attracts a 10% penalty but note the changes to eFilers discussed
above under Chapter 10 and 12.
57
Imposition of penalty
The fixed-amount and percentage-based penalties are contained in a ‗penalty assessment‘. This Penalty
Assessment Notice can be in a format determined by the Commissioner and contains the date when the ‗penalty‘
must be paid. If the ‗penalty‘ is raised simultaneously with an assessment for a tax then the date of payment is
the same date of payment for the tax assessed.
CHAPTER 16 UNDERSTATEMENT PENALTY
The penalty will be determined by locating each case within a table that assigns a percentage to objective
criteria. SARS must now prove that the grounds exist for imposing an understatement penalty.
An understatement penalty will be included in an assessment issued by SARS and must be paid by the date
specified in the notice of assessment. An understatement penalty may only be imposed if the fiscus is prejudiced
by the taxpayer‘s conduct in reporting. The fiscus will be prejudiced if there is a ―shortfall‖. In simple terms, the
―shortfall‖ is the difference between the correct amount of ‗tax‘ that should have been reported and the amount
that existed by virtue of the taxpayer‘s action.
If there is prejudice, this must have been caused because a taxpayer—
did not file a return;
filed a return but omitted an item from that return;
filed a return in which an incorrect statement was made
Substantial understatement
‗Substantial understatement‘ means a case where the prejudice to SARS or the fiscus exceeds the greater of five
per cent of the amount of ‗tax‘ properly chargeable or refundable under a tax Act for the relevant tax period, or
R1 000 000.
Finally, the amount that is imposed as the understatement penalty is calculated by applying the applicable
percentage to the amount of the ―shortfall‖.
Calculation of ―shortfall‖
The shortfall, on which the applicable percentage is applied, is the sum of the difference between–
(a) the ‗tax‘ properly chargeable and what would have been charged if the taxpayer‘s reporting had been
accepted;
(b) the amount properly refundable and what was refundable according to what the taxpayer reported;
and
(c) the ‗notional‘ amount of ‗tax‘ applied to the loss or other benefit properly carried forward, and what the loss or
benefit was according to what the taxpayer reported.
If an ‗understatement‘ results in a difference under both paragraphs (a) and (b) of TAA section 222(3), the
shortfall must be reduced by the amount of any duplication between the paragraphs. The tax rate is the maximum
tax rate applicable to the taxpayer, ignoring an assessed loss or any other benefit brought forward from a
preceding tax period to the tax period.
58
Understatement Penalty Table (Section 223)
1
Item
2
Behaviour
3
Standard
case
4
If obstructive,
or if it is a
‗repeat case‘
5
Voluntary disclosure
after notification of
audit
6
Voluntary disclosure
before notification of
audit
(i) ‗Substantial
understatement‘
10% 20% 5% 0%
(ii) Reasonable care not
taken in completing
return
25% 50% 15% 0%
(iii) No reasonable grounds
for ‗tax position‘ taken
50% 75% 25% 0%
(iv) Gross negligence 100% 125% 50% 5%
(v) Intentional tax evasion 150% 200% 75% 10%
Bona fide errors
The amendment to section 222 clarifies when an ―understatement‖ will not result in a penalty by excluding bona
fide inadvertent errors. The amendment will apply from 1 October 2012, and also to understatements made in a
return before 1 October 2012.
In determining if the ‗understatement‘ results from a bona fide inadvertent error, a SARS official will generally
have regard to the circumstances in which the error was made as well as other factors, for example:
In the context of factual errors—
if the standard of care taken by the taxpayer in completing the return is commensurate with the
taxpayer's knowledge, education, experience and skill and the care a reasonable person in the same
circumstances would have exercised;
the size or quantum, nature and frequency of the error;
whether a similar error was made in a return submitted during the preceding years; or
in the case of a arithmetical error, whether the taxpayer had procedures in place to detect arithmetical
errors.
In the case of a legal interpretive error, whether—
the relevant provision of a tax Act is generally regarded as complex;
the taxpayer took steps to understand it including following available explanatory material or making
reasonable enquiries; or
the taxpayer relied on information that, although incorrect or misleading, came from reputable sources
and a reasonable person in the same circumstances would be likely to find the relevant information
complex.
59
PRESCRIPTION
Periods of limitation for issuance of an assessment
To provide certainty to taxpayers the TAA prescribes periods after which SARS cannot raise an assessment.
SARS administered tax and self-assessment tax
The period that applies depends on whether the underlying liability arose from an assessment by SARS or
through a self-assessment by the taxpayer.
Periods of limitation for issue of assessments in terms of section 99
Incident Example Period
Original assessment is issued by SARS Income tax Three years from the date of the original
assessment.
Self-assessment by a taxpayer VAT, PAYE Five years from the date of submission of the
return.
Original assessment is issued by SARS because a
self-assessment return is not filed
VAT, PAYE when
no return filed
Five years from the date of the original
assessment.
No return is required but payment required Five years from the date of the last payment
made
Periods if action taken in line with a practice generally prevailing
A practice generally prevailing is intended to provide certainty on how a provision will be applied. In line with this
principle additional assessments and reduced assessments cannot be issued if the preceding assessment was
made in line with a practice generally prevailing at the time. The same rule applies if no return is required and a
payment is made in line with a practice generally prevailing at the time of payment.
Non-application of the prescription rules
Fraud, misrepresentation and non-disclosure: Generally the prescription period that prohibits SARS from
issuing an assessment does not apply if the reason why the full amount of tax was not charged was due to
fraud, misrepresentation, or non-disclosure of material facts.
When the tax is a self-assessment tax, such as VAT and PAYE, the basis on which the period of limitation
does not apply is extended beyond these three broad grounds to include both intentional and negligent
misrepresentation and non-disclosure.
Failure to submit a return: SARS is not barred from making an assessment if a person has not submitted a
return for a self-assessment tax.
Agreement between SARS and taxpayer: SARS and the taxpayer may agree that the prescription periods
do not apply provided that this agreement is concluded prior to the expiry of the periods.
Mistake made on returns, and incorrect assessments by SARS
The TAA makes it easier to fix mistakes made by taxpayers in a return without having to follow the formal
objection and appeal process:
60
If an original assessment has not been made, then SARS may request and allow a taxpayer to submit an
amended return to correct an undisputed error
If an incorrect original assessment has already been made because of a mistake made by the taxpayer in a
return then SARS is entitled to issue a reduced assessment to correct the error.
For instance, if a taxpayer has submitted an income tax return but has made an error, such as when amounts are
captured, SARS may draw this to the taxpayer‘s attention before issuing an original assessment. The taxpayer
may then elect to submit an amended return, and SARS will then issue an original assessment. On the other
hand, if an original assessment has been made, for instance when a VAT or employees‘ tax return is submitted,
and the taxpayer has made an error in the return, then the taxpayer can request SARS to issue a reduced
assessment without having to lodge an objection.
It is important to note that the TAA provides that the error has to be an ―undisputed error‖. Before a taxpayer
takes this quick route of correcting an assessment, SARS must be satisfied that the mistake is a genuine error. If
there is no ―undisputed error‖ then the taxpayer must follow the objection and appeal route.
Reportable arrangements
The TAA effects the following significant changes to the reportable arrangement scheme under current law:
All listed ‗arrangements‘ likely to lead to an undue ‗tax benefit‘ are to be identified by the Commissioner by
public notice, and the Commissioner may determine an arrangement to be an excluded arrangement by
public notice;
Failure to report a reportable arrangement will not constitute a criminal offence, but is subject to an
administrative non-compliance penalty under Chapter 15.
Govt Gazette 36038 (28 Dec 2012)
In terms of the abovementioned Gazette, the Commissioner has listed as reportable arrangements any hydrid
equity (s8E) or hybrid debt (s8F) instruments that would qualify as such if the prescribed period was 10 years. In
respect of s8F this will not include listed instruments
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CHAPTER 17 CRIMINAL OFFENCES
Chapter 17 provides that offences may be separated into statutory offences and serious tax offences.
Serious tax offences relate to intentional tax evasion, and one distinction to a ―non-compliance‖ offence is that the
period of imprisonment for a serious tax offence is a sentence of five years. The investigation of a serious tax
offence will be carried out with regard to the rights that a suspect has by suitably qualified and experienced SARS
officials. An investigator must have authority from a senior SARS official to investigate, and only a senior SARS
official may lay a complaint with the police concerning an offence related to tax evasion.
The ―reverse onus‖ under the previous law has been removed and replaced with a practical evidentiary rule. In a
prosecution under the evasion provisions, the person who makes a statement that is the basis of the evasion is
considered to have committed the offence unless able to prove that there is a reasonable possibility that he or
she was ignorant of the falsity of the statement was false and that that ignorance was not due to negligence. This
does not result in a so-called ‗reverse onus‘, but only places on the accused an evidentiary burden in relation to
statement made by him. If discharged the onus would remain on the state to prove beyond reasonable doubt
knowledge of, or negligence in relation to, the falsity of the statement. While it limits the fundamental right to
silence, it does so only in relation to facts which are peculiarly within the knowledge of the accused and in respect
of which it would not be unreasonable to require the accused to discharge an evidentiary burden.
Criminal offences relating to non-compliance with the tax Acts
A criminal offence may be committed if a person does not comply with an obligation imposed under a tax Act,
and section 234 of the TAA contains a comprehensive list of these obligations. These offences are committed if
the person performs or fails to perform an act wilfully and without just cause. If found guilty the taxpayer is subject
to a fine or to imprisonment for a period not exceeding two years.
The following obligations are offences if not complied with-
the failure to register and notify SARS of a change to registered particulars;
the failure to appoint a representative taxpayer;
the failure to register as a tax practitioner
refusing or neglecting to take an oath of secrecy or solemn declaration;
the failure to retain records, or to retain them in the form required;
not complying with a request issued under the information gathering powers;
not disclosing relevant material facts to SARS when required;
the failure or neglect to submit a return or document to SARS or issue a document to a person as required
by a tax Act;
the failure to comply with a directive or instruction issued by SARS to the person under a tax Act;
the refusal to give assistance during a field audit or criminal investigation required under TAA section49(1);
and
impeding the collection of tax by assisting a taxpayer to dissipate assets.
These offences are committed if the person performs or fails to perform the relevant obligation wilfully and
without just cause.
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Criminal offences relating to the evasion of tax
Section 235 lists these offences as being committed by a person who with intent to evade or to assist another
person to evade tax or to obtain an undue refund under a tax Act—
(a) makes or causes or allows to be made any false statement or entry in a return or other document, or signs a
statement, return or other document so submitted without reasonable grounds for believing the same to be true;
(b) gives a false answer, whether orally or in writing, to a request for information made under this Act;
(c) prepares, maintains or authorises the preparation or maintenance of false books of account or other records
or falsifies or authorises the falsification of books of account or other records;
(d) makes use of, or authorises the use of, fraud or contrivance; or
(e) makes any false statement for the purposes of obtaining any refund of or exemption from tax, is guilty of an
offence and, upon conviction, is subject to a fine or to imprisonment for
a period not exceeding five years.
(2) Any person who makes a statement in the manner referred to in subsection (1) must, unless the person
proves that there is a reasonable possibility that he or she was ignorant of the falsity of the statement and that the
ignorance was not due to negligence on his or her part, be regarded as guilty of the offence referred to
subsection (1).
A senior SARS official may lay a complaint with the South African Police Service or the National Prosecuting
Authority regarding an offence contemplated in subsection (1).
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DIVIDENDS AND DIVIDEND WITHHOLDING TAX GENERAL
• A dividend is an amount (which includes a dividend in specie) that a company distributes to its
shareholders.
• A dividend is a return on an investment for an investor recipient.
• A distribution can only be a dividend if the company does not expect anything in return or as repayment
for the amount. For example, if a shareholder is also an employee of the company, any distribution to the
shareholder must be analysed to determine whether or not the amount was paid for services rendered. If
the payment was for services rendered, the distribution cannot be regarded as a dividend as it has been
rendered in return for the services performed. In terms of section 10(1)(k)(i)(ii) any dividend received for
services rendered will not be exempt from normal tax
• The dividend may be funded by way of cash, assets or a journal entry to the loan account of a
shareholder. When an asset is distributed to the shareholder it is called a dividend in specie.
• A repayment by a company of ―contributed tax capital‖ (CTC) cannot be a dividend.
• A distribution by a company that cannot be regarded as a dividend because it is excluded from the
definition of a dividend, must be either
a receipt of a capital nature in the hands of an investor (which may be subject to the provisions of
the Eighth Schedule which deals with taxable capital gains and assessed capital losses) or
a receipt of an income nature (gross income) in the hands of a speculator/share dealer.
NEW DIVIDEND DEFINITION: EFFECTIVE 1 JANUARY 2011
A new definition of dividend came into effect 1 January 2011 and provides that any amount that is transferred or
applied by a company for the benefit of any shareholder in relation to the company by virtue of any share held by
the shareholder in the company is a dividend. An amount transferred to a shareholder would include going
concern distributions, liquidation distributions and amounts paid as a result of a redemption, cancellation or
buyback of issued shares.
The above definition was amended by the Taxation Laws Amendment Act 2011 (TLAA 2011) with effect from 1
April 2012. The amendment effectively widened the nexus between a shareholder and a distribution from a
resident company by expanding the ―dividend‖ definition to include an amount transferred or applied by a
company on behalf of any person in respect of a share in that company. If a company transfers an amount at the
instance of a shareholder to a third party, the amount so transferred could still constitute a dividend, and be
subject to the new dividend tax. The amount so transferred may also leave the shareholder subject to donations
tax.
The proviso to the definition still specifies that an amount of contributed tax capital returned to any shareholder
must be determined proportionately in relation to the total contributed tax capital returned to all shareholders in
that class. That is, different shareholders in the same class cannot be allocated contributed tax capital amounts
that are not in proportion to their relative shareholding.
64
Dividend definition (as amended by the TLAA 2011)
A ―dividend‖ means
"any amount transferred or applied by a resident company for the benefit or on behalf of any person in respect of
any share in that company whether the amount of transferred or applied:
by way of a distribution; or
as consideration for the acquisition of any share in that company,
but does not include any amount so transferred or applied to the extent that the amount so transferred or
applied results in a reduction of contributed tax capital;
constitutes shares in the company;
constitutes an acquisition by a company of its own securities by way of a general purchase as contemplated
in sub para (b) of para 5.67B of s 5 of the JSE Limited Listings Requirements, where that acquisition
complies with the requirements prescribed by paras 5.68 to 5.84 of s 5 of the JSE Limited Listings
Requirements.
The dividend definition will therefore include any amount transferred or applied by a company whether
(a) by way of a distribution; or
(b) as consideration for the acquisition of any share in that company
but does not include any amount so transferred or applied by the company to the extent that the amount so
transferred or applied-
(i) results in the reduction of contributed tax capital
(ii) constitutes shares in that company
(iii) constitutes a listed company share buyback
From the above definition it is clear that:
Paragraph (a) deals with a dividend distribution, while para (b) deals with a share buy-back.
Any capitalisation issue is not a dividend (capitalisation issue includes the issues of equity shares
and non-participatory preference shares).
Definition of ‗contributed tax capital‘ (CTC) and co-ordination with Company Law Reform
Company law in South Africa has recently undergone major transformation with the enactment of the Companies
Act, 2008 (Act No. 71 of 2008). The new Companies Act modernises company law in line with evolving economic
and international trends. This far-reaching modernisation includes: (i) the removal of capital maintenance rules for
determining dividends in favour of market value solvency and liquidity tests, (ii) modernisation of reorganisation
rules, and (iii) the facilitation of business rescue procedures.
Dividend definition and the concept of profits
Under previous company law principles, company dividends came from profits and reserves. In line with modern
trends, the 2008 company legislation completely jettisons these mechanical concepts in favour of a more
commercial approach. Under the revised rules, distributions are generally tested to determine whether these
dividends reduce assets below liabilities (the solvency test) and whether the dividends will deprive the company
of urgently needed cash (the liquidity test).
65
Contributed tax capital is solely a tax concept, determined without regard to company law. In essence,
contributed tax capital represents the tax consideration contributed to the company in exchange for the issue of
shares.
Contributed tax capital (CTC)
The definition of ‗contributed tax capital‘ has been inserted in section 1, and amended by the TLAA 2011. CTC is
basically what a shareholder has paid for the issue of the shares by the company; it is pure share capital and
pure share premium.
The amount of CTC received by or accruing to a company for the issue of shares would mainly include cash, the
market value of an asset received and the value of services provided by a person to the company as
consideration for a share issue or the cancellation of a loan account owed by the company as a consideration for
the issue of shares.
CTC DEFINITION
(a) In relation to a non-resident company that becomes resident on or after 1 January 2011, CTC will be an
amount equal to the sum of the market value of all the shares of that company immediately before the date on
which the company becomes a resident and any consideration received by the company for the issue of shares
after the company becomes a resident, less so much of any amount of CTC that has in terms of a director‘s
resolution (or comparable authority) been transferred for the benefit of any person holding a share in the
company of that class in respect of that share;
(b) In the case of any other company, it means an amount equal to the sum of
(i) the stated share capital or share capital and share premium of that company immediately before 1
January 2011 in relation to shares issued by that company before that date, less so much of that stated
share capital or share capital and share premium as would have constituted a dividend (that is, capitalised
profits/tainted share capital), as defined before that date, had the stated capital or share capital and share
premium been distributed by the company immediately before that date; and
(ii) the consideration received by or accrued to it for the issue of shares on or after that date, reduced by
so much of that amount as the company has transferred on or after that date for the benefit of any person
holding a share in the company of that class in respect of that share, and has by the date of the transfer
been determined by the directors of the company or persons of comparable authority to be an amount so
transferred: Provided that for both paras (a) and (b) the amount so transferred for the benefit of any
person holding a share in the company of that class in respect of that share is deemed to be an amount
that bears to the total amount of contributed tax capital attributable to that class of shares immediately
before the distribution the same ratio as the number of shares of that class held by that shareholder bears
to the total number of shares of that class.
Essentially:
Para b(i) has the effect that capitalisation shares (equity shares), issued out of capital and revenue
reserves on or after 1 January 1974, are not CTC. Therefore if those capitalisation shares are redeemed,
the payment to the shareholders is a dividend as defined. Similarly, if any share premium was created out
of capital or revenue reserves, such share premium is not CTC.
Para (b)(ii) means that if shares have been issued to a shareholder, the amount paid by the shareholder
to subscribe for the shares is CTC.
66
CTC amounts of both para (a) and (b) must be reduced by any amount repaid for the benefit of any person
holding a share in the company out of share capital or share premium contributed by the shareholder.
In order for a transfer from a company for the benefit of any person holding a share in the company to constitute
a reduction of CTC (and accordingly fall outside of the definition of a dividend), the company directors (or persons
with comparable authority) must determine that the transfer constitutes a transfer of CTC. There must be written
proof of the determination for example in the form of a company resolution and the determination must be made
(and the company resolution to this effect signed) immediately before the transfer is made. If there is no
sufficient proof of the timeous determination, the transfer will not be regarded as a reduction of CTC and will
constitute a dividend.
As with any company distribution, the distribution must be lawful and made in terms of the Companies Act.
The proviso to the CTC definition means that if a company has issued different classes of shares, each class of
shares must be looked at separately. The CTC created by an ordinary share issue cannot be allocated or
reallocated to preference shares for example. (see further amendments to the CTC proviso)
Example
Facts: Company X has two ordinary shareholders (Shareholders A and B) and one preferred shareholder
(Shareholder C). Shareholder A owns 25 ordinary shares and Shareholder B owns the other 75 ordinary shares.
Company X has CTC of R150 in respect of its preference shares and R380 in respect of its ordinary shares. As
part of a written company resolution when making a distribution to its ordinary shareholders of R200 (R50 to
Shareholder A and R150 to Shareholder B), Company X decides to allocate R60 of the ordinary share CTC to the
ordinary distribution.
Results: The amount of CTC that is transferred to shareholders A and B will be calculated as follows:
CTC transferred to A = 25 per cent x 60 = R15
CTC transferred to B = 75 per cent x 60 = R45
Hence, shareholder A receives a dividend of R35 (i.e. R50 less R15 of CTC). Shareholder B receives a dividend
of R105 (i.e R150 less R45 of CTC). The dividend portion of the distributions is subject to the Dividends Tax, and
the CTC portion is viewed as capital distributions that fall within the Capital Gains Tax.
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DIVIDEND WITHHOLDING TAX
STC was replaced as a tax on ―dividends‖ as of the 1 April 2012 by the dividend tax. One of the main differences
between STC and dividends tax is that STC was a company level tax, whereas dividends tax is mostly a
shareholder level tax. STC was levied at a rate of 10%. The dividend tax will be levied at 15%.
A “headquarter company” will be excluded from the realm of the dividend tax when it is implemented.
LEVY OF TAX
Dividends tax of 15% will be imposed on the amount of any dividend paid by a company that is a resident.
DIVIDEND TAX RETURNS
Company (or relevant party) paying the dividend
In order to request a dividend tax return (DTR) a dividends tax transaction(s) information declaration (DTR01)
needs to be completed and submitted to SARS. SARS will then use the information on the DTR01 to pre-
populate the dividend tax return (DTR02). The DTR02 must then be carefully reviewed to ensure the correct
information was populated. The DTR02 will reflect the amount of dividend tax payable to SARS. The DTR02 must
be submitted to SARS and payment of the dividend tax made.
BENEFICIAL OWNER (64F)
The dividend may be exempt from dividends tax depending on who the beneficial owner of the dividend is. The
beneficial owner of a dividend is the person entitled to the benefit of the dividend attaching to the share.
In terms of section 64K(1A)(b) a person that receives a dividend that is exempt from dividends tax (in terms of
Section 64F or 64FA), must also submit the relevant returns to SARS timeously.
Dividends that are received by the following beneficial owners are exempt from dividends tax:
A company that is a resident. A company is a resident if it is incorporated, established or formed in the
Republic or which has its place of effective management in the Republic (definition of a ‗resident‘ in s 1).
The reason for this exemption is to avoid dividends tax being levied more than once on the same
amount when the company receiving the dividend transfers it to its shareholders. This exemption applies
irrespective of the resident companies shareholding in the company declaring the dividend.
The Government, a provincial administration or a municipality.
A public benefit organisation approved by the Commissioner in terms of s 30(3).
A closure rehabilitation trust s 37A.
An institution, board or body contemplated in s 10(1)(cA) (certain entities providing beneficial services).
A fund contemplated in s 10(1)(d)(i) or (ii) (retirement and benefit funds e.g. pension and provident
funds).
A person contemplated in s 10(1)(t) (certain specified entities providing services).
A shareholder in a registered micro business, as defined in the Sixth Schedule, paying that dividend, to
the extent that the aggregate amount of dividends paid by it to its shareholders during the year of
assessment in which that dividend is paid does not exceed R200 000 .
A person that is not a resident and the dividend is paid by a company that is not resident if the share in
respect of which that foreign dividend is paid is a listed share and to the extent that the foreign dividend
does not consist of a distribution of an asset in specie.
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A portfolio of a collective investment scheme in securities
Any person to the extent that the dividend is not exempt from normal tax
Any person to the extent that the dividend was subject to STC on companies
A natural person in respect of a dividend paid in respect of a tax free investment as contemplated in
section 12T.
DIVIDEND WITHHOLDING TAX (DWT)
One of the key features of the dividend tax relates to the withholding mechanism. The DWT is based on the type
of shareholder that is receiving the dividend. The withholding mechanism must cover a wide range of
shareholders some of which are taxable, some exempt and some subject to a reduced rate of dividend tax due to
a double taxation treaty.
However the liability for withholding shifts if the dividend is paid to regulated intermediaries so that the primary
withholding obligation falls on the regulated intermediary. The withholding obligation for both the paying company
and the regulated intermediary can also be eliminated or reduced upon timely receipt of a written declaration that
the beneficial owner is entitled to exemption or tax treaty relief.
Essentially, any payment by the company to a regulated intermediary will result in the regulating intermediary
assuming the withholding responsibility. Any payment by a company to a party other than a regulated
intermediary will result in the withholding obligation for the company payor.
Regulated intermediaries are mostly involved in respect of dividends arising from listed shares because regulated
intermediaries are typically the only parties who are aware who the registered shareholders of listed companies
are (especially in the case of uncertificated shares). However, regulated intermediaries may also hold listed
paper shares. Regulated intermediaries include central securities depository participants (―CSDP‖), brokers (i.e.
authorised users or approved nominees), collective investment schemes in securities (―CIS in securities‖) and
listed investment services providers (―LISP‖).
WITHHOLDING OBLIGATION BY COMPANIES DECLARING AND PAYING DIVIDENDS
A company declaring and paying a dividend will generally be liable to withhold Dividends Tax at a rate of 15
percent of the dividend paid. The amount so withheld must be paid to SARS by the last day of the month
following the month in which that dividend was paid.
However, a company will not have the liability to withhold if the company
(i) has received a declaration of exemption from the Dividends Tax in respect of the beneficial owner
of a dividend or
(ii) makes a payment to certain entities. In addition, a company may be only required to withhold at a
reduced rate if the company has received a declaration of treaty relief in respect of the beneficial
owner.
Once a declaration form has been submitted, the company or regulated intermediary is permitted to rely on the
declaration form submitted until such time as the beneficial owner notifies the company or regulated intermediary
that the circumstances of the beneficial owner have changed. The beneficial owner will in writing undertake to
inform the company should the beneficial owner cease to be the beneficial owner.
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WITHHOLDING LIABILITY RELIEF
Declarations
A company declaring and paying a dividend must not withhold Dividends Tax if the company has a written
declaration and undertaking that the beneficial owner is entitled to a dividend exempt from the Dividends Tax. If
the registered owner of the shares in respect of which the dividend is paid is the beneficial owner of the dividend,
the registered owner (as beneficial owner) must submit the declaration. However, if the registered owner is not
the beneficial owner of the dividend, the registered owner must submit the declaration of the beneficial owner to
the company paying the dividend to enable the beneficial owner to benefit from an exempt dividend.
Similarly, a company declaring and paying a dividend must withhold Dividends Tax at a reduced rate if the
company has a written declaration and undertaking that the beneficial owner is entitled to tax treaty relief. The
required process of declarations for tax treaty relief is the same as the process for receiving declarations for
exemption (except for the additional requirement of submitting the received declaration to SARS.
Form and Timing of declaration and undertaking
The declaration forms in the case of a claim for exemption or treaty-reduced rate have been prescribed by the
SARS. In order for these forms to be effective for purposes of withholding, these forms must be submitted to the
company (or regulated intermediary) by a specified due date. If forms are submitted after the due date,
withholding must occur in full despite an applicable exemption or treaty reduction.
If the company paying the dividend is the withholding agent, the company must set a due date before which the
declaration form must be submitted. If the company does not set a date, the declaration will be valid if received
by the company by the date of payment of the dividend (i.e. accrual to the beneficial owner). In other words, the
declaration of the beneficial owner must be submitted at the earlier of the date set by the company or the date of
payment of the dividend.
It should be noted that late submission of the declaration form does not mean that the amount of Dividends Tax
withheld from the dividend becomes a final tax.
Late declaration forms can still be used in order to claim refunds.
Other exemptions
In addition to the above, a company paying a dividend can take into account automatic exemptions from
withholding without receipt of a declaration form. This form of withholding exemption arises in two circumstances:
• If the company paying a dividend pays the dividend to a regulated intermediary (with the regulatory
intermediary assuming the withholding obligation); or
• If the company paying the dividend forms part of the same group of companies (as defined in section 41)
as the company receiving the dividend.
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DATE OF PAYMENT OF A DIVIDEND
Dividends Tax will be triggered when the dividend is ―paid‖. In the case of a listed company a dividend is
regarded as paid on the date that the dividend is actually paid. In the case of a company that is not listed a
dividend is regarded as paid, at the earlier of the dividend being actually paid or becoming due and payable.
In many cases (especially in the case of closely-held companies), the date of dividend declaration and the date of
dividend payment are the same. However, a delay may exist between declaration and payment. This delay is
most prominent in the case of listed companies with these companies using a ―last date to register‖ as an interim
date for settling dividend accrual. This issue can also arise in closely-held situations. For example, a closely-held
company may declare a dividend far in advance of cash available to clear profits before the entry of new
shareholders.
PAYMENT OF DIVIDEND TAX
Dividend tax withheld or owing must be paid to SARS by the last day of the month following the month in which
the dividend was paid.
IN SPECIE DIVIDENDS
Companies pay dividends in cash or in kind (i.e. the latter being referred to as dividends in specie).
Domestic companies making in specie dividends
The company distributing the in specie dividend remains liable for paying the tax. The withholding mechanism for
in specie dividends of this nature will be rendered irrelevant.
Despite the shift in liability, in specie dividends will be eligible for the same exemptions as cash dividends. For
instance, in specie dividends paid by domestic companies to domestic companies will be exempt like cash
dividends. In order for the company payor to receive this exemption, the company must generally receive a
written declaration and undertaking of exemption from the beneficial owner by the date that the dividend is paid.
The only deviation from the declaration rule involves dividends paid to a domestic group company member or for
certain residential property company distributions; in these latter instances, the exemption applies automatically.
Tax treaty relief is also available for in specie dividends with declarations from beneficial owners similarly
required. Lastly, credits stemming from the Secondary Tax on Companies will be available to the same extent as
those credits are available for cash dividends.
Administration of in specie dividends by domestic companies will operate under roughly the same administration
as cash dividends. For instance, the tax payment due date will remain the same (i.e. the last day of the month
following the month in which the dividend was paid).
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LOSS OF DIVIDEND EXEMPTION
‗Local‘ dividends the company receives are not subject to dividend tax. Ordinarily the company receives a local
dividend exempt from normal tax in terms of section 10(1)(k)(i). With effect from the 25 October 2012 a new
proviso (ee) to the section 10(1)(k)(i) dividend exemption was created as an anti- avoidance provision to
eliminate tax avoidance by means of a ―cession‖ of the dividend stream.
Dividend cessions and loss of dividend exemption
Section 10(1)(k)(i)(ee)
Treasury has indicated its concern in respect of the abuse of the dividend tax exemption accorded to local
company beneficial owners (shareholders). As a result an amendment was made whereby the local dividend
exemption will be lost in respect of any dividend received by or accrued to a company in consequence of:
Any cession of the right to that dividend; or
The exercise of a discretionary power by any trustee of a trust,
unless that cession or exercise results in the holding by that company of all the rights attaching to the share.
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FOREIGN DIVIDENDS: SECTION 10B
Taxation of dividends paid by foreign companies
As a general rule, foreign dividends are included in the recipient‘s gross income and any portion of the
amount that is not exempt will be taxed at the marginal rates relevant to the specific recipient (that is,
28 percent for companies, up to 41 percent for individuals and 41 percent for Trusts).
Partial exemption section 10B(3)
The partial exemption formula rates are:
the 26/41 exemption for natural persons and trusts (wef 1 March 2015) and
the 13/28 exemption for companies (wef 1 April 2012)
as set out in section 10B(3).
Total exemption section 10B(2)
Foreign dividends are now subject to four exemptions as listed below:
10B(2)(a) Participation exemption. Under this exemption, foreign dividends will be exempt if
received by or accrued to a person who holds at least 10 percent of the equity shares and
voting rights in the company declaring the foreign dividend.
10B(2)(b)Country-to-country participation exemption. In terms of the country-to-country
exemption, a CFC will be allowed to claim the participation exemption without regard to the 10
percent participation requirement if the foreign dividends are paid by a foreign company which
is situated within the same country as the CFC to which the foreign dividend is paid.
10B(2)(c) The previously taxed income (or CFC exemption) exemption. Where a foreign
dividend is received by or accrued to a resident, it will be exempt in his hands to the extent
that the foreign dividend does not exceed the aggregate of all amounts included in his (the
resident‘s) income in any year of assessment under s 9D, which includes a proportionate
amount of a CFC‘s net income in the income of a resident shareholder (s 10B(2)(c)). The s
10B(2)(c) exemption therefore prevents the incidence of double taxation of the same profits in
terms of s 9D and when distributed as a dividend.
The expression ‗all amounts‘ relate to the net income of the company declaring the foreign
dividend or the net income of any other company which has been included in the income of
the resident (in terms of s 9D) by virtue of the resident‘s participation rights in that other
company held indirectly through the company declaring the foreign dividend. The net income
of either of these companies, for the purposes of s 10B(2)(c), must be determined without
regard to the formula for determining that part of a foreign dividend which is exempt in s
10B(3) (proviso to s 10B(2)(c)).
10B(2)(d) An exemption for foreign dividends will be added in respect of JSE listed shares
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(because these are taxed under the Dividends Tax).
6quat rebate
While these rebate only takes into account taxable income (thereby excluding foreign dividends
exempt by virtue of the participation and previously taxed income exemptions), the rebate will not be
directly reduced by the partial income (26/41 or13/28) exemption.
Expenses to produce foreign dividends disallowed
In terms of section 23(q) the deduction of any expenses incurred to produce foreign dividends is
disallowed. As a result, no deductions will be allowed for expenses incurred in relation to the
acquisition of the foreign shares because no comparable deduction is allowed for expenses
associated with domestic shares (section 23(f) with the exception of section 24O).
Example 1 SA Company shareholder
Facts: A Co, a South African resident company, pays taxes at 28 percent. A Co holds 2 percent of
the total equity shares and voting rights in Foreign Company (a company that does not qualify as a
controlled foreign company). Foreign Company pays a dividend of R1.2 million to A Co, which is
subject to foreign withholding taxes of 8 percent (i.e. R96 000).
Result: The gross R1.2m dividend will be included in A Co‘s gross income. The participation and
previously taxed income exemptions do not apply. However, the dividend is exempt to a ratio of 13/28
(section 10B(3)). Therefore, the amount included in A Co‘s taxable income in relation to the dividend
is R642 857 [R1.2m less R557 143(13/28th of R1.2 million)]. Assuming the South African tax on the
foreign dividend is R180 000 (i.e. R642 857 x 28%) less the R96 000 of foreign tax rebates, thereby
amounting to R84 000.
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CAPITAL GAINS TAX (CGT)
General Summary
The net capital gain of a company is multiplied by an inclusion rate of 80% to determine the taxable capital gain,
which is brought to account in the company‘s taxable income and subject to the company tax rate of 28%, giving
an effective tax rate on capital gains of 22.4%.
A variety of special rules apply to certain distributions by companies and the gains made by shareholders on
transactions in the shares of companies. Furthermore, there is a particularly awkward ‗cascade‘ effect that may
result from distributions of capital gains through a chain of companies on liquidation. And lastly, there is no
general relief for ‗unrealised group gains‘ and a deferral of recognition of group losses.
The date of a distribution is defined and generally is the date of the distribution, or the last date to register in the
case of listed companies.
• Issue of shares by a company in return for cash or kind, whether or not at a premium: There is no CGT
event for the company but the shareholder or member has a base cost in the shares or interest acquired
equal to the subscription price.
A “rights offer” :Where a company issues a rights offer there are no CGT consequences for the Company.
• Declaration of a normal cash dividend by a company: There is no CGT event for the company. Where the
dividend constitutes more than 15% of the proceeds of a subsequent disposal of the shares within two
years of their original acquisition by the recipient of the dividend, any loss suffered by the shareholder can
be affected.
• Distribution of capitalisation shares: There is no CGT event for company or shareholder. Shareholder has
deemed base cost expenditure of nil.)
• Distribution of an asset to a shareholder (whether called a dividend in specie or not): Deemed disposal by
company at market value on the date of distribution – CGT on net gain. Shareholder has a deemed base
cost of the asset acquired equal to market value.
• Disposal of an asset to a connected person and especially to another company within the same group of
companies. Unless one of the corporate rollover provisions apply, deemed disposal is at market value and
CGT on net gain (if any), even though the group as a whole has not realised any gain. If there is a loss,
there is no recognition of that loss against other gains, unless made in relation to the same connected
person.
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CGT CONSEQUENCES OF VARIOUS COMPANY TRANSACTIONS
Meaning of „disposal‟
A capital gain is made, or a capital loss is incurred, when proceeds or deemed proceeds arise on the disposal or
deemed disposal of an asset. The statutory definition of the term ‗disposal‘ is extremely wide and extends well
beyond its ordinary and natural meaning.
For convenience, the definition of ―disposal‖ can be divided into three parts:
the general definition,
the extended definition in terms of which certain events are deemed to constitute the disposal of an
asset, and finally,
the excluding part in terms of which certain specific events are not regarded as a disposal of an asset.
In terms of the general definition a ‗disposal‘ is any event, act, forbearance or operation of law that results in the
creation, variation, transfer or extinction of an asset. The term ‗disposal‘ expressly includes:
The sale, donation, expropriation, conversion, grant, cession, exchange or any other alienation or
transfer of ownership of an asset.
The forfeiture, termination, redemption, cancellation, surrender, discharge, relinquishment, release,
waiver, renunciation, expiry or abandonment of an asset.
The scrapping, loss or destruction of an asset.
The vesting of an interest in a trust asset in a beneficiary.
The distribution of an asset by a company to a shareholder.
The granting, renewal, extension or exercising of an option.
The decrease in value of a person‘s interest in a company, trust or partnership as a result of a ‗value
shifting arrangement‘.
CGT consequences for Companies
Distributions of an‖ in specie‖ dividend
When a company makes a distribution of an asset in specie to a shareholder, the disposal will give rise to normal
tax and CGT consequences for the company.
Normal tax consequences
If the asset is a capital asset (not trading stock), there will be a recoupment of deductions or allowances that have
been claimed on the asset. Such allowances are recouped upon the transferring of the asset, in whatever
manner or form to the shareholder. The market value of the asset is regarded as recouped. The effect of this is
that the difference between the market value of the asset and its tax value (cost of the asset less all allowances
claimed) on the date of transfer will be included in the company‘s income as a recoupment.
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CGT consequences
The company is treated as having disposed of the asset to its shareholder for proceeds equal to the market value
of the asset. The difference between the market value proceeds of the asset at the date of transfer and the base
cost of the asset will constitute a gain or loss in the hands of the company. The proceeds will be reduced by any
amount that was already recouped in respect of the asset and the base cost will be reduced by any allowances
already claimed in respect of the asset elsewhere in the Act.
A shareholder and a company may in certain circumstances be regarded as ―connected persons‖ in terms of the
Act, and in these circumstances any capital loss that may arise from the distribution of an asset to that
shareholder, will become a ―clogged loss‖, such that the capital loss in the hands of the company may only be set
off against future capital gains made from disposal to that specific shareholder
Distribution of trading stock in specie
Should a company distribute its trading stock in specie to any of its shareholders by way of a dividend, there will
be included in its income during the year of assessment in which the trading stock was distributed an amount
equal to the market value of that trading stock. Although the market value of trading stock distributed in specie is
included in full in the distributing company‘s income, the company will effectively have enjoyed a deduction of the
cost to it of that stock, either under s 11(a) on account of purchases during the year of assessment during which
the distribution was made, or because of its effective deduction of the value of its opening stock at the beginning
of that year.
Donations and disposals not at arm‘s length between connected persons
When a person disposes of an asset by means of a donation or for a consideration not measurable in money, or
to a connected person for a consideration that does not reflect an arm‘s length price, he is treated as having
disposed of it for an amount received or accrued equal to its market value on the date of the disposal (That is, for
proceeds equal to market value). The person who acquires the asset, in turn, is treated as having acquired it at a
cost equal to the same market value. This cost must be treated as the ‗para 20 base cost expenditure‘ of the
asset (para 38).
The provision requires that the disposal be made ‗for a consideration that does not reflect an arm‘s length price‘.
It applies, therefore, to all disposals not at an arm‘s length price, whether the consideration is greater or less than
the arm‘s length price of the underlying asset.
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CONNECTED PERSONS
Connected person in respect of a company (as defined in section 1 of the Income Tax Act)
(d) in relation to a company—
(i) any other company that would be part of the same group of companies as that company if the expression ―at
least 70 per cent of the equity shares of‖ in paragraphs (a) and (b) of the definition of ―group of companies‖ in this
section were replaced by the expression ―more than 50 per cent of the equity shares of or voting rights in‖;
(ii) . . . . . .
(iii) . . . . . .
(iv) any person, other than a company as defined in section 1 of the Companies Act, 2008 (Act No. 71 of 2008),
who individually or jointly with any connected person in relation to himself, holds, directly or indirectly, at least 20
per cent of—
(aa) the equity shares in the company; or
(bb) the voting rights in the company;
(v) any other company if at least 20 per cent of the equity shares of or voting rights in the company are held by
that other company, and no shareholder holds the majority voting rights in the company;
(vA) any other company if such other company is managed or controlled by—
(aa) any person who or which is a connected person in relation to such company; or
(bb) any person who or which is a connected person in relation to a person contemplated in item (aa);
and
(vi) where such company is a close corporation—
(aa) any member;
(bb) any relative of such member or any trust (other than a portfolio of a collective investment scheme in
securities or a portfolio of a collective investment scheme in property) which is a connected person in
relation to such member; and
(cc) any other close corporation or company which is a connected person in relation to—
(i) any member contemplated in item (aa); or
(ii) the relative or trust contemplated in item (bb); and
(e) in relation to any person who is a connected person in relation to any other person in terms of the foregoing
provisions of this definition, such other person:
Provided that for the purposes of this definition, a company includes a portfolio of a collective investment scheme
in securities;
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―group of companies‖ means two or more companies in which one company (hereinafter referred to as the
―controlling group company‖) directly or indirectly holds shares in at least one other company (hereinafter
referred to as the ―controlled group company‖), to the extent that—
(a) at least 70 percent of the equity shares in each controlled group company are directly held by the controlling
group company, one or more other controlled group companies or any combination thereof; and
(b) the controlling group company directly holds at least 70 per cent of the equity shares in at least one controlled
group company.
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SECTION 18A DONATIONS TO PUBLIC BENEFIT ORGANISATIONS
This deduction is available to all donors, not just individual taxpayers
Section 18A allows for a deduction of bona fide donations to, amongst others—
(a) any—
(i) public benefit organisation approved by the Commissioner under s 30; or
(ii) institution, board or body contemplated in s 10(1)(cA)(i) which carries on in the Republic any public
benefit activity listed in Part II of the Ninth Schedule;
(a) any public benefit organisation approved by the Commissioner under s 30, which provides funding solely to a
public benefit organisation contemplated in (a) above;
The deduction is limited to 10% of the taxable income (excluding any retirement fund lump sum benefit and
retirement fund lump sum withdrawal benefit) of the taxpayer as calculating before allowing any deduction under
this s 18A.
Section 18A certificate
Any claim for a deduction must be supported by a receipt from the organisation or agency disclosing—
the reference number and name of the public benefit organisation, institution, board or body or authority
concerned which received the donation;
the name and address of the donor and the date of the receipt of the donation;
the amount of the donation (or its nature if in kind) and a certification that the receipt is issued for
purposes of s 18A and that it will be used exclusively as required in terms of the section.
Where the donation is otherwise than in cash, s 18A(3) sets out the specific method for the calculation of the
donation.
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VALUE ADDED TAX
DEEMED SUPPLIES
Certain events are treated as deemed supplies for VAT purposes (sections 8,8A and 18(3)). Important deemed
supplies are as follows:
A person ceases to be a vendor (section 8(2)).
o When a person ceases to be a vendor he is deemed to have supplied the goods (excluding
those for which an input tax deduction was denied in terms of section 17(2)) or rights that form
part of the assets of his enterprise. He must therefore account for output VAT on the lower of
their original cost or market value at the time when he ceases to be a vendor (section 10(5)).
The output VAT must be accounted for in the tax period immediately before he ceases to be a
vendor.
o If a person (who ceases to be a vendor) disposes of any goods or rights after the cancellation
of his registration (and thus after the deemed supply has been accounted for), the person will
not carry on an enterprise for VAT purposes and no VAT will be due on the supply of the goods
or rights.
o Where the assets, forming part of a vendor‘s enterprise, are, prior to cessation of registration,
distributed to shareholders as a dividend in specie, no VAT will be payable, as the supply will
be made for no consideration. Should the recipient, however, be a connected person in
respect of the vendor and not be entitled to a full input tax credit had VAT been payable, VAT
will have to be levied on the open market value of the dividend in specie (i.e. the value of
supply rule for connected persons). The distribution of assets by a person in the form of a
dividend in specie subsequent to the cessation of registration has no VAT implication, as the
supply has not been made in the course or furtherance of an enterprise, the enterprise having
ceased. The supply will therefore not be a taxable supply.
o The general rules for deregistration (for VAT purposes) will not apply where a person ceases to
be a vendor as a result of death or insolvency, provided the enterprise is thereafter continued
by or on behalf of his executor or trustee.
o When ceasing to be a vendor outstanding creditor balances, on which input tax were claimed,
are treated as follows:
Outstanding for longer than 12 months – no adjustment for VAT on these balances
when ceasing to be a vendor, since section 22(3) requires that a VAT vendor are
required to account for output tax if he has not paid the full consideration for a supply
within 12 months. This liability for output tax is therefore as a result of the non-
payment of the creditor for 12 months and not as a result of the cessation of the
enterprise. If the vendor has however not yet accounted for the output tax on
cessation, the adjustment should be made at that time.
Outstanding for less than 12 months – on the date of the cessation of the enterprise
output tax is payable on outstanding creditor balances that is not older than 12
months. The value of these supplies is the outstanding balance of the creditor
(section 22(3) (proviso (ii)(bb)).
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Indemnity awards (section 8(8)).
o Short-term insurance premiums are subject to VAT and are deductible as input tax in relevant
circumstances. Long-term insurance premiums are, however, a financial service, which is an
exempt service.
o A deemed supply arises when a payment is received by a vendor from an insurer or when a
vendor is indemnified by the payment of money to another person by the insurer, to the extent
that the vendor makes taxable supplies.
o The deemed supply provision does not apply to an indemnity payment received by a vendor for
the total reinstatement of goods stolen or damaged beyond economic repair, and for which he
was denied an input tax credit. This would be, for example, when a motor car is completely
destroyed or stolen.
o The vendor must determine the output VAT payable by applying the tax fraction (14 / 114) to
the payment received and account for the output VAT in the tax period when the payment was
received.
Further important deemed supplies include the following:
Trading stock taken out of the business for private use (see ―change of use‖);
Amounts received in excess of consideration charged (section 8(27))
o The excess consideration charged will attract output VAT at 14% if the excess is not refunded within
four months. The excess portion will be deemed to be a supply of services performed by the
vendor. In the event that the excess amount is refunded on a date after output VAT has been
accounted for, the vendor will become entitled to claim an input VAT credit. The supply is deemed to
happen on the last day of the VAT period during which the four month period ends.
Fringe benefits (section 8(4) and section 18(3)).
Fringe benefits
A deemed supply arises when a vendor grants a benefit or advantage to an employee or office holder that is
included in gross income in terms of paragraph (i) of the definition of ‗gross income‘ read with the Seventh Schedule
of the Income Tax Act.
Specifically excluded from the fringe benefit deemed supply provision are exempt supplies, zero-rated supplies, a
supply of entertainment, a fringe benefit provided in the course of making exempt supplies and supplies when an
input tax credit is denied.
Value of supply of fringe benefits (other than the use of a motor vehicle)
Section 10(13) provides that the consideration(an amount deemed to include VAT) for the purposes of
determining the output VAT is the cash equivalent in terms of the Seventh Schedule to the Income Tax Act. The
cash equivalent value, ie the consideration for the deemed supply, must therefore be multiplied by the VAT
fraction in order to determine the output VAT.
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For the right of use of motor vehicles the consideration per month is as follows:
―Motor cars‖: Determined value × 0,3% if employer was denied an input tax credit.
Vehicles other than ―motor cars‖: Determined value × 0,6% if employer obtained an input tax credit.
The determined value is the original cost in an arm‘s length transaction excluding finance charges, interest, sales
tax or VAT.
If the employee bears the full cost of repairs and maintenance (and no compensation in the form of an allowance
or reimbursement is paid to him) the consideration determined monthly is reduced by the lesser of R85 or the
amount of the consideration determined monthly.
Output vat raised on a fringe benefit is a deductible expense under the general deduction formula (section 11(a)
and section 23(g) of the Income Tax Act).
The following table shows if a benefit or advantage granted to an employee or office holder constitutes a deemed
supply for the purposes of section 18(3):
Taxable benefit Deemed supply Reason
Asset given to employee Yes
(unless an input tax
deduction was denied to
the employer)
Seventh Schedule fringe benefit.
Use of asset Yes Seventh Schedule fringe benefit.
Use of company car Yes Seventh Schedule fringe benefit.
Free or cheap services Yes Seventh Schedule fringe benefit.
Release of an employee from a debt
owed to his employer
Yes Seventh Schedule fringe benefit. This is not
an exempt supply because it is not the issue
of a debt security.
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ADJUSTMENTS
Debit and Credit notes
A debit note will normally be issued by the supplier when the tax invoice for the supply has already been issued
and the previously agreed consideration is subsequently increased.
Conversely, a credit note will normally be issued by the supplier when the tax invoice for the supply has already
been issued and the previously agreed consideration is subsequently reduced. A credit note is also issued by the
original supplier when faulty goods are returned by the customer.
Debit and credit notes therefore provide a mechanism to support the necessary VAT adjustments required or
allowed where an event has the effect of altering the original consideration agreed upon for a past taxable supply,
after the tax invoice has already been issued, or the vendor has accounted for the supply on a VAT return.
When must a debit note or credit note be issued?
The following are the circumstances under which it will be necessary to issue a debit note or credit note:
•Where a supply of goods or services is cancelled.
•Where the nature of the supply of goods or services has been fundamentally varied or altered.
•Where the previously agreed consideration for the supply of the goods or services is being altered by
agreement with the recipient (including a discount).
•Where part of, or all the goods or services supplied are returned to the supplier (including any
returnable container returned to the supplier).
This will, however, only be necessary if in respect of any of the above circumstances the supplier has
either –
•issued a tax invoice and the tax charged is incorrect; or
•furnished a VAT return in which the incorrect amount of output tax was accounted for.
The debit or credit note must be issued, whether or not the supplier accounts for tax on an invoice or payments
basis. The issue of a credit note is not required when a prompt payment (settlement) discount is the reason for
the reduction in the consideration, providing the terms of that discount are clearly shown on the tax invoice.
Adjustments
The VAT Act makes provision for debit and credit notes to be issued in respect of a single supply. Remember
that the consideration for a supply can only be altered by means of a debit or credit note – it is not correct to
merely issue another tax invoice. Note also that it is illegal to issue more than one tax invoice per taxable supply.
Binding General Ruling No. 6 clarifies the VAT treatment of discounts, rebates and incentives in the production,
distribution as well as marketing of the packaged consumer goods industry.
Debit and credit notes must be reflected on the VAT 201 return as follows:
Field 12– Output tax – debit notes issued and credit notes received.
Field 18 – Input tax – credit notes issued and debit notes received.
Credit notes issued may not be set off against the sales made to the same vendor, and similarly, debit notes may
not be set off against purchases unless the debit or credit note concerned is issued in the same tax period in
which the supply has taken place.
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Theft
Where it is discovered that the cash relating to a transaction has been stolen or misappropriated, this does not
entitle the vendor to issue a credit note and deduct input tax thereon. The VAT Act does not provide for a
deduction or adjustment in such cases.
Bad debts
A vendor who writes off a bad debt is entitled to claim a deduction equal to the VAT portion of the consideration
written off as an input tax deduction (section 22(1)). But if the debt originated from a zero-rated supply, an input tax
deduction of ‗nil‘ arises.
Recovery of bad debts
If a debt is wholly or partly recovered for which an input tax deduction was claimed in terms of section 22(1), output
tax must be accounted for on the amount recovered during the tax period when it is recovered (section 22(2)).
Long-outstanding creditors (more than 12 months)
When a vendor (who accounts for VAT on the invoice basis) has made a deduction of input tax, and has not paid the
full consideration within twelve months after the expiry of the tax period when the input tax deduction was made, he
must, in terms of section 22(3), account for output tax in the next tax period, equal to the tax fraction of the
consideration not paid.
If the vendor subsequently settles the creditor, then he may claim an input tax deduction equal to the tax fraction of
the amount paid (section 22(4)).
Change of use adjustments
Section 18(1) provides that when goods or services are acquired for making taxable supplies and are
subsequently applied wholly for private (eg: removal of trading stock from enterprise for private use purposes),
exempt or another non-taxable use, they are deemed to be supplied in the course of the vendor‘s enterprise.
Output tax is payable by the vendor based on the market value at that time.
Value (section 10(7)): 14 / 114 × open market value.
Time: Tax period when the change of use occurs.
Example 1
Adam Black, a vendor, purchased trading stock for R228 (vat inclusive). He donated this trading stock rather
than selling it for R456 (R400 plus vat of R56).
Suggested solution
He must raise output vat on its open market value as follows:
R456 × 14 / 114 = R56
In terms of section 16(3)(h), if a full input tax credit was not claimed on its acquisition, then the vendor is also
entitled to an input tax adjustment equal to the lesser of the cost (including vat) and market value × % input
credit not claimed × 14 / 114.
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NB: See exception provided for residential property developers in terms of section 18B
Increase of decrease in taxable use
Sections 18(2) and 18(5) deal with a decrease or increase in the extent of the taxable use or application of capital
goods (the adjusted costs of which is R40 000 or greater excluding VAT) by a vendor.
In the event of a reduction in the extent of taxable use, by more than 10%, a deemed supply arises, resulting in
output tax on the portion of use that is no longer for use in the making of taxable supplies.
An increase in the extent of taxable use, will give rise to an input tax deduction:
Value (section 10(9)): 14 / 114 × lesser of adjusted cost (including VAT) and open market value × % by
which the taxable use has changed (decreased or increased).
Time: End of the vendor‘s year of assessment (or February).
Non-taxable to taxable use
Section 18(4) applies to goods or services acquired
prior to the introduction of VAT (30 September 1991) wholly for non-taxable purposes, or
acquired new or second-hand, on or after 30 September 1991 and no input tax credit was deducted.
If these goods or services are subsequently applied to a taxable purpose the vendor would be entitled to an input
tax claim as follows:
Value: Input tax adjustment: 14 / 114 × lesser of adjusted cost (including VAT) and open market value × %
taxable use.
Time: Tax period when the change of use occurs.
If the intended use is 95% or more it is deemed to be 100%, that is the full amount of input tax is deductible.
Use of going concern to make exempt supplies
Section 18A provides that when a vendor acquires an enterprise (or part of it) as a going concern (a zero-rated
supply) and then uses some of the assets wholly or partly for purposes other than the making of a taxable supply, he
will be deemed to have supplied these goods and will have to account for output tax.
Value: Output tax adjustment: adjusted cost × % of non-taxable use × 14%.
Time: Tax period when the supply is made.
If the intended use is 95% or more it is deemed to be 100%, that is, the full amount of input tax is deductible.
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Complete the amount refunded /discharged under “Specify the portion of the amount so refunded / discharged as was previously allowed by SARS as a rebate” field.
PARTNERSHIPS/ JOINT VENTURES 10.2.35
This section of the return will only display if the question “Is the company a partner in a partnership?” in the “Information to create this income tax return” is “Yes”
Note:
The Partnerships section will repeat according to the numeric value entered in the question “How many partnerships” on the “Information to create this income tax return” page.
If 5 Partnerships sections were created, it is mandatory that all 5 must be completed. If incorrectly created, refer back to the “Information to create this income tax return” to rectify.
The following fields must be completed for each Partnerships section
Partnership Name: Free text field (maximum length is 53 blocks) Specify the company’s profit / loss sharing % during the year of assessment:
Numeric field – complete the percentage Indicate if the company derived a profit / loss from this partnership during the
year of assessment: Select “Profit” or “Loss” Indicate if this information is in respect of a local or a foreign partnership:
Select “Local” or “Foreign”.
11 ANNEXURE D – MEDIUM TO LARGE BUSINESS If a company is not classified as a body corporate / share block company / micro business or small business, it will be classified as a Medium to Large Business.
11.1 INFORMATION TO CREATE THIS INCOME TAX RETURN
All questions on this page must be completed. Depending on the answer provided to each question, subsequent questions might be displayed on this page. Please ensure that all questions on this page are completed before commencing with completion of the return.
Note: If any of the questions on this page are changed after the commencement of the completion of the return (refer to section “Completion of return”), it may result in the following: Existing sections on the return may be removed/deleted. The form will display a
warning message to alert the taxpayer of any potential loss of data captured Additional sections may be displayed on the return for completion.
Representative taxpayers/tax practitioners who are not registered eFilers and have online access to this guide and prefer to, prior to visiting the nearest branch, print a manual copy of the ITR14 for completion, should prepare the necessary information and supporting material specified in this guide.
Each question in the ITR14 must be carefully reviewed to ensure that all the relevant information is ready for capturing by a SARS agent at the SARS branch and that the necessary supporting material specified in this guide is at hand in order to finalise the capturing.
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DORMANT 11.1.1
Is the company dormant? Yes” or “No” must be selected. If “Yes” is selected, the company will be classified as a dormant company and Annexure B will not be applicable to the company. The Company Representative / Public Officer must refer to Annexure A if the company is dormant. If “No” is selected, the Company Type and Tax Credits sections on the “Information to create this income tax return” page will display additional questions for customisation of the income tax return.
COMPANY TYPE 11.1.2
Is the company a body corporate / share block company as referred to in s10(1)(e)? Yes” or “No” must be selected. If “Yes” is selected, the Company Representative / Public Officer must refer to Annexure B for a Body Corporate / Share Block Company. If “No” is selected, the next question will be displayed.
Specify the gross income (sales / turnover plus other income) in respect of the year of assessment? Complete the gross income in Rands. The gross income referred to in this question must be calculated as the sum of “Sales / Turnover” declared under “Gross Profit / Loss” and all income items declared under “Income Items” in the Income Statement.
Specify the total assets (current and non-current) of the company in respect of the year of assessment? If the gross income specified in the previous question exceeds R14 million for the financial year ending prior to 30 April 2013 and R20 million for the financial year ending after 30 April 2013 and / or the total assets exceed R10 million, then the company is classified as a Medium to Large Business. If the values entered for gross income and total assets do not meet the Medium to Large Business criteria, please refer to section 3 to determine the correct classification. For Medium to Large Business:
The Company Information section on the “Information to create this income tax
return” page will display additional questions for customisation of the income tax return.
If the gross income specified previously does not exceed R14 million if the financial year end is prior to 20130430 or R20 million if the financial year end is from 20130430 and onwards the Small Business Corporation section on the “Information to create this income tax return” page will display additional questions for customisation of the income tax return.
The content of the income tax return will also be expanded to display the following sections for completion: Additional Assessment Information, Shares, Balance sheet, Income Statement, Tax Computation, Tax Allowances / Limitations, and Corporate Rules.
CAPITAL GAIN / LOSS TRANSACTIONS 11.1.3
Did the company have any transactions or events which resulted in a locally
sourced capital gain or loss? “Yes” or “No” must be selected. If “Yes” is selected, the section for ‘Schedule of Local Capital Gains and Losses in respect of the disposal of assets’ will be displayed for
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completion.
Did the company have any transactions or events which resulted in a foreign sourced capital gain or loss? “Yes” or “No” must be selected. If “Yes” is selected, the section for ‘Schedule of Foreign Capital Gains and Losses in respect of the disposal of assets’ will be displayed for completion.
Has any debt been reduced for no consideration which has the effect of reducing the company’s assessed capital loss under paragraph 12A(4) of the Eighth schedule? This field is only applicable from 2015 onwards “Yes” or “No” must be selected. If “Yes” is selected the following questions will be displayed ‘Was the reduction for a local asset?’ and ‘Was the reduction for a foreign assets?’
Was the reduction for a local asset? This field is only applicable from 2015 onwards “Yes” or “No” must be selected. If “Yes” is selected, the following section will be displayed for completion ‘Reduction of Local Assessed Capital Loss due to Debt Reduction’.
Was the reduction for a foreign asset? This field is only applicable from 2015 onwards “Yes” or “No” must be selected. If “Yes” is selected, the following section will be displayed for completion ‘Reduction of Foreign Assessed Capital Loss due to Debt Reduction’
VOLUNTARY DISCLOSURE PROGRAMME 11.1.4
Does any declaration in this return relate to an application made under the SARS Voluntary Disclosure Programme? Yes” or “No” must be selected. If “Yes” is selected, the Voluntary Disclosure Programme section in the income tax return will be displayed for completion. VENTURE CAPITAL COMPANY INVESTMENT 11.1.5
Did the company invest in SARS approved Venture Capital Companies in exchange
for the issue of shares during the year of assessment? Yes” or “No” must be selected. If “Yes” is selected, then ’Specify the number of investments made in SARS approved Venture Capital Companies’ will be displayed for completion.
Specify the number of investments made in SARS approved Venture Capital Companies This field will require you to complete the number of investments made. Complete any number between 1 and 99. A section on the income tax return will be displayed named ‘Investments in Venture Capital Companies (VCC): s12J’. This section may be repeated on the return to a maximum of 10 times. The Representative/Public Officer is required to complete in the fields provided, on the investments made. If he/she captured that the number of investments made to an approved VCC does not exceed ten, he/she must complete on the return required information on the investments made. Otherwise the Representative/Public Officer is required to complete information of the top ten investments made.
DONATIONS 11.1.6
Does the company want to claim donations made to an approved public benefit
organisation (PBO) in terms of s18A? “Yes” or “No” must be selected. If “Yes” is selected, the following question will be displayed for completion ‘Is the company a collective investment scheme’.
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Is the company a collective investment scheme? “Yes” or “No” must be selected. If “No” is selected, then ‘How many Public Benefit Organisations (PBO) did the company donate to?’ will be displayed for completion. If “Yes” is selected, then the income tax return will display the following section for completion, ‘Donations allowable in terms of s18A to approved Public Benefit Organisations (PBO) in respect of a Collective Investment Scheme’
How many Public Benefit Organisations (PBO) did the company donate to? Complete any number between 1 and 99 which indicates the number of PBO’s the company donated to. This will display on the income tax return a section to be completed named ‘Donations allowable in terms of s18A to approved Public Benefit Organisations (PBO)’. In this section complete the details of the PBOs to whom donations were made.
TAX CREDITS 11.1.7
Will the company be claiming any PAYE credits reflected on an IRP5 tax certificate? Yes” or “No” must be selected. If “Yes” is selected, complete the next question.
Specify the number of IRP5 tax certificates This field accepts numeric values between 1 and 20. Based on the numeric value entered in this field, the PAYE Credits Available section in the income tax return will repeatedly be displayed for completion (e.g. if the numeric value 5 was entered then 5 PAYE Credits Available sections will display in the return for completion).
Will the company be claiming any Foreign Tax credits not relating to Capital Gain transactions in terms of s6quat and /or treaty? Yes” or “No” must be selected. If “Yes” is selected, the Foreign Tax credits: Taxable Foreign Sourced Income of Resident Companies – s6quat (excluding foreign capital gain/loss) section in the income tax return will be displayed for completion.
Will the company be claiming any Foreign Tax credits not relating to Capital Gain transactions in terms of s6quin? “Yes” or “No” must be selected. If “Yes” is selected, the Foreign Tax credits: Taxable South African Sourced Income – s6quin (already included in taxable income) section in the income tax return will be displayed for completion.
Were any foreign tax credits refunded / discharged during the year of assessment for which a rebate was allowed during a previous year of assessment in terms of s6quin? “Yes” or “No” must be selected. If “Yes” is selected, the Foreign Tax Credits Refunded / Discharged by the government of a foreign county in respect of rebate allowed by SARS in previous year – s6quin will be displayed for completion.
COMPANY INFORMATION 11.1.8
Is the company a partner in a partnership/ joint venture? “Yes” or “No” must be selected. If “Yes” is selected, complete the next question.
How many partnerships/ joint venture? This field accepts numeric values between 1 and 99. Based on the numeric value entered in this field, the Partnerships section in the income tax return will repeatedly be displayed for completion (e.g. if the numeric value 50 was entered then 50 Partnership sections will display in the return for completion).
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Is the company a Personal Service Provider as defined in the Fourth Schedule? “Yes” or “No” must be selected. If “Yes” is selected, the Personal Service Provider section in the income tax return will be displayed for completion.
Is the company resident in South Africa for income tax purposes? “Yes” or “No” must be selected. If “No” is selected, the Non-Residency section in the income tax return will be displayed for completion. If “Yes” is selected, complete the next question.
How many different classes of shares have been issued by the company? This field accepts numeric values between 1 and 100. Based on the numeric value
entered in this field, the Contributed Tax Capital section in the income tax return will repeatedly be displayed for completion (e.g. if the numeric value 5 was entered then 5 Contributed Tax Capital sections will display in the return for completion).
For Close Corporations, the definition of a “share” (any unit into which the proprietary interest in the company is divided) according to the Companies Act includes the members’ interests in a close corporation. Members’ interest therefore must be regarded as a class of share.
The distinction between different types of shares (e.g. ordinary, preference, redeemable etc.) must be declared separately. Furthermore, if the company has only issued one class of ordinary shares (for example) then a general description would be in order. However, if classes A, B and N ordinary shares have been issued then each class of ordinary share must be specified separately i.e. if there are shares with different rights for the different shareholders they must be declared separately.
Did the company qualify for an Urban Development Zone deduction in terms of s13quat? “Yes” or “No” must be selected. If “Yes” is selected, the Urban Development Zone (s13quat) section in the income tax return will be displayed for completion.
Did the company enter into any reportable arrangement in terms of s34 – 39 of the Tax Administration Act or s80M – S80T of the Income Tax Act? “Yes” or “No” must be selected. If “Yes” is selected, complete the next question.
Specify the number of reportable arrangements This field accepts numeric values between 1 and 100. Based on the numeric value entered in this field, the Reportable Arrangement section in the income tax return will be expanded to display a field for each reportable arrangement number for completion (e.g. if the numeric value 4 was entered then 4 Reportable Arrangement Numbers will display for completion in the Reportable Arrangement section of the return).
Were any dividends declared during the year of assessment? “Yes” or “No” must be selected. If “Yes” is selected, the Dividends Declared section in the income tax return will be displayed for completion.
Does the company elect to be a headquarter company in terms of s9I? “Yes” or “No” must be selected. If “Yes” is selected, the Headquarter Company System section in the income tax return will be displayed for completion.
Specify the main industry code A pop-up list with all the Standard Industry Codes (SIC) will be displayed on eFiling
and when the agent captures the information in the SARS branch. For non-eFilers, the Company Representative / Public Officer completing the ITR14 manually can access the Standard Industry Codes (SIC) available on www.statssa.gov.za.
If the main industry code starts with 05, 06, 07, 08 or 09: The Industry Related Information: Mining and Quarrying section in the income tax return will be displayed for completion
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If the main industry code starts with 41, 42 or 43: The Industry Related Information: Construction section in the income tax return will be displayed for completion
If the main industry code starts with 45, 46 or 47: The Industry Related Information: Wholesale and Retail Trade section in the income tax return will be displayed for completion
If the main industry code starts with 64, 65 or 66: The Industry Related Information: Financial and Insurance Activities section in the income tax return will be displayed for completion.
Is the company a subsidiary of a group of companies as defined in s1? “Yes” or “No” must be selected. If “Yes” is selected, the Company Structure section in the income tax return will be displayed for completion.
Did the company receive / accrue any foreign income or incur any foreign expenditure or pay any royalties, interest, dividends or consulting fees to a non-resident? “Yes” or “No” must be selected. If “Yes” is selected, the International section in the income tax return will be displayed for completion and the below question must be answered. For years of assessment commencing on or after 1 April 2012 (for prior years
refer to guide), did the company enter into any transaction, operation, scheme, agreement or understanding as set out in section 31 (1)(a)?
If” Yes” is selected, the following question will be displayed on the return, Furthermore the following sub-questions will also be displayed for completion Did the company receive / accrue income? “Yes” or “No” must be selected. If “Yes” is selected, the Transfer Pricing Received /
Receivable section and the Transfer Pricing Supporting Information container in the income tax return will be displayed for completion
Did the company incur expenditure? “Yes” or “No” must be selected. If “Yes” is selected, the Transfer Pricing Paid / Payable
section in the income tax return will be displayed for completion.
Significant amendments have been made to section 31 of the Income Tax Act 58 of 1962 (“ITA”), which relates to transfer pricing. The amended section 31 came into operation on 1 April 2012 and applies in respect of years of assessment commencing on or after that date. The “version” of section 31 applicable to year of assessment commencing before 1 April 2012 is referred to in this guide as the “old section 31”.
The data that needs to be provided in the transfer pricing sections of the return depends on the legislation that applies to the particular year of assessment. Therefore, the year of assessment in respect of which the return is being completed, will determine which “version” of section 31 will apply and therefore what data should be provided in the transfer pricing sections of the return.
For example: If the company’s financial year commences on 1 January 2012 , the first year of assessment to which the amended section 31 will apply, will be the 2013 tax year. For the 2012 tax year (i.e. the financial year ending 31 December 2012), the provisions of the “old section 31” will apply.
For years of assessment commencing before 1 April 2012:
For years of assessment commencing before 1 April 2012, the “old section 31” applies which reads as follows: “31 (2) Where any supply of goods or services has been effected- (a) Between –
(i)(aa) A resident (bb) Any other person who is not a resident (ii)(aa) A person who is not a resident
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(bb) A permanent establishment in the Republic of any other person who is not a resident (iii) (aa) A person who is a resident (bb) A permanent establishment outside the Republic of any other person who is a resident
(b) Between those persons who are connected persons in relation to one another (c) At a price which is either –
(i) Less than the price which such goods or services might have been expected to fetch if the parties to the transaction had been independent persons dealing at arm’s length (such price being the arm’s length price
(ii) Greater than the arm’s length price the Commissioner may, for the purposes of this Act in relation to either the acquirer or supplier, in the determination of the taxable income of either the acquirer or supplier, adjust the consideration in respect of the transaction to reflect an arm’s length price for the goods or services.”
During years of assessment commencing before 1 April 2012, where the company was party to a supply of goods or services (as defined in section 31(1) of the “old section 31”) between persons (as described in section 31(2)(a) and (b) of the “old section 31”) that resulted in the company:
For years of assessment commencing after 1 April 2012:
For years of assessment commencing after 1 April 2012, the “old section 31” applies which reads as follows: “31 (2) Where- (a) Any transaction, operation, scheme, agreement or understanding constitutes an
affected transaction (b) Any term or condition of that transaction, operation, scheme, agreement or
understanding – (i) Is a term or condition contemplated in paragraph (b) of the definition of
“affected transaction”, and (ii) Results or will result in any tax benefit being derived by a person that is a
party to that transaction, operation, scheme, agreement or understanding, the taxable income or tax payable by any person contemplated in paragraph (b) (ii) that derives a tax benefit contemplated in that paragraph must be calculated as if that transaction, operation, scheme, agreement or understanding had been entered into on the terms and conditions that would have existed had those persons been independent persons dealing at arm’s length”
During years of assessment commencing after 1 April 2012, where the company was party to a supply of goods or services (as defined in section 31(1)) between persons (as described in section 31(2)(a) and (b)) that resulted in the company:
11.2 COMPLETION OF RETURN
Once all the questions on the “Information to create this income tax return” page of the ITR14 have been completed, the return information must be completed as follows:
If the taxpayer is an eFiler, the fields listed in this section must be captured electronically on eFiling
If the taxpayer is a not a registered eFiler and obtained an ITR14 example copy from the SARS website, the fields listed in this section must be completed on the example copy of the return and once all fields have been completed, visit the nearest branch to have these fields captured by a SARS agent
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If the taxpayer is a not a registered eFiler and is using this guide to prepare the information required for capturing at the nearest SARS branch without printing an example copy of the ITR14, the fields as listed in this section must be used in preparation for capturing. Once all the fields have been prepared, the taxpayer must visit the nearest branch with all the prepared information to have these fields captured by a SARS agent.
COMPANY / CLOSE CORPORATION PARTICULARS AND TAX PRACTITIONER 11.2.1DETAILS
Note:
The following read only fields will be pre-populated on the return: Tax Reference Number Year of Assessment Registered Name Trading Name Company / CC registration number Financial year end (CCYYMMDD).
Please complete the following fields: Is this return in respect of a branch / permanent establishment / agency of a
foreign company? Select “Yes” or “No”
Please indicate where the majority of the company’s taxable income / loss is derived from (mark only one box) Select the relevant option from the following list: Eastern Cape Free State Gauteng KwaZulu Natal Limpopo Mpumalanga North West Northern Cape Western Cape International.
Source code of the main industry A pop-up list with all the Standard Industry Codes (SIC) will be displayed on eFiling and when the agent captures the information in the SARS branch. For non-eFilers, the Company Representative / Public Officer completing the ITR14 manually, can access the Standard Industry Codes (SIC) booklet on www.statssa.gov.za
State the profit code of your main source of income A pop-up list with all the main source of income codes will be displayed to select on eFiling. If the company is dormant this field will be pre-populated with code 9994 and locked. For non eFilers that are not dormant, the Company Representative/Public Officer completing the ITR14 manually, can access the following the main source codes by entering “Find a source code” on the SARS website www.sars.gov.za.
If the profit code is “other not specified”, please provide a description If the profit code of your main source of income ends with ‘98’, this is a mandatory free text field and the length is 56 blocks.
TAX PRACTITIONER DETAILS (IF APPLICABLE) 11.2.2
Registration No. Complete the tax practitioner’s registration number (alphanumeric field of 9 blocks).
Tel No. Complete the Telephone number (numeric field of 15 blocks)
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Tax Practitioner Email address Complete the email address (free text field of 52 blocks)
Mark here with an “X” if you declare that you do not have an email address If you don’t have an email address, indicate this by selecting the field “Mark here with an ‘X’ if you declare that you do not have an email address”. The email address field will be locked and greyed out.
DECLARATION 11.2.3
Note: Complete the date in the format (CCYYMMDD) The Company Representative / Public Officer’s login will serve as the authentication
for the ITR14 submission on eFiling. The Public Officer / Representative must sign the signature pad when the ITR14 is
submitted at a SARS branch. The ITR14 is a legal declaration to SARS and by signing you agree that the
reconciled information is accurate. You are obliged to ensure that a full and accurate disclosure is made of all relevant
information as required in the ITR14. Misrepresentation, neglect or omission to submit a declaration or supplying false information may result in prosecution.
VOLUNTARY DISCLOSURE PROGRAMME 11.2.4
This section will only display on the return if the question “Is this declaration or any part thereof made in respect of a VDP agreement with SARS?” in the “Information to create this income tax return” page is “Yes”
Please indicate the VDP application no. issued by SARS Complete the alphanumeric field of 10 blocks. The first three characters must start with “VDP”. No spaces or dashes should be entered when completing the VDP Application No.
INTERNATIONAL 11.2.5
This section will only display on the return if the question “Did the company receive / earn any foreign income or incur any foreign expenditure or pay any royalties, interest, dividends or consulting fees to a non-resident?” in the “Information to create this income tax return” is “Yes”
Note:
All foreign dividends are taxable in the hands of South African residents unless one of the exemptions set out below applies. Amounts received by a resident from a source outside of South Africa could be subject to the provisions of a tax treaty.
Section 10(1)(k)(ii) exempts foreign dividends received by or accruing to a person in any one of the following four situations: “(aa) To the extent that the profits out of which the dividend has been declared have
been taxed in South Africa or arose from dividends declared by a South African company to the company declaring the dividend.
(bb) If the dividend is declared by a foreign company which is listed both in South Africa and in a foreign country and more than 10% of the equity share capital is at the time of the declaration collectively held by the residents.
(cc) To the extent that the dividend does not exceed the profits that have been taxed in the shareholders hands in terms of s9D.
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(dd) If the shareholder holds at least 20% of the foreign company’s equity share capital and voting rights”.
Section 10(1)(k)(ii) is deleted with effect from the following dates: For natural persons, deceased and insolvent estates, and trusts – 1 March 2012 For other taxpayers (companies, etc) – 1 April 2012.
Section 10B came into effect on the above dates and this section applies to foreign dividends as well as dividends from headquarter companies. It exempts certain dividends totally from tax and some dividends in part, so that a South African resident either pays no income tax on foreign dividends received (where the 10% participation exemption applies), or tax at a lesser rate. Residents will pay tax at an effective rate not exceeding 15%.
Par 64B of the Eight Schedule disregards the capital gain or capital loss made by a South African resident on the disposal of an interest in the share capital of a foreign company if certain conditions are met. This is called the “participation exemption”. It also applies to the disposal of shares in a headquarter company.
Note: With effect from 1 January 2012 the definition of “foreign company” is removed from par 64B. The result is that the sale in a headquarter company will no longer be exempt in terms of this participation exemption if the sale is made by South African resident taxpayers.
The capital gain or capital loss on the disposal of shares in a foreign company is disregarded if the person disposing of the asset held at least 10% of the equity shares and voting rights in that foreign company immediately before and for at least 18 months prior to the disposal; and The disposal is to a non-resident (not being a controlled foreign company); or The disposal is a deemed disposal as a result of the company ceasing to be a
controlled foreign company or a person ceasing to be a resident; or The disposal is to a controlled foreign company of that person, or a controlled foreign
company that forms part of the same group of companies as the person.
A headquarter company must disregard any capital gain or capital loss determined in respect of the disposal of any equity share in any foreign company (other than an interest contemplated in paragraph 2(2)) if that headquarter company (whether alone or together with any other person forming part of the same group of companies as that headquarter company) immediately before that disposal held at least 10% of the equity shares and voting rights in that foreign company.
Note: With effect from 1 April 2012 the words “at least 20%” are replaced with “at least 10%”. This means that the participation exemption is accessible to more South African shareholders of foreign companies.
Select “Yes” or “No” for the following questions: Does the company own any foreign assets or investments? Did the company receive any income subject to foreign taxes paid / payable? Were any payments made to a non-resident person in compensation for the
rendering of services in South Africa? This field is applicable from 2015 onwards
If “Yes” the next field will be displayed “Total payments made” for completion.
FOREIGN EXCHANGE GAINS / LOSSES 11.2.6
Select “Yes” or “No” to the following questions:
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Is the foreign exchange gain / loss incurred in respect of an exchange item where the counterparty is a connected person?
If “Yes” is selected, the following question will be displayed for completion If “Yes”, was the foreign exchange gain / loss realised during this year of
assessment?
Is the company a domestic treasury management company as defined in section 1? This question is applicable for tax years 2015 and onwards If the answer is “Yes”, then the following fields will not be editable and all inputs will
be cleared: Income Statement, Income Items, Foreign Exchange Gain Income Statement, Expense Items Foreign Exchange Loss
If the answer is “No” then the following fields will be editable Income Statement, Income Items, Foreign Exchange Gain Income Statement, Expense Items Foreign Exchange Loss
FOREIGN DIVIDENDS 11.2.7
Did the company receive any foreign dividends? Select “Yes” or “No”
Has the company claimed an exemption for any foreign dividends as referred to in s10(1)(k)(ii)(dd) or s10B(2)(a)? Select “Yes” or “No”
Where any of the foreign dividends subject to the participation exemption? Select “Yes” or “No” CAPITAL GAINS 11.2.8
Has the company claimed an exemption for any amounts relating to the disposal of equity shares in a foreign company, as contemplated in par 64B of the Eight Schedule? Select “Yes” or “No”
SA WITHHOLDING TAX 11.2.9
Was any tax withheld against royalties, interest or dividends? Select “Yes” or “No”
CONTROLLED FOREIGN COMPANY 11.2.10
Select “Yes” or “No” for the following question and if “Yes”, complete the relevant “schedule”
Does the company together with any connected person in relation to the company hold more than 10% of the participation rights in any CFC? If “Yes”, complete the applicable schedule (IT10A/B)
A Controlled Foreign Company should complete the applicable IT10A/B Controlled Foreign Company CFC return available on www.sars.gov.za.
DOUBLE TAXATION 11.2.11
Did the company earn any income from a foreign source that was exempt from tax in accordance with a double taxation agreement? Select “Yes” or “No” to the following question:
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REPORTABLE ARRANGEMENT 11.2.12
This section will only display on the return if the question “Did the company enter into any reportable arrangement in terms of s34 – 39 of the Tax Administration Act or s80M-s80T of the Income Tax Act?” in the “Information to create this income tax return” page is “Yes”
Note:
The list of reportable arrangements has been significantly extended. Arrangements that constitute or would have constituted hybrid debt instruments (s8F) or hybrid equity instruments (s8E) remain reportable arrangements, but the prescribed period for determining this has been extended to ten years. Arrangements where the calculation of interest, finance costs, fees or other charges is wholly or partly dependent on the tax treatment of the arrangement also remain reportable arrangements. However, the requirement that provision be made for the variation thereof has been removed.
Arrangements will constitute reportable arrangements if any tax benefit is derived by virtue of the arrangement and should the arrangement contain any of the following characteristics:
The quantification of any finance costs or other charges are partially or fully
dependent on the tax benefits derived by the arrangement The transaction results in round tripping of funds (a defined term), involving an
accommodating or tax indifferent party (a defined term) or contains elements that have the effect of offsetting or cancelling each other
The transaction gives rise to a liability for generally accepted accounting purposes, but not for income tax purposes
The transaction does not result in a reasonable expectation of a pre-tax profit for any participant
The present value of the tax benefit exceeds the present value of the non-tax benefits derived by the participants.
Specify the reportable arrangement number: This alphanumeric field of length 12 will be repeated based on the numeric value entered in the field “Specify the number of reportable arrangements” in the “Information to create this Income Tax Return” page. Each field is mandatory for completion.
In each of the following questions a “Yes” or “No” must be completed Is the company a participant in any arrangements which have the following features?
Round trip financing (s80D)? Elements that have the effect of offsetting or cancelling each other (s80C)? Presence of an accommodating or tax-indifferent party (s80E)? DIVIDENDS DECLARED 11.2.13
This section will only display on the return if the question “Were any dividends declared during the year of assessment?” in the “Information to create this income tax return” is “Yes”
Note:
Dividends tax replaced Secondary Tax on Companies (STC) on 01 April 2012. The final dividend cycle for all companies ended on 31 March 2012, and any STC credit remaining at the end of the final cycle may be carried forward until 31 March 2015 to be utilised against the dividends tax liability.
Dividends tax operates from the principle that the liability for dividends tax is triggered by the payment of the dividend and the tax liability on cash dividends falls on the recipient (i.e. beneficial owner) of the dividend. However, dividends tax is administered on the basis of
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withholding the applicable tax from the cash dividend payment by either the company declaring the dividend or, where relevant, regulated intermediaries.
All currency fields (15 blocks) listed below must be completed. If a specific field is not applicable to the company, a zero (0) must be completed for the field. Specify the total dividends declared consisting of the following:
Total dividends subject to STC ( Dividends declared before 1 April 2012) Total dividends subject to dividends tax (Dividends declared and paid on or
after 1 April 2012) Total dividends exempt from dividends tax Total dividends subject to double taxation relief Total dividends in specie declared.
STC CREDITS 11.2.14
Note:
The dividends tax provisions allow a company which has STC credits to apply such credits to dividends declared and paid by it on or after 1 April 2012. To the extent that certain requirements are met, dividends to which STC credits are applied will not be subject to dividends tax.
In order for a company to apply any STC credits which it may have to dividends declared and paid by it, the balance of STC credits will firstly need to be quantified. The STC credit of a company is reduced by the dividends declared and paid by the company to the extent that the dividends are paid by the company on or after 1 April 2012.
In applying the STC credits which a company has, section 64J states that a dividend paid by a company will not be subject to dividends tax to the extent that:
The dividend does not exceed the STC credit of the company The company has by the date of payment notified the person to whom the dividend
is paid of the amount by which the dividend reduces the STC credit of the company.
Select “Yes” or “No” for the following question: Were any STC credits (s64J) utilised against the total dividends declared and paid? If “Yes” was selected, all currency fields (15 blocks) listed below must be completed. If a specific field is not applicable to the company, a zero (0) must be completed for the field: STC Credits opening balance Plus: STC credits received Less: STC credits utilised STC credits closing balance.
NON-RESIDENCY 11.2.15
This section will only display on the return if the question “Is the company resident in South Africa for income tax purposes?” in the “Information to create this income tax return” is “No”
Note:
A company will be a non-resident if it is not incorporated, established or formed in South Africa and does not have its place of effective management in South Africa. The place of effective management in the case of a company is the place where it is managed on a regular or day-to-day basis by the directors or senior managers of the company, irrespective of where the overriding control is exercised, or where the board of directors meets.
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Management by these directors or senior managers refers to the execution and implementation of policy and strategy decisions made by the board of directors. It can also be referred to as the place of implementation of the entity’s overall group vision and objectives.
Is the company resident outside South Africa due to:
Foreign incorporation (and not being effectively managed in SA)? By virtue of a treaty to avoid double taxation?
HEADQUARTER COMPANY SYSTEM 11.2.16
This section of the return will only display if the question “Does the company elect to be a headquarter company in terms of s9I?” in the “Information to create this income tax return” is “Yes”
Note:
The Headquarter Company (HQ) regime in terms of S9I of the Income Tax Act is intended to provide tax rules that promote South Africa (“SA”) as the regional financial hub for Africa. Consequently, the purpose of HQ Company tax regime is to ensure that the existing tax system does not hinder the use of South Africa by foreign multinationals as the regional economic hub for investments into Africa.
The current tax benefits enjoyed by HQ Companies include the following:
Dividends paid by HQ Companies not being subject to dividends tax Exemption from normal tax on dividends received or accrued from a HQ Company The attribution rules under the provisions of section 9D not applying to a HQ
Company The transfer pricing and thin capitalisation rules being relaxed on financial
assistance provided by and to a HQ Company and on back to back licensing of intellectual property through the use of a HQ Company. This result in net losses incurred on interest and royalties being ring-fenced
Exemption from withholding tax on royalties in respect of royalties paid by a HQ Company to a foreign person under specified circumstances
Exemption from withholding tax on interest in respect of interest paid by a HQ Company to a foreign person in specified circumstances.
In order to qualify as a HQ Company, a resident company must meet all of the following criteria as set out in Section 9I of the Act: Each holder of shares in the HQ company (whether alone or together with any other
company forming part of the same group of companies as that holder) must hold at least 10% of the HQ Company’s equity shares and voting rights. This requirement need not be complied with during any period during a year of assessment before the HQ Company commenced the carrying on of a trade
The HQ Company’s asset cost base must comprise at least 80% in foreign companies in which it holds (whether alone or together with a company forming part of the same group of companies as the HQ Company) at least 10% of the equity shares and voting rights (that is, any interest in equity shares, debt and intellectual property). This requirement need not be met in a year of assessment that the HQ Company did not at any time during that year of assessment own assets with a total market value not exceeding R50 000
If the income of the HQ exceeds R5 million per annum, at least 50% of the HQ Company’s gross income (excluding certain exchange differences) must be derived from the aforementioned asset base.
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The 10% holder of shares test in a HQ Company must be satisfied for the relevant year of assessment that it elects to be a HQ Company. The 80% asset test must be satisfied for the relevant year of assessment, as well as all prior years of assessment in which that company existed, that is, “the always qualification rule”. In contrast, the 50% gross income test needs to be satisfied only in respect of the relevant year of assessment. In addition the HQ Company must file an annual election to become (and remain) a HQ company.
A company that elects to be a Headquarter Company must complete the RCH01 Schedule for companies electing to be a Headquarter Company available on www.sars.gov.za. The completed RCH01 and all relevant material requested in the RCH01 must be attached as relevant material to the ITR14.
Select “Yes” or “No” for the following questions:
Does the company comply with the requirement that each of its holders of shares (alone or together with any other company that forms part of the same group of companies as the holders of shares) holds at least 10% of the equity shares and voting rights in the company throughout the year of assessment?
Does the company comply with the requirements that at least 80% of the cost of its total assets (excluding cash and bank deposits payable on demand) is attributable to assets as listed in s9I(2)(b)?
Does the company comply with the requirements that where its gross income (excluding exchange differences determined in terms of s24I) exceeds R5 million, at least 50% of that gross income consists of amounts described in s9I(2)(c)?
PERSONAL SERVICE PROVIDER 11.2.17
This section of the return will only display if the question “Is the company a Personal Service Provider as defined in the Fourth Schedule?” in the “Information to create this income tax return” is “Yes”
Note:
A Personal Service Provider is any company or trust where services are rendered on behalf of such company or trust to a client of a company or trust is rendered personally by any connected person (usually the shareholder, a relative of the shareholder or beneficiary in the case of a trust) as defined in s1 of the Income Tax Act in relation to such company and: The person rendering the service would be regarded as an employee of the client,
had such service been performed directly to the client; or The person or company or trust rendering the service is subject to the control and
supervision of the client as to the manner in which the duties are performed in rendering such service and must be mainly performed at the premises of the client; or
More than 80% of the income of the company or trust is directly or indirectly derived during the tax year from one client of the company or trust or any associated institution as defined in the Seventh Schedule of the Income Tax Act; or
If the company or trust throughout the year of assessment employs three or more full-time employees who are on a full-time basis engaged in the business of such company of rendering any such service, other than any employee who is a shareholder or member of the company or is a connected person in relation to such person will not be regarded as a personal service provider.
S23(k) is applicable to a Personal Service Provider and prohibits a deduction of the following expenses incurred: Legal expenses Bad debts
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Employers contribution to pension funds, provident funds or benefit funds Refunds of any amount, including voluntary awards, that are received or accrued for
services rendered or to be rendered or any amount received or accrued for or by virtue of any employment or the holding of any office as was included in the taxable income of that person
Refunds of restraint of trade payments Expenses in respect of premises Expenses for premises, finance charges, insurance, repairs and fuel and
maintenance cost for assets where the premises or assets are used wholly or exclusively for the purposes of trade.
Was any service rendered on behalf of the company rendered by a connected person in relation to the company? “Yes” or “No” must be selected. If “No” is selected, the company will not be regarded as a Personal Service Provider and the below error message will be displayed. If “Yes” is selected, complete the next question.
How many full-time employees are on a full-time basis engaged in rendering any service of the company, excluding those who are shareholders or members or are connected to such shareholder or member? If this value is greater than two, the company will not be regarded as a Personal
Service Provider and the below error message will be displayed. If this value is not in excess of two, complete the next question.
Note: For all the questions below “Yes” or “No” must be selected. If any of the following three questions is “No”, the company will not be regarded as a Personal Service Provider and the below error message will be displayed.
Would the person who is personally rendering the service have been regarded as an employee of the client if the service was rendered directly to the client and not through the company?
Must the person who is rendering the service, perform the duties mainly at premises of the client, and if so, is that person subject to the control or supervision of the client as to the manner in which the duties are performed or are to be performed?
Does more than 80% of the income from services rendered by the company consist of or is likely to consist of amounts directly or indirectly received from any one client or from any associated institution in relation to the client”?
Were the necessary adjustments made in respect of expenses not allowable in terms of s23(k)? A “Yes” or “No” must be selected.
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ADDITIONAL ASSESSMENT INFORMATION 11.2.18
For each of the following questions, a “Yes” or “No” must be selected: Do you give consent that SARS can provide the attached financial statements
to the Companies and Intellectual Property Commission (CIPC)? If “Yes” is selected, the intent from SARS is to make the AFS available
to the CIPC. Have the financial statements been audited? Have the financial statements been reviewed?
If “Yes” is selected in either two questions above, the following field must be completed:
If “Yes”, provide the name of the entity that conducted the audit/review: Free text field
Note that “No” can be selected to both the questions ‘Have the financial statements been audited’ and Have the financial statements been reviewed’ The following question will be available to answer if “Yes” was selected on the
question “Have the financial statements been audited”, Have the financial statements been qualified? Select “Yes” or “No”.
o If “Yes” is selected, the following question must be completed: o If “Yes”, does this have any tax effects? Select “Yes” or “No”
Did the company generate a capital gain / loss or revenue gain / loss in respect of the early termination of a foreign instrument?
Did the company prematurely terminate / unwind a hedge position where the tax value differs in relation to the economic value?
Did the company enter into any sale and leaseback agreement? Select “Yes” or “No”
Is the company a beneficiary of a trust? Select “Yes” or “No”. If “Yes” is selected, the following question must be completed: If “Yes”, how many trusts? Numeric value (3 blocks)
Does the company exercise any control of a trust? Select “Yes” or “No” Is the company a founder /settler / beneficiary to a foreign trust? Select “Yes”
or “No” Did the company make any donations to a foreign trust? Select “Yes” or “No” Is the company a REIT (Real Estate Investment Trust as defined in section 1)?
Select “Yes” or “No”.
CONTRIBUTED TAX CAPITAL 11.2.19
This section of the return will only display if the question “How many different classes of shares have been issued by the company?” in the “Information to create this income tax return” is “Yes”
Note:
Companies must have a Contributed Tax Capital (CTC) register in place for each class of share, which reflects its CTC balance as at 1 January 2011. CTC consists of a company’s pure share capital and share premium. This excludes any capitalised reserves as at 1 January 2011, but includes any consideration received after that date for the issue of shares, reduced by any subsequent distribution of CTC.
Your company’s CTC opening balance as at 1 January 2011 must have been calculated as follows:
The value of your company’s share capital and share premium prior to 1 January
2011 The above result must have been reduced by so much of the share capital and
share premium as would have constituted a dividend (as defined before 1 Jan 2011), had that share capital been distributed immediately before that date.
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The definition (applicable from 1 January 2011) of a dividend is linked to the CTC concept. If a company is distributing an amount to shareholders, an important question is whether the amount is a dividend or a reduction of CTC. A reduction of CTC will not constitute a dividend.
In terms of the definition any buy-back of shares or distribution by a company will constitute a dividend unless the amount transferred:
Reduces the CTC Constitutes shares in that company Is a buy-back of listed shares Constitutes a redemption in an interest of certain off-shore investment schemes
Description of class of shares Complete the description of class of shares in the 3 rows of 17 blocks each provided. For Close Corporations, the definition of a “share” (any unit into which the proprietary
interest in the company is divided) according to the Companies Act includes the members’ interests in a close corporation. Members’ interest therefore must be regarded as a class of share. The distinction between different types of shares (e.g. ordinary, preference, redeemable etc.) must be declared separately. Furthermore, if the company has only issued one class of ordinary shares (for example) then a general description would be in order. However, if classes A, B and N ordinary shares have been issued then each class of ordinary share must be specified separately i.e. if there are shares with different rights for the different shareholders they must be declared separately.
Complete the following currency fields (15 blocks) in Rands (No cents): Amount of contributed tax capital: (a) Immediately before 1 January 2011; or (b) Where the company became a resident since 1 January 2011 Add: Consideration received of accrued for the issue of shares by the company Deduct: Amounts transferred to holders of shares Deduct: Reduction as a result of the application of s42 Deduct: Reduction as a result of the application of s44 Deduct: Reduction as a result of the application of s 46
Balance of contributed tax capital at the end of the year of assessment: This field will automatically be calculated on eFiling or for non-eFilers when the SARS agent captures the return in the branch. The balance can never be a negative value.
URBAN DEVELOPMENT ZONE (s13quat) 11.2.20
This section of the return will only display if the question “Did the company qualify for an Urban Development Zone deduction (s13quat)?” in the “Information to create this income tax return” is “Yes”
Note:
A deduction in respect of the Urban Development Zone (UDZ) allowance will be allowed in the determination of the taxable income of a person that constructed, improved or purchased a building from a developer, provided all the requirements are complied with. When claimed, the tax incentive reduces the taxable income. The incentive is not limited to the taxable income and can create an assessed loss. This allowance (the UDZ allowance) is applicable in respect of the: Erection, extension or improvement of or addition to an entire building
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Erection, extension, improvement or addition of part of a building representing a floor area of at least 1 000 m²
Purchase of such a building or part of a building directly from a developer on or after 8 November 2005, provided that certain requirements are met.
A person will only qualify for the UDZ allowance in respect of a building or part of the building constructed, improved or purchased directly from a developer within an urban development zone (UDZ), if the building or that part of the building is used solely for the purposes of that person’s trade and was brought into use for these purposes on or before 31 March 2020. For more information on the “UDZ refer to the Guide to the Urban Development Zone (UDZ) Tax Incentive (Issue 4)” available on SARS website www.sars.gov.za.
The following questions must be completed with a “Yes” or “No”:
Is the building for which the company is claiming an allowance in an approved demarcated zone? If “No” is selected, the error message below will tell you that an UDZ allowance
cannot be claimed.
Did the company receive a certificate issued by the municipality confirming that the building for which the company is claiming an allowance is in an urban development zone? If “No” is selected, the error message below will tell you that an UDZ allowance
cannot be claimed. If “Yes” is selected, the company must be obligated to keep a certificate issued from
the municipality as relevant material for a period of five years in terms of section 29 of the Tax Administration Act.
Did the company erect, extend, add or improve the building for which the company is claiming an allowance with the sole purpose of disposing thereof directly on completion? If “Yes” is selected, the error message below will tell you that an UDZ allowance
cannot be claimed If “No” is selected, the following currency field (15 blocks) must be completed in
Rands (No Cents) If No, state the total amount incurred for the erection, extension, addition or
improvement of the building.
Did the company purchase the building or part thereof from a developer? If “Yes” is selected, the following currency field (15 blocks) must be completed in
Rands (No Cents): If Yes, state the purchase price of the building or part thereof State the amount of the purchase price deemed to be cost incurred by the
company in terms of s13quat(3B)
Did the company use the building erected, extended, improved or added on to in use solely for the trade of the company during the year of assessment? If “No” is selected, the error message below will tell you that an UDZ allowance
cannot be claimed.
Did the company incur costs for the erection, extension or addition relating to low cost housing (s13quat(3A))?
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SHARES 11.2.21
Was there any change in shareholder’s interest during the year of assessment (excluding listed companies)? Select “Yes” or “No”: COMPANY STRUCTURE 11.2.22
This section of the return will only display if the question “Is the company a subsidiary of a group of companies as defined in s1?” in the “Information to create this income tax return” is “Yes”
Specify the name of the ultimate holding company: Complete the free text field
Is the ultimate holding company resident outside South Africa? Specify “Yes” or “No”.
If Yes, specify the tax residency country code of the ultimate holding company: If the user clicks on this field, a popup is displayed which contains a list box containing a list of valid country names. The popup also contains two buttons: “Ok” and “Cancel”. Alternatively refer to Annexure F for a list of all the valid country names.
If “No” is selected, complete the following field: If No, specify the income tax reference number of the ultimate holding
company: Enter the income tax number
Select “Yes” or “No” to the following questions: Is the company a partner in an unincorporated joint venture? Is the company part of a group of companies with a group consolidated
turnover greater than R1 billion or is the company a financial services, mining or multinational enterprise?
BALANCE SHEET 11.2.23
The figures to be used for completion are the figures reflected in the annual financial statements of the Company (not the group or consolidated annual financial statements).
All fields listed in this section are compulsory for completion. If a specific field is not applicable to the company, a zero (0) must be completed for the field.
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Non-current assets
The following currency fields (15 blocks) must be completed in Rands (No Cents):
Fixed property Fixed assets (plant and equipment) Fixed assets - other Goodwill and intellectual property Investments in subsidiaries Long-term loans – interest free: Connected (Local) Long-term loans – interest free: Non-Connected (Local) Long-term loans – interest free: Connected (Foreign) Long-term loans – interest free: Non-Connected (Foreign) Long-term loans – interest bearing: Connected (Local) Long-term loans – interest bearing: Non-Connected (Local) Long-term loans – interest bearing: Connected (Foreign) Long-term loans – interest bearing: Non-Connected (Foreign) Deferred tax assets Other non-current assets.
Please provide descriptions relating to other non-current assets listed above: This free text field must only be completed if a value exceeding R0 (zero) was entered in the field “Other non-current assets”. The maximum length is 3 rows of 17 blocks
Total non-current assets: This currency field (15 blocks) will be calculated by SARS
Current Assets
The following currency fields (15 blocks) must be completed in Rands (No Cents): Gross inventory (incl. spare parts and consumables and work in progress) Less: Provisions for inventory write off Gross trade and other receivables (excl. debtors) Less: Provisions for trade and other receivables (excl. debtors) Gross debtors (excl. trade debtors) Less: Provisions for debtors (excl. trade debtors) Prepayments Group companies current accounts Short-term investments SA Revenue Service Cash and cash equivalents Other current assets.
Please provide descriptions relating to other current assets listed above: This free text field must only be completed if a value exceeding R0 (zero) was entered in the field “Other current assets”. The maximum length is 3 rows of 17 blocks
Total current assets: This currency field (15 blocks) will be calculated by SARS
Capital and Reserves Credit balances
The following currency fields (15 blocks) must be completed in Rands (No Cents): Share capital Share premium Non-distributable reserves for credit balances
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Distributable reserves (excl. retained profit / accumulated loss) Retained profit Other capital and reserves.
Please provide descriptions relating to other capital and reserves (credit balances) listed above: Free text field – The maximum length is 3 rows of 17 blocks
Please provide descriptions relating to other capital and reserves (credit balances) listed above: This free text field must only be completed if a value exceeding R0 (zero) was entered in the field “Other capital and reserves”. The maximum length is 3 rows of 17 blocks.
Debit balances
The following currency fields (15 blocks) must be completed in Rands (No Cents): Accumulated loss Other capital and reserves for debit balances.
Please provide descriptions relating to other capital and reserves (debit balances) listed above: This free text field must only be completed if a value exceeding R0 (zero) was entered in the field “Other capital and reserves for debit balances”. The maximum length is 3 rows of 17 blocks.
Total Capital and Reserves: This field will automatically be calculated on eFiling or for non-eFilers, when the SARS agent captures the return in the branch.
Non-Current Liabilities
The following currency fields (15 blocks) must be completed in Rands (No Cents): Long-term loans – interest free: Connected (Local) Long-term loans – interest free: Non-Connected (Local) Long-term loans – interest free: Connected (Foreign) Long-term loans – interest free: Non-Connected (Foreign) Long-term loans – interest bearing: Connected (Local) Long-term loans – interest bearing: Non-Connected (Local) Long-term loans – interest bearing: Connected (Foreign) Long-term loans – interest bearing: Non-Connected (Foreign) Deferred tax liability Other non-current liabilities.
Please provide descriptions relating to other non-current liabilities listed above: This free text field must only be completed if a value exceeding R0 (zero) was entered in the field “Other non-current liabilities”. The maximum length is 3 rows of 17 blocks.
Total non-current liabilities: This currency field (15 blocks) will be calculated by SARS
Current Liabilities
The following currency fields (15 blocks) must be completed in Rands (No Cents): Gross trade and other payables (Not older than 3 years) Gross trade and other payables (Older than 3 years) Provisions – excluding inventory and trade receivables Deposits and funds received in advance (excl. contract progress payments) Group companies current accounts Contract progress payments received in advance
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Current portion of interest bearing borrowings Current portion of interest free borrowings Overdraft and interest bearing short-term borrowings SA Revenue Service Shareholders for dividend / proposed dividend Other current liabilities.
Please provide descriptions relating to other current liabilities listed above: This free text field must only be completed if a value exceeding R0 (zero) was entered in the field “Other current liabilities”. The maximum length is 3 rows of 17 blocks.
Total current liabilities: This currency field (15 blocks) will be calculated by SARS
INCOME STATEMENT 11.2.24
The figures to be used are the figures reflected in the annual financial statement of the Company (not the group or consolidated annual financial statements).
When completing the Gross Profit / Loss part of the return, the normal accounting meaning attached to the terms reflected in the tax return must be followed. In the event that a company does not have any cost of sales, for example a property rental company, the turnover and gross profit will be the same amount.
All fields listed in this section are compulsory for completion. If a specific field is not applicable to the company, a zero (0) must be completed for the field.
Gross Profit / Loss
The following currency fields (15 blocks) must be completed in Rands (No Cents): Gross Sales (excl. credit notes) – Foreign: Connected Gross Sales (excl. credit notes) – Other than foreign connected Less: Opening stock Less: Credit notes on sales Less: Purchases – Foreign: Connected (excl. rebates) Less: Purchases – Other than foreign connected (excl. rebates) Add: Rebates Add: Closing stock (Gross excl. adjustments) Add: Inventory adjustments (Previous year stock provision reversed) Less: Inventory adj. (Current year stock provision (obsolete / slow-moving stock)).
Gross profit – subtotal: This currency fields (15 blocks) will be calculated by SARS. Either a gross profit or gross loss applies. If a gross profit applies, the gross loss field is not applicable. If the net figure is R0 (zero), then this value applies to the gross profit field.
Gross loss – subtotal: This currency fields (15 blocks) will be calculated by SARS. Either a gross profit or gross loss applies. A loss is indicated as a positive value in the gross loss field.
Income Items (Only credit amounts)
The following currency fields (15 blocks) must be completed in Rands (No Cents):
Admin, secretarial, rentals, guarantee fees and other services – Connected (Local) Admin, secretarial, rentals, guarantee fees and other services – Connected (Foreign) Admin, secretarial, rentals, guarantee fees and other services – Non-connected Bad and doubtful debts recovered
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Dividends – local Dividends – foreign REIT dividends received Foreign exchange gain Interest – Financial institutions Interest – Connected Interest – Non-connected Accounting profit on disposal of fixed assets and / or other assets Gross royalties and license fees Indemnity payments: Only applicable from year of assessment 2015 onwards Levy income Reversal of impairment loss recognised in profit or loss Other income.
Please provide descriptions relating to other income listed above: This free text field must only be completed if a value exceeding R0 (zero) was entered in the field “Other income”.
Control Total: This currency field (15 blocks) will be calculated by SARS.
Expense Items (Only debit amounts)
The following currency fields (15 blocks) must be completed in Rands (No Cents): Accommodation and travel expenses: Local Accommodation and travel expenses: Foreign Accounting loss on disposal of fixed assets / other assets Admin, secretarial, rentals, guarantee fees and other services – Connected (Local) Admin, secretarial, rentals, guarantee fees and other services – Connected (Foreign) Admin, secretarial, rentals, guarantee fees and other services – Non-connected Alterations and improvements (excluding repairs and maintenance) Bad debts written off Capital improvements – farming operations (par 12 of the First Schedule) Commission paid Compensation for loss of office Consulting, legal and professional fees Depreciation Directors’ / members’ remuneration Donations – (s18A) Donations – other Expenditure incurred directly or indirectly in effecting BEE and / or BBEEE
compliance Expenditure incurred in respect of company restructuring: Only applicable from year
of assessment 2015 onwards Employee expenses: Wages and salaries (excluding medical, provident and
pension) Employee expenses: Group life insurance Employee expenses: UIF contributions and SDL Employee expenses: Pension and Provident fund contributions Employee expenses: Medical scheme contributions Employee expenses: Membership of a professional body Employee expenses: Training Foreign exchange loss Impairment loss recognised in profit or loss Interest – financial institutions Interest – Connected (Local) Interest – Connected (Foreign) Interest – Non-connected Interest and penalties paid to SARS
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Insurance (excluding s37A payments) Insurance premium in respect of rehabilitation obligations (s37A) Key man insurance (s11(w)) Operating lease payments - Connected Operating lease payments – Non-connected Lease payments other than operating leases Management fees - Connected Management fees – Non-connected Partnership / Joint venture loss - Foreign Partnership / Joint venture loss - Local Provision for doubtful debts Repairs and maintenance Research and development costs (s11B): Only applicable from Year of Assessment
2003 onwards Research and development costs (s11D): Only applicable from Year of Assessment
2007 onwards Restraint of trade Royalties and license fees (excluding payments in terms of mineral and petroleum
resources royalties) – Local Royalties and license fees (excluding payments in terms of mineral and petroleum
resources royalties) – Foreign Royalty payments in respect of mineral and petroleum resources royalties – Local Royalty payments in respect of mineral and petroleum resources royalties – Foreign Small items and loose tools Other expenses.
Please provide descriptions relating to other income listed above: This free text field must only be completed if a value exceeding R0 (zero) was entered in the field “Other income”. The maximum length is 3 rows of 17 blocks
Control Total: This currency field (15 blocks) will be calculated by SARS.
Net Profit / Loss
Net Profit – Subtotal: This currency fields (15 blocks) will automatically be calculated on eFiling or for non-eFilers when the SARS agent captures the return in the branch. Either a net profit or net loss applies. If a net profit applies, the net loss field is not applicable. If the net figure is R0 (zero), then this value applies to the net profit field.
Net Loss – Subtotal: This currency fields (15 blocks) will automatically be calculated on eFiling or for non-eFilers when the SARS agent captures the return in the branch. Either a net profit or net loss applies. A loss is indicated as a positive value in the net loss field.
TAX COMPUTATION 11.2.25
In all instances where the accounting and tax treatment of items are different, the full accounting amount must be reversed and similarly the full tax treatment amount disclosed.
For example: Prepayment is claimed for accounting purposes on the income statement but is limited by section. 23H. The portion that is limited (not allowed) must be added back as a credit adjustment. If the relevant payment is on the balance sheet, then only the qualifying portion must be indicated under the ”Special allowances not claimed” section.
Please take note of the following provisions in the Income Tax Act, 1962 (Act No. 58 of 1962):
Section. 11(B) was effective for years of assessment commencing on or after 1 January 2004. The section applied to costs related to research and development conducted by a
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taxpayer. This section was repealed on 2 November 2006 and replaced by section 11D, however the capital allowances (in s11B) in respect of buildings, plant, machinery, implements, utensils and articles brought into use prior to 2 November 2006 continue to apply to those assets.
Section. 12J - Any person can invest in an approved Venture Capital Company (VCC), in exchange for investor certificates. However there are certain limitations that apply to an investor for tax purposes when investing into an approved VCC, namely:
Where any loan or credit is used to finance the expenditure in acquiring a venture
capital share and remains owing at the end of the year of assessment, the deduction is limited to the amount for which the taxpayer deemed to be at risk.
No deduction will be allowed where the taxpayer is a connected person to the Venture Capital Company at or immediately after the acquisition of any venture capital share in that Venture Capital Company.
The tax deduction is recouped if an investor disposes of the VCC shares to the extent of the initial VCC investment (under the general recoupment rules of section 8(4) of the Income Tax Act).
Section 12M allows as a deduction an amount paid by an employer as a lump sum to a former employee who retired on the grounds of old age, ill health, or infirmity or to a dependant of that former employee or under a policy of insurance taken out with an insurer solely in respect of one or more former employees who retired on the grounds of old age, ill health, or infirmity, or their dependants, but only to the extent that the lump sum is to be used to make contributions to a medical scheme or fund registered under the Medical Schemes Act, or under a similar provision in another country The payment to the individual has to be that he or she can pay the future medical scheme payments. Where the payment is to an insurer, the policy must be only for the retired employee and his or her dependants. If the policy only relates partly to medical scheme coverage, only that part of the premium is deductible. No deduction is allowed if the employer or a connected person to the employer has any further obligation or retains any further obligation (even a contingent obligation) to pay any other amount in respect of any shortfall under the policy.
Section 12O provides a 100% tax exemption (with effect from 1 January 2012) in respect of all receipts and accruals in respect of films of which principal photography commences on or after 1 January 2012, but before 1 January 2022.
Section 24F provides a 100% deduction in respect of the cost of production and purchase of films. It will no longer apply to films in respect of which the principal photography commenced on or after 1 January 2012, and to any film after 31 December 2012.
Section 24K provides that any amount contemplated in the definition of “interest rate agreement” is deemed to have been incurred (if it is an expense) or accrued (if it is income) on a day to day basis over the period in respect of which it is calculated.
Section 24K defines an “interest rate agreement” basically as an agreement in terms of which:
A person acquires the right to receive an amount calculated with reference to an
interest rate or rates on a notional amount or even a fixed amount; and That same person becomes liable to pay an amount calculated with reference to an
interest rate or rates or a fixed amount.
The interest rate agreement applies where a rate of interest is applied to a notional amount. In other words, a real loan does not exist.
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There are two parties to an interest rate swap. Interest rate swaps effectively allows a person to swap floating rates of interest for fixed rates of interest or vice versa in order to introduce certainty or make a profit out of potential change in the interest rates.
In terms of Section 18A, a deduction (subject to a 10% limit of taxable income) is allowed in respect of the sum of bona fide donations of cash or property in kind made by a taxpayer during the year of assessment to any: Public benefit organisation (PBO) approved by the Commissioner under s. 30; Institution, board or body contemplated in s. 10(1)(cA)(i) PBO approved by the Commissioner under s. 30 which provides funds or assets to
any other approved PBO, or to any institution, board or body contemplated in s10(1)(cA)(i)
Agency as contemplated in the definition of “specialised agency” in s. 1 of the Convention on the Privileges and Immunities of the Specialised Agencies, 1947, set out in Schedule 4 to the Diplomatic Immunities and Privileges Act, 2001 (Act 37 of 2001)
Department of government in the national, provincial or local sphere as contemplated in s 10(1)(a).
DEBIT ADJUSTMENTS (DECREASE NET PROFIT / INCREASE NET LOSS) NON-11.2.26TAXABLE AMOUNTS CREDITED TO THE INCOME STATEMENT
Only complete the relevant currency fields (15 blocks) where the adjustment is applicable to the company in Rands (no cents). On eFiling and in the branch, a pop-up selection box will display from which only those adjustments relevant to the company must be selected and completed: Accounting interest received / receivable Accounting profit on disposal of fixed and / or other assets Adjustments to comply with IFRS: Accounting: Only applicable from Year of
Assessment 2006 onwards Adjustments to comply with IFRS: Fair value: Only applicable from Year of
Assessment 2006 onwards Amounts previously taxed as received in advance Exempt foreign dividends (s10(1)(k)(ii)) Exempt foreign dividends (s10B) Exempt income received or accrued in respect of government grants (s12P): Only
applicable from year of assessment 2015 onwards. Exempt local dividends Income (other than foreign dividends) exempt from tax – s10 (excluding s10(1)(e)) Income exempt in respect of ships used for international shipping (s12Q): Only
applicable from year of assessment 2015 onwards Income not taxable by virtue of double taxation agreement Receipts and / or accruals of a capital nature Reversal of provisions Other.
Please provide descriptions relating to ‘other’ consolidated above: This free text field (maximum length of 3 rows with 17 blocks) must only be completed if a value exceeding R0 (zero) was entered in the field “Other”. On eFiling and in the branch, this field will only display if “Other” was checked on the selection list.
Control Total: This currency field (15 blocks) will be calculated by SARS.
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SPECIAL ALLOWANCES NOT CLAIMED IN THE INCOME STATEMENT 11.2.27
Only complete the relevant currency fields (15 blocks) where the special allowances are applicable to the company in Rands (no cents). On eFiling and in the branch, a pop-up selection box will display from which only those special allowances relevant to the company must be selected and completed: Restraint of trade (s11(cA)): Only applicable from Year of Assessment 2000
onwards Wear and tear allowance (s11(e)) Lease premium allowance (s11(f)) Improvement to leasehold premises (s11(g)) Doubtful debt allowance (s11(j)) Amortisation of lump sum contributed to retirement / benefit funds (s11(l)) Broad-based employee share plan (deduction this year) (s11(lA)): Only applicable
from Year of Assessment 2005 onwards Depreciable asset allowance (s11(o)) Expenditure before commencing trade (s11A) Deduction against Foreign Dividends (s11C): Only applicable from Year of
Assessment 2005 onwards Research and development deduction (s11B): Only applicable from Year of
Assessment 2003 onwards Research and development deduction (s11D) – Only applicable from Year of
Assessment 2007 onwards Machinery, plant, implements, utensils and articles deduction (s12B) Manufacturers, hotelkeepers, aircraft, ship, storage and packing of agricultural
products deduction (s12C) Pipelines, transmission and rail deduction (s12D): Only applicable from Year of
Assessment 2000 onwards Rolling stock (s12DA): Only applicable from Year of Assessment 2008 onwards Plant and machinery where company qualifies as a SBC (s12E): Only applicable
from Year of Assessment 2002 onwards Airport and port assets (s12F): Only applicable from Year of Assessment 2008
onwards Industrial assets used for qualifying industrial policy projects (s12G): Only applicable
from Year of Assessment 2002 onwards Learnership agreements registered / in effect (s12H): Only applicable from Year of
Assessment 2002 onwards Registered learnership agreements completed in current year (s12H): Only
applicable from Year of Assessment 2002 onwards Industrial policy projects: Brownfield projects (s12I): Only applicable from Year of
Assessment 2009 onwards Industrial policy projects: Greenfield projects (s12I): Only applicable from Year of
Assessment 2009 onwards Expenditure incurred in exchange for the issue of Venture Capital Company shares
(s12J): Only applicable from year of assessment 2010 onwards Energy efficiency savings deduction (s12L) Certified emission reductions exemption (s12K): Only applicable from Year of
Assessment 2009 onwards Deduction for medical lump sum payments (s12M): Only applicable from Year of
Assessment 2010 onwards Improvements not owned by the company (s12N): Only applicable from year of
assessment 2015 onwards. Improvements on property of which government holds a right of use or occupation
(s12NA): Only applicable from year of assessment 2015 onwards. Exemption in respect of films (s12O): Only applicable from YOA 2015 onwards Deduction in respect of buildings in special economic zones (s12S): only applicable
to year of assessment 2014 onwards. Deduction of buildings used in a manufacturing process (s13)
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Hotel building deduction (s13bis) Residential building deduction (s13ter) UDZ (s13quat) - erection of a new building this year: Only applicable from Year of
Assessment 2005 onwards UDZ (s13quat) - improvements this year: Only applicable from Year of Assessment
2005 onwards Commercial building deduction (s13quin): Only applicable from Year of Assessment
2008 onwards Residential unit deduction (s13sex): Only applicable from Year of Assessment 2009
onwards Low cost residential unit deduction (s13sept): Only applicable from Year of
Assessment 2009 onwards Reversal of closing values of work in progress (s 22(2A)) - previous year: Only
applicable from Year of Assessment 2003 onwards Reversal of closing values of consumable stock and spare parts (previous year):
Only applicable from Year of Assessment 2000 onwards Prepaid expenditure not limited by s23H: Only applicable from Year of Assessment
2000 onwards Allowance for future expenditure (s24C) Credit agreement and debtors allowance (hire-purchase) (s24) Interest incurred (s24J and s24JA) Film allowance (s24F) Deductions in respect of co-operatives (s27) Environment asset deduction (s37B): Only applicable from Year of Assessment
2000 onwards Environmental conservation and maintenance deduction (s37C) Lease payments on capitalised leased assets Other.
Please provide descriptions relating to ‘other’ consolidated above: This free text field
(maximum length of 3 rows with 17 blocks) must only be completed if a value exceeding R0 (zero) was entered in the field “Other”. On eFiling and in the branch, this field will only display if “Other” was checked on the selection list.
Control Total: This currency field (15 blocks) will be calculated by SARS.
CREDIT ADJUSTMENTS (INCREASE NET PROFIT / DECREASE NET LOSS): NON-11.2.28DEDUCTIBLE AMOUNTS DEBITED TO THE INCOME STATEMENT
Only complete the relevant currency fields (15 blocks) where the adjustments are applicable to the company in Rands (no cents). On eFiling and in the branch, a pop-up selection box will display from which only those special allowances relevant to the company must be selected and completed: Accounting interest paid / payable Accounting losses derived from foreign sources (excluding CFC): Only applicable
from Year of Assessment 2000 onwards Accounting loss on disposal of fixed and / or other assets Adjustments to comply with IFRS: Accounting: Only applicable from Year of
Assessment 2006 onwards Adjustments to comply with IFRS: Fair value: Only applicable from Year of
Assessment 2006 onwards Amortisation of lease premiums and improvements to leasehold premises Capital expenditure and / or losses Capital Improvement - Farming operations (par 12 of the First Schedule) Depreciation according to financial statements Donations (s18A) Donations - Other Expenses attributable to exempt income - Local
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Expenses attributable to exempt income - Foreign Expenses not actually incurred in the production of income (s11(a)) Financial assistance (s31) Interest paid in respect of capitalised leased assets Interest non-deductible in terms of s23K: Only applicable from Year of Assessment
2011 onwards Interest, penalties paid in respect of taxes (s23(d)) Interest not allowed in respect of debts owed to person(s) not subject to tax (s23M) :
Only applicable from year of assessment 2015 onwards Financial assistance (s31): Only applicable from 2015 YOA onwards Lump sum contributions to retirement and / or benefit funds Prepaid expenditure not allowed under s23H: Only applicable from Year of
Assessment 2000 onwards Limitation of interest deduction under s23N: only applicable from Year of
Assessment 2014 onwards. Provision for doubtful debt not deductible in current year Provisions not deductible current year (excluding doubtful debt) Short term insurance policy premiums not allowable (s23L): Only applicable from
year of assessment 2015 onwards Transfer pricing adjustments (excluding thin capitalisation adjustments) Other.
Please provide descriptions relating to ‘other’ consolidated above: This free text field must only be completed if a value exceeding R0 (zero) was entered in the field “Other”. On eFiling and in the branch, this field will only display if “Other” was checked in the selection list.
Control Total: This currency field (15 blocks) will be calculated by SARS.
ALLOWANCES / DEDUCTIONS GRANTED IN PREVIOUS YEARS OF 11.2.29ASSESSMENT AND NOW REVERSED
Only complete the relevant currency fields (15 blocks) where the adjustments are applicable to the company in Rands (no cents). On eFiling and in the branch, a pop-up selection box will display from which only those special allowances relevant to the company must be selected and completed: Allowance for future expenditure (s24C) Credit agreements and debtors allowance (hire-purchase) (s24) Doubtful debt allowance (s11(j)) Other.
Please provide descriptions relating to ‘other’ consolidated above: This free text field (maximum length of 3 rows with 17 blocks) must only be completed if a value exceeding R0 (zero) was entered in the field “Other”. On eFiling and in the branch, this field will only display if “Other” was checked in the selection list.
Control Total: This currency field (15 blocks) will be calculated by SARS. AMOUNTS NOT CREDITED TO THE INCOME STATEMENT 11.2.30
Only complete the relevant currency fields (15 blocks) where the adjustments are applicable to the company in Rands (no cents). On eFiling and in the branch, a pop-up selection box will display from which only those special allowances relevant to the company must be selected and completed: Amounts received in advance Amounts accrued but not received
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Closing value of consumable stock and spare parts Closing balance of stock values of work in progress - (s22(2A)): Only applicable from
Year of Assessment 2003 onwards Income deemed to be from a South African source Interest accrued (s24J and s24JA) Loans / advances granted by an insurer (par. (m) of def. of “gross income”) Transfer pricing adjustment (excluding financial assistance) Other.
Please provide descriptions relating to ‘other’ consolidated above: This free text field (maximum length of 3 rows with 17 blocks) must only be completed if a value exceeding R0 (zero) was entered in the field “Other”. On eFiling and in the branch, this field will only display if “Other” was checked in the selection list.
Control Total: This currency field (15 blocks) will be calculated by SARS.
RECOUPMENT OF ALLOWANCES / EXPENSES PREVIOUSLY GRANTED 11.2.31
Only complete the relevant currency fields (15 blocks) where the adjustments are applicable to the company in Rands (no cents). On eFiling and in the branch, a pop-up selection box will display from which only those special allowances relevant to the company must be selected and completed: Bad debts Lease charges (s8(5)) Wear and tear (s8(4)) Amount recouped in respect of VCC shares sold for which a tax deduction was
allowed: Only applicable from year of assessment 2015 onwards. Reduction of Debt (s19): – Only applicable from year of assessment 2015 onwards. Other.
Please provide descriptions relating to ‘other’ consolidated above: This free text field (maximum length of 3 rows with 17 blocks) must only be completed if a value exceeding R0 (zero) was entered in the field “Other”. On eFiling and in the branch, this field will only display if “Other” was checked in the selection list.
Control Total: This currency field (15 blocks) will be calculated by SARS.
AMOUNTS TO BE INCLUDED IN THE DETERMINATION OF TAXABLE INCOME 11.2.32BEFORE S18A DONATIONS (EXCLUDING ASSESSED LOSSES BROUGHT FORWARD AND CAPITAL GAINS / LOSSES)
From 2015 year of assessment onwards, the following note will be displayed: Note: Allowable s18A donations and related carry overs will be calculated by SARS
Calculated profit excluding net income from CFC: This currency field (15 blocks) will automatically be calculated on eFiling or for non-eFilers when the SARS agent captures the return in the branch. Either a calculated profit or calculated loss applies. If a calculated profit applies, the calculated loss field and associated source code is not applicable. If the net figure is R0 (zero), then this value applies to the calculated profit.
Source Code: If a calculated profit applies, this source code is compulsory for completion. Numeric field, a pop-up list will be displayed on eFiling or for non-eFilers when the SARS agent captures the return in the branch.
Calculated loss: This currency field (15 blocks) will automatically be calculated on eFiling or for non-eFilers when the SARS agent captures the return in the branch. Either a calculated profit or calculated loss applies. If a calculated loss applies, the calculated profit field and
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associated source code is not applicable. A loss is indicated as a positive value in the calculated loss field.
Source Code: If a calculated loss applies, this field is compulsory for completion. Otherwise this field is not applicable. Numeric field, a pop-up list will be displayed on eFiling or for non-eFilers when the SARS agent captures the return in the branch. Alternatively the source code booklet is available on www.sars.gov.za.
Imputed net income from CFC: This currency field (15 blocks) must be completed in Rands (No Cents)).
TAX ALLOWANCES / LIMITATIONS 11.2.33
Did the company make any contributions to the benefit of the employees to any pension, provident or medical fund in excess of 20% of the approved remuneration (s11(l))? This field must only be completed if the field Amortisation of lump sum contributed to retirement / benefit funds (s11(l)) was completed in the Tax Computation: Special Allowances Not Claimed in the Income Statement. Select “Yes” or “No”.
Was the doubtful debt allowance as referred to in s11(j) based on a fixed percentage of all debtors as at year end in respect of the current year of assessment? This field must only be completed if the field Doubtful debt allowance (s11(j)) was completed in the Tax Computation: Special Allowances Not Claimed in the Income Statement. Select “Yes” or “No”. This question enquires whether a doubtful debt allowance as referred to in section 11(j) was claimed and whether the allowance was based on a fixed percentage of total debtors.
Did the company complete IT180’s for learnership agreements in respect of s12H? This field must only be completed if the field Learnership agreements registered / in effect (s12H) was completed in the Tax Computation: Special Allowances Not Claimed in the Income Statement. Select “Yes” or “No”.
Note: A company can claim a deduction for registered learnership agreements in
terms of the provisions of section 12H of the Income Tax Act. The agreement must be registered with the relevant Sector Education Training
Authority (SETA) in the prescribed manner. For more information refer to the following publications on the SARS website:
o Guide on Learnership Agreements o Interpretation Note: No. 20 (Issue 4) – Section 12H – Additional
Deduction For Learnership Agreements Note: The following relevant material must be made available on request by
SARS: o A copy of the learnership agreement o Confirmation of the SETA registration, o The employment contract; and o Adequate proof that the learnership has been completed successfully or
a confirmation from the SETA (if obtained within that year of assessment).
Did the company obtain a certificate issued by SANEDI in respect of energy efficiency savings for the purposes of claiming a s12L deduction? This field must only be completed if the field ‘Energy efficiency savings deduction (s12L)’ was completed in the Tax Computation: Special Allowances Not Claimed in the Income Statement. Select “Yes” or “No”. Applicable from 2015 YOA onwards
Does the company carry on any business as a hotelkeeper (s13bis)? This field must only be completed if the field Hotel building deduction (s13bis) was
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completed in the Tax Computation: Special Allowances Not Claimed in the Income Statement. Select “Yes” or “No”.
Was the allowance claimed in respect of s13ter for the erection of at least 5 residential units? This field must only be completed if the field Residential building deduction (s13ter) was completed in the Tax Computation: Special Allowances Not Claimed in the Income Statement. Select “Yes” or “No”.
Does the company use a building in the production of income in respect of trade other than the provision of residential accommodation (s13quin)? This field must only be completed if the field Commercial building deduction (s13quin)
was completed in the Tax Computation: Special Allowances Not Claimed in the Income Statement. Select “Yes” or “No”.
Did the company incur any insurance premiums on the lives of employees or directors? This field must be completed with a “Yes” or “No”.
If “Yes” is selected, the following currency field (15 blocks) must be completed in
Rands (No Cents): If Yes, state the total amount of insurance premiums incurred during the year
of assessment:
These fields must only be completed if the field Research and development deduction (s11D) was completed in the Tax Computation: Special Allowances Not Claimed in the Income Statement. Select “Yes” or “No”. Did the company incur any expense on scientific or technological research and
development for the purpose of: The discovery of non-obvious information of a scientific and technological
nature? The creating of any inventions, any design or computer programme of
knowledge. Did the company incur any capital expenditure on buildings, machinery, plant,
implements or utensils? Did the company receive a government grant for the purpose of scientific of
technological research and development? Did the company complete an application and submit it to the Department of Science
and Technology?
According to section 29 of Tax Administration Act all the relevant material relating to the Research and Development claimed must be retained for a period of five years from the date on which ITR14 return is submitted to SARS. The relevant material must contain the following information regarding the claimed expenditure under section 11D: Proof that the research and development is approved by the Minister of Science and
Technology in terms of section 11D (9) Proof that the expenditure was incurred on or after the date of receipt of the
application by the Department of Science for approval of the research and development
Did the company enter into an instalment sale agreement as referred to in s12DA to
use the rolling stock as an asset to generate income? This field must only be completed if the field Rolling stock (s12DA) was completed in the Tax Computation: Special Allowances Not Claimed in the Income Statement. Select “Yes” or “No”.
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Was the allowance claimed in terms of s12F only in relation to assets used directly in the production of income? This field must only be completed if the field Airport and port assets (s12F) was completed in the Tax Computation: Special Allowances Not Claimed in the Income Statement. Select “Yes” or “No”.
Was the strategic industrial project for which an allowance was claimed approved by the Minister of Trade and Industry (s12G)? This field must only be completed if the field Industrial assets used for qualifying industrial policy projects (s12G) was completed in the Tax Computation: Special Allowances Not Claimed in the Income Statement. Select “Yes” or “No”.
Did the company obtain approval from the Department of Science and Technology as contemplated in s11D? This field must only be completed if the field ‘Research and development deduction (s11D)’ in the Income Statement was completed. Select “Yes” or “No”. If the response to this question is “No”, a s11D deduction will not be allowed. Applicable for the 2015 YOA onwards
Was the industrial policy project for which an allowance was claimed approved by the Minister of Trade and Industry (s12I)? This field must only be completed if the field Industrial policy projects: Brownfield projects (s12I) or Industrial policy projects: Greenfield projects (s12I) was completed in the Tax Computation: Special Allowances Not Claimed in the Income Statement. Select “Yes” or “No”.
Did the company receive a certificate from the venture capital company for which a deduction as claimed (s12J)? – Only applicable to years prior to 2015 year of assessment This field must only be completed if the field Deduction in respect of Venture Capital Company shares (s12J) was completed in the Tax Computation: Special Allowances Not Claimed in the Income Statement. Select “Yes” or “No”.
Is the company the owner of the film as contemplated in s12O? This field must only be completed if the field Exemption in respect of films (s12O) was completed in the Tax Computation: Special Allowances Not Claimed in the Income Statement. Select “Yes” or “No”.
Is the building for which an allowance is claimed used in the process of manufacturing (s13)? This field must only be completed if the field Deduction for buildings used in a manufacturing process (s13) was completed in the Tax Computation: Special Allowances Not Claimed in the Income Statement. Select “Yes” or “No”.
Is the company the owner of the film as contemplated in s24F? This field must only be completed if the field Film allowance (s24F) was completed in the Tax Computation: Special Allowances Not Claimed in the Income Statement. Select “Yes” or “No”. DONATIONS ALLOWABLE IN TERMS OF S18A TO APPROVED PUBLIC BENEFIT 11.2.34
ORGANISATIONS (PBO)
This section will be displayed if the Representative/Public Officer selected “Yes” to the
question ‘Does the company want to claim donations made to an approved Public Benefit Organization (PBO) in terms of s18A?’
Total amount donated during the year assessment Complete the amount in rand value donated to all approved PBO’s. If 10 or less PBO’s were donated to, this field will be auto-calculated by SARS.
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Complete the details of the Public Benefit Organisation(s) to whom donations were made If the answer to the question ‘How many Public Benefit organisations did the company donate to?’ is ten or less, complete the details (reference number and amount donated to this PBO) of all the Public Benefit Organisations to whom donations were made.
Complete the details of the Public Benefit Organisations to whom the top 10 donations were made If the answer to the question ‘How many Public Benefit organisations did the company donate to?’ is more than ten, complete the details of the top ten Public Benefit Organisations to whom donations were made.
Reference number Complete the reference number (PBO number).
Amount donated to this PBO Complete in rand value the amount donated to the relevant PBO during the year of assessment.
DONATIONS ALLOWABLE IN TERMS OF S18A TO APPROVED PUBLIC BENEFIT 11.2.35
ORGANISATIONS (PBO) IN RESPECT OF A COLLECTIVE INVESTMENT SCHEME
This section will be displayed if the Representative/ Public Officer selected “Yes” to the questions ‘Is the company a collective investment scheme?’ and ‘Does the company want to claim donations made to an approved Public Benefit Organisation (PBO0 in terns of s18A?’.
Total amount donated during the year of assessment
Complete the total amount donated in rand value to approved PBO’s.
Average value of aggregate of all participatory interests held by investors in the portfolio Complete the average value of all participatory interest held by investors in the portfolio in rand value.
INVESTMENTS IN VENTURE CAPITAL COMPANIES (VCC) 11.2.36
Government has implemented a tax incentive for investors in selected enterprises through
a Venture Capital Company (VCC) regime. VCCs are intended to be a marketing vehicle to attract retail investors. An investor is any taxpayer who qualifies to invest in an approved Venture Capital Company. There are no special tax benefits for the VCC, only standard tax rules will apply.
From 1 January 2009, investors can claim expenditure incurred in exchange for the issue of VCC shares as a deduction from income. This deduction will not be subject to recoupment if the VCC shares are held for longer than five years. Secondary trades in VCC shares will not avail the investor of the same tax benefit.
The list of all approved VCCs can be found on the SARS website at www.sars.gov.za
Please note: Persons who intend to or who make investments in SARS approved VCCs, may not request a tax directive for purposes of section 12J under paragraph 11 of the Fourth Schedule to the Income Tax Act, in order to reduce his or her tax liability.
The section 12J deduction is claimed in the Tax Computation – Special Allowances not claimed in the Income Statement section of the return. If the shares for which a s12J deduction was claimed are sold within a period of 5 years, the recoupment must be
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declared in the Tax Computation – Recoupment of Allowances / Expenses previously granted.
This section will be displayed if the company indicated that it made investments in VCC by selecting ‘Yes’ to the following question ‘Did the company invest in SARS approved Venture Capital Companies in exchange for the issue of shares during this year of assessment?’
Please note: Only the expense incurred in exchange for the issue of shares will entitle the investor to the tax benefit. Where that original investor sells these shares to another person the tax benefit will NOT apply.
Note that this section will be repeated in line with your answer to the question ‘Specify the number of investments made in SARS approved Venture Capital Companies’.
Where your answer to the question ‘Specify the number of investments made in SARS approved Venture Capital Companies’ is greater than 10, complete only the top 10 investments made on the return.
Name of SARS approved VCC
Complete the name of the SARS approved VCC
VCC number
Complete the VCC number
Date of issue of VCC shares
Complete the date of issue of the VCC shares.
Amount invested in Venture Capital Company in exchange for the issue of shares
during the year of assessment Complete the amount in rand value invested in the VCC in exchange for the issue of shares during the year of assessment.
CORPORATE RULES 11.2.37
Select “Yes” or “No” to the following questions:
Was the company a party to any of the following transactions during the year of assessment:
Asset-for-share transactions as defined in s42? Amalgamation transaction as defined in s44? Intra-group transaction as defined in s45? Unbundling transaction as defined in s46? Liquidation, winding-up or deregistration distribution as defined in s47?
CAPITAL GAINS / LOSSES 11.2.38
Determining a capital gain or a capital loss
Use the financial information relating to any disposals or deemed disposals to complete this section. The Proceeds (selling price of the asset - Part VI of the Eighth Schedule) and the Base Cost (which includes the acquisition cost, improvement cost and direct cost in respect of the acquisition and disposal of the asset - Part V of the Eighth Schedule) must be completed to calculate the capital gain or loss.
Since the return does not make provision for the separate disclosure of “Roll over base cost” and “Exclusions/Adjustments (excluding annual exclusion rate)”, a manual calculation
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must be performed to calculate the correct capital gain or loss per main asset. The result of the manual calculation must be captured in the Capital Gain/Loss field against the applicable asset. Should there be more than one transaction for a specific asset type the amounts must be added together per asset type therefore the reason for the column "Number of Transactions".
Note: Refer to Annexure E for the main asset type source codes. The amount declared must be prior to the application of the inclusion rate as this will
programmatically be applied by SARS during the assessment process. Even numbered codes refer to gains and uneven numbered codes refer to losses.
SCHEDULE OF LOCAL CAPITAL GAINS AND LOSSES IN RESPECT OF ASSETS 11.2.39
The “Schedule of Local Capital Gains and Losses in respect of the disposal of assets” will only display on the return if the question “Did the company have any transactions or events which resulted in a locally sourced capital gain or loss?” in the “Information to create this income tax return” is “Yes”
Schedule of Local Capital Gains and Losses in respect of the disposal of assets
Note: At least one row in this schedule must be completed. If one of the fields in a row is completed with a value, then all the fields in that specific row must be completed.
The following currency fields (15 blocks) must be completed in Rands (No Cents): Proceeds Base Cost Capital Gain/Loss.
Number of Transactions: Numeric field, complete the number of transactions
Main Asset Type Source Code: Refer to Annexure E - Local Assets to complete this numeric field. A source code ending in an even number represents a capital gain and a source code ending in an uneven number represents a capital loss.
A person's capital loss determined in respect of the disposal of an asset to a connected person is treated as a ‘clogged’ loss. In other words, the capital loss is ring-fenced and may be set off only against capital gains arising from disposals to the same connected person. Whether a capital loss will be ring-fenced will depend on the relationship between the parties and the timing of that relationship.
A person must disregard any capital loss determined in respect of the disposal of an asset to a connected person. Capital losses of this nature are ‘clogged’ (ring-fenced). One of the reasons for determining the relationship immediately after the disposal is that in some cases the relationship is established only after the transaction. This situation typically occurs, for example, in an asset-for-shares swap under which one person disposes of an asset to a company in exchange for shares in that company.
Add: Adjustment for clogged losses included in amounts listed above to be carried forward (par 39 of the Eight Schedule): This field is mandatory from 2014 onwards. For prior years it is optional. If this field is not applicable to the company, complete the field with R0 (zero rand). This currency field (15 blocks) must be completed with the relevant amount. Note that clogged losses are not assessed losses carried forward by the SARS system.
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Less: Allowable deduction i.r.o prior year clogged losses carried forward on capital gain(s) to connected person(s) (par 39 of the Eighth Schedule): This field is mandatory from 2014 onwards. For prior years it is optional. If this field is not applicable to the company, complete the field with R0 (zero rand). This currency field (15 blocks) must be completed with the relevant amount.
Note that a clogged loss brought forward from a previous year may be set off only against capital gains arising in the current year with the same connected person. In addition the clogged loss must be limited to the amount of such capital gains. If the clogged loss exceeds the gain the excess must be carried forward.
Aggregate Gain: This currency field (15 blocks) will be calculated by SARS by subtracting all capital losses (Capital gain/loss with asset source code ending in an uneven number) from capital gains (Capital gain/loss with asset source code ending in an even number). Either an aggregate gain or aggregate loss applies. If an aggregate gain applies, the aggregate loss field is not applicable. If the net figure is R0 (zero), then this value applies to the aggregate gain field.
Aggregate Loss: This currency field (15 blocks) will be calculated by SARS by subtracting all capital losses (Capital gain/loss with asset source code ending in an uneven number) from capital gains (Capital gain/loss with asset source code ending in an even number). Either an aggregate gain or aggregate loss applies. If an aggregate loss applies, the aggregate gain field is not applicable.
SCHEDULE OF FOREIGN CAPITAL GAINS AND LOSSES IN RESPECT OF THE 11.2.40DISPOSAL OF ASSETS
The “Schedule of Foreign Capital Gains and Losses in respect of the disposal of assets” will
only display on the return if the question “Did the company have any transactions or events which resulted in a foreign sourced capital gain or loss?” in the “Information to create this income tax return” is “Yes”
Schedule of Foreign Capital Gains and losses in respect of the disposal of assets
Note: At least one row in this schedule must be completed. If one of the fields in a row is completed with a value, then all the fields in that specific row must be completed.
The following currency fields (15 blocks) must be completed in Rands (No Cents):
Proceeds Base Cost Capital Gain/Loss.
Number of Transactions: Numeric field, complete the number of transactions
Main Asset Type Source Code: Refer to Annexure E – Foreign Assets to complete this numeric field. A source code ending in an even number represents a capital gain and a source code ending in an uneven number represents a capital loss.
A person's capital loss determined in respect of the disposal of an asset to a connected person is treated as a ‘clogged’ loss. In other words, the capital loss is ring-fenced and may be set off only against capital gains arising from disposals to the same connected person. Whether a capital loss will be ring-fenced will depend on the relationship between the parties and the timing of that relationship.
A person must disregard any capital loss determined in respect of the disposal of an asset to a connected person. Capital losses of this nature are ‘clogged’ (ring-fenced). One of the
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reasons for determining the relationship immediately after the disposal is that in some cases the relationship is established only after the transaction. This situation typically occurs, for example, in an asset-for-shares swap under which one person disposes of an asset to a company in exchange for shares in that company.
Add: Adjustment for clogged losses included in amounts listed above to be carried forward (par 39 of the Eight Schedule): This field is mandatory from 2014 onwards. For prior years it is optional. If this field is not applicable to the company, complete the field with R0 (zero rand). This currency field (15 blocks) must be completed with the relevant amount.
Less: Allowable deduction i.r.o. prior year clogged losses carried forward on capital gain(s) to connected person(s) (par 39 of the Eighth Schedule): This field is mandatory from 2014 onwards. For prior years it is optional. If this field is not applicable to the company, complete the field with R0 (zero rand). This currency field (15 blocks) must be completed with the relevant amount.
Note that a clogged loss brought forward from a previous year may be set off only against capital gains arising in the current year with the same connected person. In addition the clogged loss must be limited to the amount of such capital gains. If the clogged loss exceeds the gain the excess must be carried forward.
Aggregate Gain: This currency field (15 blocks) will be calculated by SARS by subtracting all capital losses (Capital gain/loss with asset source code ending in an uneven number) from capital gains (Capital gain/loss with asset source code ending in an even number). Either an aggregate gain or aggregate loss applies. If an aggregate gain applies, the aggregate loss field is not applicable. If the net figure is R0 (zero), then this value applies to the aggregate gain field.
Aggregate Loss: This currency field (15 blocks) will be calculated by SARS by subtracting all capital losses (Capital gain/loss with asset source code ending in an uneven number) from capital gains (Capital gain/loss with asset source code ending in an even number). Either an aggregate gain or aggregate loss applies. If an aggregate loss applies, the aggregate gain field is not applicable.
Foreign tax credit in respect of Capital Gains (Rand value only): This currency field (15 blocks) must only be completed if a value exceeding R0 (zero) was calculated in the field Aggregate Gain or Aggregate Loss.
REDUCTION OF LOCAL ASSESSED CAPITAL LOSS DUE TO DEBT REDUCTION 11.2.41
This section will be displayed if “Yes” was selected on the return to the question ‘Was the
reduction for a local asset?’
Amount of debt reduction If an amount is entered into field next to code 4254, the Local Assessed Capital Loss Carry Over amount on ITS will programmatically be reduced with the amount entered and limited to the amount available for Local Assessed Capital Loss Carry Over. REDUCTION OF FOREIGN ASSESSED CAPITAL LOSS DUE TO DEBT 11.2.42
REDUCTION
This section will be displayed if “Yes” was selected on the return to the question ‘Was the
reduction for a foreign asset?’
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Amount of debt reduction If an amount is entered into field next to code 4254, the Local Assessed Capital Loss Carry Over amount on ITS will programmatically be reduced with the amount entered and limited to the amount available for Local Assessed Capital Loss Carry Over.
PAYE CREDITS (excluding provisional tax) 11.2.43
This section of the return will only display if the question “Will the company be claiming any PAYE credits reflected on an IRP5 tax certificate issued to the Company?” in the “Information to create this income tax return” is “Yes”
Note:
The PAYE credits Available section will be repeated according to the numeric value completed in the question “Specify the number of IRP5 certificates” field on the “Information to create this income tax return” page.
The following fields must be completed for each PAYE Credits Available section:
IRP5 certificate number: This field is prepopulated from 2015 YOA onwards PAYE Credit: Enter the PAYE credit amount. This field is applicable from 2015
YOA onwards
FOREIGN TAX CREDITS: Taxable Foreign Sourced Income of Resident 11.2.44Companies – s6quat (excluding foreign capital gain / loss)
This section of the return will only display if the question “Will the company be claiming any Foreign Tax credits not relating to Capital Gain transactions in terms of s6quat and/or a treaty?” in the “Information to create this income tax return” is “Yes”
During the assessment process the information in this section is used when calculating the allowable amount in foreign tax credits in terms of s6quat.
Relief from double taxation A South African resident is subject to normal tax on income derived worldwide (i.e.
income derived from sources within and outside of the Republic of South Africa). However, any income which is derived by a resident from a foreign source may have been or may be subjected to tax in a foreign country, resulting in double taxation on this amount. S6quat grants relief from any potential double taxation, in that any foreign taxes payable in respect of income derived from a foreign source which is included in the taxable income of a resident, may (subject to certain conditions) be allowed as a rebate against normal income tax payable in South Africa by the resident.
Conditions governing the granting of a rebate The sum of foreign taxes payable may qualify for a rebate against the normal income
tax payable by a resident if the following condition is met: The taxes must be taxes payable on income
Please note: Capital gains are included in taxable income (s26A) and the tax payable thereon is regarded as a tax on income. The taxes have to be imposed in terms of the laws of a foreign country,
whether it be at national, state, local or other level of government; The taxes should be proved to be payable, i.e. a legal obligation to pay must
exist; The taxes must be payable without any right of recovery by any person (other
than a right of recovery in terms of an entitlement to carry back losses arising during any year of assessment to a prior year of assessment); and
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The taxes ought to be payable in respect of amounts included in that resident’s taxable income.
Qualifying amounts of income derived from foreign sources
In order to qualify for a rebate in terms of s6quat, the foreign taxes must be payable in respect of any of the following items of income , provided it was included in the resident’s taxable income: Any income received by or accrued to a resident, excluding foreign dividends),
from an actual (real) source outside the Republic, which is not deemed to be from a source within the Republic (s6quat(1)(a)(i))
Any portion of the net income of a controlled foreign company (CFC) as contemplated in section 9D which is attributed to a resident that holds participation rights in that CFC under section 9D(2) (s6quat(1)(b)).
Any foreign dividends (s6quat(1)(d)) Any taxable capital gain as contemplated in s26A from a foreign source which
is not deemed to be from a source in the Republic (s6quat(1)(e)) Any amount dealt with above which is received by or accrued to a particular
person, for example, a trust, but which is deemed to be derived by another person (the resident) (s6quat(1)(f)(i) and (ii))
Any amount dealt with above which forms part of the capital of a trust established in a foreign country, which is regarded as being derived by a resident for either income tax or capital gains tax purposes (s6quat(1)(f)(iii)).
Limitation on the amount of the rebate
The amount of foreign taxes which qualify for the s6quat rebate is limited to a pro rata amount calculated in accordance with the following formula:
Taxable income derived from all foreign sources (A) × Normal tax payable on (B)
Taxable income derived from all sources (B)
The carry forward of an excess amount of foreign tax credits Where the sum of foreign taxes payable exceeds the amount of the rebate, the
excess amount may be carried forward to the immediately succeeding year of assessment. This excess amount will be ranked as a foreign tax credit available for set off against the normal tax payable in that year of assessment, in respect of foreign taxable income after the qualifying foreign taxes for that year have been taken into account.
Instances where no rebate is forthcoming
No foreign tax relief will be granted where the foreign taxes do not qualify for the rebate, for example if the actual source of the amount is located in South Africa. In such instances the amount may qualify as a deduction in terms of s6quat(1C) in determining taxable income for a particular year of assessment. The foreign taxes must have been incurred in respect of the resident’s trading operations and must be proved to be payable without a right of recovery. A resident may not elect to claim the foreign taxes either as a rebate or alternatively as a deduction. Only those foreign taxes that do not qualify for a rebate may be considered as a deduction.
If a resident elects for the relief provided in a tax treaty which does not refer to the s 6quat method of relief, none of the provisions of s6quat will apply. It should be noted that the carry forward of excess tax credits is only allowed in terms of the s6quat method of relief. None of South Africa’s double taxation agreements provide for the carry forward of excess tax credits.
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All fields listed in this section are compulsory for completion. If a specific field is not applicable to the company, a zero (0) must be completed for the field.
Net losses: This currency field (15 blocks) must be completed in Rands (No Cents) for Foreign income.
The following currency fields (15 blocks) for Foreign income and Imputed net income CFC must be completed in Rands (No Cents):
Taxable Income Foreign Tax Credits.
Foreign Tax Credits: This currency field (15 blocks) will automatically be calculated on eFiling or for non-eFilers when the SARS agent captures the return in the branch as the sum of Foreign Tax Credits.
How many of the above Foreign Tax Credits is being claimed in terms of a treaty? This field is only applicable from 2015 onwards. The currency must be completed in Rand value (No cents) (15 blocks)
FOREIGN TAX CREDITS: SOUTH AFRICAN SOURCED INCOME – S6QUIN 11.2.45(ALREADY ELSEWHERE INCLUDED IN THIS RETURN) – S6QUIN (RANDS ONLY, UNLESS CENTS SPECIFIED)
This section of the return will only display if the question “Will the company be claiming any Foreign Tax credits not relating to Capital Gain transactions in terms of s6quin?” in the “Information to create this income tax return” is “Yes”
Section 6quin provides for a rebate for foreign taxes paid on income derived by a taxpayer from services rendered in South Africa.
The return of foreign tax withheld (FTW01) and the relevant material in respect of foreign tax withheld must be sent to SARS within 60 days from the date the tax was withheld or paid. The declaration must be sent to [email protected]
The return of Foreign Tax Withheld (FTW01) can be downloaded from the SARS website on www.sars.gov.za
The amount of income must be from a source within the Republic and received by or accrued to a resident for services rendered.
With the submission of the ITR14 the currency must be translated to the currency of the Republic at the last day of the year of assessment by applying the average exchange rate for the year of assessment.
The tax credit may be in respect of an amount of tax levied by any sphere of the government of any country
Other than the Republic With which the Republic has concluded a Double Tax Agreement (DTA).
Where a DTA is not concluded between the Republic and the other country a tax credit may also be in respect of the amount of tax imposed in terms of the laws of that country.
The following currency fields (15 blocks) must be completed in Rands (No Cents):
Taxable Income from services rendered in South Africa taxed outside the RSA
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Select “Y” or “N” to the question “Was the declaration of foreign tax withheld (FTW01) submitted to the Commissioner within 60 days? Select “Y” if the submission was made to the Commissioner within 60 days
Select “Y” or “N” to “Please confirm that this amount was not claimed as a deduction in terms of s6quat (1C)?”, Select “Y” if the amount was not claimed as a deduction in terms of s6quat(1C)
Foreign Tax Credits.
FOREIGN TAX CREDITS REFUNDED / DISCHARGED BY THE GOVERNMENT OF A 11.2.46FOREIGN COUNTRY IN RESPECT OF A REBATE ALLOWED BY SARS IN A PREVIOUS YEAR – S6QUIN
This section will display if “Y” was selected to “Were any foreign tax credits refunded / discharged during the year of assessment for which a rebate was allowed during a previous year of assessment in terms of s6quin?”
Complete the amount refunded /discharged under “Specify the portion of the amount so
refunded / discharged as was previously allowed by SARS as a rebate” field.
PARTNERSHIPS/JOINT VENTURES 11.2.47
This section of the return will only display if the question “Is the company a partner in a partnership/joint venture?” in the “Information to create this income tax return” is “Yes”
Note:
The Partnerships section will repeat according to the numeric value entered in the question “How many partnerships” on the “Information to create this income tax return” page.
If 5 Partnerships sections were created, it is mandatory that all 5 must be completed. If incorrectly created, refer back to the “Information to create this income tax return” to rectify.
The following fields must be completed for each Partnerships section
Partnership Name: Free text field (maximum length is 53 blocks) Specify the company’s profit / loss sharing % during the year of assessment:
Numeric field – complete the percentage Indicate if the company derived a profit / loss from this partnership during the year of
assessment: Select “Profit” or “Loss” Indicate if this information is in respect of a local or a foreign partnership: Select
“Local” or “Foreign”.
TRANSFER PRICING: RECEIVED / RECEIVABLE 11.2.48
This section of the return will only display if the question “Referring to legislation applicable to years of assessment commencing on or after 1 April 2012 (refer to guide for years of assessment prior to 1 April 2012), did the company enter into an affected transaction, as set out in s31(1) “affected transaction” (a), where the company: Received / earned foreign income?” in the “Information to create this income tax return” is “Yes”
Note:
Transfer pricing happens whenever two related companies – that is, a parent company and a subsidiary, or two subsidiaries controlled by a common parent – trade with each other, as when a US-based subsidiary of Company X, for example, buys something from a South African-based subsidiary of Company X. When the parties establish a price for the transaction, they are engaging in transfer pricing.
If two unrelated companies trade with each other, a market price for the transaction will generally result. This is known as “arms-length” trading, because it is the product of
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genuine negotiation in a market. This arm’s length price is usually considered to be acceptable for tax purposes.
For years of assessment commencing before 1 April 2012, the data to be provided in the Transfer pricing Received and Receivable section of the return is for direct transactions between persons (as described in section 31(2)(a) and (b) of the “old section 31”). Reference to the words ‘operation, scheme, agreement or understanding directly or indirectly entered into’ should be ignored.
All fields listed in this section are compulsory for completion. If a specific field is not applicable to the company, a zero (0) must be completed for the field.
Note: Where one field in a line (row) is completed, all columns fields in that row must be completed
The following currency fields (15 blocks) must be completed in Rands (No Cents) for each column:
Sale of goods Commission received / receivable Interest received / receivable Royalties or license fees received / receivable Admin, secretarial fees, rentals received / receivable Insurance premiums received / receivable Other finance charges received / receivable Research & Development fees received / receivable Other income received / receivable.
The columns are subdivided into the following categories:
Foreign Connected Total Aggregate Value – Complete the aggregate value for the relevant
transaction. No of Jurisdictions - Indicate the number of jurisdictions (enter a number
between 0 and 999) for each of the currency fields mentioned above. This field must be completed with a zero (0) if the Total Aggregate Value for the relevant transaction is R0. If the number of jurisdictions captured is between 1 and 5, the fields ‘Top 5 Jurisdictions (Country Code)’ and ‘Transaction Value – Foreign Connected per country’ will be repeated based on the number of jurisdictions indicated. If the value captured is greater than 5, the fields ‘Top 5 Jurisdictions (Country Code)’ and ‘Transaction Value – Foreign Connected per country’ will be repeated a maximum of 5 times and the top 5 jurisdictions with the highest transaction value must be completed.
Top 5 Jurisdictions (Country Code) – capture the relevant country codes as reflected in Appendix F (limited to the top 5 jurisdictions).
Transaction Value: Foreign connected per country – capture the relevant transaction value per country code (limited to the top 5 jurisdictions).
Foreign: Non- Connected Total Aggregate Value – Complete the aggregate value for the relevant
transaction. No of Jurisdictions - Indicate the number of jurisdictions (enter a number
between 0 and 999) for each of the currency fields mentioned above. This field must be completed with a zero (0) if the Total Aggregate Value for the relevant transaction is R0. If the number of jurisdictions captured is between 1 and 5, the fields ‘Top 5 Jurisdictions (Country Code)’ and ‘Transaction Value – Foreign Connected per country’ will be repeated based on the
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number of jurisdictions indicated. If the value captured is greater than 5, the fields ‘Top 5 Jurisdictions (Country Code)’ and ‘Transaction Value – Foreign Connected per country’ will be repeated a maximum of 5 times and the top 5 jurisdictions with the highest transaction value must be completed.
Top 5 Jurisdictions (Country Code) – capture the relevant country codes as reflected in Appendix F (limited to the top 5 jurisdictions). Disclosure of the transaction value per country is not required for Foreign: Non-Connected.
TRANSFER PRICING: PAID / PAYABLE 11.2.49
This section of the return will only display if the question “Referring to legislation applicable to years of assessment commencing on or after 1 April 2012 (refer to guide for years of assessment prior to 1 April 2012), did the company enter into an affected transaction, as set out in s31(1) “affected transaction” (a), where the company: Incurred expenditure?” in the “Information to create this income tax return” is “Yes”
All fields listed in this section are compulsory for completion. If a specific field is not applicable to the company, a zero (0) must be completed for the field.
For years of assessment commencing before 1 April 2012, the data to be provided in the Transfer Pricing Paid and Payable section of the return is for direct transactions between persons (as described in section 31(2)(a) and (b) of the “old section 31”). However, interest paid/ payable includes indirect financial transactions such as back to back arrangements. Reference to the words ‘operation, scheme, agreement or understanding directly or indirectly entered into’ should be ignored. Please refer to section 31(3) of the “old section 31” read together with Practice Note 2 of 14 May 1996 for further guidance relating to the calculation of the financial assistance to fixed capital ratio for years of assessment commencing prior to 1 April 2012.
Note: Where one field in a line (row) is completed, all columns fields in that row must be completed
The following currency fields (15 blocks) must be completed in Rands (No Cents) for each column:
Purchase of goods Commission payable Interest paid / payable Royalties or license fees paid / payable Admin, secretarial fees, rentals paid / payable Guarantee fees paid / payable Insurance premiums paid / payable Other finance charges paid / payable Research & Development fees paid / payable Other expenses paid / payable.
The columns are subdivided into the following categories:
Foreign Connected Total Aggregate Value – Complete the aggregate value for the relevant
transaction. No of Jurisdictions - Indicate the number of jurisdictions (enter a number
between 0 and 999) for each of the currency fields mentioned above. This field must be completed with a zero (0) if the Total Aggregate Value for the relevant transaction is R0. If the number of jurisdictions captured is between 1 and 5, the fields ‘Top 5 Jurisdictions (Country Code)’ and ‘Transaction Value – Foreign Connected per country’ will be repeated based on the
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number of jurisdictions indicated. If the value captured is greater than 5, the fields ‘Top 5 Jurisdictions (Country Code)’ and ‘Transaction Value – Foreign Connected per country’ will be repeated a maximum of 5 times and the top 5 jurisdictions with the highest transaction value must be completed.
Top 5 Jurisdictions (Country Code) – capture the relevant country codes as reflected in Appendix F (limited to the top 5 jurisdictions).
Transaction Value: Foreign connected per country – capture the relevant transaction value per country code (limited to the top 5 jurisdictions).
Foreign: Non- Connected Total Aggregate Value – Complete the aggregate value for the relevant
transaction. No of Jurisdictions - Indicate the number of jurisdictions (enter a number
between 0 and 999) for each of the currency fields mentioned above. This field must be completed with a zero (0) if the Total Aggregate Value for the relevant transaction is R0. If the number of jurisdictions captured is between 1 and 5, the fields ‘Top 5 Jurisdictions (Country Code)’ and ‘Transaction Value – Foreign Connected per country’ will be repeated based on the number of jurisdictions indicated. If the value captured is greater than 5, the fields ‘Top 5 Jurisdictions (Country Code)’ and ‘Transaction Value – Foreign Connected per country’ will be repeated a maximum of 5 times and the top 5 jurisdictions with the highest transaction value must be completed.
Top 5 Jurisdictions (Country Code) – capture the relevant country codes as reflected in Appendix F (limited to the top 5 jurisdictions). Disclosure of the transaction value per country is not required for Foreign: Non-Connected.
The following 3 fields are decimal fields that must be completed: Specify the financial assistance to fixed capital ratio
Mandatory field if a value of greater than zero rand was entered in the “Financial assistance (s31) field in the Tax Computation container. This question is only relevant if financial assistance was received by the company. If the year of assessment commenced prior to 1 April 2012, only complete if the company received financial assistance from a non-resident connected person or from an investor as defined in section 31(3), or else complete with a zero(0). This is the debt to equity ratio for years of assessment commencing on or after 1 April 2012 and should be calculated as follows: The debt is the debt determined in terms of International Financial Reporting
Standards (“IFRS”) during the year of assessment. Debt for purposes of arm’s length testing will therefore include, for example straightforward loans, advances and debts and items that are economically equivalent to debt such as finance leases, certain structured derivative financial instruments and components of hybrid instruments.
The equity amount to be used for the purposes of this calculation is all items that are treated as equity in terms of IFRS.
Specify the debt in relation to EBITDA (earnings, before interest, taxes, depreciation, and amortisation) ratio: This field must only be completed if the value of the field “Interest paid /
payable” exceeds R0 (zero). This question is only relevant for years of assessment commencing on or after 1
April 2012. For years of assessment commencing prior to 1 April 2012, complete with a zero (0).
The debt to EBITDA (earnings before interest, taxes, depreciation and amortisation) ratio should be calculated as follows: o The ratio to be calculated should be read as follows: Debt to EBITDA
and the reference to the words ‘interest paid’ should be ignored. o In determining the nature of debt the principles and treatment which
would be adopted in financial statements prepared in terms of IFRS
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should be used. Debt for purposes of arm’s length testing will therefore include, for example, straightforward loans, advances and debts and items that are economically equivalent to debt such as finance leases, certain structured derivative financial instruments and components of hybrid instruments.
o EBITDA should be determined in accordance with the principles and basis of recognition of its component parts as would be adopted in financial statements prepared in terms of IFRS.
Specify the EBITDA (earnings, before interest, taxes, depreciation, and amortisation) to finance cost ratio: This field must only be completed if the value of the field “Interest paid / payable” exceeds R0 (zero). This question is only relevant for years of assessment commencing on or after 1 April 2012. For years of assessment commencing prior to 1 April 2012, complete with a zero (0). This ratio should be calculated as follows EBITDA should be determined in accordance with the principles and basis
of recognition of its component parts as would be adopted in financial statements prepared in terms of IFRS.
The ‘interest paid’ must include interest, dividends and other charges paid and accrued on all items treated as debt in terms of IFRS. Items that are economically equivalent to debt such as finance leases, certain structured derivative financial instruments and components of hybrid instruments should also be taken into account.
The “interest” component, for purposes of ‘interest paid’ should be computed on a gross basis (excluding interest received and equivalent items in terms of IFRS).
This ratio should only be completed if the value of the field exceeds R0 (zero).
Specify the debt in relation to total tangible assets ratio: Only applicable from year of assessment 2015 onwards.
TRANSFER PRICING SUPPORTING INFORMATION 11.2.50
This section of the return will only display if the question “Did the company enter into an affected transaction as defined in s31 where the company: Received / earned foreign income?” in the “Information to create this income tax return” is “Yes”
Select “Yes” or “No” for the following questions:
Does the company have transfer pricing documentation that supports the pricing policy applied to each transaction between the company and the foreign connected person during the year of assessment as being at arm’s length? Please note that this question must be answered as “NO” if:
The transfer pricing documentation supporting the pricing policy applied does not
cover each transaction with the company and the foreign connected person; or Where such documentation is incomplete at the time of completing this return and is
not available for immediate submission to the SARS if requested.
Was there any change between the company and a non-resident connected person since the previous reporting period with respect to the transfer pricing methodologies/transaction, operation, scheme, agreement or understanding classification? – Only applicable to 2015 YOA onwards
Did the company conduct any outbound transaction, operation, scheme, agreement for no consideration with a connected person that is tax resident outside South Africa?
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Did the company transact with a connected person that is a tax resident in a country jurisdiction that has a corporate tax rate that is less than 18% or is a tax haven?
Did the company transact with a connected person that is tax resident in a country with which South Africa does not have a tax treaty? – Only applicable to 2015 YOA onwards
Did the company transact with a connected person that is tax resident in a tax haven / low tax jurisdiction? Please note that for the purposes of answering the question the term ‘tax haven/ low tax jurisdiction” means: any jurisdiction with an effective corporate tax rate that is less than 75% of South Africa’s statutory corporate tax rate.
Did the company make a year-end adjustment to achieve a guaranteed profit margin? Please note that this question must be answered “YES” if: A year end adjustment was made to achieve a guaranteed profit margin either for
the company itself OR for a foreign connected person.
Is the “tested party”, of the transaction operation, scheme, agreement or understanding, a tax resident outside South Africa? Select “Yes” or “No”, if “Yes” is selected the following question will be displayed for completion ‘How many tested party/parties of the transaction operation, scheme, agreement or understanding are resident outside South Africa?’ - Only applicable to year of assessment 2015 onwards
How many tested party/parties of the transaction operation, scheme, agreement or understanding are resident outside South Africa? Indicate the number of tested party/parties (enter a number between 1 and 99) of the transaction, operation, scheme, agreement or understanding that are resident outside of South Africa. Only applicable to year of assessment 2015 onwards
Did the company, on or after 1990, transfer, alienate or dispose of any South African developed (or previously South African registered) Intellectual Property to any non-resident connected person or any foreign branch of a South African resident? Select “Yes” or “No”. Only applicable to year of assessment 2015 onwards
MINING AND QUARRYING 11.2.51
This section of the return will only display if the main industry code starts with 05, 06, 07, 08 or 09 the in the “Information to create this income tax return”.
Select “Yes” or “No” for the following questions:
Did the company conduct mining operations in more than one separate and distinct mine?
Did the company acquire a mining operation as a going concern during the year of assessment?
Did the company acquire / dispose of mining property and equipment as envisaged in s37?
Specify the % of the company’s total turnover that relates to the buy-in of minerals.
Did the company conduct prospecting outside South Africa? Did the company conduct mining / mining operations where the company is not
the legal owner of the mining right?
Note: A company that conducted mining activities must complete the GEN-001 mining schedule available on www.sars.gov.za. The completed GEN-001 must be attached as a relevant material to the ITR14.
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CONSTRUCTION 11.2.52
This section of the return will only display if the main industry code starts with 41, 42 or 43 in the “Information to create this income tax return”.
Select “Yes” or “No” for the following questions:
Did the company have any creditor’s retentions with sub-contractors of services?
Did the company incur any losses on contract work in progress which is required to be declared as into trading stock in terms of s22(3A)?
WHOLESALE AND RETAIL TRADE 11.2.53
This section of the return will only display if the main industry code starts with 45, 46 or 47 in the “Information to create this income tax return.”
Did the company enter into an agreement to disclose the debtor’s book to a 3rd
party? Select “Yes” or “No”
FINANCIAL AND INSURANCE ACTIVITIES 11.2.54
This section of the return will only display if the main industry code starts with 64, 65 or 66 in the “Information to create this income tax return”.
Select “Yes” or “No” for the following questions:
If the company is a bank, has the company claimed a doubtful debt provision in excess of the amount agreed upon with SARS?
Has the company made a capital contribution or advanced a loan to any trust? Where the taxpayer has claimed a deduction for any provision related to claims
intimated but not reported or to outstanding claims, does such provision factor in an amount related to ex gratia payments?
Note: A company that conducted short term insurance activities must complete the ICS01 - short term insurance schedule available on www.sars.gov.za. The completed ICS01 and all relevant material requested in the ICS01 must be attached as relevant material to the ITR14.
1 | GUIDE ON HOW TO COMPLETE THE IT14SD SUPPLEMENTARY DECLARATION
GUIDE ON HOW TO COMPLETE THE IT14SD
Supplementary Declaration
2013
2 | GUIDE ON HOW TO COMPLETE THE IT14SD SUPPLEMENTARY DECLARATION
CONTENTS
1. INTRODUCTION 3
2. HOW WILL THE IT14SD BE ISSUED 3
3. HOW WILL THE IT14SD BE SUBMITTED 3
4. DOCUMENTATION REQUIRED TO COMPLETE YOUR IT14SD 3
5. MULTIPLE SUBMISSIONS OF IT14SD AND ITR14 DURING SARS VERIFICATION 4
6. PROGRESS OF VERIFICATION 5
7. COMPLETING THE IT14SD RETURN 5
8. COMPANY CLASSIFICATION 5
8.1 ANNEXURE A – OLD IT14 RETURN 7
8.2 ANNEXURE B – DORMANT COMPANY, BODY CORPORATE, SHARE BLOCK COMPANY and MICRO BUSINESS 17
8.3. ANNEXURE C – SMALL BUSINESS 27
8.4 ANNEXURE D – MEDIUM TO LARGE BUSINESS 37
3 | GUIDE ON HOW TO COMPLETE THE IT14SD SUPPLEMENTARY DECLARATION
1. INTRODUCTION
• If a company is selected for verification, SARS will issue a letter - Verification of Income Tax Return - to the company.
• This letter will specify that the company has the option to either submit a revised company Income Tax Return (ITR14) or a
Company Income Tax Supplementary Declaration (IT14SD).
• The IT14SD is a supplementary declaration in which a company must reconcile Income Tax, Value-Added Tax (VAT), Pay-As-You-
Earn (PAYE) and Customs declarations after the initial submission of the Return of Income (IT14/ITR14) for the applicable financial
year end as specified in the verification letter.
• This guide is designed to assist with the completion and submission of the IT14SD return.
• For further information on the IT14SD return visit the SARS website www.sars.gov.za, your nearest SARS branch or call the SARS
Contact Centre on 0800 00 (SARS) 7277.
2. HOW WILL THE IT14SD BE ISSUED
• The IT14SD will be issued by SARS to the relevant company through the following channels:
» If the company is a registered eFiler, the IT14SD will be available on the company’s eFiling profile
» If the company is not a registered eFiler, the “Verification of Income Tax Return” letter, accompanied by the notice of
assessment (ITA34), will be posted to the company and will specify that the company must visit the nearest SARS branch to
obtain the IT14SD for completion.
NOTE: The IT14SD cannot be obtained via the Contact Centre, since there will be no posting or email option for request of the
IT14SD. The company has the option to register for eFiling, submit a revised Company Income Tax Return (ITR14) via the “Request
for Correction” button and if SARS requires a further verification, an IT14SD will automatically be available on the company’s eFiling
profile.
3. HOW MUST THE IT14SD BE SUBMITTED
• The IT14SD must be submitted by the due date specified in the “Verification of Income Tax Return” letter. The IT14SD can be
submitted through the following channels:
» If the Representative Taxpayer / Public Officer is a registered eFiler, the IT14SD can be completed and submitted electronically
on eFiling
» If the Representative Taxpayer / Public Officer is not a registered eFiler, he/she can visit the nearest SARS branch for submission.
Representative taxpayers that are not registered eFilers, and have access to this guide online but prefer to submit the IT14SD
at the nearest SARS branch may use the various fields as specified in this guide in preparation for submission
» Alternatively, the Representative Taxpayer / Public Officer can register as an eFiler, but MUST first submit a revised company
Income Tax Return (ITR14) via the “Request for Correction” button. Thereafter, if SARS requires further verification, an
IT14SD will automatically be available on the company’s eFiling profile.
NOTE: The SARS agent will only capture the relevant data specified in the guide and completed on the IT14SD. The agent will not
assist in the completion of any of the containers or in the interpretation of the financial statements.
4. DOCUMENTATION REQUIRED TO COMPLETE YOUR IT14SD
• Please note that although the documents listed below are used to complete the IT14SD, they must NOT be submitted as relevant
material when submitting the IT14SD to SARS.
• In order to complete the IT14SD, you must have the following previously submitted returns and declarations for the relevant
financial year end.
4 | GUIDE ON HOW TO COMPLETE THE IT14SD SUPPLEMENTARY DECLARATION
» Company income tax return (IT14/ITR14)
» Value-Added Tax Declarations (VAT201s)
» Monthly Employer Declaration (EMP201s).
• Where the IT14SD is to be submitted manually at a SARS branch, ensure that the various totals from the VAT201’s submitted for
the relevant tax periods relating to the particular financial year end are added together:
» Total amount of output VAT as declared under field 13
» Total zero rated supplies as declared per field 2 and 2A
» Total exempt and non-supplies as declared per field 3
» Total VAT input claimed per the submitted VAT201s (field 19)
» Total goods exported as claimed per the VAT201s (field 2A)
» Total goods imported as per the VAT 201s (field 15A).
Monthly Employer Declaration (EMP201)
Where the IT14SD is to be submitted at a SARS branch, ensure that the total amount for PAYE calculated from all the EMP201s
submitted for the Financial year-end are added together.
Customs Declarations Form (SAD 500) and/or Voucher of Correction (SAD504s or SAD554s)
Where the IT14SD is to be submitted manually at a SARS branch ensure that the various totals from the SAD500s and/or SAD504s or
SAD554s submitted for the financial year-end are added together:
• Total customs value or total after correction of imported goods
» Total customs value or total after correction of exported goods.
NOTE: The SARS Branch agent will not calculate the totals required to be completed on the IT14SD.
• The following additional financial records for the relevant financial year end may also assist when completing the IT14SD:
» Annual Financial Statements together with required Schedules
» General Ledger
» Trial Balance.
5. MULTIPLE SUBMISSIONS OF IT14SD AND ITR14 DURING SARS VERIFICATION
• For the relevant financial year end specified in the verification letter:
» The company will on receipt of the initial verification letter for the relevant financial year end be given an option to submit
either the revised ITR14 or the IT14SD. However, if the company has selected to submit the revised ITR14 and SARS is not
satisfied with the revised ITR14 declaration, SARS will issue a subsequent verification letter stipulating that submission of
the IT14SD is mandatory.
• The company has one opportunity to submit a revised ITR14. Once the revised ITR14 declaration has been submitted, the
company will not be able to submit a subsequent revised ITR14. The company will not be allowed to submit a revised ITR14 after
submitting the IT14SD
• Multiple versions of the IT14SD can be submitted at a SARS branch provided that the company received a verification letter
requesting the company to submit an IT14SD. Once the verification is finalised, further submissions of the IT14SD will be
disallowed
• On eFiling, the IT14SD can be submitted in every instance where there is a verification letter published on the company’s eFiling
Income Tax work page requesting submission of the IT14SD. Once the IT14SD is submitted for the relevant verification letter
issued, the IT14SD submission will be de-activated until such time that SARS issues a subsequent verification letter requesting
the IT14SD.
5 | GUIDE ON HOW TO COMPLETE THE IT14SD SUPPLEMENTARY DECLARATION
NOTE: The data from the first submitted IT14SD will not be pre-populated on the IT14SD for a subsequent submission for the
relevant financial year end.
• The company may be required to submit additional relevant material for the relevant financial year-end during a verification
process, but this does not absolve the company from the requirement to submit either a revised ITR14 or IT14SD.
6. PROGRESS OF VERIFICATION
• For information regarding the progress of a SARS verification, the channels specified below are available:
» For registered eFilers, view the progress of the IT14SD processing by clicking on the “Query SARS status” button and the
refund status by clicking on the “Dashboard” button on the Income Tax Work Page
» Call the SARS Contact Centre on 0800 00 (SARS)7277; or
» Visit the nearest SARS branch.
7. COMPLETING THE IT14SD RETURN
• All the fields in the Reconciliation Schedules are compulsory and must be completed.
• An error message will be displayed on eFiling as well as on SARS system at a branch when the agent is electronically capturing
the IT14SD if the captured information is incomplete or incorrect.
• Only Rand values must be declared. Fields that are not relevant must be completed with a R0.
8. COMPANY CLASSIFICATION
• The details in the IT14SD will be explained for the two Company Income Tax Return types, that is the IT14 in the old format and
the new ITR14 and various company types which became effective with the new ITR14.
• If the old IT14 format was submitted, the IT14SD for the old IT14 return must be submitted.
• To determine if the company submitted an old IT14 return, the following can be an indication:
» The income tax return displays IT14 in the right top corner on the first page; and
» The particulars of the Public Officer, Postal Address, Registered Address, Physical Address and Bank Account Details appear
on the first two pages of your company income tax return.
• ITR14 - If the ITR14 is displayed in the right top corner on the first page, then the ITR14 portion of the IT14SD together with the
company classification will be applicable, that is one of the following:
» ITR14 – DORMANT
A Dormant company is classified as a company that was not actively trading for the full financial year (i.e. if the company
partially traded during financial year, the company will not be regarded as a dormant company). On the “Information to
create this Income Tax Return” page of the ITR14, section “Dormant”, the field “Is the company dormant?” is “Yes”
» ITR14 – SHARE BLOCK COMPANY
A Share Block Company is a company which is defined in s1 of the Share Blocks Control Act, 1980 (Act 59 of 1980). On
the “Information to create this Income Tax Return” page of the ITR14, section “Company Type”, the field “Is the company
a body corporate / share block company as defined in s10(1)(e)?” is “Yes”.
» ITR14 - BODY CORPORATE
A Body Corporate is an entity such as a company or institution that is defined in Section 1 of the Sectional Titles Act, 1986
(Act 95 of 1986). On the “Information to create this Income Tax Return” page of the ITR14, section “Company Type”, the
field “Is the company a body corporate / share block company as defined in s10(1)(e)?” is “Yes”.
» ITR14 – MICRO BUSINESS
A Micro Business is classified as a company with a gross income (sales / turnover plus other income) not exceeding R1 million
6 | GUIDE ON HOW TO COMPLETE THE IT14SD SUPPLEMENTARY DECLARATION
and total assets (current and non-current) not exceeding R 5million, and that is not classified as a Body Corporate / Share
Block Company. On the “Information to create this Income Tax Return” page of the ITR14, section “Company Type”, the
field “Specify the gross income (sales / turnover plus other income) in respect of the financial year end?” does not exceed
R1 million and the field “Specify the total assets (current and non-current) of the company in respect of the financial year
end?” does not exceed R5 million.
» ITR14 – SMALL BUSINESS
A Small Business is classified as a company with a gross income (sales / turnover plus other income) not exceeding R14
million and total assets (current and non-current) not exceeding R10 million, that is not classified as a Body Corporate /
Share Block Company or Micro Business.
o The classification of the total assets that must not be in excess of R10 million does not define a Small Business
Corporation (s.12E); this only serves as a classification to create this Income Tax Return for a small business.
Also note that a Small Business is not the same as a Small Business Corporation as defined in Section 12E.
» ITR14 – MEDIUM TO LARGE BUSINESS
A Medium to Large Business: If a company is not classified as a body corporate / share block company, micro business or
small business, it will be classified as a medium to large business (i.e. gross income (sales / turnover plus other income)
exceeding R14 million and / or total assets exceeding R10 million).
• After you have established the company type, refer to the Annexure applicable to the company type for completion of the
IT14SD return:
» Old IT14 Return – Annexure A
» Body Corporate /Share Block Company /Micro Business/ Dormant Company – Annexure B
» Small Business – Annexure C
» Medium to Large Business – Annexure D.
• TheIT14SDisdividedintothefollowingschedules:
» PAYE Reconciliation Schedule
» Income Tax Reconciliation Schedule
» VAT Reconciliation Schedule
» Customs Reconciliation Schedule
» Reconciling Items.
37 | GUIDE ON HOW TO COMPLETE THE IT14SD SUPPLEMENTARY DECLARATION
8.4 ANNEXURE D – MEDIUM TO LARGE BUSINESS
• If the income tax return displays ITR14 in the right top corner on the first page on the first page and the company is classified
as a Medium to Large Business below:
» A Medium to Large Business: If a company is not classified as a body corporate / share block company, micro business or
small business, it will be classified as a medium to large business (i.e. gross income (sales / turnover plus other income)
exceeding R14 million and / or total assets exceeding R10 million).
• If the company does not comply with the criteria specified above, please refer to Section 8: Company Classification to determine
the annexure of this guide that is relevant to the company.
REGISTERED INFORMATION
• Please verify against the “Verification of Income Tax Return” letter that the Income Tax Ref No, Case No and Financial year end
details have been pre-populated correctly. The Financial year end cannot be before 1999. If the information is not pre-populated
correctly, please correct the information on the return.
PAYE RECONCILIATION SCHEDULE
• This section must reflect the total salaries and wages and employment expenses declared under the “Income Statement” on the
ITR14 and EMP201’s submitted to SARS pertaining to the relevant financial year end.
• The reconciliation must include all PAYE declarations connected to the entity.
» For example: If the company has branches that are registered separately for Employees Tax, the total declarations for all the
branches must reconcile with the salaries and wages and employment expenses declared on the ITR14.
38 | GUIDE ON HOW TO COMPLETE THE IT14SD SUPPLEMENTARY DECLARATION
• Field 1: Directors’ / Members’ remunerations as per ITR14
» Capture the amount declared under “Directors’ / members’ remuneration” field on the ITR14
» Complete the amount declared under “Expense Items: Salaries and wages (incl. medical, pension, provident fund
contributions) as per ITR14.
• Field 2: Employee expenses: Pension and provident fund contributions as per ITR14
» Capture the “Employee expenses: Pension and Provident fund contributions” amount declared under the “Expense Items”
section in the “Income Statement” as per the ITR14.
• Field 3: Employee expenses: Medical scheme contributions as per ITR14
» Capture the “Employee expenses: Medical scheme contributions” amount declared under the “Expense Items” section in
the “Income Statement” as per the ITR14.
• Field 4: Employee expenses: Salaries and wages (excl. medical, pension, provident fund contributions) as per ITR14
» Capture the amount declared under “Employee expenses: Wages and salaries (excluding medical, provident and pension)”
amount declared under the “Expense Items” section in the “Income Statement” as per the ITR14.
• Field 5: Employee expenses: Group life insurance as per ITR14
» Capture the “Employee expenses: Group life insurance” amount declared under the “Expense Items” section in the “Income
Statement” as per the ITR14.
• Field 6: Employee expenses: UIF contributions and SDL as per ITR14
» Capture the “Employee expenses: UIF contributions and SDL” amount declared under the “Expense Items” section in the
“Income Statement” as per the ITR14.
• Field 7: Employee expenses: Membership of a professional body as per ITR14
» Capture the “Employee expenses: Membership of a professional body” amount declared under the “Expense Items” section
in the “Income Statement” as per the ITR14.
• Field 8: Employee expenses: Training as per ITR14
» Capture the “Employee expenses: Training” amount declared under the “Expense Items” section in the “Income Statement”
as per the ITR14.
• Field 9: Other employment cost per ITR14
» Add all other amounts related to employment cost on which PAYE liability was calculated included in the “Income Statement:
Expense Items” on the ITR14 excluding the specific amounts mentioned in Field 1 to 8 above.
• Field 10: Total employment cost
» Calculate this field as the total (sum) of the amounts completed for Field 1 to Field 9. This field will be calculated automatically
where the IT14SD is submitted online via eFiling or captured at a branch.
39 | GUIDE ON HOW TO COMPLETE THE IT14SD SUPPLEMENTARY DECLARATION
• Field 11: Total PAYE paid as per EMP201s
» Capture the total amount of Pay-As-You-Earn (PAYE) paid as per the EMP201’s for the 12 months of the company financial
year
» Where a subsequent EMP501 was submitted for an additional amount paid/payable this must be added to the total amount
of the EMP201’s
» Where an amount was refunded/refundable due to an over payment on the EMP501 this amount should be deducted from
the total amount of the EMP201’s.
• Field 12: Total employment cost on which PAYE liability was calculated
» Calculate this field by consolidating the records on the payroll.
• Field 13: Reconciling differences (Provide details in the Reconciling Items section if applicable).
» Calculate this field as the positive difference (subtract lesser amount from greater amount) between the following two
fields:
o Field 10: Total employment cost
o Field 12: Total employment cost on which PAYE liability was calculated
» This field will be calculated automatically where the IT14SD is submitted online via eFiling or captured at a branch
» Where the value exceeds R100, reason(s) for reconciling differences and the related amount(s) must be completed in the
Reconciling items: PAYE Reason(s) schedule (refer to Reconciling Items section in the Annexure)
» Please note: that as the amounts for Skills Development Levy (SDL), Unemployment Insurance Fund (UIF), and training
allowances are included in the ITR14 portion of the reconciliation schedule this could result in a reconciling difference and
should be declared in the reconciling items.
INCOME TAX RECONCILIATION SCHEDULE
• This schedule should reflect the amounts declared under the “Tax Computation” section and the net profit or net loss declared
under the “Income Statement Information” sections of the ITR14.
40 | GUIDE ON HOW TO COMPLETE THE IT14SD SUPPLEMENTARY DECLARATION
• Field 1: Net Profit or Loss
» Insert “X” in the applicable box to indicate whether the amount reflects a profit or a loss.
» Capture the “Net Profit – Subtotal” or “Net Loss – Subtotal” amount declared under the “Income Statement Information:
Net Profit/Loss” section on the ITR14.
• Field 2: Calculated Profit or Loss
» Insert “X” in the applicable box to indicate whether the amount reflects a profit or a loss
» Capture the “Calculated Profit excluding net income from CFC” or “Calculated Loss” amount declared under the “Tax
Computation: Amounts to be included in the determination of taxable income” (excluding assessed loss brought forward
and capital gains / losses)” section on the ITR14.
• Field 3: Difference: Net and Calculated Profit/Loss
» Calculate this field as the positive difference (subtract lesser amount from greater amount) between the amount for Field
1: “Net Profit/Loss” and Field 2: “Calculated Profit/Loss”.
» This field will be calculated automatically where the IT14SD is submitted online via eFiling or captured at a branch.
» For a company that is preparing the necessary information for capture at a SARS branch:
o If Net Profit and Calculated Profit - subtract the amounts to calculate the difference
o If Net Loss and Calculated Loss - subtract the amounts to calculate the difference
o If Net Profit and Calculated Loss – add the amounts to calculate the difference
o If Net Loss and Calculated Profit – add the amounts to calculate the difference
» Example: Manual calculation
o If there is a Net Profit and a Calculated Loss - add the amounts to calculate the difference:
Net Profit R4 000
(Add) Calculated Loss R5 800
Difference R9 800
• Field 4: Debit Adjustment: Non-Taxable amounts credited to the Income Statement
» Capture the “Control Total” amount of “Non-taxable amounts credited to Income Statement” declared under the “Tax
Computation: Debit Adjustments” section on the ITR14.
• Field 5: Debit Adjustment: Special allowances not claimed in the Income Statement
» Capture the “Control Total” amount of “Special allowances not claimed in the Income Statement” declared under the “Tax
Computation: Debit Adjustments” section on the ITR14.
• Field 6: Credit Adjustment: Non-deductible amounts debited to the Income Statement
» Capture the “Control Total” amount of “Non-deductible amounts debited to the Income Statement” declared under the
“Tax Computation: Credit Adjustments” section on the ITR14.
• Field 7: Credit Adjustment: Allowances/deductions granted in previous years of assessment and now reversed
» Capture the “Control Total” amount of “Allowances / Deductions granted in previous financial year end and now reversed”
declare under the “Tax Computation: Credit Adjustments” section on the ITR14.
• Field 8: Credit Adjustment: Amounts not credited to the Income Statement
» Capture the “Control Total” amount of “Amounts not credited to the Income Statement” declared under the “Tax
Computation: Credit Adjustments” section on the ITR14.
41 | GUIDE ON HOW TO COMPLETE THE IT14SD SUPPLEMENTARY DECLARATION
• Field 9: Credit Adjustment: Recoupment of allowances previously grated
» Capture the “Control Total” amount of “Recoupment of allowances previously grated” declared under the “Tax
Computation: Credit Adjustments” section on the ITR14.
• Field 10: Total: Tax Adjustments
» Calculate this field as the positive difference (subtract lesser amount from greater amount) between all the Debit Adjustment
(sum of Field 4 and 5) and Credit Adjustment (sum of Field 6, 7, 8 and 9) amounts.
» This field will be calculated automatically where the IT14SD is submitted online via eFiling or captured at a branch.
• Field 11: Reconciling differences (Provide details in the Reconciling Items section if applicable).
» Calculate this field as the positive difference (subtract lesser amount from greater amount) between the following two
fields:
o Field 3: Difference: Net and Calculated Profit/Loss;
o Field 10: Total: Tax Adjustments.
» This field will be calculated automatically where the IT14SD is submitted online.
» Where the value exceeds R100, reason(s) for reconciling differences and the related amount(s) must be completed in the
Reconciling items: Income Tax Reason(s) schedule (refer to Reconciling Items section in this Annexure).
VAT RECONCILIATION SCHEDULE
• This section is divided into two parts:
» Output VAT declared for tax periods falling within the financial year end.
» Input VAT claimed for tax periods falling within the financial year end.
• This schedule should reflect the amounts declared in the “Income Statement Information” section of the ITR14 and the VAT
declared as per the VAT201’s previously submitted to SARS.
• If the Company submits the VAT201s for bimonthly tax periods or tax periods of six months, exclude all the supply for the next
or previous financial year.
42 | GUIDE ON HOW TO COMPLETE THE IT14SD SUPPLEMENTARY DECLARATION
• Complete the following fields under Output VAT declared for tax periods falling within the year of assessment:
» Field 1: Total output VAT as per VAT201 tax periods (field 13)
o Capture the total amount of output VAT as declared under field 13 of the VAT201’s submitted to SARS within the
financial year end. Where the VAT periods differ from the financial period, the difference should be reflected under
the “Reconciling differences”
» Complete this field with a zero (R0) if the company is not registered for VAT, Field 2: Total supplies excl. zero rate /
exempt as per VAT201 tax periods: This value is calculated by dividing the Total Output VAT as per VAT201 tax
periods by 0.14
o Calculate this field by dividing the “Total output VAT as per VAT201 tax periods (field 13)” by 0.14.
Example:
If the amount declared under field 13 on the VAT201 is R8 000, the calculation will be as follows:
Field 13 = R 8000 = R 57 143
0.14 0.14
o This field will be calculated automatically where the IT14SD is submitted online via eFiling.
» Field 3: Total zero rate supplies as per VAT201 tax periods
o Capture the total zero rated supplies as declared per field 2 and 2A on the VAT201s for the financial year end
o Complete this field with a zero (R0) if the company is not registered for VAT.
» Field 4: Total exempt and non-supplies as per VAT201 tax periods
o Capture the total exempt and non-supplies as declared per field 3 on the submitted VAT201s for the financial year
end
o Note: If the company is not registered for VAT, complete this field with a zero (R0).
43 | GUIDE ON HOW TO COMPLETE THE IT14SD SUPPLEMENTARY DECLARATION
» Field 5: Total VAT supplies as per VAT201 tax periods
o Calculate the total (sum) of the amounts entered for Field 2, 3 and 4
o This field will be calculated automatically where the IT14SD is submitted online via eFiling or captured at a branch.
» Field 6: Gross Sales (excl. credit notes) – Foreign Connected as per ITR14
o Capture the “Gross Sales (excl. credit notes) – Foreign Connected” amount declared under the “Gross Profit /
Loss” section in the “Income Statement” as per the ITR14.
» Field 7: Gross Sales (excl. credit notes) – Other than foreign connected as per ITR14
» Field 8: Total Gross Sales:Capture the “Gross Sales (excl. credit notes) – Other than foreign connected” amount declared
under the “Gross Profit / Loss” section in the “Income Statement” as per the ITR14.
o Calculate the total (sum) of Fields 6 and 7.
o This field will be calculated automatically where the IT14SD is submitted online via eFiling or captured at a branch.
» Field 9: Reconciling differences (Provide details in the Reconciling Items section if applicable)
o Calculate this field as the positive difference (subtract lesser amount from greater amount) between the following
two fields:
• Field 5: Total VAT supplies as per VAT201 tax periods
•Field 8: Total Gross Sales
o This field will be auto-calculated when IT14SD is submitted online
o If the value of this field exceeds R100, the Reconciliation Items: Output VAT Reason(s) container will be displayed
in order to explain the reasons for the difference (refer to Reconciling Items section in this Annexure).
• Complete the following fields under Input VAT claimed for tax periods falling within the year of assessment:
» Field 1: Total input VAT as per VAT tax periods (field 19)
o Calculate the total VAT input claimed per the submitted VAT201s (field 19) for the same periods
incorporated into the relevant year of assessment.
o Complete this field with a zero (R0) if the company is not registered for VAT.
» Field 2: Total acquisitions as per VAT201 tax periods. This value is calculated by dividing the total input VAT as
per VAT201 tax periods by 0.14
o Calculate the value for this field by dividing “Total input VAT as per VAT tax periods (field 19)” by 0.14.
» Example:
o If the amount declared under field 19 on the VAT201 is R184 929, the calculation will be as follows:
Field 19 = R25 890 = R184 929
0.14 0.14
o This field will be calculated automatically where the IT14SD is submitted online via eFiling or captured at a branch.
» Field 3: Opening stock as per ITR14
o Capture “Less: Opening stock” declared under the “Gross Profit / Loss” section in the “Income Statement” as per
the ITR14.
» Field 4: Add: Credit notes on sales as per ITR14
o Capture “Less: Credit notes on sales” declared under the “Gross Profit / Loss” section in the “Income Statement”
as per the ITR14.
» Field 5: Add: Purchases - Foreign: Connected (excl. rebates) as per ITR14
o Capture “Less: Purchases – Foreign: Connected (excl. rebates)” declared under the “Gross Profit / Loss” section in
the “Income Statement” as per the ITR14.
44 | GUIDE ON HOW TO COMPLETE THE IT14SD SUPPLEMENTARY DECLARATION
» Field 6: Add: Purchases - Other than Foreign: Connected (excl. rebates) as per ITR14
o Capture “Less: Purchases – Other than foreign connected (excl. rebates)” declared under the “Gross Profit / Loss”
section in the “Income Statement” as per the ITR14.
» Field 7: Less: Rebates as per ITR14
o Capture “Add: Rebates” declared under the “Gross Profit / Loss” section in the “Income Statement” as per the
ITR14.
» Field 8: Less: Closing stock (Gross excl. adjustments) as per ITR14
o Capture “Add: Closing stock (Gross excl. adjustments)” declared under the “Gross Profit / Loss” section in the
“Income Statement” as per the ITR14.
» Field 9: Less: Inventory adjustments (Previous years stock provision reversed) as per ITR14
o Capture “Add: Inventory adjustments (Previous year stock provision reversed)” declared under the “Gross Profit /
Loss” section in the “Income Statement” as per the ITR14.
» Field 10: Add: Inventory adjustments (Current year stock provision (obsolete / slow-moving stock)) as per ITR14
o Capture “Less: Inventory adj. (Current year stock provision (obsolete / slow-moving stock))” declared under the
“Gross Profit / Loss” section in the “Income Statement” as per the ITR14.
» Field 11: Total Cost of Sales
o This field must be calculated as Field 3 add Field 4 add Field 5 add Field 6 less Field 7 less Field 8 less Field
9 add Field 10.
o This field will be calculated automatically where the IT14SD is submitted online via eFiling or captured at a branch.
» Field 12: Reconciling differences (Provide details in the Reconciling Items section if applicable)
o Calculate this field as the positive difference (subtract lesser amount from greater amount) between the following
two fields:
• Field 2: Total acquisitions as per VAT201 tax periods. This value is calculated by dividing the total input VAT
as per VAT201 tax periods by 0.14
•Field 11: Total Cost of Sales
o This field will be auto-calculated when IT14SD is submitted online
o If the value of this field exceeds R100, the Reconciliation Items: Input VAT Reason(s) container will be displayed in
order to explain the reasons for the difference (refer to Reconciling Items section in this Annexure).
DECLARATION
• If the company is a registered eFiler, the electronic signature (i.e. the Company’s log in) associated with an eFiler is deemed to
be the signature of the declarant.
• If the company is not a registered eFiler, the declaration must be signed on the electronic signature pad by the representative
taxpayer when submitting at the nearest SARS branch.
• The IT14SD is a legal declaration to SARS and by signing you agree that the reconciled information is accurate.
45 | GUIDE ON HOW TO COMPLETE THE IT14SD SUPPLEMENTARY DECLARATION
• You are obliged to ensure that a full and accurate disclosure is made of all relevant information as required in the IT14SD.
Misrepresentation, neglect or omission to submit a declaration or supplying false information may result in prosecution.
VAT REGISTRATION NUMBERS
• A new requirement on the IT14SD is that the company must complete VAT registration numbers.
• Specify the total number of VAT registration number(s) for the company
» The field “Specify the total number of VAT registration numbers” must at least be 1 or more (maximum of 999) if either
one of the following conditions are met:
o Total input VAT as per VAT201 tax periods (field 19) exceeds R0
o Total output VAT as per VAT201 tax periods (field 13) exceeds R0
» Complete a zero for this field if the Company is not registered for VAT.
• VAT Registration Number(s): Based on the numeric value entered in the field “Specify the total number of VAT registration
number(s) for the company”, the VAT registration number fields will repeat on the IT14SD. Each VAT registration number field
(numeric field of 10 blocks) is mandatory for completion.
CUSTOMS RECONCILIATION SCHEDULE
• This section is divided into two parts:
» Imported Goods: Declare the total value of imported goods for the financial year-end
» Exported Goods: Declare the total value of exported goods for the financial year-end.
• This schedule should reflect the amounts included in terms of goods imported and exported in the “Income Statement
Information” section of the ITR14 and the amounts of goods imported and exported declared as per the SAD500s or/and
SAD554s or SAD504s and VAT201s’ previously submitted to SARS.
• Complete the following fields under Imported Goods:
» Field 1: Total Value of imported goods as per Customs declarations:
o Calculate the total value of imported goods according to the final Bill of Entry Declarations (SAD500’s or CD001’s )
for the relevant financial year end. Calculate the total value of imported goods according to the SAD500s or/and
SAD504s for the relevant financial year end.
•Calculatethetotalofimportamountasper(field42customsvalue)ofalltheSAD500s.
•IfthecustomvaluedeclaredonthepreviouslysubmittedSAD500changed,addthe“TotalafterCorrection”
amounts of all the SAD504s.
» Field 2: Total Imported goods included in Cost of Sales as per ITR14
o Complete the portion of the Total Imported goods declared that was included in the “Cost of Sales” on the ITR14.
o The Cost of Sales on the ITR14 must be calculated from the section “Income Statement – Gross Profit / Loss”
section on ITR14 (also refer to Total Cost of Sales on Input VAT reconciliation schedule of IT14SD) as follows:
•OpeningstockasperITR14
•Add:CreditNotesonSalesasperITR14
46 | GUIDE ON HOW TO COMPLETE THE IT14SD SUPPLEMENTARY DECLARATION
•Add:Purchases–Foreign:Connected(excl.rebates)asperITR14
•Add:Purchases–OtherthanForeign:Connected(excl.rebates)asperITR14
•Less:RebatesasperITR14
•Less:ClosingStock(Grossexcl.adjustments)asperITR14
•Less:Inventoryadjustments(Previousyearsstockprovision)asperITR14
•Add:Inventoryadj.(Currentyearstockprovision(obsolete/slowmovingstock))asperITR14
» Field 3: Total goods imported by you as per VAT201s:
o Calculate the total goods imported as per the VAT 201’ (field 15A) for the same periods incorporated into the
relevant financial year end.
• Complete the following fields under Exported Goods:
» Field 1: Total Value of Exported goods as per Customs declaration
o Calculate the total value of exported goods according to the final SAD500s and/or SAD554s for the relevant
financial year end
o Calculate the total of export amount as per (field 42 customs value) of all the SAD500s
o If the customs value declared on the previously submitted SAD500s changed, add the “Total after Correction”
amounts of all the SAD554s.
» Field 2: Total Exported goods included in Sales as per ITR14
o Complete the portion of the Total Exported goods declared that was included in the “Sales (Turnover)” in the
Income Statement Gross Profit / Loss section on the ITR14
o The Sales on the ITR14 must be calculated from the section “Income Statement – Gross Profit / Loss” section on
ITR14 (also refer to Total Gross Sales on Output VAT reconciliation schedule of IT14SD) as follows:
•GrossSales(excl.creditnotes)–Foreign:ConnectedasperITR14
•GrossSales(excl.creditnotes)–OtherthanForeign:ConnectedasperITR14
» Field 3 Total goods exported by you as per VAT201’s
o Calculate the total goods exported by you as claimed per the VAT201 (field 2A) for the same periods incorporated
into the relevant financial year end.
RECONCILING ITEMS
• If the “Reconciling difference” field in the PAYE Reconciliation schedule exceeds R100, the PAYE Reason(s) container will
appear in the Reconciling items section as indicated below.
• If the “Reconciling difference” field in the Income Tax Reconciliation schedule exceeds R100, the Income Tax Reason(s)
container will appear in the Reconciling items section as indicated below.
• If the “Reconciling difference” field in the Output VAT declared for tax periods falling within the year of assessment
Reconciliation schedule exceeds R100, the Output VAT Reason(s) container will appear in the Reconciling items section as
indicated below.
• If the “Reconciling difference” field in the Input VAT claimed for tax periods falling within the year of assessment exceeds
R100, the Input VAT Reason(s) container will appear in the Reconciling items section as indicated below.
47 | GUIDE ON HOW TO COMPLETE THE IT14SD SUPPLEMENTARY DECLARATION
• If the positive difference (subtract lesser amount from greater amount) between any of the 3 fields in the Customs Imported
Goods Reconciliation schedule exceeds R100, the Customs: Imported Goods Reason(s) container will appear in the
Reconciling items section as indicated below.
Example:
If the” Total value of imported goods as per Customs declarations” is R2 000 and “Total imported goods included in Cost of Sales”
is R4 000, the reconciling difference will be R2 000. Capture the reasons for the difference under “Reconciling items: Customs:
Imported Goods reasons” field.
Field 1 R 6 000
(Less) Field 2 - (12 000)
= R 6 000
• If the positive difference (subtract lesser amount from greater amount) between any of the 3 fields in the Customs Exported
Goods reconciliation schedule exceeds R100, the Customs: Exported Goods Reason(s) container will appear in the
Reconciling items section as indicated below.
Example:
If the” Total value of exported goods as per Customs declarations” is R2 000 and “Total exported goods included in Sales” is R4
000, the reconciling difference will be R2 000. Capture the reasons for the difference under “Reconciling items: Customs: Exported
Goods Reason(s)” field.
Field 1 R 6 000
(Less) Field 2 - (12 000)
= R 6 000
• One row will display initially. At least one row is mandatory for completion. If a reason is entered, then the “Amount” field in
the relevant row becomes compulsory for completion and vice versa. Use the “+” button to add additional rows and the “-”
button to delete existing rows.
• Complete the detailed reasons for reconciling items as stated under each reconciliation schedule and ensure that amounts are
completed for each reason.
• The IT14SD will perform an online validation on efiling and in the branch to ensure that the sum of the “Amount” fields in every
row of the respective “Reason(s)” container is equal to the “Reconciling difference” in the respective Reconciliation schedules
listed above. The warning message below will display and the IT14SD form cannot be submitted until the fields balance.
ITR
14
This
page
allow
s the
comp
any t
o cus
tomise
the I
TR14
retur
n.IN
FORM
ATIO
N TO
CRE
ATE
THIS
INCO
ME T
AX R
ETUR
N
Is the
comp
any d
orma
nt?
Did
the c
ompa
ny b
ecom
e do
rman
t/ in
activ
edu
ring
the y
ear o
f as
sess
ment?
YN
YN
Spec
ify th
e gro
ss in
come
(sale
s / tu
rnov
er pl
us ot
her in
come
) in re
spec
t of th
e yea
r of
asse
ssme
nt
Is the
com
pany
a P
erso
nal S
ervic
e Pr
ovide
r as
defin
ed in
the
Four
th Sc
hedu
le?
Info
rma
tio
n
YN
YN
Did
the c
ompa
ny h
ave
any
trans
actio
ns o
r eve
nts w
hich
resu
lted
in a
locall
y sou
rced c
apita
l gain
or lo
ss?
Did
the c
ompa
ny h
ave
any
trans
actio
ns o
r eve
nts w
hich
resu
lted
in a
foreig
n sou
rced c
apita
l gain
or lo
ss?
YN
YN
Did
the c
ompa
ny q
ualify
for
a Ur
ban
Deve
lopme
nt Zo
ne d
educ
tion
(s13q
uat)
?
ITR14
L XX
b91c9121-0a17-4b26-a09d-d5980eb532db
FV V2010.XX.XX
SV XXXX
CT XX
NO XXXXXXXXXX
P XXXXXX
Y XXXX
001/001
How
many
diffe
rent
class
es o
f sha
res
have
bee
n iss
ued
by th
e co
mpan
y?
Is the
comp
any r
eside
nt in
South
Afric
a for
inco
me ta
x pur
pose
s?Y
N
Does
the
comp
any
electe
d to
be a
hea
dqua
rter c
ompa
ny in
term
s of
s9I?
YN
Is the
comp
any a
partn
er in
a pa
rtner
ship/
joint
ventu
re?
YN
How
many
partn
ersh
ips/jo
int ve
nture
s?
Do
rman
t
Co
mp
an
y I
nfo
rmati
on
Cap
ital
Gain
/ L
os
s T
ran
sacti
on
s
Co
mp
an
y T
yp
e
Spec
ify th
e mov
emen
t in as
sets,
liabil
ities a
nd / o
r res
erve
s
Spec
ify th
e main
indu
stry c
ode
Is the
comp
anya
subs
idiar
y of a
grou
p of c
ompa
nies a
s defi
ned i
n s1?
YN
Did
the c
ompa
ny e
nter i
nto a
ny re
porta
ble a
rrang
emen
t in
terms
of
s34–
39 of
the T
ax A
dmini
strati
on A
ctor
s80M
-s80T
of th
e Inc
ome T
ax
Act?
YN
R R
Spec
ify th
e tota
l ass
ets (c
urre
nt an
d non
-curre
nt) of
the c
ompa
ny in
resp
ect o
f the
year
of as
sess
ment
R
Is the
comp
any a
bod
y cor
pora
te / s
hare
bloc
k com
pany
as r
eferre
d to
in s1
0(1)
(e)?
YN
Re
gis
tere
d D
eta
ils
Have
the
bank
ing, p
ublic
offic
er a
nd c
ontac
t deta
ils o
f the
com
pany
be
en ve
rified
and c
onfirm
ed as
corre
ct? (R
efer t
o guid
e)Y
N
Spec
ify th
e num
ber o
f rep
ortab
le ar
rang
emen
ts
Wer
e any
divid
ends
decla
red d
uring
the y
ear o
f ass
essm
ent?
YN
Will
the c
ompa
ny b
e cla
iming
any
PAY
E cre
dits
refle
cted
on a
n IR
P5
tax ce
rtifica
te?Y
N
Will
the c
ompa
ny b
e cla
iming
any
For
eign
Tax
credit
s no
t rela
ting
to Ca
pital
Gain
trans
actio
ns in
term
s of s
6qua
t and
/or a
treaty
?
Ta
x C
red
its
Is the
comp
any a
Sma
ll Bus
iness
Cor
pora
tion a
s defi
ned i
n s12
E?Y
N
Vo
lun
tary
Dis
clo
su
re P
rog
ram
me
Does
any
dec
larati
on in
this
retur
n re
late
to an
app
licati
on m
ade
unde
r the
SAR
S Vo
luntar
y Disc
losur
e Pro
gram
me?
Spec
ify th
e num
ber o
f IRP5
tax c
ertifi
cates
YN
YN
Will
the c
ompa
ny b
e cla
iming
any
For
eign
Tax
credit
s no
t rela
ting
to Ca
pital
Gain
trans
actio
ns in
term
s of s
6quin
?
Sm
all
Bu
sin
es
s C
orp
ora
tio
n
Wer
e an
y for
eign
tax c
redit
s re
funde
d / d
ischa
rged
dur
ing th
e ye
ar
of as
sess
ment
for w
hich
a re
bate
was
allow
ed d
uring
a p
revio
us
year
of as
sess
ment
in ter
ms of
s6qu
in?Y
N
Spec
ify t
he n
umbe
r of
inves
tmen
ts ma
de i
n SA
RS a
ppro
ved
Ventu
re C
apita
l Com
panie
s
Did
the
comp
any
inves
t in
SARS
ap
prov
ed
Ventu
re
Capit
al Co
mpan
ies in
exc
hang
e for
the
issue
of s
hare
s du
ring
this
year
of
asse
ssme
nt?Y
N
Ven
ture
Cap
ital
Com
pany
Inv
estm
ents
How
many
Pub
lic B
enefi
t Org
anisa
tions
(PBO
) did
the co
mpan
y do
nate
to?
Don
atio
ns
Does
the
comp
any
want
to cla
im d
onati
ons
made
to a
n ap
prov
ed
Publi
c Ben
efit O
rgan
isatio
n (PB
O) in
term
s of s
18A?
YN
YN
Isthe
comp
anya
colle
ctive
inve
stmen
t sch
eme?
Did
the c
ompa
ny r
eceiv
e / a
ccru
e an
y for
eign
incom
e or
incu
r any
for
eign
expe
nditu
re o
r pa
y an
y ro
yaltie
s, int
eres
t, div
idend
s or
co
nsult
ing fe
es to
a no
n-re
siden
t?Y
N
Did t
he co
mpan
y rec
eive /
accru
e inc
ome?
YN
Did t
he co
mpan
y inc
ur ex
pend
iture
?Y
N
For y
ears
of as
sess
ment
comm
encin
g on
or a
fter 1
Apr
il 201
2 (fo
r pr
ior y
ears
refer
to
guide
), did
the
com
pany
ente
r int
oan
y tra
nsac
tion,
oper
ation
, sch
eme,
agre
emen
t or u
nder
stand
ingas
set
out in
secti
on 31
(1)(a
)?
Group 3 -Medium to Large BusinessGroup 2 –Small or Medium to Large Business
Group 1 –Micro, Small or Medium to Large Business
YN
Has a
ny d
ebt b
een
redu
ced
for n
o co
nside
ratio
n wh
ich h
as th
e eff
ect
of re
ducin
g the
com
pany
’s as
sess
ed c
apita
l los
s un
der p
arag
raph
12
A(4)
of th
e Eigh
th Sc
hedu
le?Y
N
Was
the r
educ
tion f
or a
local
asse
t?Y
N
Was
the r
educ
tion f
or a
foreig
n ass
et?Y
N
YN
Page
1 of
26
SARS
_201
5_Lo
okFe
el_IT
R14_
v201
5.00.2
8Exa
mpl
e
EX
AM
PLE
Year
of A
sses
smen
tIn
com
e T
ax R
eturn
for C
ompa
nies
(In
co
me
Tax A
ct,
No
. 58 o
f 19
62,
as a
men
ded
)Ta
xpay
er R
efere
nce N
umbe
rIT
R14
Part
icu
lars
Regis
tered
Na
me
Comp
any /
CC
Reg
No.
Regis
tratio
n No.
Tel N
o.
Pra
cti
tio
ner
Deta
ils (
if a
pp
licab
le)
PR
SIF
01
ITR14
L XX
b91c9121-0a17-4b26-a09d-d5980eb532db
FV V2010.XX.XX
SV XXXX
CT XX
NO XXXXXXXXXX
P XXXXXX
Y XXXX
001/001
Tax P
racti
tione
r Em
ail ad
dres
s
Plea
se in
dica
te w
here
the m
ajorit
y of t
he co
mpa
ny’s
taxa
ble i
ncom
e / lo
ss is
der
ived
from
(mar
k onl
y one
box
)Is
this r
eturn
in re
spec
t of a
bran
ch / p
erma
nent
estab
lishm
ent /
agen
cy of
a for
eign c
ompa
ny?
YN
I dec
lare t
hat:
I am
the du
ly ap
point
ed P
ublic
Offic
er / R
epre
senta
tive o
f the c
ompa
nyTh
e info
rmati
on fu
rnish
ed in
this
retur
n is t
o the
best
of my
know
ledge
both
true a
nd co
rrect
I hav
e disc
losed
the g
ross
amou
nts of
all in
come
rece
ived a
nd / o
r acc
rued
to th
is co
mpan
y dur
ing th
e per
iod co
vere
d by t
his re
turn
I hav
e the
nece
ssar
y fina
ncial
reco
rds a
nd su
ppor
ting s
ched
ules t
o sup
port
all de
clara
tions
on th
is re
turn w
hich I
will
retai
n for
audit
purp
oses
.
Date
(CCY
YMMD
D)Fo
r enq
uiries
go to
www
.sars.
gov.z
a or
call 0
800 0
0 SAR
S (7
277)
XXXX
XXXX
XXXX
XXXX
XXX
XXXX
XXXX
XXXX
XXXX
XXX
Plea
se en
sure
you s
ign ov
er
the 2
lines
of “X
”s ab
ove
Wha
t is th
e rea
son
for do
rman
cy?
DE
CIF
01
Sour
ce co
de of
the m
ain in
dustr
y.St
ate th
e pro
fit co
de of
your
main
sour
ce of
inco
me.
If the
profi
t cod
e is “
other
not s
pecif
ied”,
pleas
e pro
vide a
desc
riptio
n
Easte
rn C
ape
Free
Stat
eKw
azulu
Nata
lGa
uteng
Limpo
poMp
umala
nga
North
Wes
t No
rther
n Cap
eW
ester
n Cap
eInt
erna
tiona
l
Plea
se in
dicate
the V
DP ap
plica
tion
no. is
sued
by S
ARS
VD
PIF
01
Trad
ing
Name
Det
ails
DO
CD
A0
1
Is the
comp
any a
cting
as, o
r car
rying
on th
e acti
vities
of, a
nomi
nee?
YN
Is the
comp
any a
party
to an
y con
tract
in ter
ms of
whic
h it h
as un
derta
ken t
o con
duct
any a
ctivit
y or
hold
any a
ssets
on be
half o
f ano
ther p
erso
n dur
ing th
e cur
rent
or a
futur
e yea
r of a
sses
smen
t?Y
N
Mark
here
with
an ‘X
’ if yo
u dec
lare t
hat y
ou do
not h
ave a
n ema
il add
ress
.
Finan
cial Y
ear E
nd
(CCY
YMMD
D)
If no V
DP ap
plica
tion w
as m
ade,
chan
ge yo
ur V
DP an
swer
to “N
o” on
the f
irst p
age
of thi
s retu
rn
Page
2 of
26
SARS
_201
5_Lo
okFe
el_IT
R14_
v201
5.00.2
8Exa
mpl
e
EX
AM
PLE
ITR14
L XX
b91c9121-0a17-4b26-a09d-d5980eb532db
FV V2010.XX.XX
SV XXXX
CT XX
NO XXXXXXXXXX
P XXXXXX
Y XXXX
001/001
Decla
red
Spec
ify th
e tota
l divi
dend
s dec
lared
cons
isting
of th
e foll
owing
:
R
DID
EA
01
Wer
e any
STC
cred
its (s
64J)
utilis
ed ag
ainst
the to
tal di
viden
ds de
clare
d?Y
N
Spec
ify th
e rep
ortab
le ar
rang
emen
t num
ber:
RP
TA
A0
1
Does
the c
ompa
ny ow
n any
fore
ign as
sets
or in
vestm
ents?
YN
Did t
he co
mpan
y rec
eive a
ny in
come
subje
ct to
foreig
n tax
es pa
id /
paya
ble?
YN
Is the
fore
ign ex
chan
ge ga
in / lo
ss in
curre
d in r
espe
ct of
an ex
chan
ge
item
wher
e the
coun
terpa
rty is
a co
nnec
ted pe
rson?
YN
If Yes
, was
the f
oreig
n exc
hang
e gain
/ los
s rea
lised
durin
g this
ye
ar of
asse
ssme
nt?Y
N
Fo
reig
n E
xch
an
ge G
ain
s /
Lo
sses
Did t
he co
mpan
y rec
eive a
ny fo
reign
divid
ends
?Y
N
Fo
reig
n D
ivid
en
ds
Has t
he co
mpan
y clai
med a
n exe
mptio
n for
any a
moun
ts re
lating
to
the di
spos
al of
equit
y sha
res i
n a fo
reign
comp
any,
as co
ntemp
lated
in
par 6
4B of
the E
ighth
Sche
dule?
YN
Ca
pit
al
Ga
ins
Has t
he co
mpan
y clai
med a
n exe
mptio
n for
any f
oreig
n divi
dend
s as
refer
red t
o in s
10(1
)(k)(i
i)(dd
) or s
10B
(2)(a
) ?Y
N
Wer
e any
of th
e for
eign d
ivide
nds s
ubjec
t to th
e par
ticipa
tion
exem
ption
?Y
N
Co
ntr
olled
Fo
reig
n C
om
pan
y
Does
the c
ompa
ny to
gethe
r with
any c
onne
cted p
erso
n in r
elatio
n to
the co
mpan
y hold
mor
e tha
n 10%
of th
e par
ticipa
tion r
ights
in an
y CF
C? If
Yes,
comp
lete t
he ap
plica
ble sc
hedu
le (IT
10) (
refer
to gu
ide).
YN
INT
NA
01
Did t
he co
mpan
y ear
n any
inco
me fr
om a
foreig
n sou
rce th
at wa
s ex
empt
from
tax in
acco
rdan
ce w
ith a
doub
le tax
ation
agre
emen
t?Y
N
Do
ub
le T
axati
on
Is the
comp
any a
partic
ipant
in an
y arra
ngem
ents
which
has t
he fo
llowi
ng
featur
es:
Roun
d trip
finan
cing (
s80D
)?
Elem
ents
that h
ave t
he ef
fect o
f offs
etting
or ca
ncell
ing ea
ch
other
(s80C
)?
Pres
ence
of an
acco
mmod
ating
or ta
x-ind
iffere
nt pa
rty (s
80E)
?
YN
YN
YN
Total
divid
ends
subje
ct to
STC
(Befo
re 1
April
2012
)
Total
divid
ends
subje
ct to
divide
nds t
ax (F
rom
1 Apr
il 201
2)
Total
divid
ends
exem
pt fro
m div
idend
s tax
R R R
Total
divid
ends
subje
ct to
doub
le tax
ation
relie
f
Total
divid
ends
in sp
ecie
decla
red
R
If Yes
, spe
cify t
he fo
llowi
ng:
R
Total
paym
ents
made
Plus
: STC
cred
its re
ceive
d
R
RLess
: STC
cred
its ut
ilised
STC
cred
its cl
osin
g ba
lance
R
ST
C C
red
its
ST
CC
T0
1
Wer
e any
paym
ents
made
to a
non-
resid
ent p
erso
n in c
ompe
nsati
on fo
r the
rend
ering
of se
rvice
s in S
outh
Afric
a?Y
N
Is the
comp
any a
dome
stic t
reas
ury m
anag
emen
t com
pany
as de
fined
in
Secti
on 1?
YN
SA
Wit
hh
old
ing
Ta
x
INT
NB
01
Was
any t
ax w
ithhe
ld ag
ainst
roya
lties,
inter
esto
rdivi
dend
s?Y
N
STC
credit
s ope
ning b
alanc
e
R
Page
3 of
26
SARS
_201
5_Lo
okFe
el_IT
R14_
v201
5.00.2
8Exa
mpl
e
EX
AM
PLE
ITR14
L XX
b91c9121-0a17-4b26-a09d-d5980eb532db
FV V2010.XX.XX
SV XXXX
CT XX
NO XXXXXXXXXX
P XXXXXX
Y XXXX
001/001
Have
the f
inanc
ial st
ateme
nts be
en au
dited
?Y
N
Have
the f
inanc
ial st
ateme
nts be
en qu
alifie
d?Y
N
If Yes
, doe
s this
have
any t
ax ef
fects?
YN
If Yes
, pro
vide t
he na
me of
the e
ntity
that c
ondu
cted t
he au
dit/re
view
Info
rma
tio
nO
TH
GA
01
(a) I
mmed
iately
befor
e 1 Ja
nuar
y 201
1; or
R
(b) W
here
the c
ompa
ny be
came
a re
siden
t sinc
e 1 Ja
nuar
y 201
1
R Add:
Con
sider
ation
rece
ived o
r acc
rued
for t
he is
sue o
f sha
res b
y the
comp
any
R Dedu
ct:A
moun
ts tra
nsfer
red t
o hold
ers o
f sha
res
R Dedu
ct: R
educ
tion a
s a re
sult o
f the a
pplic
ation
of s4
2
R Dedu
ct: R
educ
tion a
s a re
sult o
f the a
pplic
ation
of s4
4
R
Cap
ita
lC
CT
IF0
1
Amou
nt of
contr
ibuted
tax c
apita
l:
Desc
riptio
n of c
lass o
f sha
res
Note
: As
the c
ompa
ny el
ected
to be
a he
adqu
arter
comp
any i
n ter
ms of
s9I, p
lease
comp
lete t
he
appli
cable
sche
dule
(refer
to gu
ide).
Does
the c
ompa
ny co
mply
with
the re
quire
ment
that e
ach o
f its
shar
ehold
ers (
alone
or to
gethe
r with
any o
ther c
ompa
ny th
at for
ms
part
of the
same
grou
p of c
ompa
nies a
s the
shar
ehold
ers)
hold
at lea
st 10
% of
the e
quity
shar
es an
d voti
ng rig
hts in
the c
ompa
ny
throu
ghou
t the y
ear o
f ass
essm
ent a
nd al
l pre
vious
year
s of
asse
ssme
nt?
HQ
CIF
01
Does
the c
ompa
ny co
mply
with
the re
quire
ment
that a
t leas
t 80%
of th
e co
st of
its to
tal as
sets
(exc
luding
cash
and b
ank d
epos
its pa
yable
on
dema
nd) is
attrib
utable
to as
sets
as lis
ted in
s9I(2
)(b)?
YN
Does
the c
ompa
ny co
mply
with
the re
quire
ment
that w
here
its gr
oss
incom
e (ex
cludin
g exc
hang
e diffe
renc
es de
termi
ned i
n ter
ms of
s24I)
ex
ceed
s R5 m
illion
, at le
ast 5
0% of
that
gros
s inc
ome c
onsis
ts of
amou
nts de
scrib
ed in
s9I(2
)(c)?
YN
YN
Pro
vid
er
How
many
full-t
ime e
mploy
ees a
re on
a ful
l-time
basis
enga
ged i
n re
nder
ing an
y ser
vice o
f the c
ompa
ny, e
xclud
ing th
ose w
ho ar
e sh
areh
older
s or m
embe
rs or
arec
onne
cted t
o suc
h sha
reho
lder o
r me
mber
?
PE
SP
A0
1
Wou
ld the
perso
n who
is pe
rsona
lly re
nder
ing th
e ser
vice h
ave b
een
rega
rded
as an
emplo
yee o
f the c
lient
if the
servi
ce w
as re
nder
ed
direc
tly to
the c
lient
and n
ot thr
ough
the c
ompa
ny?
YN
Must
the pe
rson w
ho is
rend
ering
the s
ervic
e, pe
rform
the d
uties
ma
inly a
t the p
remi
ses o
f the c
lient,
and i
f so,
is tha
t per
son s
ubjec
t to
the co
ntrol
or su
pervi
sion o
f the c
lient
as to
the m
anne
r in w
hich t
he
dutie
s are
perfo
rmed
or ar
e to b
e per
forme
d?
YN
Does
mor
e tha
n 80%
of th
e inc
ome f
rom
servi
ces r
ende
red b
y the
co
mpan
y con
sist o
f or is
likely
to co
nsist
of am
ounts
dire
ctly o
r ind
irectl
y rec
eived
from
any o
ne cl
ient, o
r fro
m an
y ass
ociat
ed
institu
tion i
n rela
tion t
o the
clien
t?
YN
Is the
comp
any r
eside
nt ou
tside
Sou
th Af
rica d
ue to
:
NR
SY
A0
1
Fore
ign in
corp
orati
on (a
nd no
t bein
g effe
ctive
ly ma
nage
d in S
A)?
YN
By vi
rtue o
f a tr
eaty
to av
oid do
uble
taxati
on?
YN
Did t
he co
mpan
y gen
erate
a ca
pital
gain
/ loss
or re
venu
e gain
/ los
s in
resp
ect o
f the e
arly
termi
natio
n of a
fore
ign in
strum
ent?
YN
Did t
he co
mpan
y pre
matur
ely te
rmina
te / u
nwind
a he
dge p
ositio
n wh
ere t
he ta
x valu
e diffe
rs in
relat
ion to
the e
cono
mic v
alue?
YN
Is the
comp
any a
bene
ficiar
y of a
trus
t?Y
N
If Yes
, how
man
y tru
sts?
Co
rpo
rati
on
State
the g
ross
inco
me, a
s defi
ned i
n s1 o
f the I
ncom
e Tax
Act,
of the
comp
any
R
Does
the c
ompa
nyde
clare
that
not m
ore t
han 2
0% of
the t
otal o
f all
rece
ipts a
nd ac
cruals
(othe
r tha
n of a
capit
al na
ture)
and a
ll ca
pital
gains
of th
e com
pany
cons
ists c
ollec
tively
of in
vestm
ent
incom
e and
inco
me fr
om re
nder
ing a
perso
nal s
ervic
e?
YN
Does
the c
ompa
ny de
clare
that
the co
mpan
y is n
ot a P
erso
nal
Servi
ce P
rovid
er as
defin
ed in
the F
ourth
Sch
edule
?Y
N
Does
the c
ompa
nyde
clare
that
all of
the s
hare
holde
rs /
memb
ers w
ere n
atura
l per
sons
(indiv
iduals
) thr
ough
out th
e yea
r of
asse
ssme
nt?Y
N
Does
the c
ompa
nyde
clare
that
none
of th
e sha
reho
lders
/mem
bers
of the
comp
any h
eldsh
ares
/ inte
rests
in an
other
clos
e cor
pora
tion,
comp
any o
r co-
oper
ative
othe
r tha
n tho
se sp
ecifie
d in
s12E
(4)(a
)(ii)?
YN
SM
CP
A0
1
YN
Wer
e the
nece
ssar
y adju
stmen
ts ma
de in
resp
ect o
f exp
ense
s not
allow
able
in ter
ms of
s23(
k)?
Was
any s
ervic
e ren
dere
d on b
ehalf
of th
e com
pany
rend
ered
by a
conn
ected
perso
n in r
elatio
n to t
he co
mpan
y?
YN
Do yo
u give
cons
ent th
at SA
RS ca
n pro
vide t
he at
tache
d fina
ncial
sta
temen
ts to
the C
ompa
nies a
nd In
tellec
tual P
rope
rty C
ommi
ssion
(C
IPC)
? Y
N
Is the
comp
any a
REI
T (R
eal E
state
Inves
tmen
t Tru
st as
defin
ed in
Se
ction
1)?
YN
Did t
he co
mpan
y ente
r into
any s
ale an
d lea
seba
ck ag
reem
ent?
YN
Have
the f
inanc
ial st
ateme
nts be
en re
viewe
d?Y
N
Does
the c
ompa
ny ex
ercis
e any
contr
ol of
a tru
st?
YN
Is the
comp
any a
foun
der /
settle
r / be
nefic
iary o
f a fo
reign
trus
t?Y
N
Did t
he co
mpan
y mak
e any
dona
tions
to a
foreig
n tru
st?Y
N
Page
4 of
26
SARS
_201
5_Lo
okFe
el_IT
R14_
v201
5.00.2
8Exa
mpl
e
EX
AM
PLE
Was
ther
e any
chan
ge in
shar
ehold
er’s
inter
est d
uring
the y
ear o
f as
sess
ment
(exc
luding
listed
comp
anies
)?Y
N
Is the
ultim
ate ho
lding
comp
any r
eside
nt ou
tside
Sou
th Af
rica?
Str
uctu
re
YN
Is the
comp
any a
partn
er in
an un
incor
pora
ted jo
int ve
nture
?Y
N
Spec
ify th
e nam
e of th
e ultim
ate ho
lding
comp
any
If Yes
, spe
cify t
he ta
x res
idenc
y cou
ntry c
ode o
f the u
ltimate
holdi
ng
comp
any
If No,
spec
ify th
e inc
ome t
ax re
feren
ce nu
mber
of th
e ultim
ate ho
lding
co
mpan
y
CO
MS
T01
CO
SH
R0
1
ITR14
L XX
b91c9121-0a17-4b26-a09d-d5980eb532db
FV V2010.XX.XX
SV XXXX
CT XX
NO XXXXXXXXXX
P XXXXXX
Y XXXX
001/001
Zo
ne (
s13
qu
at)
Is the
build
ing fo
r whic
h the
comp
any i
s clai
ming
an al
lowan
ce in
an
appr
oved
dema
rcated
zone
?Y
N
Did t
he co
mpan
y rec
eive a
certif
icate
issue
d by t
he m
unici
pality
co
nfirm
ing th
at the
build
ing fo
r whic
h the
comp
any i
s clai
ming
an
allow
ance
is in
an ur
ban d
evelo
pmen
t zon
e?Y
N
Did t
he co
mpan
y ere
ct, ex
tend,
add t
o or im
prov
e the
build
ing fo
r wh
ich th
e com
pany
is cl
aiming
an al
lowan
ce w
ith th
e sole
purp
ose o
f dis
posin
g the
reof
direc
tly on
comp
letion
?Y
N
If No,
state
the to
tal am
ount
incur
red f
or th
e ere
ction
, exte
nsion
, ad
dition
or im
prov
emen
t of th
e buil
ding
Did t
he co
mpan
y pur
chas
e the
build
ing or
part
there
of fro
m a
deve
loper
?Y
N
If Yes
, stat
e the
purch
ase p
rice o
f the b
uildin
g or p
art th
ereo
f
State
the a
moun
t of th
e pur
chas
e pric
e dee
med t
o be c
ost in
curre
d by t
he
comp
any i
n ter
ms of
s13q
uat(3
B)
Did t
he co
mpan
y use
the b
uildin
g ere
cted,
exten
ded,
impr
oved
or
adde
d on t
o sole
ly for
the t
rade
of th
e com
pany
durin
g the
year
of
asse
ssme
nt?Y
N
Did t
he co
mpan
y inc
ur co
sts fo
r the
erec
tion,
exten
sion o
r ad
dition
relat
ing to
low
cost
hous
ing (s
13qu
at(3
A))?
YN
UR
DE
A0
1
R R R
Is the
comp
any p
art o
f a gr
oup o
f com
panie
s with
a gr
oup c
onso
lidate
d tur
nove
r gre
ater t
han R
1 billi
on or
is th
e com
pany
a fin
ancia
l ser
vices
, mi
ning o
r mult
inatio
nal e
nterp
rise?
YN
Dedu
ct: R
educ
tion a
s a re
sult o
f the a
pplic
ation
of s4
6
R Balan
ce of
contr
ibuted
tax c
apita
l at th
e end
of th
e yea
r of a
sses
smen
t
R
Cap
ital
(co
nti
nu
ed
)
Page
5 of
26
SARS
_201
5_Lo
okFe
el_IT
R14_
v201
5.00.2
8Exa
mpl
e
EX
AM
PLE
As
sets
Curre
nt as
sets
–Inv
entor
y and
wor
k in p
rogr
ess (
net a
fter p
rovis
ions)
RNon-
curre
nt as
sets
–Pro
perty
, plan
t and
equip
ment
RNon-
curre
nt as
sets
–Lon
g-ter
m loa
ns
R
BS
ISM
01
RTota
l ass
ets
Othe
r ass
ets
R Curre
nt lia
bilitie
s -Tr
ade a
nd ot
her p
ayab
les (in
cludin
g acc
ruals
)
RCurre
nt as
sets
–Tra
de an
d othe
r rec
eivab
les (n
et aft
er pr
ovisi
ons)
R Non-
curre
nt lia
bilitie
s –Lo
ng-te
rm lo
ans &
prov
ision
s
R ITR14
L XX
b91c9121-0a17-4b26-a09d-d5980eb532db
FV V2010.XX.XX
SV XXXX
CT XX
NO XXXXXXXXXX
P XXXXXX
Y XXXX
001/001
Total
Equ
ity (C
apita
l and
rese
rves)
R Othe
r equ
ity an
d liab
ilities
REq
uit
y a
nd
Lia
bilit
ies
RTota
l equ
ity an
d Li
abilit
ies
Sales
(Tur
nove
r)
R Gros
s pro
fit –
subt
otal
R Gros
s los
s –su
btot
al
RGro
ss
Pro
fit
/ L
os
s
Less
: Cos
t of s
ales
R Inter
est r
eceiv
ed
R Acco
untin
g pro
fit on
disp
osal
of fix
ed as
sets
and /
or ot
her a
ssets
R Bad a
nd do
ubtfu
l deb
ts re
cove
red
RInc
om
e I
tem
s (
On
ly c
red
it a
mo
un
ts)
Othe
r inco
me
R Cont
rol T
otal
R RExp
en
se I
tem
s (
On
ly d
eb
it a
mo
un
ts)
Bad d
ebts
writte
n off
R
Acco
untin
g los
s on d
ispos
al of
fixed
asse
ts / o
ther a
ssets
Depr
eciat
ion
R
Curre
nt as
sets
–Cas
h and
cash
equiv
alents
R
Levy
inco
me
R
Prov
ision
for d
oubtf
ul de
bts
R Salar
ies an
d wag
es (in
cl. di
recto
rs’ / m
embe
rs’ re
mune
ratio
n)
R RRepa
irs, m
ainten
ance
,insu
ranc
e,alt
erati
ons a
nd im
prov
emen
ts
Trav
elling
expe
nses
R Othe
r exp
ense
s
R Cont
rol T
otal
RRMunic
ipal c
harg
es (e
lectric
ity, w
ater,
sewe
rage
, refu
se, r
ates &
taxe
s)
RDona
tions
-Ot
her
Net P
rofit
-Su
btot
al
R Net L
oss -
Subt
otal
RNet
Pro
fit
/ L
oss
Exp
en
se I
tem
s(O
nly
deb
it a
mo
un
ts)
(Co
nti
nu
ed
)
REIT
divid
ends
rece
ived
R
The
se c
onta
iners
are
fo
r M
icro
Bu
sin
ess /
Bo
dy C
orp
ora
te / S
ha
re B
lock C
om
pan
ies
RDona
tions
(s18
A)
Page
6 of
26
SARS
_201
5_Lo
okFe
el_IT
R14_
v201
5.00.2
8Exa
mpl
e
EX
AM
PLE
ITR14
L XX
b91c9121-0a17-4b26-a09d-d5980eb532db
FV V2010.XX.XX
SV XXXX
CT XX
NO XXXXXXXXXX
P XXXXXX
Y XXXX
001/001
(Co
nti
nu
ed
)
Ad
justm
en
ts:
Ad
de
d B
ack
Acco
untin
g inte
rest
paid
/ pay
able
R Acco
untin
g los
s on d
ispos
al of
fixed
and /
or ot
her a
ssets
R Capit
al ex
pend
iture
and /
or lo
sses
R RDepr
eciat
ion ac
cord
ing to
finan
cial s
tatem
ents
R R Othe
r Adju
stmen
ts: A
dded
Bac
k
R Doub
tful d
ebts
R
Expe
nses
attrib
utable
to ex
empt
incom
e and
not a
ctuall
y inc
urre
d in p
rodu
ction
of in
come
R Cont
rol T
otal
R
R
Non-
dedu
ctible
prov
ision
s
R
R
RReve
rsal o
f pre
vious
year
allow
ance
s / de
ducti
ons g
rante
d
Taxa
ble am
ounts
not d
eclar
ed in
Inco
me S
tatem
ent (
incl. r
ecou
pmen
ts)
R RAd
jus
tme
nts
: A
llo
wa
ble
RLoca
l divi
dend
s exc
luding
divid
ends
men
tione
d in s
8E, s
8EA
and s
103(
5)
RReve
rsal o
f pro
vision
s
RRece
ipts a
nd / o
r acc
ruals
of a
capit
al na
ture
RAcco
untin
g pro
fit on
disp
osal
of fix
ed an
d / or
othe
r ass
ets
R Doub
tful D
ebt A
llowa
nce:
s11(
j)
Depr
eciab
le As
set A
llowa
nce:
s 11(
o)
Plan
t and
mac
hiner
y whe
re co
mpan
y qua
lifies
as a
SBC:
s12E
Othe
r Adju
stmen
ts: A
llowa
ble
Cont
rol T
otal
(Co
nti
nu
ed
)(C
on
tin
ued
)T
XC
PT
01
R RLevy
exem
ption
in te
rms o
f s10
(1)(e
)(i) (
refer
to gu
ide)
Othe
r inco
me ex
empti
on (e
xclud
ing le
vy) in
term
s of s
10(1
)(e)(i
i) (re
fer to
guide
)
Wea
r and
tear
: s11
(e)
Calcu
lated
Pro
fit ex
cludin
g net
incom
e fro
m CF
C
Am
ou
nts
to
be
In
clu
de
d i
n t
he
De
term
ina
tio
n o
f T
ax
ab
le I
nc
om
e
befo
re s
18A
Do
nati
on
s (
Exc
lud
ing
as
se
ss
ed
lo
ss
es
bro
ug
ht
forw
ard
an
d
ca
pit
al
ga
ins /
lo
ss
es
)
Calcu
lated
Loss
Impu
ted ne
t inco
me fr
om C
FCR
4276
R R
Sour
ce co
de
Sour
ce co
de
R
The
se c
onta
iners
are
fo
r M
icro
Bu
sin
ess /
Bo
dy C
orp
ora
te / S
ha
re B
lock C
om
pan
ies
RDona
tions
-Ot
her
RDona
tions
(s18
A)
No
te:
Allow
able
s18A
dona
tions
and r
elated
carry
over
s will
be ca
lculat
ed by
SAR
S.
Page
7 of
26
SARS
_201
5_Lo
okFe
el_IT
R14_
v201
5.00.2
8Exa
mpl
e
EX
AM
PLE
No
n-c
urr
en
t A
ssets
ROthe
r non
-curre
nt as
sets
Cash
and c
ash e
quiva
lents
Othe
r cur
rent
asse
ts
R R
RTota
l non
-cur
rent
asse
ts
Plea
se pr
ovide
desc
riptio
ns re
lating
to ot
her n
on-cu
rrent
asse
ts lis
ted ab
ove
ITR14
L XX
b91c9121-0a17-4b26-a09d-d5980eb532db
FV V2010.XX.XX
SV XXXX
CT XX
NO XXXXXXXXXX
P XXXXXX
Y XXXX
001/001
Inven
tory a
nd w
ork i
n pro
gres
s (ne
t afte
r pro
vision
s)
Trad
e and
othe
r rec
eivab
les (e
xcl. d
ebtor
s)–n
et aft
er pr
ovisi
ons
RRCu
rre
nt
As
se
ts
RTota
l cur
rent
asse
ts
Plea
se pr
ovide
desc
riptio
ns re
lating
to ot
her c
urre
nt as
sets
listed
abov
e
Tota
l Cap
ital a
nd R
eser
ves
RPlea
se pr
ovide
desc
riptio
ns re
lating
to ot
her c
apita
l and
rese
rves
listed
abov
e
Cap
ital
an
d R
eserv
es
No
n-C
urr
en
t L
iab
ilit
ies
Long
-term
loan
s
Othe
r non
-curre
nt lia
bilitie
s
R Plea
se pr
ovide
desc
riptio
ns re
lating
to ot
her n
on-cu
rrent
liabil
ities l
isted
abov
e
Tota
l Non
-Cur
rent
liabi
lities
RR
Prop
erty,
plan
t and
equip
ment
R Inves
tmen
ts in
asso
ciates
and j
oint v
entur
es
R Long
term
loan
s –int
eres
t bea
ring
R Long
term
loan
s –int
eres
t free
R Debto
rs (e
xcl. t
rade
debto
rs)
R
Othe
r cap
ital a
nd re
serve
s
RNon-
distrib
utable
rese
rves
RShor
t-ter
m inv
estm
ents
RCu
rren
t A
ss
ets
(C
on
tin
ued
)
Trad
e and
othe
r pay
ables
(inclu
ding a
ccru
als)
RCu
rre
nt
Lia
bil
itie
s
Over
draft
and i
ntere
st be
aring
shor
t-ter
m bo
rrowi
ngs
R Othe
r cur
rent
liabil
ities
R Plea
se pr
ovide
desc
riptio
ns re
lating
to ot
her c
urre
nt lia
bilitie
s list
ed ab
ove
Tota
l Cur
rent
liabi
lities
R
(Co
nti
nu
ed
)(C
on
tin
ued
)B
SS
BD
01
The
se c
onta
iners
are
fo
r S
ma
ll B
usin
ess a
nd D
orm
an
t C
om
pa
nie
sPa
ge 8
of 26
SARS
_201
5_Lo
okFe
el_IT
R14_
v201
5.00.2
8Exa
mpl
e
EX
AM
PLE
RSa
les (T
urno
ver)
R Gros
s pro
fit –
subt
otal
R Admi
n., m
anag
emen
t, sec
retar
ial, r
ental
s
R RGros
s los
s –su
btot
al
R Bad a
nd do
ubtfu
l deb
ts re
cove
red
RPlus
: Clos
ing st
ock
R Divid
ends
rece
ived
R R ITR14
L XX
b91c9121-0a17-4b26-a09d-d5980eb532db
FV V2010.XX.XX
SV XXXX
CT XX
NO XXXXXXXXXX
P XXXXXX
Y XXXX
001/001
Othe
r inco
me
R
Acco
untin
g pro
fit on
disp
osal
of fix
ed as
sets
and /
or ot
her a
ssets
Plea
se pr
ovide
desc
riptio
ns re
lating
to ot
her in
come
listed
abov
e
Admi
n., m
anag
emen
t, sec
retar
ial fe
es, r
ental
s
R R R R R
Prov
ision
for d
oubtf
ul de
bts
R
Gro
ss
Pro
fit
/ L
os
s
Inc
om
e I
tem
s(O
nly
cre
dit
am
ou
nts
)
Exp
en
se I
tem
s(O
nly
deb
it a
mo
un
ts)
Bad d
ebts
writte
n off
RDepr
eciat
ion
Inter
est p
aid
Acco
untin
g los
s on d
ispos
al of
fixed
asse
ts / o
ther a
ssets
Inter
est r
eceiv
ed
Cont
rol T
otal
R Cons
ulting
, lega
l and
profe
ssion
al fee
s
Dona
tions
–othe
r
Dona
tions
(s18
A)
Alter
ation
s and
impr
ovem
ents
Trav
elling
expe
nses
R R R
RDire
ctors’
/ mem
bers’
remu
nera
tion
Inco
me
Ite
ms
(On
ly c
red
it a
mo
un
ts)
(Co
nti
nu
ed
)E
xp
en
se
Ite
ms
(On
ly d
eb
it a
mo
un
ts)
(Co
nti
nu
ed
)
Othe
r exp
ense
s
R Plea
se pr
ovide
desc
riptio
ns re
lating
to ot
her e
xpen
ses l
isted
abov
e
Cont
rol T
otal
RSalar
ies an
d Wag
es (in
cl. M
edica
l, Pen
sion a
nd P
rovid
ent F
und C
ontrib
ution
s)
Repa
irs an
d main
tenan
ce
R R Net P
rofit
-Su
btot
al
R Net L
oss -
Subt
otal
RNe
t P
rofi
t /
Lo
ss
Less
: Pur
chas
es
R Less
: Ope
ning s
tock
R
(Co
nti
nu
ed
)(C
on
tin
ued
)IS
SB
A0
1
RREIT
divid
ends
rece
ived
The
se c
onta
iners
are
fo
r S
ma
ll B
usin
ess C
om
pa
nie
sPa
ge 9
of 26
SARS
_201
5_Lo
okFe
el_IT
R14_
v201
5.00.2
8Exa
mpl
e
EX
AM
PLE
No
n-c
urr
en
t A
ssets
Fixed
asse
ts -o
ther
RFixed
prop
erty
RFixed
asse
ts (p
lant a
nd eq
uipme
nt)
R
Grou
p com
panie
s cur
rent
acco
unts
RPrep
ayme
nts
R R Cash
and c
ash e
quiva
lents
R Othe
r cur
rent
asse
ts
RShor
t-ter
m inv
estm
ents
R
RTota
l non
-cur
rent
asse
ts
SA R
even
ue S
ervic
e
Othe
r non
-curre
nt as
sets
R Plea
se pr
ovide
desc
riptio
ns re
lating
to ot
her n
on-cu
rrent
asse
ts lis
ted ab
ove
Gros
s inv
entor
y (inc
l. spa
re pa
rts an
d con
suma
bles a
nd w
ork i
n pro
gres
s)
Gros
s tra
de an
d othe
r rec
eivab
les (e
xcl. d
ebtor
s)
RR
Good
will a
nd in
tellec
tual p
rope
rty
R Inves
tmen
ts in
subs
idiar
ies
R Long
-term
loan
s –int
eres
t free
: Con
necte
d (Lo
cal)
R
Defer
red t
ax as
sets
R Cu
rren
t A
ssets
RTota
l cur
rent
asse
ts
Plea
se pr
ovide
desc
riptio
ns re
lating
to ot
her c
urre
nt as
sets
listed
abov
e
Long
-term
loan
s –int
eres
t free
: Non
-Con
necte
d (Lo
cal)
R Long
-term
loan
s –int
eres
t free
: Con
necte
d (Fo
reign
)
R Long
-term
loan
s –int
eres
t free
: Non
-Con
necte
d (Fo
reign
)
R ITR14
L XX
b91c9121-0a17-4b26-a09d-d5980eb532db
FV V2010.XX.XX
SV XXXX
CT XX
NO XXXXXXXXXX
P XXXXXX
Y XXXX
001/001
Long
-term
loan
s –int
eres
t bea
ring:
Conn
ected
(Loc
al)
R Long
-term
loan
s –int
eres
t bea
ring:
Non-
Conn
ected
(Loc
al)
R Long
-term
loan
s –int
eres
t bea
ring:
Conn
ected
(For
eign)
R
Long
-term
loan
s –int
eres
t bea
ring:
Non-
Conn
ected
(For
eign)
R Gros
s deb
tors (
excl.
trad
e deb
tors)
RNo
n-c
urr
en
t A
ssets
(C
on
tin
ued
)C
urr
en
t A
ss
ets
(C
on
tin
ued
)
Less
: Pro
vision
s for
inve
ntory
write
off
R Less
: Pro
vision
s for
trad
e and
othe
r rec
eivab
les (e
xcl d
ebtor
s)
R
Less
: Pro
vision
s for
debto
rs (e
xcl. t
rade
debto
rs)
R Shar
e cap
ital
RCap
ital
an
d R
eserv
es
Cred
it Ba
lance
s
Shar
e pre
mium
R
(Co
nti
nu
ed
)(C
on
tin
ued
)B
SM
LA
01
The
se c
onta
iners
are
fo
r M
ed
ium
to
La
rge B
usin
ess C
om
pa
nie
sPa
ge 10
of 2
6
SARS
_201
5_Lo
okFe
el_IT
R14_
v201
5.00.2
8Exa
mpl
e
EX
AM
PLE
(Co
nti
nu
ed
)
ITR14
L XX
b91c9121-0a17-4b26-a09d-d5980eb532db
FV V2010.XX.XX
SV XXXX
CT XX
NO XXXXXXXXXX
P XXXXXX
Y XXXX
001/001
Cap
ital
an
d R
es
erv
es
(Co
nti
nu
ed
)
Othe
r cap
ital a
nd re
serve
s
R Plea
se pr
ovide
desc
riptio
ns re
lating
to ot
her c
apita
l and
rese
rves(
credit
balan
ces)
listed
ab
ove
Accu
mulat
ed lo
ss
Othe
r cap
ital a
nd re
serve
sfor
debit
balan
ces
RRDebi
t Bala
nces
Plea
se pr
ovide
desc
riptio
ns re
lating
to ot
her c
apita
l and
rese
rves
(deb
it bala
nces
) liste
d ab
ove
RTota
l Cap
ital a
nd R
eser
ves
Depo
sits a
nd fu
nds r
eceiv
ed in
adva
nce (
excl.
contr
act p
rogr
ess p
ayme
nts)
RGros
s tra
de an
d othe
r pay
ables
(Not
older
than
3 ye
ars)
R Prov
ision
s –ex
cludin
g inv
entor
y and
trad
e rec
eivab
les
R
Defer
red t
ax lia
bility
R Plea
se pr
ovide
desc
riptio
ns re
lating
to ot
her n
on-cu
rrent
liabil
ities l
isted
abov
e
Tota
l Non
-Cur
rent
liabi
lities
ROthe
r non
-curre
nt lia
bilitie
s
RLong
-term
loan
s –int
eres
tfree
: Con
necte
d (Lo
cal)
R Long
-term
loan
s –int
eres
t free
: Non
-Con
necte
d (Lo
cal)
R Long
-term
loan
s –int
eres
t free
: Con
necte
d (Fo
reign
)
R Long
-term
loan
s –int
eres
t free
: Non
-Con
necte
d (Fo
reign
)
R Long
-term
loan
s –int
eres
t bea
ring:
Conn
ected
(Loc
al)
R Long
-term
loan
s –int
eres
t bea
ring:
Non-
Conn
ected
(Loc
al)
R Long
-term
loan
s –int
eres
t bea
ring:
Conn
ected
(For
eign)
R Long
-term
loan
s –int
eres
t bea
ring:
Non-
Conn
ected
(For
eign)
RNo
n-C
urr
en
t L
iab
ilit
ies
Cu
rre
nt
Lia
bilit
ies
Grou
p com
panie
s cur
rent
acco
unts
R Contr
act p
rogr
ess p
ayme
nts re
ceive
d in a
dvan
ce
R Curre
nt po
rtion o
f inter
est b
earin
g bor
rowi
ngs
R Curre
nt po
rtion o
f inter
est fr
ee bo
rrowi
ngs
R Over
draft
and i
ntere
st be
aring
shor
t-ter
m bo
rrowi
ngs
R SA R
even
ue S
ervic
e
R Shar
ehold
ers f
or di
viden
d / pr
opos
ed di
viden
d
R
Non-
distrib
utable
rese
rves f
or cr
edit b
alanc
es
R Distr
ibutab
le re
serve
s (ex
cl. re
taine
d pro
fit / a
ccum
ulated
loss
)
R Retai
ned p
rofit
R
Gros
s tra
de an
d othe
r pay
ables
(Olde
r tha
n 3 ye
ars)
R
(Co
nti
nu
ed
)(C
on
tin
ued
)B
SM
LB
01
The
se c
onta
iners
are
fo
r M
ed
ium
to
La
rge B
usin
ess C
om
pa
nie
sPa
ge 11
of 2
6
SARS
_201
5_Lo
okFe
el_IT
R14_
v201
5.00.2
8Exa
mpl
e
EX
AM
PLE
Cu
rre
nt
Lia
bil
itie
s(C
ontin
ued
)
Othe
r cur
rent
liabil
ities
R Plea
se pr
ovide
desc
riptio
ns re
lating
to ot
her c
urre
nt lia
bilitie
s list
ed ab
ove
Tota
l Cur
rent
liabi
lities
R
(Co
ntin
ue
d)
ITR14
L XX
b91c9121-0a17-4b26-a09d-d5980eb532db
FV V2010.XX.XX
SV XXXX
CT XX
NO XXXXXXXXXX
P XXXXXX
Y XXXX
001/001
Gros
s Sale
s (ex
cl. cr
edit n
otes)
–For
eign:
Conn
ected
R Add:
Inven
tory a
djustm
ents
(Pre
vious
year
stoc
k pro
vision
reve
rsed)
RLess
: Inve
ntory
adj. (
Curre
nt ye
ar st
ock p
rovis
ion (o
bsole
te / s
low-m
oving
stoc
k))
RGros
s pro
fit –
subt
otal
R
Admi
n., m
anag
emen
t, sec
retar
ial, r
ental
s, gu
aran
tee fe
es an
d othe
r ser
vices
–Co
nnec
ted (F
oreig
n)R
Gros
s los
s –su
btot
al
Bad a
nd do
ubtfu
l deb
ts re
cove
red
R
Gro
ss P
rofi
t /
Lo
ss
Inc
om
e I
tem
s(O
nly
cre
dit
am
ou
nts
)
Gros
s Sale
s (ex
cl. cr
edit n
otes)
–Othe
r tha
n for
eign c
onne
cted
R Less
: Ope
ning s
tock
R Less
: Pur
chas
es –
Fore
ign: C
onne
cted (
excl.
reba
tes)
R Add:
Clos
ing st
ock (
Gros
s exc
l. adju
stmen
ts)
RLess
: Cre
dit no
tes on
sales
R Less
: Pur
chas
es –
Othe
r tha
n for
eign c
onne
cted (
excl.
reba
tes)
R RAdd:
Reba
tes
R
Admi
n., m
anag
emen
t, sec
retar
ial, r
ental
s, gu
aran
tee fe
es an
d othe
r ser
vices
–Non
-co
nnec
tedRAd
min.,
man
agem
ent, s
ecre
tarial
, ren
tals,
guar
antee
fees
and o
ther s
ervic
es–
Conn
ected
(Loc
al)R Di
viden
ds –
local
R Divid
ends
–for
eign
R Fore
ign ex
chan
ge ga
in
R Inter
est –
Non-
conn
ected
R Gros
s roy
alties
and l
icens
e fee
s
RAcco
untin
g pro
fit on
disp
osal
of fix
ed as
sets
and /
or ot
her a
ssets
R Inter
est –
Conn
ected
R
(Co
ntin
ue
d)
Inter
est –
Finan
cial in
stitut
ions
R
ISM
LA
01
REIT
divid
ends
rece
ived
R
The
se c
onta
iners
are
fo
r M
ed
ium
to
La
rge B
usin
ess C
om
pa
nie
s
RIndem
nity p
ayme
ntsre
ceive
d
Page
12 o
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_201
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e
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AM
PLE
ITR14
L XX
b91c9121-0a17-4b26-a09d-d5980eb532db
FV V2010.XX.XX
SV XXXX
CT XX
NO XXXXXXXXXX
P XXXXXX
Y XXXX
001/001
R R Alter
ation
s and
impr
ovem
ents
(exc
luding
repa
irs an
d main
tenan
ce)
R R R RExp
en
se I
tem
s(O
nly
deb
it a
mo
un
ts)
Bad d
ebts
writte
n off
R
Acco
untin
g los
s on d
ispos
al of
fixed
asse
ts / o
ther a
ssets
Acco
mmod
ation
and t
rave
l exp
ense
s: Lo
cal
Acco
mmod
ation
and t
rave
l exp
ense
s: Fo
reign
Inco
me
Ite
ms
(On
ly c
red
it a
mo
un
ts)
Comp
ensa
tion f
or lo
ss of
offic
e
Cons
ulting
, lega
l and
profe
ssion
al fee
s
Depr
eciat
ion
R R R R RCapit
al im
prov
emen
ts –f
armi
ng op
erati
ons (
par 1
2 of th
e Firs
t Sch
edule
)
Comm
ission
paid
Dire
ctors’
/ mem
bers’
remu
nera
tion
R
(Co
nti
nu
ed
)(C
on
tin
ued
)
Othe
r inco
me
R Plea
se pr
ovide
desc
riptio
ns re
lating
to ot
her in
come
listed
abov
e
Reve
rsal o
f impa
irmen
t loss
reco
gnise
d in p
rofit
or lo
ss
R Cont
rol T
otal
R R
Exp
en
se I
tem
s(O
nly
deb
it a
mo
un
ts)
(Co
nti
nu
ed
)
R RDona
tions
(s18A
)
Dona
tions
–othe
r
R
R R R R R R RFore
ign ex
chan
ge lo
ss
Inter
est –
finan
cial in
stitut
ions
Emplo
yee e
xpen
ses:
UIF
contr
ibutio
ns an
d SDL
Emplo
yee e
xpen
ses:
Pens
ion an
d Pro
viden
t fund
contr
ibutio
ns
Emplo
yee e
xpen
ses:
Medic
al sc
heme
contr
ibutio
ns
Emplo
yee e
xpen
ses:
Memb
ersh
ip of
a pro
fessio
nal b
ody
Emplo
yee e
xpen
ses:
Train
ing
Impa
irmen
t loss
reco
gnise
d in p
rofit
or lo
ss
R REmplo
yee e
xpen
ses:
Wag
es an
d sala
ries (
exclu
ding m
edica
l, pro
viden
t and
pens
ion)
Emplo
yee e
xpen
ses:
Grou
p life
insu
ranc
e
RExpe
nditu
re in
curre
d dire
ctly o
r indir
ectly
in ef
fectin
g BEE
and /
or B
BEEE
comp
lianc
e
(Co
nti
nu
ed
)
Ex
pe
ns
e I
tem
s(O
nly
deb
it a
mo
un
ts)
(Co
nti
nu
ed
)
R R RInter
est –
Conn
ected
(Loc
al)
Insur
ance
prem
ium in
resp
ect o
f reh
abilit
ation
oblig
ation
s (s3
7A)
Insur
ance
(exc
luding
s37A
paym
ents)
RInter
est –
Conn
ected
(For
eign)
RInter
est a
nd pe
naltie
s paid
to S
ARS
Admi
n., se
cretar
ial, r
ental
s, gu
aran
tee fe
es an
d othe
r ser
vices
–Con
necte
d (Fo
reign
)
Admi
n., se
cretar
ial, r
ental
s, gu
aran
tee fe
es an
d othe
r ser
vices
–Non
-conn
ected
Admi
n., se
cretar
ial, r
ental
s, gu
aran
tee fe
es an
d othe
r ser
vices
–Con
necte
d (Lo
cal)
RInter
est –
Non-
conn
ected
ISM
LB
01
RExpe
nditu
re in
curre
d in r
espe
ct of
comp
any r
estru
cturin
g
The
se c
onta
iners
are
fo
r M
ed
ium
to
La
rge B
usin
ess C
om
pa
nie
s
Levy
inco
me
R
Page
13 o
f 26
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_201
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EX
AM
PLE
(Co
nti
nu
ed
)
ITR14
L XX
b91c9121-0a17-4b26-a09d-d5980eb532db
FV V2010.XX.XX
SV XXXX
CT XX
NO XXXXXXXXXX
P XXXXXX
Y XXXX
001/001
Exp
en
se I
tem
s(O
nly
deb
it a
mo
un
ts)
(Co
nti
nu
ed
)
Restr
aint o
f trad
e
R R R
R R R
Rese
arch
and d
evelo
pmen
t cos
ts (s1
1B)
RRoya
lties a
nd lic
ense
fees
(exc
luding
paym
ents
in ter
ms of
mine
ral a
nd pe
troleu
m re
sour
ces r
oyalt
ies) –
Fore
ign
Roya
lty pa
ymen
ts in
resp
ect o
f mine
ral a
nd pe
troleu
m re
sour
ces r
oyalt
ies –
Loca
l
Roya
lties a
nd lic
ense
fees
(exc
luding
paym
ents
in ter
ms of
mine
ral a
nd pe
troleu
m re
sour
ces r
oyalt
ies) –
Loca
l
Roya
lty pa
ymen
ts in
resp
ect o
f mine
ral a
nd pe
troleu
m re
sour
ces r
oyalt
ies –
Fore
ign
Ex
pen
se I
tem
s (
On
ly d
eb
it a
mo
un
ts)
(Co
nti
nu
ed
)
RSmall
items
and l
oose
tools
Othe
r exp
ense
s
R Plea
se pr
ovide
desc
riptio
ns re
lating
to ot
her e
xpen
ses l
isted
abov
e
Cont
rol T
otal
R Net P
rofit
-Su
btot
al
R Net L
oss -
Subt
otal
RNe
t P
rofi
t /
Lo
ss
R Prov
ision
for d
oubtf
ul de
bts
R R R R R R R ROper
ating
leas
epay
ments
–No
n-co
nnec
ted
Partn
ersh
ip / J
oint v
entur
e los
s -Lo
cal
Repa
irs an
d main
tenan
ce
Leas
e pay
ments
othe
r tha
n ope
ratin
g lea
ses
Mana
geme
nt fee
s -Co
nnec
ted
Oper
ating
leas
epay
ments
-Co
nnec
ted
Partn
ersh
ip / J
oint v
entur
e los
s -F
oreig
n
Mana
geme
nt fee
s –No
n-co
nnec
ted
(Co
nti
nu
ed
)
RKey m
an in
sura
nce (
s11(
w))
Deb
it A
dju
stm
en
ts(d
ec
rea
se
net
pro
fit
/ in
cre
ase
ne
t lo
ss
)
No
n-T
ax
ab
le A
mo
un
ts C
red
ite
d t
o t
he I
nc
om
e S
tate
me
nt
Acco
untin
g inte
rest
rece
ived/
rece
ivable
R Acco
untin
g pro
fit on
disp
osal
of fix
ed an
d / or
othe
r ass
ets
R Adjus
tmen
ts to
comp
ly wi
th IF
RS: F
air va
lue
R Exem
pt loc
al div
idend
s
RExem
pt for
eign d
ivide
nds (
s10(
1)(k)
(ii))
R Incom
e (oth
er th
an fo
reign
divid
ends
) exe
mpt fr
om ta
x –s1
0 (ex
cludin
g s10
(1)(e
))
Amou
nts pr
eviou
sly ta
xed a
s rec
eived
in ad
vanc
e
R R RAdjus
tmen
ts to
comp
ly wi
th IF
RS: A
ccou
nting
R Exem
pt for
eign d
ivide
nds (
s10B
)
Se
lectio
nPl
ease
selec
t / de
-selec
t the n
on-ta
xable
amou
nts cr
edite
d to t
he In
come
St
ateme
nt
TX
SL
A0
1IS
ML
C0
1
Th
is c
on
tain
er
is for
Sm
all,
Me
diu
m to
La
rge B
usin
ess C
om
pa
nie
s
Rese
arch
and d
evelo
pmen
t cos
ts (s1
1D)
RExem
pt inc
ome r
eceiv
ed or
accru
ed in
resp
ect o
f gov
ernm
ent g
rants
(s12
P)
RIncom
e exe
mpt in
resp
ect o
f ship
s use
d for
inter
natio
nal s
hippin
g (s1
2Q)
The
se c
onta
iners
are
fo
r M
ed
ium
to
La
rge B
usin
ess C
om
pa
nie
s
RIncom
e not
taxab
le by
virtu
e of a
doub
le tax
ation
agre
emen
t
Page
14 o
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AM
PLE
ITR14
L XX
b91c9121-0a17-4b26-a09d-d5980eb532db
FV V2010.XX.XX
SV XXXX
CT XX
NO XXXXXXXXXX
P XXXXXX
Y XXXX
001/001
Sp
ec
ial
All
ow
an
ce
s N
ot
Cla
ime
d i
n t
he
In
co
me
Sta
tem
en
t
RDoub
tful d
ebt a
llowa
nce (
s11(
j))
RImpr
ovem
ent to
leas
ehold
prem
ises (
s11(
g))
RRestr
aint o
f trad
e (s1
1(cA
))
RWea
r and
tear
allow
ance
(s11
(e))
RLeas
e pre
mium
allow
ance
(s11
(f))
RAmor
tisati
on of
lump
sum
contr
ibuted
to re
tireme
nt / b
enefi
t fund
s (s1
1(l))
Othe
r
Plea
se pr
ovide
desc
riptio
ns re
lating
tooth
er lis
ted ab
ove
RCont
rol T
otal
R
Se
lection
Plea
se se
lect /
de-se
lect th
e spe
cial a
llowa
nces
not c
laime
d in t
he In
come
St
ateme
nt
RBroa
d-ba
sed e
mploy
ee sh
are p
lan (d
educ
tion t
his ye
ar) (
s11(lA
))
(Co
nti
nu
ed
)
De
bit
Ad
justm
en
ts(d
ecre
as
e n
et
pro
fit
/ in
cre
ase
net
los
s)
No
n-T
axa
ble
Am
ou
nts
Cre
dite
d t
o t
he
In
co
me
Sta
tem
en
t (c
on
tin
ued
)
(Co
nti
nu
ed
)
Deb
it A
dju
stm
en
ts (
de
cre
ase
net
pro
fit
/ in
cre
ase
net
los
s)
Sp
ec
ial
All
ow
an
ce
sN
ot
Cla
ime
d in
th
e I
nco
me
Sta
tem
en
t(C
on
tin
ued
)
RExpe
nditu
re be
fore c
omme
ncing
trad
e (s1
1A)
R Rese
arch
and d
evelo
pmen
t ded
uctio
n (s1
1D)
Mach
inery,
plan
t, imp
lemen
ts, ut
ensil
s and
artic
lesde
ducti
on(s1
2B)
R RDedu
ction
again
st Fo
reign
Divi
dend
s (s1
1C)
Rese
arch
and d
evelo
pmen
t ded
uctio
n (s1
1B)
R RR Pipe
lines
, tran
smiss
ion an
d rail
dedu
ction
(s12
D)
Manu
factur
ers,
hotel
keep
ers,
aircra
ft, sh
ip, st
orag
e and
pack
ing of
agric
ultur
al pr
oduc
ts de
ducti
on(s1
2C)
RIndus
trial a
ssets
used
for q
ualify
ing in
dustr
ial po
licy p
rojec
ts (s1
2G)
R Plan
t and
mac
hiner
y whe
re co
mpan
y qua
lifies
as a
SBC
(s12E
)
R Airp
ort a
nd po
rt as
sets
(s12F
)
RRollin
g stoc
k (s1
2DA)
RDepr
eciab
le as
set a
llowa
nce (
s11(
o))
RRegis
tered
lear
nersh
ip ag
reem
ents
comp
leted
in cu
rrent
year
(s12
H)
RLear
nersh
ip ag
reem
ents
regis
tered
/ in e
ffect
(s12H
)
Indus
trial p
olicy
proje
cts: B
rown
field
proje
cts (s
12I)
Indus
trial p
olicy
proje
cts: G
reen
field
proje
cts (s
12I)
R Certif
ied E
miss
ion R
educ
tions
Exem
ption
(s12K
)
Dedu
ction
of m
edica
l lump
sum
paym
ents
(s12M
)
R R Dedu
ction
for b
uildin
gs us
ed in
a ma
nufac
turing
proc
ess (
s13)
R Hotel
build
ing de
ducti
on (s
13bis
)
RR Expe
nditu
re in
curre
d in e
xcha
nge f
or th
e iss
ue of
Ven
ture C
apita
l Com
pany
shar
es
(s12J
)
RSp
ecia
l A
llo
wan
ces N
ot
Cla
imed
in
th
e I
nco
me S
tate
men
t(C
on
tin
ued
)
(Co
nti
nu
ed
)
De
bit
Ad
justm
en
ts (
dec
rea
se n
et
pro
fit
/ in
cre
as
e n
et
los
s)
TX
SL
B0
1T
XS
LD
01
TX
SL
C01
Ener
gy ef
ficien
cy sa
vings
dedu
ction
(s12
L)
R
Reve
rsal o
f pro
vision
s
RRece
ipts a
nd / o
r acc
ruals
of a
capit
al na
ture
R
Impr
ovem
ents
not o
wned
by th
e com
pany
(s12
N)
Impr
ovem
ents
on pr
oper
ty of
which
gove
rnme
nt ho
lds a
right
of us
e or o
ccup
ation
(s1
2NA)
R R
The
se c
onta
iners
are
fo
r S
ma
ll, M
ediu
m t
o L
arg
e B
usin
ess C
om
pa
nie
s
RExem
ption
in re
spec
t of fi
lms (
s12O
)
Page
15 o
f 26
SARS
_201
5_Lo
okFe
el_IT
R14_
v201
5.00.2
8Exa
mpl
e
EX
AM
PLE
ITR14
L XX
b91c9121-0a17-4b26-a09d-d5980eb532db
FV V2010.XX.XX
SV XXXX
CT XX
NO XXXXXXXXXX
P XXXXXX
Y XXXX
001/001
R Reve
rsal o
f clos
ing va
lues o
f wor
k in p
rogr
ess(
s 22(
2A))
-pre
vious
year
Reve
rsal o
f clos
ing va
lues o
f con
suma
ble st
ock a
nd sp
are p
arts
(pre
vious
year
)
R Prep
aid ex
pend
iture
not li
mited
by s2
3H
R Cred
it agr
eeme
nt an
d deb
tors a
llowa
nce (
hire-
purch
ase)
(s24
)
Allow
ance
for f
uture
expe
nditu
re (s
24C)
R Film
allow
ance
(s24
F)
RLow
cost
resid
entia
l unit
dedu
ction
(s13s
ept)
R Inter
est in
curre
d (s2
4J an
d s24
JA)
RRSp
ecia
l A
llo
wan
ces N
ot
Cla
imed
in
th
e I
nco
me S
tate
men
t(C
on
tin
ued
)
R RUDZ
(s13q
uat)
-impr
ovem
ents
this y
ear
Resid
entia
l unit
dedu
ction
(s13
sex)
R Comm
ercia
l buil
dingd
educ
tion(
s13q
uin)
(Co
nti
nu
ed
)
Deb
it A
dju
stm
en
ts (
de
cre
as
e n
et
pro
fit
/ in
cre
ase
net
los
s)
Adjus
tmen
ts to
comp
ly wi
th IF
RS: A
ccou
nting
Adjus
tmen
ts to
comp
ly wi
th IF
RS: F
air va
lue
R Amor
tisati
on of
leas
e pre
mium
s and
impr
ovem
ents
to lea
seho
ld pr
emise
s
R Capit
al ex
pend
iture
and /
or lo
sses
R R
No
n-D
ed
ucti
ble
Am
ou
nts
Deb
ited
to
th
e In
co
me
Sta
tem
en
t
Depr
eciat
ion ac
cord
ing to
finan
cial s
tatem
ents
Dona
tions
(s18
A)
Expe
nses
attrib
utable
to ex
empt
incom
e -Lo
cal
R Expe
nses
attrib
utable
toex
empt
incom
e -Fo
reign
R R R R Expe
nses
not a
ctuall
y inc
urre
d in t
he pr
oduc
tion o
f inco
me (s
11(a
))
Dona
tions
–oth
er
RRCapit
al Im
prov
emen
t -Fa
rming
oper
ation
s (pa
r 12 o
f the F
irst S
ched
ule)
TX
SL
E0
1
ROthe
r
Plea
se pr
ovide
desc
riptio
ns re
lating
to ot
her li
sted a
bove
RCont
rol T
otal
Sp
ecia
l A
llo
wan
ces
No
t C
laim
ed
in
th
e I
nco
me S
tate
men
t(C
on
tin
ued
)
(Co
nti
nu
ed
)
De
bit
Ad
justm
en
ts(d
ecre
as
e n
et
pro
fit
/ in
cre
ase
net
los
s)
TX
SL
F0
1
Se
lectio
nPl
ease
selec
t / de
-selec
t the n
on-d
educ
tible
items
debit
ed to
the I
ncom
e St
ateme
ntAc
coun
ting i
ntere
st pa
id / p
ayab
le
Acco
untin
g los
ses d
erive
d fro
m for
eign s
ource
s (ex
cludin
g CFC
)
R
Acco
untin
g los
s on d
ispos
al of
fixed
and /
or ot
her a
ssets
R
RNo
n-D
ed
ucti
ble
Am
ou
nts
De
bit
ed
to
th
e In
co
me
Sta
tem
en
t(C
on
tin
ued
)
(Co
nti
nu
ed
)
Cre
dit
Ad
jus
tme
nts
(in
cre
ase
net
pro
fit
/ d
ecre
ase
net
los
s)
TX
SL
G0
1
UDZ
(s13q
uat)
-ere
ction
of a
new
build
ing th
is ye
ar
R
Cre
dit
Ad
justm
en
ts(i
nc
rea
se n
et
pro
fit
/ d
ec
rea
se n
et
loss
)
Envir
onme
ntal a
sset
dedu
ction
(s37
B)
Envir
onme
ntal c
onse
rvatio
n and
main
tenan
ce de
ducti
on (s
37C)
R R Leas
e pay
ments
on ca
pitali
sed l
ease
d ass
ets
RRDedu
ction
s in r
espe
ct of
co-o
pera
tives
(s27
)Re
siden
tial b
uildin
g ded
uctio
n (s1
3ter)
R
Inter
est p
aid in
resp
ect o
f cap
italis
ed le
ased
asse
ts
R
The
se c
onta
iners
are
fo
r S
ma
ll, M
ediu
m t
o L
arg
e B
usin
ess C
om
pa
nie
sPa
ge 16
of 2
6
SARS
_201
5_Lo
okFe
el_IT
R14_
v201
5.00.2
8Exa
mpl
e
EX
AM
PLE
ITR14
L XX
b91c9121-0a17-4b26-a09d-d5980eb532db
FV V2010.XX.XX
SV XXXX
CT XX
NO XXXXXXXXXX
P XXXXXX
Y XXXX
001/001
Doub
tful d
ebt a
llowa
nce (
s11(
j))
RAllow
ance
for f
uture
expe
nditu
re (s
24C)
R Cred
it agr
eeme
nts an
d deb
tors a
llowa
nce (
hire-
purch
ase)
(s24
)
R ROthe
r
Plea
se pr
ovide
desc
riptio
ns re
lating
to ot
her li
sted a
bove
RCont
rol T
otal
Se
lectio
nPl
ease
selec
t / de
-selec
t the a
llowa
nces
/ ded
uctio
ns gr
anted
in pr
eviou
s ye
ars o
s ass
essm
ent a
nd no
w re
verse
d.
Amou
nts re
ceive
d in a
dvan
ce
R Amou
nts ac
crued
but n
ot re
ceive
d
R Clos
ing va
lue of
cons
umab
le sto
ck an
d spa
re pa
rts
R Clos
ing ba
lance
of st
ock v
alues
of w
ork i
n pro
gres
s -(s2
2(2A
))
R
Se
lection
Plea
se se
lect /
de-se
lect th
e amo
unts
not c
redit
ed to
the In
come
Stat
emen
t
(Co
nti
nu
ed
)
Incom
e dee
med t
o be f
rom
a Sou
th Af
rican
sour
ce
R Inter
est a
ccru
ed (s
24Ja
nds2
4JA)
R Loan
s / ad
vanc
es gr
anted
by an
insu
rer (
par.
(m) o
f def.
of “g
ross
inco
me”)
R Tran
sfer p
ricing
adjus
tmen
t(ex
cludin
g fina
ncial
assis
tance
)
RAm
ou
nts
no
t C
red
ited
to
th
e In
co
me
Sta
tem
en
t )
R Plea
se pr
ovide
desc
riptio
ns re
lating
to ot
her li
sted a
bove
RCont
rol T
otal
Othe
r
TX
SL
J0
1(C
on
tin
ued
)
Cre
dit
Ad
justm
en
ts(i
nc
reas
e n
et
pro
fit
/ d
ec
reas
e n
et
loss
)
No
n-D
ed
ucti
ble
Am
ou
nts
Deb
ited
to
th
e In
co
me S
tate
men
t(C
on
tin
ue
d)
Prov
ision
s not
dedu
ctible
curre
nt ye
ar(e
xclud
ing do
ubtfu
l deb
t)
Tran
sfer p
ricing
adjus
tmen
ts (e
xclud
ing th
in ca
pitali
satio
n adju
stmen
ts)
R R
ROthe
r
Plea
se pr
ovide
desc
riptio
ns re
lating
to ot
her li
sted a
bove
RCont
rol T
otal
TX
SL
H0
1
Lump
sum
contr
ibutio
ns to
retire
ment
and /
or be
nefit
funds
Prov
ision
for d
oubtf
ul de
bt no
t ded
uctib
le in
curre
nt ye
ar
R Prep
aid ex
pend
iture
not a
llowe
d und
ers2
3H
R R
(Co
nti
nu
ed
)T
XS
LI0
1
All
ow
an
ce
s /
De
du
cti
on
s G
ran
ted
in
Pre
vio
us
Ye
ars
of
As
sessm
en
t an
d n
ow
Revers
ed
Inter
est, p
enalt
ies pa
id in
resp
ect o
f taxe
s (s2
3(d)
)
RInter
est n
on-d
educ
tible
in ter
ms of
s23K
Limita
tion o
f inter
est d
educ
tion u
nder
s23N
RRFinan
cial a
ssist
ance
(s31
)
No
n-D
ed
ucti
ble
Am
ou
nts
Deb
ited
to
th
e In
co
me S
tate
men
t(C
on
tin
ue
d)
Shor
t term
insu
ranc
e poli
cy pr
emium
snot
allow
able
(s23L
)
RInter
est n
ot all
owab
le in
resp
ect o
f deb
ts ow
ed to
perso
n(s)
not s
ubjec
t to ta
x(s2
3M)
RThe
se c
onta
iners
are
fo
r S
ma
ll, M
ediu
m t
o L
arg
e B
usin
ess C
om
pa
nie
s
R
Page
17 o
f 26
SARS
_201
5_Lo
okFe
el_IT
R14_
v201
5.00.2
8Exa
mpl
e
EX
AM
PLE
Did t
he co
mpan
y inc
uran
y ins
uran
ce pr
emium
s on t
he liv
es of
em
ploye
es or
dire
ctors?
Did t
he co
mpan
y ente
r into
an in
stalm
ent s
ale ag
reem
ent a
s refe
rred t
o in
s12D
A to
use t
he ro
lling s
tock a
s an a
sset
to ge
nera
te inc
ome?
Was
the a
llowa
nce c
laime
d in t
erm
of s1
2F on
ly in
relat
ion to
asse
ts us
ed di
rectl
y in t
he pr
oduc
tion o
f inco
me?
Does
the c
ompa
ny ca
rry on
any b
usine
ss as
a ho
telke
eper
(s13
bis)?
Was
the s
trateg
ic ind
ustria
l pro
ject fo
r whic
h an a
llowa
nce w
as cl
aimed
ap
prov
ed by
the M
iniste
r of T
rade
and I
ndus
try (s
12G)
?
ITR14
L XX
b91c9121-0a17-4b26-a09d-d5980eb532db
FV V2010.XX.XX
SV XXXX
CT XX
NO XXXXXXXXXX
P XXXXXX
Y XXXX
001/001
If Yes
, stat
e the
total
amou
nt of
insur
ance
prem
iums i
ncur
red d
uring
the y
ear o
f as
sess
ment:
R
Was
the i
ndus
trial p
olicy
proje
ct for
whic
h an a
llowa
nce w
as cl
aimed
ap
prov
ed by
the M
iniste
r of T
rade
and I
ndus
try (s
12I)?
Is the
comp
any t
he ow
ner o
f the f
ilm as
conte
mplat
ed in
s12O
?
Is the
comp
any t
he ow
ner o
f the f
ilm as
conte
mplat
ed in
s24F
?
Did t
he co
mpan
y mak
e any
contr
ibutio
ns to
the b
enefi
t of th
e emp
loyee
s to
any p
ensio
n, pr
ovide
nt or
med
ical fu
nd in
exce
ss of
20%
of th
e ap
prov
ed re
mune
ratio
n (s1
1(l))
?
Is the
build
ing fo
r whic
h an a
llowa
nce i
s clai
med u
sed i
n the
proc
ess o
f ma
nufac
turing
(s13
)?
Does
the c
ompa
ny us
e a bu
ilding
in th
e pro
ducti
on of
inco
me in
re
spec
t of tr
ade o
ther t
han t
he pr
ovisi
on of
resid
entia
l acc
ommo
datio
n (s1
3quin
)?
Was
the d
oubtf
ul de
bt all
owan
ce as
refer
red t
o in s
11(j)
base
d on a
fixed
pe
rcenta
ge of
all d
ebtor
s as a
t yea
r end
in re
spec
t of th
e cur
rent
year
of
asse
ssme
nt?
Was
the a
llowa
nce c
laime
d in r
espe
ct of
s13te
r for
the e
recti
on of
at
least
5 res
identi
al un
its?
Did t
he co
mpan
y com
plete
IT18
0's fo
r lear
nersh
ip ag
reem
ents
in re
spec
t of s
12H?
Calcu
lated
Pro
fit ex
cludin
g net
incom
e fro
m CF
C
Calcu
lated
Loss
Impu
ted ne
t inco
me fr
om C
FC
RR R
(Co
nti
nu
ed
)T
XS
LK
01
Sour
ce co
de
Sour
ce co
de
Reco
up
men
t o
f A
llo
wa
nces /
Exp
en
ses P
revio
usly
Gra
nte
d
Bad d
ebts
R Leas
e cha
rges
(s8(
5))
R Wea
r and
tear
(s8(
4))
R R Plea
se pr
ovide
desc
riptio
ns re
lating
to ot
her li
sted a
bove
RCont
rol T
otal
Othe
r
Se
lectio
nPl
ease
selec
t / de
-selec
t the r
ecou
pmen
t of a
llowa
nces
/ exp
ense
s pr
eviou
sly gr
anted
TA
SL
A0
1
No
te:
Sche
dules
mus
t be
prep
ared
in a
ll cas
es w
here
the
ques
tions
belo
w ar
e an
swer
ed in
the
affirm
ative
. The
sch
edule
s mu
st be
retai
ned
for a
per
iod o
f 5 y
ears
after
sub
miss
ion o
f this
re
turn.
Amou
nt re
coup
ed in
resp
ect o
f VCC
shar
es so
ld, fo
r whic
h a ta
x de
ducti
on w
as al
lowed
R Redu
ction
of D
ebt (
s19)
R
Did t
he co
mpan
y obta
in ap
prov
al fro
m the
Dep
artm
ent o
f Scie
nce a
nd
Tech
nolog
y as c
ontem
plated
in s1
1D?
The
se c
onta
iners
are
fo
r S
ma
ll, M
ediu
m t
o L
arg
e B
usin
ess C
om
pa
nie
s
Did t
he co
mpan
y obta
in a c
ertifi
cate
issue
d by t
he S
ANED
I in
resp
ect o
f ene
rgy e
fficien
cy sa
vings
for t
he pu
rpos
es of
claim
ing a
s12L
dedu
ction
?
YN
YN
YN
YN
YN
YN
YN
YN
YN
YN
YN
YN
YN
YN
YN
No
te:
Allow
able
s18A
dona
tions
and r
elated
carry
over
s will
be ca
lculat
ed by
SAR
S.
Am
ou
nts
to
be
In
clu
ded
in
th
e D
ete
rmin
ati
on
of
Taxa
ble
In
co
me
befo
re s
18A
Do
nati
on
s (
Ex
clu
din
g a
sse
ss
ed
lo
ss
es
bro
ug
ht
forw
ard
an
d
ca
pit
al
ga
ins
/ lo
ss
es
)
YN
Page
18 o
f 26
SARS
_201
5_Lo
okFe
el_IT
R14_
v201
5.00.2
8Exa
mpl
e
EX
AM
PLE
Ru
les
Was
the c
ompa
ny a
party
to an
y of th
e foll
owing
tran
sacti
ons d
uring
the y
ear o
f ass
essm
ent:
Asse
t-for
-shar
e tra
nsac
tion a
s defi
ned i
n s42
?Y
N
Amalg
amati
on tr
ansa
ction
as de
fined
in s4
4?Y
N
Intra
-gro
up tr
ansa
ction
as de
fined
in s4
5?Y
N
Unbu
ndlin
g tra
nsac
tion a
s defi
ned i
n s46
?Y
N
Liquid
ation
, wind
ing-u
p or d
ereg
istra
tiond
istrib
ution
as
defin
ed in
s47?
YN
CR
SM
L0
1
Inv
es
tme
nts
in
(V
CC
): s
12J
–R
an
ds o
nly
, n
o c
en
ts
Name
of S
ARS
appr
oved
VCC
Amou
nt inv
ested
in a
Ventu
re C
apita
l Com
pany
in ex
chan
ge fo
r the
issu
e of s
hare
s dur
ing
the ye
ar of
asse
ssme
nt
RVCC
numb
er
Date
of iss
ue of
VCC
shar
es
(CCY
YMMD
D)8
Co
mp
lete
th
e d
eta
ils o
f th
e in
vestm
en
t(s
) m
ad
e b
elo
w:
Co
mp
lete
th
e d
eta
ils
of
the
to
p 1
0 i
nv
es
tme
nts
ma
de
be
low
:
4276
allo
wab
le i
n t
erm
s o
f s18A
to
ap
pro
ved
Pu
blic
B
en
efi
t O
rgan
isati
on
s(P
BO
) –
Ran
ds o
nly
, n
o c
en
ts
R40
11To
tal am
ount
dona
ted du
ring t
he ye
ar of
asse
ssme
nt
Refer
ence
numb
er
RAmou
nt do
nated
to th
is PB
O
Co
mp
lete
th
e d
eta
ils
of
the
Pu
bli
c B
en
efi
t O
rga
nis
ati
on
(s)
to
wh
om
do
nati
on
s w
ere
mad
e:
Co
mp
lete
th
e d
eta
ils o
f th
e t
op
Pu
blic B
en
efi
t O
rgan
isati
on
s t
o
wh
om
th
e t
op
10 d
on
ati
on
s w
ere
ma
de:
allo
wab
le i
n t
erm
s o
f s18A
to
ap
pro
ved
Pu
blic
B
en
efi
t O
rgan
isati
on
s(P
BO
) in
resp
ect
of
a C
ollecti
ve
Investm
en
t S
ch
em
e –
Ran
ds o
nly
, n
o c
en
ts
R40
11
Total
amou
nt do
nated
durin
g the
year
of as
sess
ment
RAver
age v
alue o
f agg
rega
te of
all pa
rticipa
tory i
ntere
sts he
ld by
inve
stors
in the
portf
olio
ITR14
L XX
b91c9121-0a17-4b26-a09d-d5980eb532db
FV V2010.XX.XX
SV XXXX
CT XX
NO XXXXXXXXXX
P XXXXXX
Y XXXX
001/001Pa
ge 19
of 2
6
SARS
_201
5_Lo
okFe
el_IT
R14_
v201
5.00.2
8Exa
mpl
e
EX
AM
PLE
ITR14
L XX
b91c9121-0a17-4b26-a09d-d5980eb532db
FV V2010.XX.XX
SV XXXX
CT XX
NO XXXXXXXXXX
P XXXXXX
Y XXXX
001/001
Sch
ed
ule
of
in r
es
pe
ct
of
the
dis
po
sa
l o
f a
ss
ets
Pro
ce
ed
sB
as
e C
os
tC
ap
ita
l G
ain
/ L
os
sN
um
ber
of
tran
sacti
on
s
Plea
se re
fer t
o th
e gui
de w
ith re
gard
s to
the m
ain as
set t
ype
sour
ce co
de lis
t.Ev
en n
umbe
red
code
s ref
er to
gain
s and
une
ven
num
bere
d co
des r
efer
to lo
sses
.Pl
ease
not
e the
inclu
sion
rate
will
be ap
plied
by S
ARS.
Main
Ass
et T
ype
Sour
ce C
ode
Aggr
egate
Gain
Aggr
egate
Loss
4250
4251
Add:
Adjus
tmen
t for c
logge
d los
ses i
nclud
ed in
amou
nts lis
ted ab
ove t
o be
carri
ed fo
rwar
d (pa
r. 39
of the
Eigh
th Sc
hedu
le)Le
ss: A
llowa
ble de
ducti
on i.r
.o. pr
ior ye
ar cl
ogge
d los
ses c
arrie
d for
ward
on
capit
al ga
in(s)
to co
nnec
ted pe
rson(
s) (p
ar. 3
9of th
e Eigh
th Sc
hedu
le)
Page
20 o
f 26
SARS
_201
5_Lo
okFe
el_IT
R14_
v201
5.00.2
8Exa
mpl
e
EX
AM
PLE
Sch
ed
ule
of
in r
es
pe
ct
of
the d
isp
os
al
of
as
sets
Pro
ce
ed
sB
ase C
ost
Ca
pit
al
Ga
in /
Lo
ss
Nu
mb
er
of
tran
sacti
on
s
Plea
se re
fer t
o th
e gui
de w
ith re
gard
s to
the m
ain as
set t
ype s
ourc
e co
de lis
t. Ev
en n
umbe
red
code
s ref
er to
gain
s and
une
ven
num
bere
d co
des
refe
r to
loss
es.
Plea
se n
ote t
he in
clusio
n ra
te w
ill be
appl
ied b
y SAR
S.
Main
Ass
et T
ype
Sour
ce C
ode
Fore
ign ta
x cre
dits i
n res
pect
of ca
pital
gains
(Ran
d valu
e only
) 41
1441
14
Add:
Adjus
tmen
t for c
logge
d los
ses i
nclud
ed in
amou
nts lis
ted ab
ove t
o be
carri
ed fo
rwar
d (pa
r. 39
of the
Eigh
th Sc
hedu
le)Le
ss: A
llowa
ble de
ducti
on i.r
.o. pr
ior ye
ar cl
ogge
d los
ses c
arrie
d for
ward
on
capit
al ga
in(s)
to co
nnec
ted pe
rson(
s) (p
ar. 3
9of th
e Eigh
th Sc
hedu
le)
Aggr
egate
Gain
Aggr
egate
Loss
4252
4253
ITR14
L XX
b91c9121-0a17-4b26-a09d-d5980eb532db
FV V2010.XX.XX
SV XXXX
CT XX
NO XXXXXXXXXX
P XXXXXX
Y XXXX
001/001
Red
ucti
on o
f Lo
cal A
sses
sed
Cap
ital
Los
s du
e to
RAmou
nt of
debt
redu
ction
4254
Red
ucti
on o
f Fo
reig
n A
sses
sed
Cap
ital
Los
s du
e to
RAmou
nt of
debt
redu
ction
4255
Page
21 o
f 26
SARS
_201
5_Lo
okFe
el_IT
R14_
v201
5.00.2
8Exa
mpl
e
EX
AM
PLE
(exclu
din
g p
rovis
ion
al
tax)
4102
,R
Fore
ign in
come
Impu
ted ne
t inco
me C
FC
Ne
t L
osses
Taxab
le I
nco
me
Fo
reig
n T
ax C
red
its
7454
7455
ITR14
L XX
b91c9121-0a17-4b26-a09d-d5980eb532db
FV V2010.XX.XX
SV XXXX
CT XX
NO XXXXXXXXXX
P XXXXXX
Y XXXX
001/001
IRP
5 c
ert
ific
ate
nu
mb
er
PA
YE
Cre
dit
Taxab
le F
ore
ign
So
urc
ed
In
co
me o
f R
esid
en
t C
om
pan
ies –
s6qu
at (e
xclu
din
g f
ore
ign
ca
pit
al
gain
/ lo
ss
)
Fore
ign
Tax C
redi
t (Ra
nd va
lue o
nly)
R
FT
CR
A01
So
uth
Afr
ica
n S
ou
rce
d
Inc
om
e (
alr
ea
dy
els
ew
he
re i
nc
lud
ed
in
th
is r
etu
rn)
–s
6qu
in(R
an
ds o
nly
, u
nle
ss c
en
ts s
pecif
ied
)
R RFore
ign T
ax C
redit
s
Taxa
ble in
come
from
servi
ces r
ende
red i
n Sou
th Af
rica t
axed
outsi
de th
e RSA
7456
,
Was
the d
eclar
ation
of fo
reign
tax w
ithhe
ld (F
TW01
) su
bmitte
d to t
he C
ommi
ssion
er w
ithin
60 da
ys?
YN
Refu
nd
ed
/ D
isch
arg
ed
by t
he
go
vern
men
t o
f a F
ore
ign
Co
un
try in
res
pe
ct
of
a r
eb
ate
all
ow
ed
by
SA
RS
in
a
pre
vio
us
year
–s6
quin
FT
CR
D01
RSpec
ify th
e por
tion o
f the a
moun
t so r
efund
ed / d
ischa
rged
as w
as pr
eviou
sly al
lowed
by
SAR
S as
a re
bate
,
Plea
se co
nfirm
that
this a
moun
t was
not c
laime
d as a
de
ducti
on in
term
s of s
6qua
t(1C)
?Y
N
How
much
of th
e abo
ve F
oreig
n Tax
Cr
edits
is be
ing cl
aimed
in te
rms o
f a
treaty
? 15
PR
TIF
01
Partn
ersh
ipNa
me
Spec
ify th
e com
pany
’s pr
ofit /
loss s
harin
g %
durin
g the
year
of as
sess
ment:
Indica
te if t
he co
mpan
y der
ived a
profi
t / los
s fro
m thi
s pa
rtner
ship
durin
g the
year
of as
sess
ment:
Profi
tLo
ss,
%
Indica
te if t
his in
forma
tion i
s in
resp
ect o
f a lo
cal o
r a fo
reign
pa
rtner
ship:
Loca
lFo
reign
R
Page
22 o
f 26
SARS
_201
5_Lo
okFe
el_IT
R14_
v201
5.00.2
8Exa
mpl
e
EX
AM
PLE
ITR14
L XX
b91c9121-0a17-4b26-a09d-d5980eb532db
FV V2010.XX.XX
SV XXXX
CT XX
NO XXXXXXXXXX
P XXXXXX
Y XXXX
001/001
Re
ceiv
ed
/ R
ec
eiv
ab
le
In ter
ms of
secti
on 46
of th
e Tax
Adm
inistr
ation
Act,
spec
ify th
e tota
l agg
rega
te va
lue (w
here
appli
cable
) for
the y
ear o
f ass
essm
ent w
here
the t
rans
actio
n, op
erati
on, s
chem
e, ag
reem
ent o
r und
ersta
nding
dire
ctly o
r indir
ectly
enter
ed in
to, re
sulte
d in:
Sale
of go
ods
To
tal A
gg
reg
ate
Valu
e –
Fo
reig
n:
Co
nn
ecte
d
Comm
ission
rece
ived /
rece
ivable
Inter
est r
eceiv
ed / r
eceiv
able
Roya
lties o
r lice
nse f
ees r
eceiv
ed /
rece
ivable
Admi
n., m
ng., s
ecre
tarial
fees
, ren
tals
rece
ived /
rece
ivable
Guar
antee
fees
rece
ived /
rece
ivable
Insur
ance
prem
iums r
eceiv
ed / r
eceiv
able
Othe
r fina
nce c
harg
es re
ceive
d /
rece
ivable
Rese
arch
& D
evelo
pmen
t fees
rece
ived /
re
ceiva
ble
Othe
r inco
me re
ceive
d / re
ceiva
ble
Receiv
ed
/ R
eceiv
ab
le
TP
RR
A0
1
3
Tra
nsacti
on
va
lue:
Fo
reig
n C
on
nec
ted
per
co
un
try
To
p <
5>
Ju
risd
icti
on
s 3
33
Numb
er of
Ju
risdic
tions
Numb
er of
Ju
risdic
tions
No
of
Ju
risd
icti
on
s 33
Numb
er of
Ju
risdic
tions
33
Numb
er of
Ju
risdic
tions
33
Numb
er of
Ju
risdic
tions
33
Numb
er of
Ju
risdic
tions
33
Numb
er of
Ju
risdic
tions
3Nu
mber
of
Juris
dictio
ns
3Nu
mber
of
Juris
dictio
ns
3Nu
mber
of
Juris
dictio
ns
Coun
try C
ode
Coun
try C
ode
Coun
try C
ode
Coun
try C
ode
Coun
try C
ode
Coun
try C
ode
Coun
try C
ode
Coun
try C
ode
Coun
try C
ode
Coun
try C
ode
Sale
of go
ods
Comm
ission
rece
ived /
rece
ivable
Inter
est r
eceiv
ed / r
eceiv
able
Roya
lties o
r lice
nse f
ees r
eceiv
ed /
rece
ivable
Admi
n., m
ng., s
ecre
tarial
fees
, ren
tals
rece
ived /
rece
ivable
Guar
antee
fees
rece
ived /
rece
ivable
Insur
ance
prem
iums r
eceiv
ed / r
eceiv
able
Othe
r fina
nce c
harg
es re
ceive
d /
rece
ivable
Rese
arch
& D
evelo
pmen
t fees
rece
ived /
re
ceiva
ble
Othe
r inco
me re
ceive
d / re
ceiva
ble
Receiv
ed
/ R
eceiv
ab
le
3
To
p <
5>
Ju
risd
icti
on
s 3
33
Numb
er of
Ju
risdic
tions
Numb
er of
Ju
risdic
tions
No
of
Ju
risd
icti
on
s 33
Numb
er of
Ju
risdic
tions
33
Numb
er of
Ju
risdic
tions
33
Numb
er of
Ju
risdic
tions
33
Numb
er of
Ju
risdic
tions
33
Numb
er of
Ju
risdic
tions
33
Numb
er of
Ju
risdic
tions
33
Numb
er of
Ju
risdic
tions
33
Numb
er of
Ju
risdic
tions
To
tal
Ag
gre
gate
Valu
e –
Fo
reig
n:
No
n-c
on
necte
d
Coun
try C
ode
Coun
try C
ode
Coun
try C
ode
Coun
try C
ode
Coun
try C
ode
Coun
try C
ode
Coun
try C
ode
Coun
try C
ode
Coun
try C
ode
Coun
try C
ode
Page
23 o
f 26
SARS
_201
5_Lo
okFe
el_IT
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5.00.2
8Exa
mpl
e
EX
AM
PLE
: P
aid
/ P
ayab
le
ITR14
L XX
b91c9121-0a17-4b26-a09d-d5980eb532db
FV V2010.XX.XX
SV XXXX
CT XX
NO XXXXXXXXXX
P XXXXXX
Y XXXX
001/001
In ter
ms of
secti
on 46
of th
e Tax
Adm
inistr
ation
Act,
spec
ify th
e tota
l agg
rega
te va
lue (w
here
appli
cable
) for
the y
ear o
f ass
essm
ent w
here
the t
rans
actio
n, op
erati
on, s
chem
e, ag
reem
ent o
r und
ersta
nding
dire
ctly o
r indir
ectly
enter
ed in
to, re
sulte
d in:
Purch
ase o
f goo
ds
Comm
ission
paid
/ pay
able
Inter
est p
aid / p
ayab
le
Roya
lties o
r lice
nse f
ees p
aid / p
ayab
le
Admi
n., m
ng., s
ecre
tarial
fees
, ren
tals p
aid /
paya
ble
Guar
antee
fees
paid
/ pay
able
Insur
ance
prem
iums p
aid / p
ayab
le
Othe
r fina
nce c
harg
es pa
id / p
ayab
le
Rese
arch
& D
evelo
pmen
t fees
paid
/ pa
yable
Othe
r exp
ense
s paid
/ pay
able
Pa
id /
Pa
ya
ble
TP
PP
A0
1
To
tal A
gg
reg
ate
Valu
e –
Fo
reig
n:
Co
nn
ecte
d
3
Tra
nsacti
on
va
lue:
Fo
reig
n C
on
nec
ted
per
co
un
try
To
p <
5>
Ju
ris
dic
tio
ns 3
33
Numb
er of
Ju
risdic
tions
Numb
er of
Ju
risdic
tions
No
of
Ju
risd
icti
on
s 33
Numb
er of
Ju
risdic
tions
33
Numb
er of
Ju
risdic
tions
33
Numb
er of
Ju
risdic
tions
33
Numb
er of
Ju
risdic
tions
33
Numb
er of
Ju
risdic
tions
33
Numb
er of
Ju
risdic
tions
33
Numb
er of
Ju
risdic
tions
33
Numb
er of
Ju
risdic
tions
3
To
p <
5>
Ju
risd
icti
on
s 3
33
Numb
er of
Ju
risdic
tions
Numb
er of
Ju
risdic
tions
No
of
Ju
risd
icti
on
s 33
Numb
er of
Ju
risdic
tions
33
Numb
er of
Ju
risdic
tions
33
Numb
er of
Ju
risdic
tions
33
Numb
er of
Ju
risdic
tions
33
Numb
er of
Ju
risdic
tions
33
Numb
er of
Ju
risdic
tions
33
Numb
er of
Ju
risdic
tions
33
Numb
er of
Ju
risdic
tions
To
tal
Ag
gre
gate
Valu
e –
Fo
reig
n:
No
n-c
on
nec
ted
Coun
try C
ode
Coun
try C
ode
Coun
try C
ode
Coun
try C
ode
Coun
try C
ode
Coun
try C
ode
Coun
try C
ode
Coun
try C
ode
Coun
try C
ode
Coun
try C
ode
Coun
try C
ode
Coun
try C
ode
Coun
try C
ode
Coun
try C
ode
Coun
try C
ode
Coun
try C
ode
Coun
try C
ode
Coun
try C
ode
Coun
try C
ode
Coun
try C
ode
Purch
ase o
f goo
ds
Comm
ission
paid
/ pay
able
Inter
est p
aid / p
ayab
le
Roya
lties o
r lice
nse f
ees p
aid / p
ayab
le
Admi
n., m
ng., s
ecre
tarial
fees
, ren
tals p
aid /
paya
ble
Guar
antee
fees
paid
/ pay
able
Insur
ance
prem
iums p
aid / p
ayab
le
Othe
r fina
nce c
harg
es pa
id / p
ayab
le
Rese
arch
& D
evelo
pmen
t fees
paid
/ pa
yable
Othe
r exp
ense
s paid
/ pay
able
Pa
id /
Pa
ya
ble
Page
24 o
f 26
SARS
_201
5_Lo
okFe
el_IT
R14_
v201
5.00.2
8Exa
mpl
e
EX
AM
PLE
ITR14
L XX
b91c9121-0a17-4b26-a09d-d5980eb532db
FV V2010.XX.XX
SV XXXX
CT XX
NO XXXXXXXXXX
P XXXXXX
Y XXXX
001/001
Min
ing
an
d Q
ua
rry
ing
Did t
he co
mpan
y con
duct
minin
g ope
ratio
ns in
mor
e tha
n one
sepa
rate
and d
istinc
t mine
? Y
N
Did t
he co
mpan
y acq
uire
a mini
ng op
erati
on as
a go
ing co
ncer
n dur
ing
the ye
ar of
asse
ssme
nt?
YN
Did t
he co
mpan
y acq
uire /
disp
ose o
f mini
ng pr
oper
ty an
d equ
ipmen
t as
envis
aged
in s3
7?
YN
Spec
ify th
e % of
the c
ompa
ny’s
total
turno
ver t
hat
relat
es to
the b
uy-in
of m
inera
ls.
Did t
he co
mpan
y con
duct
pros
pecti
ng ou
tside
Sou
th Af
rica?
YN
Did t
he co
mpan
y con
duct
minin
g / m
ining
oper
ation
s whe
re th
e co
mpan
y is n
ot the
lega
l own
er of
the m
ining
right?
Y
N
Info
rmati
on
IRIM
Q0
1
Co
nstr
ucti
on
Did t
he co
mpan
y hav
e any
cred
itor’s
reten
tions
with
sub-
contr
actor
s of
servi
ces?
Y
N
Did t
he co
mpan
y inc
ur an
y los
ses o
n con
tract
work
in pr
ogre
ss w
hich
is re
quire
d to b
e dec
lared
as in
to tra
ding s
tock i
n ter
ms of
s22(
3)?
YN
Wh
ole
sa
le a
nd
Re
tail
Tra
de
(in
cl. M
ail O
rde
r)
Did t
he co
mpan
y ente
r into
an ag
reem
ent to
disc
lose t
he de
btor’s
book
to
a 3rd
party
? Y
N
Fin
an
cia
l an
d I
nsu
ran
ce A
cti
vit
ies
Note
: If t
he co
mpan
y is a
shor
t term
insu
rer,
comp
lete t
he ap
plica
ble In
sura
nce C
ompa
ny
Sche
dule
and s
ubmi
t as a
supp
ortin
g doc
umen
t with
this
retur
n(re
fer to
guide
).
If the
comp
any i
s a ba
nk, h
as th
e com
pany
claim
ed a
doub
tful d
ebt
prov
ision
in ex
cess
of th
e amo
unt a
gree
d upo
n with
SAR
S?Y
N
Has t
he co
mpan
y mad
e a ca
pital
contr
ibutio
n or a
dvan
ced a
loan
to an
y tru
st?
YN
Whe
re th
e tax
paye
r has
claim
ed a
dedu
ction
for a
ny pr
ovisi
on re
lated
to
claim
s inti
mated
but n
ot re
porte
d or t
o outs
tandin
g clai
ms, d
oes s
uch
prov
ision
facto
r in an
amou
nt re
lated
to ex
grati
a pay
ments
? Y
N
IRIC
A0
1
IRIR
T01
IRIF
R0
1
Note
:Co
mplet
e the
appli
cable
mini
ng sc
hedu
les (S
ched
ules A
and B
) and
subm
it as a
su
ppor
ting d
ocum
ent w
ith th
is re
turn(
refer
to gu
ide).
Info
rma
tio
n
,%
Does
the c
ompa
ny ha
ve tr
ansfe
r pric
ing do
cume
ntatio
n tha
t sup
ports
the
prici
ng po
licy a
pplie
d to e
ach t
rans
actio
n betw
een t
he co
mpan
y an
d the
fore
ign co
nnec
ted pe
rson d
uring
the y
ear o
f ass
essm
ent a
s be
ing at
arm’
s len
gth?
YN
Did t
he co
mpan
y con
duct
any o
utbou
nd tr
ansa
ction
, ope
ratio
n, sc
heme
, agr
eeme
nt for
no co
nside
ratio
n with
a co
nnec
ted pe
rson t
hat
is tax
resid
ent o
utside
Sou
th Af
rica?
YN
Tra
ns
fer
Pri
cin
g S
up
po
rtin
g I
nfo
rma
tio
nT
PS
IA0
1
Did t
he co
mpan
y mak
e a ye
ar-e
nd ad
justm
ent to
achie
ve a
guar
antee
d pr
ofit m
argin
?Y
N
YN
Did t
he co
mpan
y, on
or af
ter 19
90, tr
ansfe
r, ali
enate
or di
spos
e of a
ny
South
Afric
an de
velop
ed (o
r pre
vious
ly So
uth A
frican
regis
tered
) Int
ellec
tual P
rope
rty to
any n
on-re
siden
t con
necte
d per
son o
r any
for
eign b
ranc
h of a
Sou
th Af
rican
resid
ent?
YN
Did t
he co
mpan
y tra
nsac
t with
a co
nnec
ted pe
rson t
hat is
tax r
eside
nt in
a cou
ntry w
ith w
hich S
outh
Afric
a doe
s not
have
a tax
trea
ty?
YN
Is the
“tes
ted pa
rty”,
of an
y tra
nsac
tion o
pera
tion,
sche
me, a
gree
ment
or un
derst
andin
g, a t
ax re
siden
t outs
ide S
outh
Afric
a?
YN
Was
ther
e any
chan
ge be
twee
n the
comp
any a
nd no
n-re
siden
t co
nnec
ted pe
rson s
ince t
he pr
eviou
s rep
ortin
g per
iod w
ith re
spec
t to
the tr
ansfe
r pric
ing m
ethod
ologie
s/tra
nsac
tion,
oper
ation
, sch
eme,
agre
emen
tor u
nder
stand
ing cl
assif
icatio
n?
How
many
“tes
ted pa
rty/pa
rties”
of the
tran
sacti
on op
erati
on, s
chem
e, ag
reem
ent o
r und
ersta
nding
are a
tax r
eside
nt of
anoth
er co
untry
?
: P
aid
/ P
ay
ab
le(c
on
tin
ued
)
Spec
ify th
e deb
t in re
lation
to E
BITD
A (e
arnin
gs be
fore i
ntere
st, ta
xes,
depr
eciat
ion,
and a
mortis
ation
) rati
oSp
ecify
the E
BITD
A (e
arnin
gs be
fore i
ntere
st,
taxes
, dep
recia
tion,
and a
mortis
ation
) to
finan
ce co
st ra
tio
Spec
ify th
e fina
ncial
assis
tance
to fix
ed ca
pital
ratio
,: 1 : 1: 1
Spec
ify th
e deb
t in re
lation
to to
tal ta
ngibl
e as
sets
ratio
: 1,
Did t
he co
mpan
y tra
nsac
t with
a co
nnec
ted pe
rson t
hat is
a tax
re
siden
t in a
jurisd
iction
that
has a
corp
orate
tax r
ate th
at is
less t
han
18%
or is
a tax
have
n?Y
N
,,
Page
25 o
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SARS
_201
5_Lo
okFe
el_IT
R14_
v201
5.00.2
8Exa
mpl
e
EX
AM
PLE
Ta
x
(dec
reas
e net
pro
fit / i
ncre
ase n
et lo
ss)
Am
ou
nts
Cre
dit
ed
to
th
e In
co
me S
tate
men
t
TX
CP
A0
1
RCont
rol T
otal
R ITR14
L XX
b91c9121-0a17-4b26-a09d-d5980eb532db
FV V2010.XX.XX
SV XXXX
CT XX
NO XXXXXXXXXX
P XXXXXX
Y XXXX
001/001
{Disp
lay fie
ld se
lected
from
Dro
pdow
n list
with
the a
moun
t field
}
Se
lectio
nPl
ease
selec
t / de
-selec
t the n
on-ta
xable
amou
nts cr
edite
d to t
he In
come
St
ateme
ntN
on
-Taxab
le A
mo
un
ts C
red
ited
to
th
e I
nco
me S
tate
men
t
Acco
untin
g inte
rest
rece
ived/
rece
ivable
Acco
untin
g pro
fit on
disp
osal
of fix
ed an
d / or
othe
r ass
ets
Adjus
tmen
ts to
comp
ly wi
th IF
RS: A
ccou
nting
Adjus
tmen
ts to
comp
ly wi
th IF
RS: F
air va
lue
Amou
nts pr
eviou
sly ta
xed a
s rec
eived
in ad
vanc
e
Exem
pt for
eign d
ivide
nds (
s10(
1)(k)
(ii))
Exem
pt for
eign d
ivide
nds (
s10B
)
Incom
e (oth
er th
an fo
reign
divid
ends
) exe
mpt fr
om ta
x –s1
0 (ex
cludin
g s1
0(1)
(e))
Incom
e exe
mpt b
y virtu
e of d
ouble
taxa
tion a
gree
ment
Loca
l divi
dend
s exc
luding
divid
ends
men
tione
d in s
8E an
d 103
(5)
Levy
exem
ption
in te
rms o
f s10
(1)(e
)(i) (
refer
to gu
ide)
Othe
r inco
me ex
empti
on (e
xclud
ing le
vy) in
term
s of s
10(1
)(e)(i
i) (re
fer to
gu
ide)
Rece
ipts a
nd / o
r acc
ruals
of a
capit
al na
ture
Reve
rsal o
f pro
vision
s
Othe
r
OK
Am
ou
nts
Cre
dit
ed
to
th
e I
nco
me S
tate
men
t
Ca
nce
l
Page
26 o
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SARS
_201
5_Lo
okFe
el_IT
R14_
v201
5.00.2
8Exa
mpl
e
EX
AM
PLE