TAX2601 INCOME TAX SUMMARY

TAX2601 STUDY UNIT 1 – Introduction Governments collect the income they need through taxation in order to provide services to citizens. (SA government has fiscal year 1 April – 31 March) List taxes or duties that are collected by SARS  Income tax (capital gains tax, turnover tax, dividends tax)  Value added tax (VAT)  Estate duty  Excise duty  Customs duty  Transfer duty  Air passenger tax  Securities transfer tax  Unemployment insurance fund (UIF)  Skills development levy (SDL The Income tax Act is administered by the Commissioner for SARS. The SA tax regime is set by National Treasury and administered by the Commissioner of SARS (CSARS). In SA, taxpayers are taxed on the residence basis of taxation. Persons who are residents are subject to taxation in respect of ALL the income they earn anywhere in the world. Where person not a resident, will be taxed on income earned from a South African source – could lead to double tax. INTERPRETATION OF TAX LAW The need for interpretation arise when Income tax Act not clear. Binding general rules are issued by CSARS – these rules are binding on CSARS and taxpayers. Interpretation notes are merely the opinion of SARS – are not binding. A taxpayer can object to an assessment even if SARS has assessed that taxpayer in terms of an interpretation note. When interpretation note provides guidance as to how commissioner intends to use discretion – then interpretation note binding. A definition in the Income Tax Act will take precedence over the definition in the Interpretation Act. 1 Contra Fiscum Rule – where a provision of the Income tax Act has two interpretations, the court will interpret the provision that places the smaller burden on the taxpayer. LEGAL REMEDIES Taxpayer / SARS (has a dispute on tax liability of taxpayer) ADR (Alternative Dispute Resolution) Tax Board (1st appeal to Tax Board, less than R500 000, consist of Advocate or Attorney) Tax Court (no inherent powers such as High court, not a court of law – h