TAX with verified questions and answers

laffer curve shows the relationship between tax rates and the amount of tax revenue collected by governments illustrates the argument that sometimes cutting tax rates can result in increased tax revenue marginal tax rate tax rate that will apply if the tax base increases by one rand effective tax rate determined by dividing tax liability by total profit or income income tax capital gains tax turnover tax dividends tax other types of tax value added tax estate duty excise duty customs duty transfer duty air passenger tax unemployment insurance fund skills development levy proportional tax tax levied at a fixed rate for example, companies tax progressive tax tax rate increases with the amount of money earned, income tax regressive tax tax rate decreases with the amount of money earned, there is no such tax in South Africa direct tax the same person who earns the income pays the tax, income tax, capital gains tax indirect tax the seller bears the impact of the tax while the consumer pays the tax, VAT purposive approach when interpreting wording in the Income Tax Act, take note of the real intention of the legislator by reading the explanatory memorandum to discover the purpose behind the words contra fiscum rule where a provision of the Income Tax Act has two interpretations, the court will interpret the provision in terms of the interpretation that places a smaller burden on the taxpayer objective approach when interpreting legislation, the emphasis should be on considering both the context and the words of the provision with neither dominating the other and furthermore one should not impose one's views as to what would have been sensible for others to intend substance over form if problems of interpretation arise in relation to the true meaning of an agreement or transaction, the courts will be concerned with the substance rather than the form of the agreement or transaction substance being the material part of something or what it really is and form being what it is described as on paper legal remedies when a taxpayer disagrees with an assessment, disagreement can be resolved through the alternate dispute resolution process (ADR), tax board or tax court if these methods fail the higher courts need to be approached ratio decidendi the reason or ground for the decsision of a court this becomes a principle of law that may have to be applied in future cases where the facts are similar, depending on the authority of the court that gave the decision service delivery issues taxpayers who have a service delivery dispute with SARS may contact the SARS complaint management office or lodge a complaint with the public protector or tax ombud as envisioned under the tax administation act legislation over the tax landscape constitution, bill of rights and promotion of administrative justice act (PAJA) tax year year of assessment, 1 Mar to 28 Feb calculating taxable income income -deductions and allowances =taxable income before capital gains tax +taxable capital gain =taxable income calculating normal tax liability taxable income x tax rate -prepaid taxes =tax liability assessment the determination of the amount of a tax liability or refund either by way of self assessment or an assessment by SARS date of assessment for a self assessment it is the date the return is submitted for a SARS assessment it is the date of the issue of the notice of assessment return a form, declaration or other manner of submitting information to SARS by the taxpayer or a third party SARS official means the commissioner, an employee of SARS or a person contracted by SARS other than an external legal representative, for the purposes of the administration of a tax act and who carries out the provisions of a tax act under the control, direction or supervision of the commisioner shareholder a person who holds a beneficial interest in a share in a company as defined in the income tax act thing a tangible or intangible thing eg a chair or shares in a company source documents income tax returns ITR12 (for individuals) ITR14 (for companies) calculating taxable turnover (for micro businesses) cash sales +investment income +50% sale of fixed assets taxable turnover requirements for small businesses all shareholders be natural persons no shareholders hold any shares in the equity of another company company must not be a personal service provider investment income and income from professional services do not make up more than 20% of the total revenue receipts and capital gains gross income may not exceed 20 million for the year of assessment must be a private company requirements for micro businesses all shareholders be natural persons no shareholders hold any shares in the equity of another company qualifying turnover is less than 1 million for the year of assessment must be a private company year end is 31 January and not on the last day of February calculating interim payments (for micro businesses) estimated taxable turnover x applicable tax bracket =tax payable for the year/2 estimated taxable turnover x applicable tax bracket =tax payable for the year - 1st payment =2nd payment provisional taxpayers persons who derive income which is not renumeration any person notified by the commissioner any company calculating provisional tax payments (1) determine the basic amount calculate normal tax divide by 2 =1st payment calculating provisional tax payments (2) for taxable income of less than R start with the lower of the basic amount or the estimated taxable income for taxable income of more than R start with estimated taxable income calculate normal tax (multiply it by the tax rate) -1st payment =2nd payment calculating provisional tax payments (3) determine actual taxable income calculate normal tax (multiply it by the tax rate) -1st payment -2nd payment =3rd payment gross income (for a resident) the total amount in cash or otherwise received by or accrued to such resident (other) the total amount in cash or otherwise received by or accrued to such person from a source within the republic during such year of assessment excluding receipts or accruals of a capital nature taxpayers exempt from tax any level of government any institution which as its principal objective conducts scientific research body corporates est in terms of sectional titles act 95 of 1986 share-block companies est in terms of share blocks control act 59 of 1980 public benefit organisations pension funds and retirement annuity funds recreational clubs approved by the commissioner incomes exempt from tax dividends government grants deductions section 11(a) expenditure and losses actually incurred (during the year of assessment) in the production of the income provided such expenditure and losses are not of a capital nature deductions section 23(g) no deductions shall be made in respect of the following matters (g) any moneys claimed as a deduction from income derived from trade to the extent to which such moneys were not laid out or expended for the purposes of trade requirements for deductions the taxpayer must be carrying a trade income must be derived from that trade trade includes every profession, trade, business, employment, calling, occupation or venture, including the letting of any property and the use of or the grant of permission to use any patent or any design or any trademark or any copyright or any other property which is of a similar nature a trade must be carried on, there must be continuity tests for expenditure of a capital nature it adds to the the taxpayers income earning structure its a once off expense from which future income will flow it creates an enduring benefit or advantage for the taxpayer