UNISA TAX 3701
The Taxation of Business Activities
2018
, TABLE OF CONTENTS
VAT ..................................................................................................................................................................3
GENERAL TIME OF SUPPLY ........................................................................................................................................ 3
OUTPUT VAT ......................................................................................................................................................... 3
Output VAT: Importation of goods and SERVICES .......................................................................................... 4
Output VAT: Zero rated Supplies .................................................................................................................... 4
Output VAT: Exempt supplies ......................................................................................................................... 7
Output VAT: deemed supplies ........................................................................................................................ 8
Output VAT: General rules ........................................................................................................................... 10
INPUT VAT .......................................................................................................................................................... 11
INPUT TAX denied ........................................................................................................................................ 12
Deemed input tax ......................................................................................................................................... 13
Special Rules................................................................................................................................................. 13
ADJUSTMENTS ...................................................................................................................................................... 14
Tax Rulings ................................................................................................................................................... 14
Tax avoidance and unprofessional conduct ................................................................................................. 14
Influence of VAT on income tax calculation ................................................................................................. 14
TURNOVER TAX .............................................................................................................................................15
CALCULATING TAXABLE TUNOVER ............................................................................................................................ 16
ADMINISTRATION .................................................................................................................................................. 17
TRASITIONAL MATTERS ........................................................................................................................................... 18
INCOME TAX ..................................................................................................................................................19
GROSS INCOME .................................................................................................................................................... 19
Capital nature .............................................................................................................................................. 19
Special inclusions ......................................................................................................................................... 20
Exempt income............................................................................................................................................. 20
Forrign income ............................................................................................................................................. 20
Non-residents ............................................................................................................................................... 21
GENERAL DEDUCTION FORMULA ............................................................................................................................... 22
SPECIAL DEDUCTIONS............................................................................................................................................. 23
Foreign exchange transactions .................................................................................................................... 25
The accrual and incurral of interest ............................................................................................................. 26
Assessed losses............................................................................................................................................. 26
Prepaid expenses ......................................................................................................................................... 26
Trading stock ................................................................................................................................................ 26
Prohibited deductions .................................................................................................................................. 27
CAPITAL ALLOWANCES ........................................................................................................................................... 27
Repairs and improvements .......................................................................................................................... 27
Process of manufacture ............................................................................................................................... 28
Cost of an asset ............................................................................................................................................ 28
Deduction In Respect of Improvements To Assets Not Owned by the Taxpayer .......................................... 28
Capital allowances applicable to movable assets qualifying for wear-and-tear allowances: ..................... 29
Capital allowances applicable to immovable assets: .................................................................................. 29
Disposal of assets that were subject to an allowance: ................................................................................ 30
Donations and dividends - Recoupment ...................................................................................................... 31
Leased Assets ............................................................................................................................................... 31
CAPITAL GAINS TAX .......................................................................................................................................32
CAPITAL GAIN AND CAPITAL LOSS .............................................................................................................................. 33
EXCLUSIONS PER ASSET ........................................................................................................................................... 34
, ADJUSTED PROCEEDS ............................................................................................................................................. 34
Base Cost ...................................................................................................................................................... 35
Exclusions and Limitation of Losses ............................................................................................................. 35
Rollover of Capital Gain ............................................................................................................................... 36
Anti-Avoidance ............................................................................................................................................. 36
TAXATION OF COMPANIES AND CLOSE CORPORATIONS ...............................................................................37
TAX IMPLICATIONS OF A COMPANY............................................................................................................................ 37
Calculating the taxable income of companies and close corporations using accounting profits as a point of
departure ..................................................................................................................................................... 37
Collection of tax due by a company ............................................................................................................. 38
Non-resident companies .............................................................................................................................. 38
ASSESSED LOSSES .................................................................................................................................................. 38
DIVIDEND TAX ...................................................................................................................................................... 38
Definition of dividends tax ........................................................................................................................... 38
Contributed tax capital ................................................................................................................................ 39
Levying of dividends tax ............................................................................................................................... 39
Exemptions from dividends tax .................................................................................................................... 39
Withholding and refunding of dividends tax ................................................................................................ 40
Dividends tax summary ................................................................................................................................ 40
EMPLOYEES PROVISIONAL AND DONATIONS TAX .........................................................................................41
EMPLOYEES TAX .................................................................................................................................................... 41
Calculation of employees’ tax ...................................................................................................................... 41
Provisional tax .............................................................................................................................................. 41
Donations tax ............................................................................................................................................... 45
TRUSTS ..........................................................................................................................................................49
PERSON LIABLE FOR TAX ON INCOME OF A TRUST ........................................................................................................ 49
VESTED RIGHTS TO INCOME(SECTION 7(1)) ............................................................................................................... 49
TRANSACTIONS BETWEEN SPOUSES (SECTION 7(2))..................................................................................................... 50
TRANSACTIONSBETWEENPARENTS AND CHILDREN (SECTION 7(3)) ................................................................................. 50
CROSS DONATIONS (SECTION 7(4)) .......................................................................................................................... 50
DONATIONS LINKED TO A CONDITION (SECTION 7(5)) ................................................................................................. 50
DONATIONS WHERE CONTROL IS RETAINED (SECTION 7(6)) ......................................................................................... 51
DONATION OF INCOME(SECTION 7(7)) ..................................................................................................................... 51
DONATIONS BETWEEN RESIDENT AND NON-RESIDENT (SECTION 7(8)) ........................................................................... 51
LOANS BETWEEN TRUSTS AND CONNECTED PERSONS (SECTION 7C) ............................................................................... 51
MISCELLANEOUS PROVISIONS .................................................................................................................................. 52
THE NATURE OF INCOME FROM A TRUST .................................................................................................................. 52
STEPS THAT YOU SHOULD FOLLOW WHEN CALCULATING THE TAX LIABILITY OF A TRUST AND/OR ITS BENEFICIARIES ............. 52
CAPITAL GAINS TAX IMPLICATIONS OF TRUST ............................................................................................................. 52
THINGS TO REMEMBER........................................................................................................................................... 53
PARTNERSHIPS ..............................................................................................................................................54
STRUCTURE FOR THE BASIC CALCULATION OF THE TAXABLE INCOME OF A PARTNER ......................................................... 54
CALCULATION OF THE TAXABLE INCOME OF A PARTNERSHIP......................................................................................... 54
CALCULATION OF THE TAXABLE INCOME OF PARTNERS ................................................................................................ 55
LIMITED PARTNERSHIPS .......................................................................................................................................... 55
, VAT
Goods and services sold → Levy OUTPUT TAX
Goods and services purchased → Claim INPUT TAX
The accounting basis, that is, the invoice basis or payments basis, will determine when VAT will be
payable.
GENERAL TIME OF SUPPLY
According to the general time of supply rule on the invoice basis, a supply occurs at the earlier of the
following events:
• at the time that an invoice is issued; or
• at the time that any payment is received by the supplier
All vendors must account for VAT on the invoice (or accrual) basis, unless requirements for registering
on the payments basis are met.
On the payments basis, VAT is accounted for when payments are made or received. The invoice date is
irrelevant.
OUTPUT VAT
Generally speaking, before output tax can be levied, all the following requirements must be met:
• the supply of
• goods or services in South Africa
• by a vendor
• in the course or furtherance of an enterprise carried on by him.
The Taxation of Business Activities
2018
, TABLE OF CONTENTS
VAT ..................................................................................................................................................................3
GENERAL TIME OF SUPPLY ........................................................................................................................................ 3
OUTPUT VAT ......................................................................................................................................................... 3
Output VAT: Importation of goods and SERVICES .......................................................................................... 4
Output VAT: Zero rated Supplies .................................................................................................................... 4
Output VAT: Exempt supplies ......................................................................................................................... 7
Output VAT: deemed supplies ........................................................................................................................ 8
Output VAT: General rules ........................................................................................................................... 10
INPUT VAT .......................................................................................................................................................... 11
INPUT TAX denied ........................................................................................................................................ 12
Deemed input tax ......................................................................................................................................... 13
Special Rules................................................................................................................................................. 13
ADJUSTMENTS ...................................................................................................................................................... 14
Tax Rulings ................................................................................................................................................... 14
Tax avoidance and unprofessional conduct ................................................................................................. 14
Influence of VAT on income tax calculation ................................................................................................. 14
TURNOVER TAX .............................................................................................................................................15
CALCULATING TAXABLE TUNOVER ............................................................................................................................ 16
ADMINISTRATION .................................................................................................................................................. 17
TRASITIONAL MATTERS ........................................................................................................................................... 18
INCOME TAX ..................................................................................................................................................19
GROSS INCOME .................................................................................................................................................... 19
Capital nature .............................................................................................................................................. 19
Special inclusions ......................................................................................................................................... 20
Exempt income............................................................................................................................................. 20
Forrign income ............................................................................................................................................. 20
Non-residents ............................................................................................................................................... 21
GENERAL DEDUCTION FORMULA ............................................................................................................................... 22
SPECIAL DEDUCTIONS............................................................................................................................................. 23
Foreign exchange transactions .................................................................................................................... 25
The accrual and incurral of interest ............................................................................................................. 26
Assessed losses............................................................................................................................................. 26
Prepaid expenses ......................................................................................................................................... 26
Trading stock ................................................................................................................................................ 26
Prohibited deductions .................................................................................................................................. 27
CAPITAL ALLOWANCES ........................................................................................................................................... 27
Repairs and improvements .......................................................................................................................... 27
Process of manufacture ............................................................................................................................... 28
Cost of an asset ............................................................................................................................................ 28
Deduction In Respect of Improvements To Assets Not Owned by the Taxpayer .......................................... 28
Capital allowances applicable to movable assets qualifying for wear-and-tear allowances: ..................... 29
Capital allowances applicable to immovable assets: .................................................................................. 29
Disposal of assets that were subject to an allowance: ................................................................................ 30
Donations and dividends - Recoupment ...................................................................................................... 31
Leased Assets ............................................................................................................................................... 31
CAPITAL GAINS TAX .......................................................................................................................................32
CAPITAL GAIN AND CAPITAL LOSS .............................................................................................................................. 33
EXCLUSIONS PER ASSET ........................................................................................................................................... 34
, ADJUSTED PROCEEDS ............................................................................................................................................. 34
Base Cost ...................................................................................................................................................... 35
Exclusions and Limitation of Losses ............................................................................................................. 35
Rollover of Capital Gain ............................................................................................................................... 36
Anti-Avoidance ............................................................................................................................................. 36
TAXATION OF COMPANIES AND CLOSE CORPORATIONS ...............................................................................37
TAX IMPLICATIONS OF A COMPANY............................................................................................................................ 37
Calculating the taxable income of companies and close corporations using accounting profits as a point of
departure ..................................................................................................................................................... 37
Collection of tax due by a company ............................................................................................................. 38
Non-resident companies .............................................................................................................................. 38
ASSESSED LOSSES .................................................................................................................................................. 38
DIVIDEND TAX ...................................................................................................................................................... 38
Definition of dividends tax ........................................................................................................................... 38
Contributed tax capital ................................................................................................................................ 39
Levying of dividends tax ............................................................................................................................... 39
Exemptions from dividends tax .................................................................................................................... 39
Withholding and refunding of dividends tax ................................................................................................ 40
Dividends tax summary ................................................................................................................................ 40
EMPLOYEES PROVISIONAL AND DONATIONS TAX .........................................................................................41
EMPLOYEES TAX .................................................................................................................................................... 41
Calculation of employees’ tax ...................................................................................................................... 41
Provisional tax .............................................................................................................................................. 41
Donations tax ............................................................................................................................................... 45
TRUSTS ..........................................................................................................................................................49
PERSON LIABLE FOR TAX ON INCOME OF A TRUST ........................................................................................................ 49
VESTED RIGHTS TO INCOME(SECTION 7(1)) ............................................................................................................... 49
TRANSACTIONS BETWEEN SPOUSES (SECTION 7(2))..................................................................................................... 50
TRANSACTIONSBETWEENPARENTS AND CHILDREN (SECTION 7(3)) ................................................................................. 50
CROSS DONATIONS (SECTION 7(4)) .......................................................................................................................... 50
DONATIONS LINKED TO A CONDITION (SECTION 7(5)) ................................................................................................. 50
DONATIONS WHERE CONTROL IS RETAINED (SECTION 7(6)) ......................................................................................... 51
DONATION OF INCOME(SECTION 7(7)) ..................................................................................................................... 51
DONATIONS BETWEEN RESIDENT AND NON-RESIDENT (SECTION 7(8)) ........................................................................... 51
LOANS BETWEEN TRUSTS AND CONNECTED PERSONS (SECTION 7C) ............................................................................... 51
MISCELLANEOUS PROVISIONS .................................................................................................................................. 52
THE NATURE OF INCOME FROM A TRUST .................................................................................................................. 52
STEPS THAT YOU SHOULD FOLLOW WHEN CALCULATING THE TAX LIABILITY OF A TRUST AND/OR ITS BENEFICIARIES ............. 52
CAPITAL GAINS TAX IMPLICATIONS OF TRUST ............................................................................................................. 52
THINGS TO REMEMBER........................................................................................................................................... 53
PARTNERSHIPS ..............................................................................................................................................54
STRUCTURE FOR THE BASIC CALCULATION OF THE TAXABLE INCOME OF A PARTNER ......................................................... 54
CALCULATION OF THE TAXABLE INCOME OF A PARTNERSHIP......................................................................................... 54
CALCULATION OF THE TAXABLE INCOME OF PARTNERS ................................................................................................ 55
LIMITED PARTNERSHIPS .......................................................................................................................................... 55
, VAT
Goods and services sold → Levy OUTPUT TAX
Goods and services purchased → Claim INPUT TAX
The accounting basis, that is, the invoice basis or payments basis, will determine when VAT will be
payable.
GENERAL TIME OF SUPPLY
According to the general time of supply rule on the invoice basis, a supply occurs at the earlier of the
following events:
• at the time that an invoice is issued; or
• at the time that any payment is received by the supplier
All vendors must account for VAT on the invoice (or accrual) basis, unless requirements for registering
on the payments basis are met.
On the payments basis, VAT is accounted for when payments are made or received. The invoice date is
irrelevant.
OUTPUT VAT
Generally speaking, before output tax can be levied, all the following requirements must be met:
• the supply of
• goods or services in South Africa
• by a vendor
• in the course or furtherance of an enterprise carried on by him.
