The newly updated Interpreta-

tion Note dealing with STC

credits is also addressed.

For the fist time some Cus-

toms draft rules are also cov-

ered. This issue also contains

an update on IASB discussions

and some information regard-

ing IFRS for SMEs.

As always your comments and

suggestions are very welcome.

Please feel free to forward

these to the IAC office to be

addressed in future issues of

the Professional.

2015 marks a significant mile-

stone for the IAC newsletter

which appeared for the first

time in March 2005, a full dec-

ade ago. The newsletter has a

few name changes, from its

humble beginning as ‘The IAC

Newsletter which consisted of

2-4 pages once a quarter to

the Informant in the same for-mat as the current Profession-

al.

The name was changed from

‘The Informant’ to ‘The Profes-

sional” to align with the IAC

Zimbabwe’s publication.

Over the years we addressed

various topics within the tax

arena, including Capital Gains

Tax, Donations tax, Corporate

Tax, Personal Income Tax,

Estate Duty and Value-Added

Tax.

Even though the focus was on

tax, various other disciplines

were also covered over the

years, including:

Practical “How to”s;

Labour Law;

Industrial Psychology;

Accounting;

Internal Audit;

Valuations;

Employee relationships.

We wish to thank our mem-

bers for their support over the

last 10 years and look forward

to the future to continuously

improve this publication.

It is therefore our pleasure to

welcome our members to the

first issue of the Professional

for 2015.

This issue focuses on some

aspects of the long awaited Tax

Amendment Acts of 2014

which were promulgated on 20

January 2015.

IAC Newsletter—Tenth anniversary

INSTITUTE OF

ACCOUNTING

AND COMMERCE

January 2015 Volume 6, Issue 1

The Professional

Special points of

interest:

Budget speech:

25 February 2015

Inside this issue:

CCMA

Dividend tax and

STC credits

3

4

Customs payments

Learnership allow-

ances

5

7

Debtor allowances

PPP-improvements

Tax free invest-

ments

8

10

Category F ven-

dors

Tax compliance

11

IASB update

IFRS for SMEs

12

Contact details 14

Death Announcement—William Keith (Bill) Shellard 1942—2015

Dear members, it is with great sadness that we inform you of the passing of one of our long serving

members, Mr William Keith (Bill) Shellard. Mr Shellard was an active member on the Gauteng Regional

Committee and served as an Assessor at the IAC for many years.

On behalf of the management, staff and members, we express our sincere condolences to the Shellard

family and friends of Bill.

Page 2 The Professional

SHELF COMPANIES

REGISTRATION OF NEW COMPANIES

Henze

l S

erv

ices

(P

ty)

Lim

ited

1988/0

06

587/0

7

Pro

fessio

nal C

om

pany S

ecre

taria

l Servic

es

Shelf company for R 1 005

From R 631 to Register a new company

From R 1 223 to Convert a CC into a private company

Re-instatement of deregistered CCs and companies

Special resolutions including replacement of old MOI with

new MOI

Change name, directors, shareholders, year-end, registered of-

fice and auditors of companies

Name reservations

Act as Company Secretary

Annual returns

Filing of company and CC forms

Copies of Company and CC documents

Publication of notices in Government Gazette and newspapers

Address: PO Box 35857, Menlo Park 0102

Tel (012) 346 4343

Fax (086) 274 5631

Email services@henzel.co.za

The Commission for Concilia-

tion, Mediation and Arbitra-

tion (CCMA) is a dispute res-

olution body established in

terms of the Labour Relations

Act, 66 of 1995 (LRA). It is an

independent body which does

not belong to and is not con-

trolled by any political par-

ty, trade union or business.

The Governing Body is the

supreme policy making body

of the CCMA and consists of :

a chairperson,

three state representatives;

three representatives from

organised labour and

three representatives from

organised business;

all of whom are nominated by

NEDLAC and the Director of

the CCMA nominated by the

Governing Body.

Each provincial office has a

team of full time commission-

ers supported by an additional

complement of part-time

commissioners. They concili-

ate, facilitate, mediate and in

some instances arbitrate, to prevent and settle industrial

disputes. Convening Senior

Commissioners (CSCs) have

been appointed in each prov-

ince and their role is to moni-

tor the professional standards

of the CCMA and to assist in

the allocation of cases to com-

missioners.

The CCMA conciliates work-

place disputes, arbitrate dis-

putes that remain unresolved after conciliation, facilitate the

establishment of workplace

forums and compile and pub-

lish statistics about its activi-

ties.

Commission for Conciliation, Mediation and Arbitration

Referring a dispute to the CCMA

proof of delivery needs to be

retained. The applicant has to

submit the referral form and

proof of delivery to the

CCMA who will inform both

parties of the date, time and

venue of the first hearing.

Conciliation

The first meeting is generally

known as a conciliation. Only the parties, trade union or

employer’s organisation rep-

resentatives and the CCMA

commissioner attends this

meeting. Legal representation

is not allowed at this stage.

The purpose of this meeting is

to reach and agreement that is

acceptable to both parties.

If no agreement is reached,

the CCMA commissioner will

issue a certificate to that ef-

fect. Depending on the nature

of the dispute, it may be re-

ferred to the CCMA for arbi-

tration or the Labour Court.

Arbitration

The aggrieved party needs to

complete a request for arbi-

tration form (aka LRA Form

7.13) in order to request arbi-

tration. A copy of the form

has to be served on the other

party. The request for arbitra-

tion should be applied for

within 3 months from the date

the CCMA commissioner

issued the certificate.

Arbitration is more formal

than conciliation. Witnesses

may be called and supporting

documents need to be lodged

as evidence. Parties may also

cross-examine each other and legal representation is al-

lowed.

The CCMA commissioner will

make a final and binding deci-

sion (arbitration award) within

14 days.

If a party does not comply

with the arbitration award,

the aggrieved party can re-

quest an order of the Labour

Court to enforce the arbitra-

tion award.

Review

A party may apply to the La-

bour Court on the basis of an

alleged defect with a CCMA

commissioner's rulings or

awards. The party who alleges

such a defect must apply to

the Labour Court to set aside

the award within 6 weeks of

the award being served.

Employees can refer a dispute

with their employer (and vice

versa) to the CCMA on vari-

ous matters, including dismis-

sals, wages, working condi-

tions and discrimination. Inde-

pendent contractors can how-

ever not refer disputes to the

CCMA as they are not in an

employee/employer relation-

ship.

It is very important to take

immediate steps if there is a

labour problem as there are

certain time limits within

which the dispute needs to be

lodged, e.g. in the case of an

unfair dismissal, the dispute

must be lodged within 30 days

from the date the dispute

arose. In the case of an unfair

labour practice, the dispute

has to be lodged within 90

days and in discrimination

cases, within 6 months.

The first step is to lodge a

CCMA referral form, (aka

LRA form 7.11). These forms

are available from the CCMA

offices, Department of Labour

and the CCMA website.

www.ccma.org.za

Once the form is completed, a

copy thereof has to be deliv-

ered to the other party and

You can have

everything you

want in life if

you just help

enough people

get what they

want in life.

Zig Ziglar

Page 3 Volume 6, Issue 1

Dividends payable to the fol-

lowing beneficial owners are

exempt from Dividends Tax if

the required “declaration” and

“undertaking” are submitted

to the company or withhold-

ing agent in time:

South African resident

companies

Government (all three

spheres)

Public Benefit Organisa-

tions (approved in terms of

section 30(3) of the Act)

Mining rehabilitation trusts

(section 37A of the Act)

Section 10(1)(cA) persons

Section 10(1)(d) funds

(e.g. pension funds, provi-

dent funds and medical

schemes)

Section 10(1)(t) persons

(e.g. CSIR and SANRAL)

Shareholders in a regis-

tered micro business (6th

Schedule to the Act)

(insofar as dividends do not

exceed R200,000 per year)

Non-residents receiving

dividends from foreign

companies listed on the

Johannesburg Stock Ex-

change

Portfolios of collec-

tive investment schemes in

securities

Any person to the extent

that the dividend consti-

tutes income of that per-

son

Any person to the extent

that the dividend was sub-

ject to the STC

Fidelity or indemnity funds

contemplated in section 10

(1)(d)(iii)

Dividends paid by a REIT

( r e a l e s -

tate investment trust) or a

controlled property com-

pany (as defined in section

25BB) received or accrued

before 1 January 2014

(insofar as it does not con-

sist of a dividend in specie)

A small business funding

entity under section 10(1)

(cQ)

A natural person in respect

of a dividend paid on or

after 1 March 2015, for a

tax free investment.

of 15% of the amount of any

dividend paid by any company

other than a headquarter

company.

Section 64J(1) stipulates that a

dividend paid by a company is

not subject to dividends tax to

the extent that the dividend

does not exceed the STC

credit of the company and 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.

Both section 64E(1) and sec-

tion 64J(1) refer to a dividend

“paid” by a company. The STC

credit of a company can there-

fore only be applied against a

dividend that is paid by a com-

pany.

Section 64J(5) provides that

the STC credit of a company

on or after the third anniver-

sary of the effective date is

deemed to be nil, i.e. the STC

credits will effectively cease

A draft BGR was published on

28 January 2015 whereby

public comments were re-

quested on or before 20 Feb-

ruary 2015. The purpose of

this draft BGR is to clarify that

STC credits are not available if

a dividend is declared before

1 April 2015, but paid on or

after that date.

STC credits originated under

the previous Secondary Tax

on Companies regime before

the introduction of Dividend

Tax. As a transitional dispen-

sation, these STC credits

were allowed to reduce the

Dividend Tax liability. This

ensured that profits previously

subject to STC were not

taxed again under the Divi-

dend tax regime.

Income Tax Act

Section 64E(1), which came

into operation on 1 April

2012, provides that, subject to

paragraph 3 of the Tenth

Schedule to the Act, dividends

tax must be levied at the rate

on 1 April 2015.

The STC credit of a company

must be applied against any

dividend paid by that company

before 1 April 2015. A divi-

dend paid by a company on or

after 1 April 2015 cannot be

reduced by any STC credit,

since the STC credit of a com-

pany on or after 1 April 2015

is deemed to be nil.

Under section 64J(7) a compa-

ny that pays a dividend will be

liable for any dividends tax

that is subsequently not with-

held by another person as a

result of an inaccurate notifi-

cation provided by that com-

pany.

Ruling

If company pays dividend

before 1 April 2014, the re-

maining STC credits may be

applied against these dividends

paid by the company. STC

credits cannot be applied if

dividend was declared before

1 April 2015, but only paid

thereafter.

Dividend tax—Exemptions

Termination of STC credits

Happiness is

not something

you postpone

for the future;

it is something

you design for

the present.

Jim Rohn

Page 4 The Professional

The Fourth Batch of Customs

Control Rules were published

for public comments on 28

January 2015. The due date

for comments is 20 February

2015.

The Commissioner indicated

under rule 32.1 that the fol-

lowing payment methods

would be acceptable:

Cash payments;

Checque payments;

Payment by electronic funds

transfer, (including payment

effected by using SWIFT

message in the case of inter-

national payments);

Credit push payment initiat-

ed through eFiling, and

Debit or credit card pay-

ments.

If the person making the pay-

ment is registered for eFiling,

payment must be made using

the credit push payment facili-

ty on eFiling.

Cash payment conditions

Cash payments may be made

at any Customs Office during

office hours. The maximum

amount of cash that may be

paid per transaction is limited

to:

R 2 000 in bank notes;

R 50 in R5 coins;

R 20 in R2 coins;

R 20 in R1 coins;

R 5 each in 10c to 50c

coins, and

50c in 5c coins.

These limitations do not apply

to payments at place of entry

or exit made by travelers and

crew members entering or

leaving South Africa.

All cash payments must be

rounded off to the nearest 5

cents to the benefit of the

person making the payment.

Furthermore, all cash pay-

ments must be accompanied

by a payment advice notice

that is not older than 7 calen-

dar days.

Checque payments

All cheque must be signed and

made out to “South African

Revenue Service” in any of the

official languages of the Repub-

lic and the payment must be

reflected in Rand.

Checque payments will not be

accepted if two cheques made

out to the South African Rev-

enue Service had been

“referred to drawer” in the

three years preceding the date

of payment.

Cheques exceeding R10 000

must be bank guaranteed. The

daily limit for cheque payment

per person per day is R50

000, irrespective of the num-

ber of cheque payments re-

quired to be made on that

day.

No post-dated cheques will be

accepted and all cheque pay-

ments must be supported by a

payment advice notice that is

not older than seven calendar

days.

EFT payments

Electronic funds may only be

transferred through internet

banking facilities of banks where SARS is listed on the

bank’s preconfigured benefi-

ciary ID listing, by selecting

the applicable SARS benefi-

ciary identification code.

In the case of electronic fund

transfers effected by using

SWIFT message payments may

be done only through the

internet banking facilities of a

bank which supports payment

effected by using SWIFT mes-

sage; and the SARS beneficiary

identification code for foreign

payments must be indicated.

All EFT payments must be

supported by a payment ad-

vice notice which must be

submitted to SARS.

the transaction or transactions being set-

tled, and

the amount to be paid;

The payment reference number is the

unique 19-digit number allocated by the cus-

toms authority to identify a payment and to

ensure the correct allocation of the payment

in a notice demanding payment of an amount

owed to the Commissioner.

The payment advice notice is a notice

generated by the customs authority upon

request by a person liable for a debt, in

respect of a payment to be made by that

person, which reflects –

the name of the person making pay-

ment;

the relevant payment reference num-

ber;

Draft Customs Rules—Batch 4—Payment methods

Payment advice notice and reference number

Today I will do

what others

won’t, so

tomorrow I can

accomplish

what others

can’t.

Jerry Rice

Page 5 Volume 6, Issue 1

According to Draft Rule 32.6,

the following conditions apply

in respect of debit or credit

card payments.

Payments by debit or credit

card may be made by a

traveler or a crew member

when entering or leaving

the Republic at the place of

entry or exit or, in the case

of rail travelers and crew, at

the rail travelers terminal

where that traveler or

crew member is pro-

cessed through the Pas-

senger Processing Sys-

tem; or

in the case of a trusted

or frequent traveler,

where that traveler is

processed at a self-

service facility for trust-

ed or frequent travelers;

payment must be in Rand;

the traveler or crew mem-

ber or other person tender-

ing the card must be the

account holder; and

only approved debit or

credit cards as indicated on

notice boards at the rele-

vant traveler terminal or

Customs Office may be

accepted.

Draft Customs Rules—Debit and credit card payments

Draft Customs Rules—Payment of debt in instalments

the kind and amount of the

debt owed to the Commis-

sioner;

the reason why the appli-

cant cannot pay the debt in

a single payment;

whether the applicant antici-

pates income or other re-

ceipts which can be used to

satisfy the debt, including a

list of such anticipated in-

comes or receipts indicating

the date when the income

or receipt is expected;

details of the applicant’s

assets, investments and

policies, including a descrip-

tion of the asset, the type of

investment or policy, the

name of the institution and

the relevant values and, if

applicable, maturity dates;

details of the applicant’s

debtors and creditors in-

cluding names and contact

details and amounts owed

or owing;

details of contracts or ten-

ders awarded to the appli-

cant, if any, including the

name of the institution or

contracting party, the con-

tract or tender number, the

contract or tender value

and the commencement and

completion dates;

the proposed repayment

period, which may not ex-

ceed a period of twelve

months; and

the name and contact de-

tails of the applicant’s audi-

tor or financial adviser.

The application must be sup-

ported by

Certified bank statements

for a period of 6 months

preceding the application;

Evidence of the applicant’s

financial position, e.g. audit-

ed financial statements;

Documentary evidence of

assets, investments, debtors,

creditors, tenders and other

contracts awarded to the

applicant.

The Commissioner may ap-

prove or refuse the applica-

tion and the applicant is enti-

tled to be notified of the deci-

sion. After being notified of

the approval if the application,

the applicant must complete

an instalment payment agree-

ment which will be published

on the SARS website. The

agreement must be signed by the parties to the agreement

and submitted manually to-

gether with the other sup-

porting documents to any

Customs Office.

All payments must be sup-

ported by a payment advice

which must be submitted to

SARS.

A person who is liable for

Customs Duty but unable to

pay the debt in a single pay-

ment, may apply to the Com-

missioner via eFiling for per-

mission to pay the debt in

instalments. The application

may also be submitted in pa-

per format on a Form to be

published on the SARS web-site and submitted to any

Customs Office.

Application

The application must reflect

the following information

about the applicant:

The applicant’s customs

code, or if the applicant

does not have a customs

code, the applicant’s name,

physical address and contact

details;

if the applicant is a natural

person, identity or passport

number; and

if the applicant is a juristic

entity, the name of the per-

son authorised to act on

behalf of the entity, as well

as that person’s physical

address, contact details,

identity or passport number

and capacity;

Furthermore, the following

information must also be in-

cluded in the application:

the reference number of

any document that demand-

ed payment of the debt;

Too many

people are

thinking the

grass is greener

on the other side

of the fence,

when they ought

to just water the

grass they are

standing on.

Amar Dave

Page 6 The Professional

Section 12H provides an annu-

al allowance and a completion

allowance to employers who

entered into a qualifying learn-

ership agreement with an

employee.

The annual allowance of

R30 000 is subject to a pro

rata reduction when the num-

ber of full months in a year of assessment is less than 12.

The completion allowance is

limited to R30 000 when the

learnership is for a period of

less than 24 full months. For

longer agreements the com-

pletion allowance is R30 000

multiplied by the number of

consecutive 12-month periods

covered by the agreement.

The allowances are increased

to R50 000 for learnerships

entered into with disabled

employees.

Interpretation Note 20 was

updated on 30 January 2015

to provides clarity on the

interpretation and application

of section 12H which provides

deductions for registered

learnership agreements.

The amendments to section

12H by the Taxation Laws

Amendment Act No. 43 of

2014 was been taken into

account in the updated IN and

are effective from 20 Janu-

ary 2015 and applicable to all

learnership agreements en-

tered into on or after that

date.

Registered learnership

agreement

A registered learnership

agreement refers to an agree-

ment that is registered under

the Skills Development Act

which was entered into by the learner and employer before 1

October 2016. The term

‘learner’ also includes an ap-

prentice.

Until 31 December 2012, the

deduction was only available

to those learnership agree-

ments which had been official-

ly registered with a SETA. In

practice registrations were

often delayed because of a

variety of reasons.

With effect from 1 January

2013, any learnership agree-

ment which has not been

registered from the inception

of the agreement will be

deemed to have been regis-

tered on the date it has been

entered into, provided it is

registered within 12 months

after the last day of the em-

ployer’s year of assessment.

Annual allowance

The employer will qualify for

the annual allowance if :

the learner is a party to a

registered learnership

agreement with the em-

ployer during any year of

assessment ;

the agreement was entered

into pursuant to a trade

carried on by that employ-

er; and

the employer has derived

“income” from that trade.

The allowance only applies to

a period during which a learn-

er is a party to a registered

learnership agreement with an

employer. Thus an employer

will not qualify for the annual

allowance during any period in

which –

learnership agreement is

not registered, subject to

the deeming provision

previously mentioned or

the learner is not in em-

ployment.

The definition of “employer”

in section 12H(1) merely clari-

fies or expands the meaning of

that term. A learner who has

not yet commenced employ-

ment cannot have an agree-

ment with an “employer”

because there is no employ-ment relationship between

them.

during the year of assess-

ment; and

the employer has derived

“income” from that trade.

The deduction must be made

against income derived from

the particular trade in which

the employee is employed.

This means that there must at

least be some income from

the particular trade in order

to achieve the deduction. The

wording does however not,

prevent the allowance from

An employer qualifies for the

completion allowance if –

the learner is a party to a

registered learnership

agreement with the em-

ployer during any year of

assessment ;

the agreement had been

entered into pursuant to a

trade carried on by the

employer;

the learner successfully

completes the learnership

creating a loss from the partic-

ular trade. There is also noth-

ing in the wording to prevent

such a loss from being set off

against income from another

trade.

SARS requires adequate proof

of the successful completion

of the learnership agreement

in order to allow the comple-tion allowance, e.g. confirma-

tion of successful completion

provided by the SETA with

which the learnership agree-

ment is registered.

Learnership agreements—IN 20 (Issue 5)

Completion allowance

The content of

your character

is your choice.

Day by day,

what you

choose, what

you think and

what you do is

who you

become.

Heraclitus

Page 7 Volume 6, Issue 1

Enhanced allowances

In order to encourage em-

ployers to develop the skills of

persons with a disability, the

annual and completion allow-

ances are increased by

R20 000 for a learner who has

a “disability” as defined in

section 6B(1) at the time of

entering into the learnership

agreement [section 12H(5)].

The criteria prescribed by the

Commissioner relating to

disability are contained in

form ITR-DD “Confirmation

of Diagnosis of Disability”,

which is available on the SARS

website.

Termination

An employer is entitled to

deduct an amount equal to a

pro rata portion of the annual

allowance if the registered

learnership agreement is ter-

minated (whether by the em-

ployee resigning or by the

employer terminating the

learner’s employment).

The employer is not entitled

to deduct any further annual

allowance or the completion

allowance since the learner-

ship agreement is terminated

and the learnership is not

completed.

Reporting

The employer must submit

the information required by

the relevant SETA in the form

and manner indicated by that

SETA.

Learnership allowances—Miscellaneous

Instalment credit agreements and debtor’s allowance

Finance charges must be rec-

ognised on a day-to-day basis

over the period of an instal-

ment credit agreement with

reference to the outstanding

balance under section 24J.

IN 48 does not apply to the

debtors’ allowance and the al-

lowance for contingent develop-

ment expenditure granted to township developers under sec-

tion 24(2).

The debtors’ allowance does

not apply to –

sales on extended credit in

the absence of a condition

suspending the passing of

ownership;

sales subject to a resolutive condition, for example,

when it is agreed that a sale

shall be regarded as can-

celled if the purchase price

is not paid by a certain date;

Leases, if the lessee has an

option to acquire the goods

at the end of the lease. Such

an option is not an agree-

ment of sale, but merely

confers on the holder the

right to enter into such an

agreement at an agreed

price at a future date.

Section 24 also applies to lay-

by agreements of not less than

12 months. Under a lay-by the

buyer pays the purchase price

over a period while the seller

retains possession of the

goods until the purchase price

is paid in full. Ownership pass-

es to the buyer on the date on

which the purchase price is paid in full and the goods are

delivered to the buyer.

Allowance—conditions

Under section 24(1) the debt-

ors’ allowance is granted to

taxpayers only in cases in

which the passing of owner-

ship of the property sold is

subject to a suspensive condi-

tion, namely, payment of the

whole or a certain portion of

the selling price.

In addition, section 24(2) pro-

vides that at least 25% of the

whole of the amount under

the agreement must be due

and payable at least 12 months

after conclusion of the agree-

ment before the debtors’

allowance may be granted. For

this purpose, any deposit pay-

able is regarded as a payment

of a portion of the selling

price within the first 12

months. Deduction is made

under section 11(x).

Interpretation Note 48 dealing

with the above topic was up-

dated on 19 December 2014.

The purpose of IN 48 is to

provide guidance on the appli-

cation and determination of

the debtors’ allowance grant-

ed under section 24(2), as it

applies to instalment credit

agreements.

Section 24 deals with the fol-

lowing two main concepts.

Firstly, in the context of a

disposal by a taxpayer of trad-

ing stock under an instalment

credit agreement, section 24

(1) provides that the whole

amount, excluding finance

charges, is deemed to be in-

cluded in the taxpayer’s gross

income at the time of entering

into the agreement.

This deemed inclusion pre-

vents any argument that the

proceeds under an instalment

credit agreement do not ac-

crue because of a delay in

transfer of ownership.

Secondly, section 24(2) pro-

vides the Commissioner with

the discretion to grant a debt-

ors’ allowance to the taxpay-

er, thereby allowing the profit

under the instalment credit

agreement to be taxed on a

cash-flow basis.

Don’t let life

discourage you;

everyone who

got where he is

had to begin

where he was.

Richard L. Evans

Page 8 The Professional

The amount of the debtors’ allow-

ance is based on the gross profit

percentage applied on qualifying

outstanding debtors at the end of

the taxpayer’s year of assessment

(excluding finance charges and

VAT) and reduced by –

bad debts under section 11(i),

and

any allowance for doubtful

debts under section 11(j).

Finance charges and VAT must

also be excluded from turnover (sales) and cost of sales in

determining the gross profit percentage which is calculated

as follows:

[(sales – cost of sales) / sales] × 100 = gross profit %

or

(gross profit / sales) × 100 = gross profit percentage

The gross profit should include other forms of income

such as delivery charges, fees for maintenance contracts

and insurance premiums.

Debtor allowance

Debtor allowance—Basis

applicable gross profit per-

centage to be applied to the

instalment debtors outstand-

ing at the end of a year of

assessment (excluding bad and

doubtful debts, VAT and fi-

nance charges). An important

condition for accepting a glob-

ular method is that it must be

consistently applied. It will be unacceptable to SARS if a

taxpayer switches from one

method to another simply to

exploit the allowance. A

switch should only be made

for a very sound reason, such

as an upgrade to the account-

ing system. Below follows the

various acceptable globular

methods that may be used to

calculate the average gross

profit percentage.

Aged-debtor basis

Under the aged debtor

method, the outstanding

debtors at the end of the year

of assessment are aged and

allocated across the years of

assessment to which they

arose. The applicable gross

profit percentage for each

year of assessment is then

applied to the debtors that

arose during that year of as-

sessment. [Refer to example 3

of IN 48]

Moving-weighted average

If aging of the individual debt-

ors is not possible the taxpay-

er could use the moving-

weighted-average method.

It involves determining a mov-

ing-weighted-average percent-

age based on each year’s sales

and gross profit while also

taking into account the aver-age period of the relevant

agreements. The average

gross profit percentage is then

applied to the total outstand-

ing debtors (excluding bad and

doubtful debts, VAT and fi-

nance charges). [Refer to ex-

ample 4 of IN 48.]

Current year’s gross profit

percentage

It is acceptable use the cur-

rent year’s gross profit per-

centage if the taxpayer’s gross

profit remains constant from

year to year, provided that the

level of variation over the

previous year of assessment

does not exceed 2%. The 2%

variation is not the simple

difference between the previ-

ous year’s percentage and the

current year’s percentage, but

rather the percentage varia-

tion over the previous year’s

percentage. [Refer to exam-

ple 5 of IN 48.]

The purpose of the debtors’

allowance is to grant an allow-

ance equal to the gross profit

element of the outstanding

debtors at the end of each

year of assessment.

Individual basis

The manual determination of

the allowance on a debtor-by-debtor basis is simple when

there is a single debtor or a

few debtors. In other words,

the specific gross profit per-

centage applicable to each

debtor is applied to that debt-

or. This method could also be

applied when there are nu-

merous instalment debtors

and the taxpayer has a sophis-

ticated computer system capa-

ble of determining the exact

gross profit percentage appli-

cable to each debtor. Such a

method would be the most

accurate and would be the

ideal method most acceptable

to SARS.

Globular basis

Not all taxpayers have sophis-

ticated accounting systems

capable of handling an individ-

ual debtor-by-debtor determi-

nation of the gross profit per-

centage and it is therefore

necessary for SARS to accom-

modate globular methods

which involve estimating the

Keep away from

people who try

to belittle your

ambitions. Small

people always

do that, but the

really great

make you feel

that you, too,

can become

great.

Mark Twain

Page 9 Volume 6, Issue 1

Section 12NA was introduced

to allow a deduction where a

person actually incurred ex-

penditure to effect an im-

provement to land and/or

buildings in terms of an obliga-

tion under a PPP if the SA

Government holds the right of

use or occupation of the

building. For purposes of this section Government includes

the national, provincial and

local spheres.

The deduction is equal to the

expenditure actually incurred

which has not been allowed to

be deducted under section

12NA divided by the number

of years (including that year of

assessment) for which the

taxpayer will derive income

under the PPP agreement or

25 years, whichever is lesser.

The expenditure taken into

account to determine the

deduction must be reduced by

any amount received from

Government for the purpose of effecting the improvement

or building if the amount falls

within section 10(1)(zI).

Section 12NA does not apply

if the person effecting the

improvements to the land or

building is a person carrying

on any banking, financial ser-

vices or insurance business.

Even though the Taxation

Laws Amendment Act of 2014

was only promulgated in 2015,

section 12NA is deemed to

have come into operation on

1 January 2013.

Section 12NA therefore ap-

plies to expenditure incurred to effect improvements during

any year of assessment com-

mencing on or after 1 January

2013.

Satisfies SARS that, within

5 years of that year of as-

sessment, the person is

likely to incur an amount of

expenditure on repairs to

any ship used by that per-

son for purposes of that

person's trade.

In order to determine the

amount of the deduction, the

estimated costs of those re-

pairs and the date on which

Section 24P was introduced to

allow the deduction of ex-

penditure on repairs to any

ship, notwithstanding section

23(e). SARS will allow a de-

duction for every year of as-

sessment if that person

Is a resident;

Carries on any business as

owner or charterer of any

ship; and

the repairs are likely to be

incurred must be taken into

account. The amount of the

deduction allowed in any year

of assessment must be includ-

ed in the person’s income in

the following year of assess-

ment.

This section is deemed to

have come into operation on

12 December 2013.

Public Private Partnerships—Improvements to property

Allowance—Future repairs to certain ships

Tax free investments

and should be disregarded

when determining the aggre-

gate capital gain or loss for

any year of assessment.

Contribution limitation

Contributions to the tax free

investment is limited to

R30 000 in aggregate during

any year of assessment and

R500 000 in total. The contri-butions must be paid in cash.

Transfers between tax free

investments of the same per-

son should not be taken into

account in calculating the an-

nual or total contributions.

If a person contributes more

than the annual limitation, 40%

of the excess (i.e. contribution

exceeding R30 000) is regard-

ed as normal tax payable dur-

ing that year of assessment in

respect of that investment.

The minister will publish regu-

lations prescribing the re-

quirements to which the in-

vestments must conform in

order to be regarded as tax

free investments.

The Financial Services Board

will be responsible for super-

vising and enforcing compli-

ance to these regulations.

Section 12T comes into oper-

ation on 1 March 2015.

Tax free investments are de-

fined in the newly promulgat-

ed section 12T of the Income

Tax Act as any financial instru-

ment or policy as defined in

section 29A which is adminis-

tered by a person or entity

designated by notice by the

Minister in the Gazette. The

instrument/policy must be owned by a natural person (or

his/her deceased/insolvent

estate which is deemed to be

the same person as the natu-

ral person for contributions

made.

Any amount received or ac-

crued under such investment

is exempt from normal tax

It isn’t what you

have, or who you

are, or where

you are, or what

you are doing

that makes you

happy or

unhappy. It is

what you think

about.

Dale Carnegie

Page 10 The Professional

The fourth-monthly VAT cate-

gory for vendors was intro-

duced in 2005 to assist small

retailers. Vendors could regis-

ter under this category if the

vendor made taxable supplies

of R1.5 million over a 12

month period. There were

however less than 1 000 ven-

dors registered under this category accounting for mere-

ly R44 million output tax and

deducting R23 million input

tax.

Section 27 of the VAT Act

was therefore amended to

delete the definition of

‘Category F’ as well as any

reference thereto in section

27. [Refer to section 28 of the

Tax Administration Laws

Amendment Act of 2014.]

This amendment comes into

operation on 1 July 2015 and

applies to tax periods com-

mencing on or after that date.

According to the Memoran-dum on the Objectives of the

Tax Administration Laws

Amendment Bill, vendors

registered under category F

will be moved to category A

or B which are bimonthly

categories. Consequently,

these vendors will be required

to submit VAT returns every

two months instead of every

four months.

Court cases

CSARS v Africa Cash & Carry (Pty) Ltd & 18 Others — Preservation order

TC-VAT 1005 JHB — Zero or standard rating of amount iro building houses

Draft documents for public comment

Draft Binding General Ruling (Dividends Tax) — Termination of STC credits

(20/2/2015)

Fourth batch of Customs Control Rules (20/2/2015)

Draft comprehensive guide to CGT (Issue 5) (31/5/2015)

Interpretation Notes

Interpretation Note 20 (Issue 5) — Additional deduction for learnership agreements

Category F vendors

What’s new @ SARS?

Tax compliance status

cient and effective collection

of revenue).

A senior SARS official may

only issue such confirmation if

the taxpayer is registered for

tax and does not have any

Outstanding tax debt

(excluding certain catego-

ries, e.g. debt suspended

under section 164);

Outstanding return, unless

an acceptable arrangement

was made with SARS.

The confirmation must be in

the prescribed form an include

at least:

The original date confirma-

tion is issued to the taxpay-

er;

Name, tax reference num-

ber and identity number or

company registration num-

ber of the taxpayer;

Confirmation of tax com-

pliance status of the tax-

payer.

Taxpayers may, under section

256 of the Tax Administration

Act, for a confirmation of the

taxpayer’s tax compliance

status.

SARS must issue or decline to

issue the confirmation of the

taxpayer’s tax compliance

status within 21 business

days from the date the appli-cation is submitted (or such

longer period reasonable re-

quired if a senior SARS official

is satisfied that the confirma-

tion may prejudice the effi-

The best way

to predict the

future is

to create it.

Abraham Lincoln

Page 11 Volume 6, Issue 1

The IASB met in public from

20-22 January 2015 at the

IASB offices in London, UK.

The following topics were

discussed during the meeting:

Leases

Conceptual Framework

I F R S f o r S M E s

(Comprehensive Review

2012–2014)

Disclosure Initiative

IAS 19 Employee Bene-

fits and IFRIC 14 IAS19—

The Limit on a Defined

Benefit Asset, Minimum

Funding Requirements and

their Interaction

Measuring investees at fair

value through profit or loss:

a n i n v e s t m e n t - b y -

investment choice or a con-

sistent policy choice

Sale or Contribution of

Assets between an Investor

and its Associate or Joint

Venture: Narrow-scope

Amendment to IFRS 10 and

IAS 28, issued September

2014—Interaction with

paragraph 32 of IAS 28

Insurance Contracts

Emissions Trading Schemes

The IASB meets at least once

a month for up to 5 days. The

next IASB meetings are sched-

uled for:

16-20 February

16-20 March

27-30 April.

size and nature of the omis-

sion or misstatement judged in

the surrounding circumstanc-

es. Users are however as-

sumed to have a reasonable

knowledge of business and

economic activities and ac-

counting and a willingness to

study the information with

reasonable diligence.

If the IFRS does not specifical-

ly address a transaction, event

or condition, the entity’s man-

agement has use its judgment

in developing and applying an

accounting policy that results

in information that is:

relevant to the economic

decision-making needs of

users, and

Accounting policies are the

specific principles, bases, con-

ventions, rules and practices

applied by an entity in prepar-

ing and presenting financial

statements. If IFRS specifically

addresses a transaction, other

event or condition, an entity

has to apply IFRS, unless the

effect of applying another method would not be materi-

al.

Omissions or misstatements

of items are material if they

could, individually or collec-

tively, influence the economic

decisions of users made on

the basis of the financial state-

ments.

Materiality depends on the

reliable in that the financial

statements:

Faithfully represent

the financial position,

financial performance

and cash flows of the

entity

reflect the economic

substance of transac-

tions, other events and

conditions, and not

merely the legal form;

are neutral, i.e. free

from bias;

are prudent; and

are complete.

IASB update

SMEs—Accounting policies

IFRS for SMEs

The IASB met on 21 January 2015 to discuss an issue that had arisen during the balloting process

of the amendments to the IFRS for SMEs. Those amendments resulted from the initial comprehen-

sive review of the IFRS for SMEs. The issue related to the transition requirements for the option

to use the revaluation model for property, plant and equipment. The IASB decided to require pro-

spective application of the option to use the revaluation model from the beginning of the period in

which the entity first adopts the amendments. All IASB members agreed.

Next steps

The amendments are expected to be issued in the first half of 2015. The IASB will discuss the pro-

cedures surrounding future reviews of the IFRS for SMEs at its February 2015 meeting .

You must take

personal

responsibility.

You cannot

change the

circumstances,

the seasons, or

the wind, but

you can change

yourself.

Jim Rohn

Page 12 The Professional

Section 13 sets out the princi-

ples for recognizing and meas-

uring inventories which are

current assets –

Held for sale in the ordinary

course of business

In the process of produc-

tion for such sale or

In the form of materials or

supplies to be consumed in

production process or in

the rendering of services.

Measurement

Inventories must be measured

at the lower of cost and esti-

mated selling price less cost to

sell. Entities may use tech-

niques like standard costing,

the retail method or most

recent purchase price for

measuring the cost of invento-

ries is the result approximates

cost.

Cost

Cost includes all costs of pur-

chase, cost of conversion and

other costs incurred in bring-

ing the inventories to its pre-

sent condition and location.

The cost of inventories of

items that are not ordinarily

interchangeable and goods or

services produced and segre-

gated for specific projects has

to be measured by using spe-

cific identification of their

individual costs. In other in-

stances, the cost has to be

measured using the first-in,

first-out (FIFO) or weighted

average cost formula. The last-

in, first-out (LIFO) method is

not permitted. The same cost

formula has to be used for all

inventories that are similar in

nature and use for the entity.

Cost of purchase

The cost of purchase includes

the purchase price, import

duties and other taxes (other

than those subsequently re-

coverable, e.g. input tax in the

case of a vendor), transport,

handling and other costs di-

rectly attributable to the ac-

quisition of finished goods,

materials and services. The

entity must however also

remember to deduct trade

discounts, rebates and other

similar items from the costs of

purchase.

If the entity purchase invento-

ry on deferred settlement

terms (i.e. on credit where interest is charged), the cost

of purchase should exclude

the interest component of the

price which should be recog-

nised separately over the peri-

od of the financing.

Cost of conversion

Cost of conversion include

costs directly related to the

units of production, (e.g. di-

rect labour) as well as the

systematic allocation of fixed

and variable production over-

heads that are incurred to

convert raw material into

finished goods.

Fixed overheads (e.g. rental of

the production area) has to be

allocated on the basis of the

normal capacity of the pro-

duction facilities. Normal ca-

pacity means the production

expected to be achieved in

average over a number of

periods or seasons under

normal circumstances. The

actual level of production may

be used if it approximates the

normal production. The

amount of fixed overhead

allocated to each unit of pro-

duction should not be in-

creased as a consequence of

low production or idle plant.

Unallocated overheads should

be recognised as an expense

in the period it is incurred.

Variable overheads are allo-

cated on the basis of the actu-

al use of the production facili-

ties.

Exclusions

The following costs must be

excluded from the cost of

inventories:

Abnormal amounts of wast-

ed materials, labour and

other production costs;

Storage costs, unless these

costs are necessary during

the production process

before a further production

stage;

Administrative overheads

that do not contribute to

bringing the inventory to its

present location and condi-

tion; and

Selling costs.

Impairment

SMEs has to assess at the end

of each reporting period

whether any inventories are

impaired, i.e. if the carrying

amount is not fully recovera-

ble as a result of damage, ob-

solescence etc. If impairment

occurs, these inventories have

to be measure at selling price

less cost to sell (net realizable value) and an impairment loss

has to be recognised for the

difference between the carry-

ing amount and the net realiz-

able value.

Allocation to other asset

accounts

There may be instances where

inventory is allocated to other

asset accounts, e.g. if invento-

ry is used as a component of

self constructed property,

plant and equipment. In these

instances the inventory will

form part of the cost of the

other asset and is depreciated

(if appropriate) in accordance

with the section of IFRS rele-

vant to that type of asset.

Disclosure

The SME must disclose the

following:

Accounting policy, includ-

ing cost formula used;

Total carrying amount of

inventories (and classifica-

tions) as well as pledged

inventories; and

Impairment losses.

Inventory—Section 13 of IFRS for SMEs

A successful

man is one who

can lay a firm

foundation

with the bricks

others have

thrown at him.

David Brinkley

Page 13 Volume 6, Issue 1

Primary Business Address

252 Rosmead Avenue Wynberg

7780

Phone: (021) 761 6211 Fax: 086 637 6989

Report misconduct to:

ceo@iacsa.co.za

QUERIES

General: Abeeda Busch info@iacsa.co.za

Membership Soraya Busch members@iacsa.co.za

Wendy van der Heyde members2@iacsa.co.za

Finance Duncan Stark finance@iacsa.co.za

Valencia Williams finance2@iac.co.za

Marketing Magsoedah Fakier marketing@iacsa.co.za pa@iacsa.co.za

CEO & Technical

Ehsaan Nagia: ceo@iacsa.co.za

The Institute of Accounting and Commerce (IAC) is a professional accounting insti-

tute. Established in 1927, it is registered in South Africa as a section 21 company. It is

fully self-funded and conducts its business from its Head Office in Cape Town.

MISSION STATEMENT

It is the aim of the Institute of Accounting and Commerce to promote actively the

effective utilisation and development of qualified manpower through the achievement

of the highest standards of professional competence and ethical conduct amongst its

members.

INSTITUTE OF

ACCOUNTING AND

COMMERCE

A dynamic world-class professional accounting institute

www.iacsa.co.za

CPD

The Institute, being affiliated with SAQA and registered with CIPRO and SARS, requires all

its members to comply with our Continued Professional Development (CPD) requirements.

CPD refers to ongoing post-qualification development aimed at refreshing, updating and

developing knowledge and skills of professionals. Our members are required to be compe-

tent to carry out their duties and responsibilities and therefore have a duty to maintain a

high level of professional knowledge and skills required to carry out their work in accord-

ance with all relevant laws, regulations, technical and professional standards applicable to

that work. All members should complete 40 hours of CPD per calendar year (1 January - 31 Decem-

ber) of which 50% must be structured CPD and 50% must be unstructured. Tax practition-

ers must log a minimum of 15 tax related CPD hours per calendar year, of which 60% must

be structured and 40% unstructured. Structured CPD hours can be obtained by attending

courses, seminars and lectures and by performing research and/or writing technical articles.

Attending the monthly IAC discussion group also counts towards structured CPD hours.

Unstructured CPD hours can be obtained by reading technical and business literature, in-

cluding the IAC’s newsletter.

The Board further recommended that CPD hours need to be broken down into the follow-

ing categories:

Accounting (i.e. IFRS)

Taxation

Company Law

Auditing & Review Engagements

Other (which is appropriate to the type of work undertaken by the member).

Members must log their CPD hours on the IAC’s website.

Please note that the following penalties will be levied if a member fails to meet the CPD

requirements:

First time offenders – R 2 000 and catching up on outstanding CPD hours;

Second time offenders ­ R 5 000 and catching up on outstanding CPD hours;

Third time offenders – R 10 000 and catching up on outstanding CPD hours and

More than 3 offences – IAC membership is cancelled.