Occupational Certificate Tax Professional Knowledge

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Occupational Certificate Tax Professional Knowledge (Syllabus Specificated) Curriculum Guide 2020

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I. Background Pursuant to the mandate of the Quality Council for Trades and Occupations, the Tax Professional programme requires three components for passage. These components consist of: (i) a knowledge component, (ii) a practical component, and (iii) a workplace / work training component. The purpose of this document is to provide the full spectrum of learning required for the knowledge component. This knowledge requires an understanding of legislative acts and authoritative interpretations as listed below (include SARS guides which are not officially viewed as dispositive). The curriculum outline also includes recommended study materials (in this case, “South African Income Tax” by Silke). Trainees (and Skills Development Providers) are free to utilise other study materials that cover the same learning coverage.

II. Learning Objectives Tax Professionals have multiple skills. Tax professionals can handle tax compliance, tax controversy and tax advisory. Tax professionals may work in a range of knowledge areas or may be specialised to a select few. The core knowledge areas of tax directly or indirectly pertain to company income tax (IT14 company returns), value-added tax (VAT 201 returns), personal income taxes (IT12 personal returns) and employer payroll taxes (EMP 501 employer returns). Some of these knowledge areas include cross-border (international) considerations. Tax Professionals deal with a range of clients, mostly businesses and high net-worth individuals / families. Most businesses are of a medium-to-large nature (typically exceeding R20-to-25 million in revenue and possibly including listed companies). Tax Professionals must have analytical skills. They need to be able to assess risk, especially in terms of their advisory capabilities. Tax Professionals need to be able to develop and organise arguments with credibility, both in terms of tax controversy and advisory. Understanding compliance is key, including audit review. The primary role of a Tax Technician is compliance. Compliance involves more than just preparation but assurance that the numbers and statements satisfy the full standards of law and due diligence regarding the facts provided.

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III. Overall Knowledge Modules Unlike the syllabus of many tax programmes, the syllabus for the Tax Professional programme has been specifically arranged in a logical / transaction order. Tax law needs to be understood in a practical and transactional setting. Most of the coverage relates to income tax with a secondary emphasis on value-added tax and other secondary taxes. In terms of specific categories, the Tax Professional Programme falls into ten knowledge modules, as follows:

Fundamentals 1. General Tax Fundamentals 2. Advanced Tax Fundamentals 3. Accounting for Tax Fundamentals 4. International Tax Fundamentals

Core Subspecialties 5. Corporate / Shareholder Transactional Taxation 6. Indirect Taxation 7. Personal Taxation 8. Employment Payroll Taxation 9. Wealth Succession Planning (Lifetime and Death Transfers)

Tax Controversy and Practice

10. Tax Administration and Practice Management

III. Detailed Coverage

Fundamentals – Overall note: The purpose of the first four modules is to cover the essential basics associated with income taxation. This analytical framework is expected of every tax trainee in the Tax Professional programme.

1. General Tax Fundamentals Trainees are expected to have an in-depth understanding of the basic conceptual framework associated with income tax. This segment represents the core basics at both an academic level and for practical application.

Fundamental Conceptual Pillar I: Overall Income Tax Calculation Trainees must understand the core formula associated with the income tax calculation to determine taxable income as applied to a specific taxpayer at a specified tax rate. This formula essentially acts as the “spinal cord” for the income tax system. More specifically, this pillar

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mainly covers the net profit (i.e. taxable income) formula, tax rates, identification of key taxpayer types, and the nature of annual tax periods.

Fundamental Conceptual Pillar II: General Inflows & Outflows This pillar covers general revenue flows and outflowing expenditures. These flows include items, such as services, general rentals and related operational expenses. At issue in a tax sense is whether and when to account for these items as well as the calculation of amounts. Part A: Gross Income / Exempt Income: The income tax formula begins with the

calculation of receipts and accruals. These receipts and accruals are taken into account during one or more years of assessments under the general “gross income” formula definition (before paragraph (a)). Special additional inclusions of gross income exist to override the potential treatment of certain receipts and accruals as capital in nature and further special inclusions can be found elsewhere in the income tax act (via paragraph (n) of the section 1 “gross income” definition). In a limited number of cases, certain exemptions exist (under section 10). These exemptions can be in regards to a whole entity (e.g. a sphere of government) or in regards to particular categories of receipts and accruals (e.g. dividends).

Part B: Deductions and Assessed Losses: The income tax formula then allows

deductions to be subtracted so as to determine “taxable income”. Deductions are initially found in section 11(a) under the general deduction formula associated with trading activities. Special deductions also exist in other paragraphs of section 11 or are derived from other sections of the income tax act (with section 11(x), thereby bringing these other sections technically into operation). Deductions may stem from expenditures incurred during the current year of assessment or as excess deductions from prior years (known as assessed losses).

Fundamental Conceptual Pillar III: General Property Disposals

The disposal of property operates differently in a tax sense from the general flow of revenue and expense outlined in Pillar II. Properties of this nature fall into three practical groups: immovable property, movable property and intellectual property. Part A: Character Determination of Overall Disposal: In terms of income tax, each of

these property groups will typically be classified as trading stock, capital assets and allowance assets for tax purposes. The question of classification is generally based on facts-and-circumstance (e.g. ordinary versus capital) and must be determined upfront because each classified group has its own system of determining gain or loss (as well as the impact on tax rates).

Part B: Disposals of an ordinary nature: The disposal of assets giving rise or ordinary

gain and loss is generally referred to as trading stock. Trading stock largely consists of business inventory but may also consist of others assets held largely for disposal (as opposed to assets held for use or long-term investment).

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Part C: Disposals of a capital nature: The disposal of capital assets fall entirely under

the capital gain system of the 8th Schedule. These extensive rules have their own system of deemed disposals, value determinations, anti-loss rules and exclusions.

Part D: Impairing Allowance / Depreciable Assets and Subsequent Disposals: Allowance

assets fall under a mix of ordinary revenue / loss and capital gain / loss. In the main, allowances assets are capital assets that can be depreciated / amortized over the life of the asset, thereby generating a stream of ordinary deductions. This system of depreciation / amortization is roughly akin to the financial accounting system of impairment. The disposal of these assets give rise to a mix of ordinary and capital consequences.

Fundamental Conceptual Pillar IV: Tax Reporting and Payments

Tax practice is not just a theoretical exercise. Once the core calculations are complete, the information must be properly submitted to SARS. Taxpayers must make payment or claim refunds. Income tax payments are not just a year-end event, but must also be preceded by interim payments (known as provisional taxes). 2. Advanced Tax Fundamentals The tax law contains many subsystems in addition to the core conceptual systems outlined above. Each of these subsystems is self-contained – some defer or accelerate gains and losses while others ensuring appropriate matching principles. The purpose of this core pillar is to introduce a staple array of unique subsystems that commonly apply to local business activities (e.g. as a company operation or as a sole proprietorship). Part A: Capital and allowance asset rollovers and deferrals: The tax system contains

various rollover / deferral regimes. In these regimes, gain or loss is disregarded upon disposal when certain conditions apply. These conditions typically require a reinvestment in comparable assets or a transfer within the same economic unit. The deferred gain / loss will only be triggered upon a subsequent disposal. This part also serves as an important entry to other more advanced rollover regimes in specialised areas (e.g. particularly corporate formations and reorganisations).

Part B: Leases: Commercial leases are a frequent method of business occupation.

Under this subsystem, there is a dual impact – a deduction for the rent paid by the commercial lessee (i.e. tenant) and gross income for the commercial lessor (i.e. a landlord). Other dual systems are required in the case of lease premiums and lessee improvements on lessor land.

Part C: Debt / Loans (Initial Funding and Repayments): The most common form of

business financing is via borrowing (e.g. from a bank or other source). Lending has two elements – the underlying capital loan and the interest charge. This part covers the initial lending and repayment (Note: Failure to repay creates

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another set of rules for creditors who may be eligible to claim a capital /ordinary loss and for debtors who may have resultant capital gain / ordinary revenue).

Part D: Foreign currency: South African businesses regularly utilise foreign currency in

the case of imports and exports as part of everyday operations. Taxation of foreign currency is very unique among asset classes in that foreign currency gains and losses are generally taken into account annually even if not disposed of (i.e. still held at annual year-end).

Part E: Government grants: Grants may be exempt, but the use of government funds

can hardly be viewed as a taxpayer expenditure incurred. This subsystem ensures that the direct or indirect receipt of government funds is not reduced in value by the burden of tax. However, taxpayers cannot claim a deduction to the extent expenses are subsidised by government grants nor can assets purchased with subsidised funds be considered a taxpayer cost.

Part F: Business incentives: Government frequently utilises the tax system to

incentivise certain activities. This part focuses on a few frequently used incentives with either a business focus or an employment focus. While incentives may differ, the overall structure contains recurring similarities. For purposes of this qualification, the knowledge level is required to be at a diagnostic level only.

Part G: Small and Micro Business Relief: Like most countries, South Africa provides

special measures of relief for small and micro-business to ease the tax burden and reduce compliance. In the case of tax professionals, the core focus will be on small business relief (as opposed to the micro-business turnover tax, which is infrequently used).

Part H: Specialised Industries (Farming and Mining): Certain businesses operate

uniquely, requiring their own set of special tax rules. In South Africa, the most notable regimes are for farming and mining (i.e. primary sector). Farming may have a crop focus or a livestock focus. Mining typically encounters large capital intensity and timing challenges in terms of price volatility. For purposes of this qualification, the knowledge level is required to be at a diagnostic level only.

This module closes with the concept of tax avoidance, which tends to be a permeating issue throughout the tax system. Although the tax law has a strong preference for hard objective rules over (subjective (e.g. intention-based) rules, concerns have grown that clever tax planners can misuse those rule so that the technical wording works against the underlying intention. Trainees must accordingly focus on the judicial doctrine of substance-over-form, the general anti-avoidance rule and other longstanding subjective anti-avoidance rules that are recurrent concern for planning, compliance a controversy purposes. 3. Accounting for Tax Fundamentals Accounting information is often the key facts relied upon as evidence for tax return calculations. Compliance requires a continuous connection between accounting and tax. Tax

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planning must synchronise both the tax and the accounting so that the substance of the plan can be fully understood and justified. Tax controversy can often turn on the accounting because the accounting may be the best demonstration of the underlying business substance. Students must accordingly have a solid awareness of accounting and how the accounting numbers translate into tax numbers (with appropriate adjustments). Given that most (if not all) trainees are assumed to have an accounting background based on their university or other experiences, no additional knowledge criteria is specifically listed for this module. Students will integrate their accounting and tax knowledge mainly via simulations (i.e. practical knowledge component) and work training. At a more detailed level, tax professional trainees must:

• Be familiar with the terms and concepts contained within core accounting statements regarding profit and loss (e.g. the statement of profit and loss and other comprehensive statement of income);

• Be familiar with terms and concepts regarding balance sheet assets and liabilities (e.g. the statement of financial position); and

• Be familiar with the general concepts associated with trial balances and general ledgers. These concepts include the distinction between current and non-current assets / liabilities, the basics of equity (e.g. share capital versus debt), impairments and similar financial basics. Tax professionals must additionally be familiar with commonplace terminology and processes (e.g. the meaning of a deferred tax account and the general role of IFRS). In terms of reading, tax professionals should be able to rely on their books used in university relating to financial accounting. 4. International Tax Fundamentals

A. Overview

Most of the programme is focused on transactions between domestic taxpayers in terms of domestic activities. However, tax professionals must understand the basics of cross-border taxation. The basic framework entails two sets of considerations:

• South African residents versus foreign tax residents; and

• South African activities versus foreign activities. South African tax can apply only when South Africa has taxing jurisdiction (i.e. a nexus) to the person or the underlying activities. Like most modern countries, South Africa taxes its (e.g. individual and corporate) tax residents on a worldwide basis. South Africa also taxes foreign tax residents on their South African tax residents. South Africa also has an extensive network of tax treaties. These treaties allocate taxing rights between countries so as to eliminate double taxation (and also to promote cross-border reporting and enforcement). The first portion of this module covers the overall framework for this allocation, including the basic role of tax treaties. Key aspects of this portion focus on the rules that distinguish

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domestic tax residents from foreign tax residents (including tax treaty adjustments where dual country tax residence is otherwise claimed). This portion also focuses on distinguishing activities that have a South African source versus a foreign source.

B. South African Activities of Foreign Tax Residents (Inbound) Special rules apply when foreign persons operate within South Africa. Foreign persons are either subject to direct taxation or South African persons must withhold tax when making payments to foreign persons. This portion focuses on both tax mechanisms with the main focus being on cross-border withholding. Three main forms of cross-border payments are at play – royalties, interest and dividends. South African taxation of these items can also be eliminated or reduced via tax treaty.

C. Foreign Activities of South Tax Residents (Outbound) This portion of the module focuses on South Africans with foreign activities. As stated above, South Africans are subject to worldwide taxation so all foreign income must be included as income on a South African taxpayer’s tax return. However, this worldwide tax system is subject to key adjustments:

• South African taxpayers receive section 6quat rebates (i.e. tax credits) for taxes “proved to be payable”. The purpose of this rebate is to eliminate double taxation (with South Africa yielding in favour of the other country because the activities arise in that foreign country).

• The South African tax system also contains a number of limited exemptions. This module focuses on the most common foreign exemptions: (i) the exemption for foreign-earned salaries and the exemption for foreign dividends, (ii) as well as capital gains for the disposal of foreign shares.

5. Core Subspecialties (Modules 5 through 9) In addition to the fundamentals above, trainees should have a broader understanding of certain specialty areas that are expected of most mid-level tax professional trainees. While most trainees may find that only certain of these specialities are of use on a daily basis, a basic understanding of these areas is intermittently required for peripheral use and engagement with other tax experts. The introductory specialities outlined below form the basis of the expertise that is the main object of most tax professionals. These specialties are as follows: 1. Corporate / Shareholder Transactional Taxation 2. Indirect (e.g. Value-Added) Tax 3. Personal Taxation 4. Employment Payroll Taxation 5. Family and Wealth Taxation

A. Specialty I – Corporate / Shareholder Transaction Taxation: Most profit-making business in South Africa operate as a company. Companies are separate taxpayers whose operations are taxed accordingly. One unique aspect of companies is the relationship between the company and its owners (i.e. shareholders). It is these transactions

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between the company and its shareholders that forms the basis of the work undertaken by many company tax specialists.

➢ Company formations: The first stage of the shareholder / company relationship entails

the company’s formation. This stage entails the transfer of cash and assets to a newly formed company in exchange for newly issued shares. This formation can be taxable or tax-free (i.e. tax-deferred via the reorganisation rollover rules). This area also includes some basics about the securities transfer tax.

➢ Taxation of company distributions to its shareholders: One of the primary functions of a company is to produce profits for its shareholders that can be distributed as dividends. Alternatively, distributions can be made that represent a return of capital (i.e. the initial investment). In tax, the shareholders can freely choose whether they want the profits first or a return on the initial investment. Dividends are taxed at a flat 20 per cent rate. Return of capital distributions reduce the base cost in shares and / or trigger capital gains tax. A variation on this theme are other forms of distributions, such as share buybacks and liquidations.

➢ Taxable Company Acquisitions: There comes a point when the owner of the company may seek to sell his or her shares in a company. This is a common event for practitioner advise. In most cases, these sales are taxable events. The main issue is whether the owner directly sells the shares or the underlying company sells the business. The purpose of this portion of the module is to unpack both forms of sale.

➢ Debt Corpus: Besides equity investments, the second major source of funding for

companies is debt borrowed from banks and other sources. The advanced tax fundamental module addresses simply debt creation and repayment. In this subspecialty, the focus is mainly on the impact of concessions of compromises of underlying debt.

B. Indirect Tax

1. VAT Overview and initial formalities Trainees are expected to understand the basic mechanics of “output and input” calculations required for VAT 201 returns. They must also understand the underlying purpose of the VAT system. This understanding must include a solid foundation of the basic concepts of standard rated, zero rated and exempt supplies. Trainees must additionally understand the initial formalities associated with VAT. These initial formalities include:

• Registration: Trainees must understand how clients can register for VAT to become a VAT vendor – including “who may” / “who must” register for VAT and when registration must occur. This understanding requires a basic knowledge of the definition of “enterprise” for general private sector activities as well as the rules relating to taxable turnover that form part of the “enterprise” calculation.

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• Tax periods: VAT vendors are required to submit VAT 201 returns periodically throughout the year. Most VAT vendors must submit returns every two months or every month.

2. Basic VAT compliance in terms of taxable supplies

Basic VAT 201 return calculations as well as the time periods for filing returns (e.g. monthly and bi-monthly) are core to a fundamental understanding of VAT. Trainees are expected to have the knowledge to service small or medium size companies as well as individual businesses in terms of making these calculations. Trainees must further understand the input and output calculations required for goods (both trading stock and capital) as well as for services in respect of purchaser / clients. These input / output calculations will include the basics associated with imports and exports.

3. Common VAT Zero Rated and Exempt Supplies Trainees must be familiar with recurring zero-rated and exempt supplies that often arise in the small and medium business sector. In terms of zero-rated goods, trainees must be aware of the list of zero rated goods (e.g. for food and fuel) and the zero-rated claims for direct exports. Trainees must additionally know the basics associated with exempt supplies, especially the supply of transport, education, residential rentals and straight-forward financial services (e.g. credit / debt, shares and currency). Of further importance is how to account for (i.e. exclude) direct inputs associated with exempt outputs.

4. Frequently Recurring Special Circumstances Beyond the core concepts outlined above, VAT (like the Income Tax) contains a number of special rules and subsystems. These subsystems are designed to extend the VAT into unique circumstances. Recurring circumstances of this kind include second-hand goods, employee motor cars (and other employee fringe benefits), irrecoverable debts and fixed property rentals. Some basic general awareness of the VAT as applied to farming is also expected (similar to the diagnostic awareness of income tax as applied to farming).

5. Special Rules for VAT Administration

VAT contains its own rules pertaining to administration. Tax periods are more recurring (generally bi-monthly or monthly). Most notably, the key to any VAT system are refunds to ensure that the VAT does not effectively apply to business-to-business transactions. Another key feature of VAT is the required accuracy of VAT invoices, especially in terms of claiming input credits.

6. Basics of Customs Duty

Another key indirect tax is Customs, which is largely a specialty on its own (often seen as a separate form of revenue from other nationally imposed taxes). Trainees are expected to have a general diagnostic awareness of customs and its core essentials. Customs Duty applies to the import of goods, and these imports must be coo-ordinated with the VAT. Customs is based on

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three concepts – origin, classification and valuation. When calculating duties, these calculations may contain rebates, drawbacks ad refunds. In some cases, anti-dumping and countervailing duties may apply in order to ensure fair trade.

C. Personal Taxation Tax preparation for individual tax returns (IT12s) is a specific line of activity for many practitioners. Tax returns for most individuals differ significantly from business returns. – many deductions are denied to prevent private / personal consumption while also containing special relief measures and incentives to assist middle and lower-income families save or cover core needs. Many tax practitioners provide this service for individual shareholders as part of their service for the underlying business. ➢ Special net calculations: Individual tax returns contain a number of special automatic relief

measures designed to mitigate taxation of middle and lower-income workers. These include the primary rebate and the annual exclusion.

➢ Special deduction limitations, medical credits, retirement and capital gain adjustments: Individuals cannot deduct private expenses or expenses that can easily masquerade as private expenses. On the other hand, government provides relief for medical aid contributions or the sale of the home and other personal effects.

➢ Retirement funds: Government has created a whole array of retirement fund rules in order

to facilitate long-term savings so that individuals have savings upon retirement. Under this system, contributions are generally deductible, the growth is tax-free while in a fund and tax occurs on pay-out. This deferred tax effectively arises only upon retirement consumption.

➢ General savings: Individuals have an array of savings products to choose from them – each

of which offer a tax outcome. For most middle and upper-income earners, these savings products entail institutional savings products, such as bank interest, collective investment schemes, insurance products and investment units in real estate investment trusts.

➢ Basics of Transfer Duty: A common issue for many individuals is the purchase of a home.

This purchase typically triggers Transfer Duty, which may be substantial. Although this area is typically dealt with by conveyancers and real estate attorneys, tax practitioners are expected to have a general awareness of this area given that this area may be the subject of a general discussion with clients.

D. Employment Payroll Taxation The taxation of individual salary earners are effectively split into two as a practical matter. Individual taxpayers must file their own independent tax returns (IT12s) at year-end as outlined above. In addition, individual employee salaries must be taxed on a monthly basis. This monthly tax obligation falls on the employer with certain tax specialists solely dedicated to payroll and the related monthly-related payment of the tax imposed on payroll.

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➢ Employees’ Tax (Pay-As-You-Earn Withholding): Employers must withholding tax on salaries on a monthly basis to be paid over seven days after every month. Most withholding is fairly straight-forward. However, special concerns do arise, such as employment versus independent contractor status, part-time and occasional employees and irregular payments.

➢ Fringe benefits: Salary comes in many forms. Salary can come as a bonus, accrued and sick leave, exit payments and often disguised as an allowance (e.g. travel, entertainment and subsistence). Salary can also be in the form of cash or in-kind – all of which has a value. The purpose of the tax rules is largely to value these fringe benefits in a simplified manner with special relief mechanisms for certain government preferred priorities (e.g. bursaries).

E. Wealth Succession Planning (Lifetime and Death Transfers)

Wealth planning is a combination of estate preservation, investment growth and tax minimisation. Tax practitioners can be specifically dedicated to wealth preservation while others find themselves assisting their small and entrepreneurial clientele with preservations as the businesses reach maturity.

➢ Family Income Taxation: The starting point for the tax system is to treat each individual as

a wholly independent taxpayer even if those individuals are part of the same family economic unit. While this principle eases administration, the tax law contains certain attribution rules to prevent the artificial shifting of income from high-income earners to low-income earners merely to mitigate tax. In other cases, special allocations of income are required to represent the various forms of marriage (community of property, ANC with accrual and without accrual).

➢ Taxation of donations: Donations trigger both an income tax consequence and a Donations

Tax consequence. In terms of income tax, the donation of an asset generally triggers capital gain based on the fair value of the asset less the tax cost. In terms of the Donations Tax, the charge generally triggers a 20 per cent charge (less the R100 000 annual exemption).

➢ Taxation at death: Death has a similar dual consequence to donations. In terms of the

Income Tax, the death of an individual generally triggers gain or loss on all assets held immediately before death (triggering capital gains or ordinary revenue). Death also triggers the Estate Duty at 20 per cent. This 20 per cent charge largely falls on the net value (gross assets less debts owed) of the estate.

➢ Trusts: One core feature of estate planning is a trust. Trusts can preserve wealth for

multiple generations and remove growth from a person’s estate before death. Many small and medium South African companies are held by domestic trusts established by a founding business owner or entrepreneur. Trusts can be in the simple form of a bewind or vesting trust, both of which automatically give rise to income allocated to the beneficiaries. Most trusts, however, come as a discretionary trust. Discretionary trusts are a flexible vehicle in terms of income / capital gain allocations with income/ gains being allocable to various beneficiaries and the trust itself.

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6. Tax Administration and Practice Management A. Tax Administration Expertise in tax administration has become of increasing importance in the tax field. SARS audit and dispute has become an increasing part of everyday tax practice. Tax returns are no longer simply submitted. SARS increasingly verifies, queries or audits returns. Tax professionals are expected to understand this part of practice in order to properly engage. This form of practice must also be understand when dealing with basic compliance and advisory. ➢ Preliminary Concepts: Tax practitioners must have a basic understanding of the Tax

Administration Act and related acts (such as the Promotion of Administrative Justice Act). Also of importance is an understanding of the roles and responsibility of the basic actors (e.g. SARS, the Tax Ombud and the tax practitioners themselves).

➢ Ancillary Return Administration: There are a number of ancillary aspects to every tax return. Tax returns will be assessed and adjusted (e.g. additional and reduced assessments). Understatements result in interest and penalties. Post-return adjustments may leave taxpayers seeking a reduction or seeking to pay extra without penalty (e.g. via the Voluntary Disclosure Programme). Other common issues pertain to tax clearance certificates, which are often needed by taxpayers to conduct certain forms of business.

➢ Dispute and Settlement: There comes a point when the process becomes increasingly

confrontational, and tax practitioners need to understand the early stages of dispute as issues and amounts in dispute coalesce. These early stages entail a fair amount of information gathering and disclosure. SARS may issue an additional assessment, which may be followed by a formal taxpayer objection. Tax practitioners must be very familiar with these aspects of the process as well as settlement alternatives and payment options. Lastly, tax practitioner must have general familiarity with the role of Tax Board, Tax Court and other judicial processes (most of which will be handled by lawyers and other legal specialists).

B. Practice Management

Tax practitioners must be able to properly manage the affairs of the client, including the practitioner-client relationship. These aspects of tax practice are best learned through simulations and job training. Hence, no specific modules are generally required in terms of these issues. However, one formal part of practice management is a Code of Professional ethics. Trainees are therefore required to review the SAIT Code of Conduct in Relation to Taxation and the South African Tax Standards. Both of these items can be found on the SAIT website.

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General Tax Fundamentals – Knowledge Module #1

Topic KT01: Range of Tax Instruments

Elements

Specific Authorities Study Guide

KT0101: Tax Types General awareness of the multiplicity of South African tax acts, including:

• Income Tax Act

• Value-Added Tax Act

• Transfer Duty Act

• Estate Duty Act

• Securities Transfer Tax Act

• Customs and Excise Duties

• Unemployment Insurance Contributions Act

• Skills Development Levy Act

Table 2.1 of Chapter 2.2.3

KT0102: Charges within the Income Tax Act

General awareness of:

• The Normal Tax

• Cross-Border Withholding

• Turnover Tax

• Dividends Tax

• Donations Tax

Chapters 2.2.3.1 through 2.2.3.5

KT0103: Direct versus Indirect Tax

“Direct versus Indirect Tax: Top 6 Differences You Must Know”, by Wallstreet Mojo (Website)

KT0104: Tax base versus tax rate

Chapter 1.2 and 1.3

KT0105: Annual Tax Legislative Changes

General awareness of the Rates and Monetary Amounts Amendment Act

Chapter 2.2.2

Topic KT02: Overall Income Tax Construction

Elements

Specific Authorities Study Guide

KT0201: Core Components of the Normal Tax (within the Income Tax Act)

Income Tax Act: Section 5(1) and (2) Income Tax Act: Section 1(1) the definitions of:

Chapter 2.5 (“Illustrating the components of normal tax and the interpretation of tax law in South Africa” other than 2.5.1), 2.6

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• “normal tax”

• “taxable income”

• “income”

• “tax” Capital Gains Tax:

• Section 26A

• Eighth Schedule (skim)

(“Comprehensive example”) and 19.2.2 (“Taxation of company profits”) See also Silke Chapter 17.1 (CGT Overview)

KT0202: Tax rates and monetary thresholds

Rates and Monetary Amounts Amendment Act (latest year):

• Paragraph 1

• Paragraph 2

• Paragraph 3 (Up through (a))

Appendices A and B (“Tax monetary thresholds”)

KT0203: Key recurring definitions

Taxable Entities: Income Tax Act: Section 1(1) the definitions of: “company” (paragraphs (a) and (f)) “person” “trust” Income Tax Act:

• Section 1(1) the definitions of: “financial year”, “return” and “year of assessment”

• Section 66(13) (without regard to the provisos)

Income Tax Act: Section 1(1) the definitions of:

• “connected person”

• “relative”

• “spouse” SARS interpretation: Interpretation Note 67 (issue 3)

Chapter 2.5.1 (“The incidence of normal tax”), 3.5 (“Year or period of assessment”) and 13.2.1 (“Connected persons”)

Topic KT03: General Trading Inflows: Single Stream Receipts and Accruals

Element KT0301: General Gross Income Definition General concept: Ordinary receipts and accruals Income Tax Act:

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Section 1 “gross income definition” (opening paragraph before (a) but disregarding (ii) dealing with non-residents)

Sub-Elements Specific Authorities Study Guide

The definition of ‘gross income’

Chapter 3.1 (“Overview”)

Amount in cash or otherwise

CSARS v Brummeria Renaissance (Pty) Ltd; : CIR v Butcher Brothers (Pty) Ltd; Lategan v CIR

Chapter 3.3

Received by or accrued to Chapter 3.4 (opening)

Meaning of ‘received by’ Geldenhuys v CIR; MP Finance Group CC v CSARS; Pyott Ltd v CIR; CIR V Delagoa Bay Connect Co Ltd CSARS v Cape Consumers (Pty) Ltd

Chapter 3.4.1

Meaning of ‘accrued to’ Cactus Investments (Pty) Ltd; CIR v People's Stores (Walvis Bay) (Pty) Ltd Mooi v SIR Gud Holdings (Pty) Limited v CSARS; CIR v Witwatersrand Racing Clubs

Chapter 3.4.2

Valuation of receipt or accrual

CSARS v KWJ Investment (142/2017) [2018] ZASCA 81 (31 May 2018) South Atlantic Jazz Festival (Pty) Ltd v CSARS

Chapter 3.4.3

Disposal of income after receipt or accrual

CIR v Witwatersrand Association of Racing Clubs SIR v Silverglen Investments (Pty) Ltd CSARS v KWJ Investment (142/2017) [2018] ZASCA 81 (31 May 2018)

See also section 7(1) and 7(7)

Chapter 3.4.7

Time of accrual of interest payable by SARS

Section 7E Chapter 3.4.8

Element KT0302: Exclusion for Receipts and Accruals of a Capital Nature General concept: Receipts and accruals of a capital nature are excluded from the gross income definition but may fall under the Capital Gains Tax. Income Tax Act: Section 1 “gross income definition” (opening paragraph before (a) but disregarding (ii) dealing with non-residents)

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Note: This segment deals with single stream receipts and accruals of a capital nature. However, this question mostly arises when the disposal of assets is involved. The capital versus ordinary nature of asset disposals is covered in the topic dealing with “Asset Disposals”.

Sub-Element Chapter Title Study Guide

General concept Chapter 3.6 (opening) (“Receipts and accruals of a capital nature”)

Damages and compensation (CGT)

Paragraph 59 of the 8th Schedule Stellenbosch Farmers’ Winery v CSARS and Fourie Beleggings v CSARS Bos v CSARS

3.6.10 See also Item 7 of Chapter 17.10.2 (“Other exclusions”)

Gambling

Paragraph 60 of the 8th Schedule Paragraph 12.9 in the SARS CGT guide.

3.6.15 See also Item 8 of Chapter 17.10.2 (“Other exclusions”)

Receipt of gifts, donations and inheritances

Chapter 3.6.17 (“Gifts, donations and inheritances”)

Element KT0303: Special Inclusions in Gross Income (e.g. Capital Overrides) Certain items qualify as “capital” via judicial precedent but specific provisions have been added to the “gross income” definition as judicial overrides.

Sub-Elements Tax Act Sections Authoritative Interpretations

Study Guide

Overview Section 1(1) “gross income definition” (opening paragraph before (a) but disregarding (ii) dealing with non-residents)

Chapter 4.1

Annuities Section 1(1): The proviso to paragraph (a) of the definition of “gross income” (focus on basic annuities)

Chapter 4.2

17

See also living annuities and section 10A purchased annuities

Services

Section 1(1): Paragraph (c) of the definition of “gross income” The proviso to paragraph (c)

• CIR v Crown Mines Ltd

• ITC 1439

• CSARS v Kotze

• Stevens v CSARS

Chapter 4.4

Restraint of trade (see also 3.6.20 (Restraint of trade)

Section 1(1): paragraph (cB) of the definition of “gross income”

Chapter 4.5

Services – Compensation for termination of employment

Section 1(1): paragraph (d) of the definition of “gross income” Severance benefits: See also Appendix B and Paragraph 9(c) of Schedule I to the Rates and Monetary Threshold Act of 2017

SIR v Somers Vine See also SARS Interpretation Note 26: (Taxation of CCMA) and Labour Court awards to employees and former employees

Chapter 4.6 (opening)

Services – Commutation of amounts due

Section 1(1): paragraph (f) of the definition of “gross income”

Chapter 4.8

Compensation for imparting knowledge and information

Section 1(1): paragraph (gA) of the definition of “gross income”)

Chapter 4.10

Fringe benefits

Section 1(1): paragraph (i) of the definition of “gross income” Skim Seventh Schedule

Anglo Platinum Management Services v SARS

Chapter 4.12

18

Amounts deemed to be receipts or accruals and section 8(4)(a) recoupments

Section 1(1): paragraph (n) of the definition of “gross income” See also section 8(4)(a) Note that recoupments also arise upon certain asset disposals.

Chapter 4.19

Element KT0304: Exempt Entities and Receipts / Accruals

Note: Some exemptions apply only to particular receipts and accruals while other exemptions apply to the entity as whole. This distinction is indicated below.


Study Guide

Introduction Section 10(1) (opening line)

Chapter 5.1

Sample List of Entity Exemptions

Governments, governmental and local authorities

Section 10(1)(a); (bA); (bB); (c); (t) and

Chapter 5.6.1

Semi-public companies and boards

Section 10(1)(t) and (zE)

Chapter 5.6.6

Public benefit organisations

Section 10(1)(cN) (light review only) Ninth Schedule (Part I) (light review only)

Chapter 5.7.2

Research bodies

Section 10(1)(cA) (light review only)

Chapter 5.11.2 (“Promotion of research”)

Sample List of Receipt / Accrual Exemptions

Exemptions relating to dividends and Dividends from resident companies

Section 10(1)(k)(i) (before all the provisos) See also Section 1(1): paragraph (k) of the gross income definition

5.3 (opening) and 5.3.1 See also Chapter 4.14 (“Dividends” initially as gross income)

19

Note: Many of these dividends may instead be subject to the dividends withholding tax (see Part VIII of the Income Tax Act)

Unemployment insurance benefits

Section 10(1)(mB) 5.4.2

Bursaries and scholarships (but only in respect of non-employees)

Section 10(1)(q) (before the proviso) and (qB) (before the proviso)

5.5.1

War pensions and awards for diseases and injuries (but only disability and compensation)

Section 10(1)(g): war pension; Section 10(1)(gA): disability pension; and (gB)(i): Compensation for Occupational Injuries and Diseases Act; (gB)(iii): compensation where death arose out of and in the course of employment; and (gB)(iv): Road Accident Fund

5.11.4 (lightly review)

Topic KT04: General Trading Outflows: Single Stream Expenditures Incurred

Element KT0401: Core Principles of The General (Section 11) Deduction Formula


Study Guide

General deduction formula

Section 11 (opening paragraph) and (a) Section 23(g)

Chapter 6.1 (“Overview”) and 6.3 (opening) (“General deduction formula”)

20

The meaning of ‘carrying on a trade’

Section 11 (opening paragraph) and (a) See also: Section 1(1) the definition of “trade”

• Burgess v CIR

• Stephan v CIR

• De Beers Holdings (Pty) Ltd v CIR

• ITC 1275

• Robin Consolidated Industries Ltd v CIR

Chapter 6.2

Non-trade expenditure

Section 23(g) Warner Lambert SA (Pty) Ltd v CSARS; CSARS V Seribante Construction (Pty) Ltd

Chapter 6.5.7

Private maintenance expenditure

Section 23(a) See also 11 (opening) and (a)

CIR v Hickson Chapter 6.5.1

Expenditure and losses

Section 11 (opening paragraph) and (a) Section 1 (definition of “trade”)

Port Elizabeth Tramway Company Ltd v CIR Joffe & Co (Pty) Ltd v CIR CSARS v Labat

Chapter 6.3.1

‘Actually incurred’

Section 11 (opening paragraph) and (a)

• Edgars Stores Ltd v CIR

• Nasionale Pers Bpk v KBI

• Caltex Oil (SA) Ltd v SIR

• CIR v Golden Dumps (Pty) Ltd

Chapter 6.3.2 (opening)

Provisions and reserves

Section 23(e) Chapter 6.5.5 See also: Chapter 6.10.3 (“Provisions for anticipated losses or expenditure”)

Recoverable expenditure

Section 23(c) Note: Section 8(4)(a) applies if recovered but not previously denied under section 23(c)

Oosthuizen and Another v Standard Credit Corporation Limited

Chapter 6.5.3

Notional interest

Section 23(h) Chapter 6.5.8

‘In the production of income’


Provider V COT Chapter 6.3.4

21

CSARS v Mobile Telephone Networks Holdings (Pty) Ltd Port Elizabeth Electric Tramway Co Ltd v CIR

Expenditure incurred to produce exempt income

Section 23(f) See also section 10(1)(k)(i)(before all provisos)

Sub-Nigel Ltd v CIR CIR V Nemojim

Chapter 6.5.6

‘Not of a capital nature’

Section 11(opening paragraph) and (a) Note: Incurrals of a capital nature may be added to the cost / base cost of assets (see Pillar III)

• BP Southern Africa (Pty) Ltd v CSARS

• SIR v Guardian Assurance Holdings (SA) Ltd

• Rand Mines (Minding and Services) Ltd v CIR

• New State Areas Ltd v CIR

• ITC 1036

Chapter 6.3.5

‘During the year of assessment’


• Concentra (Pty) Ltd v CIR

Chapter 6.3.3

Element KT0402: The General (Section 11) Deduction Formula: Ancillary Principles


Study Guide

Prepaid expenditure

Section 23H(1) (other than provisos (cc)) and (3)

Chapter 6.4

Interest penalties and taxes

Section 23(d) Chapter 6.5.4

Fines Section 11 (opening paragraph) and (a) Section 23(o)

SARS Interpretation Note 54 (Issue 2) (Deductions: Corrupt activities, fines and penalties)

Chapter 6.10.6

Prohibition against double deductions

Section 23B(1) through (3)

Chapter 6.6

Excessive expenditure

Section 11 (opening paragraph) and (a) and 23(g)

• ITC 792

• ITC 1518

• ITC 575

Chapter 6.8

Cost of assets and VAT

Section 23C(1) (before the proviso)

Chapter 6.9

Variable remuneration

Section 7B

Paragraph 1.4 Explanatory

Chapter 12.2.7

22

Employees’ tax (focus on variable remuneration)

See also Employees’ Tax Withholding

Memorandum on the Taxation Laws Amendment Bill, 2012 10 December 2012

Element KT0403: The General (Section 11) Deduction Formula: Specific Expenses as Interpreted


Study Guide

Advertising Section 11 (opening paragraph) and (a)

• CIR v Pick ‘n Pay Wholesalers (Pty) Ltd

• SARS Interpretation Note 45 (Issue 3)

Chapter 6.10.1

Copyrights, inventions, patents, trademarks and know how

Section 11 (opening paragraph) and (a) See also section 11(gB) and (gC) (deductions as a capital allowance) and section 11D (research and development incentive)

BP Southern Africa (Pty) Ltd v CSARS

Chapter 6.10.2

Damages and compensation


Joffe & Co (Pty) v CIR Chapter 6.10.3

Education and continuing education


Smith v SIR

Chapter 6.10.4

Employment and services rendered


ITC 618 Chapter 6.10.5

Losses: Fire, theft and embezzlement (trading stock to be discussed under Pillar III)


SARS Interpretation Note 80 (Dealing with the income tax treatment of stolen money)

Chapter 6.10.10

Losses – Loans, advances and guarantees


• Stone v SIR

• ITC 249

Chapter 6.10.11

Element KT0404: Special “Section 11” Deductions

Note: These provisions allow for a deduction even though the deduction may be impermissible under the general deduction formula of section 11(a).

23


Study Guide

Restraint of trade payments

Sections 11(cA) and 23(l)

SARS Interpretation Note 7 (Restraint of trade payments)

Chapter 12.2.1 See also Chapters 3.6.20 (“Restraint of trade”) and 6.5.11 (“Restraint of trade”)

Annuities to former employees (disregard partners and dependants)

Section 11(m)(i) Chapter 12.2.5

Legal expenses

Section 11(c) • ITC 1310

• ITC 1154

• ITC 1241

• ITC 1598

Chapter 12.3 See also Chapters 6.10.8 (“Legal expenditure”) and 6.10.9 (“Legal expenditure: Of a capital nature”)

Repairs Section 11(d) Note: Repairs can alternatively be viewed as improvements that add to cost – mainly base cost for Capital Gains Tax purposes (see “Disposal of Assets” module)

• CSARS v Pinestone Properties CC

• ITC 491

• Rhodesia Railways Ltd v Collector of Income Tax, Bechuanaland

• Flemming v KBI

• CIR v African Products Manufacturing Co Ltd

• ITC 915

Chapter 12.4

Bad debt Section 11(i) – one sided concession Note: Reverses prior unpaid accrual or invoices

SIR v Kempton Furnishers (Pty) Ltd

Chapter 12.5

Doubtful debt Section 11(j) Note: Reverses prior unpaid accrual

Chapter 12.6

Allowance for outstanding debt: Credit

Section 24 Chapter12.10

24

agreements and debtor’ allowance

Element KT0405: Special Deductions “Outside Section 11”


Study Guide

Overview: The special deductions, the general deduction formula and prohibited deductions

Section 11(x) Chapter 12.1

Pre-trade expenditure and losses

Section 11A SARS Interpretation Note 51 (June 2018)

Chapter 6.2.1

Deduction of medical lump sum payments

Section 12M Chapter 12.2.3

Deductible donations to public benefit organisations

Section 18A(1)(opening paragraph), (a)(i), not exceeding (B) (10% limit) and (2), (2A)(a) Part II of the 9th Schedule (light review only) See paragraph 62(b) of the 8th Schedule (i.e. capital gains tax relief for the transfer of property as a PBO contribution”)

Chapter 12.9 (“donations to public benefit organisations”) See also Chapter 17.10.2 (Item (10) of “Donations to public benefit organisations and other exempt institutions”)

Future expenditure on contracts

Section 24C (but see section 23(e))

• ITC 1601

• SARS Interpretation Note 78 (Allowance for future) expenditure on contracts

Chapter 12.11

Element KT0406: Assessed (Excess) Losses

25


Study Guide

Assessed losses Section 20(1) (without regard to the provisos) and (2)


Assessed losses – Balance set off by taxpayers other than companies

Section 20(1)(without regard to the provisos), (2) and (2A) See also section 1 (definition of “trade”)

Chapter 12.12.1

Assessed losses – Balance set off by companies

Section 20(1)(without regard to the provisos) and (2) See also section 1 (definition of “trade”)

• SA Bazaars (Pty) Ltd v CIR

• Robin Consolidated Industries Ltd v CIR

• SARS Interpretation Note 33 (Issue 5) (Assessed losses: Companies: The 'trade' and 'income from trade' requirements)

Chapter 12.12.2

Topic KT05: Disposal of Assets

Element KT0501: Ordinary Versus Capital Disposals of Property

Income Tax Act: Section 1(1): Definition of “gross income (before paragraph (a)) Note: The first step in determining the tax impact of disposing any property is to resolve whether the disposal is ordinary or capital in nature. Ordinary disposals are taxed under sections 1 “gross income” definition, 11(a) and 22. Capital disposals are taxed under the 8th Schedule.


Study Guide

Receipts and accruals of a capital nature


Nature of an asset

• CIR v George Forest Timber Company Limited

• CIR v Visser

Chapter 3.6.1

Intention of a company

Elandsheuwel Farming (Edms) Bpk v SBI

Chapter 3.6.2

26

Business conducted with a profit making purpose

CIR v Pick’n Pay Employee Share Purchase Trust

Chapter 3.6.3

Selling an asset to best advantage

CIR v Stott Chapter 3.6.4

Realisation of a capital asset

• CIR v Nel

• CIR v Richmond Estates (Pty)

Chapter 3.6.5

Change of intention

• John Bell & Co (Pty) Ltd v SIR

• Natal Estates Ltd v CIR

Chapter 3.6.6

Mixed purpose COT (Southern Rhodesia) v Levy

Chapter 3.6.7

Secondary purpose

CIR v Nussbaum Chapter 3.6.8

Realisation company

• Berea West Estates (Pty) Ltd v SIR

• CSARS v Founders Hill (Pty) Ltd

Chapter 3.6.9

Isolated transactions

ITC 43 Chapter 3.6.11

Copyrights, inventions, patents, trademarks, formulae and secret processes

Chapter 3.6.13

Kruger Rands CIR v Nel Chapter 3.6.19

Share transactions

• Anglovaal Mining Limited v CSARS

• CSARS v Capstone 556 (Pty) Ltd

Chapter 3.6.21 (disregard employees’ share trusts and portfolios in a collective investment scheme)

Deemed capital receipts from the disposal of shares (limit to section 9C(1) and (2) discussion)

Section 9C(1) and (2) Chapter 14.10

Element KT0502: Disposals of an Ordinary Nature (Trading Stock) - Basics Income Tax Act:

27

Section 22 but note that section 11(a) applies on purchase and the section 1 “gross income” definition on inclusion.


Study Guide

Overview Section 22(1) and (2) (light review) See also Section 1 (definition of “trading stock”) See also section 11(a) (upon purchase) See also section 1 (opening paragraph of the “gross income” definition) (upon sale)

Chapter 14.1

Closing stock Section 22(1)(excluding (b))

C:SARS v Volkswagen South Africa (Pty) Ltd

Chapter 14.2

Opening stock Section 22(2) Ernst Bester Trusts v C:SARS SARS Practice Note 36

Chapter 14.3

Cost price of trading stock

Section 22(3)(opening and (i)) See also section 22(3)(iA) and (ii) (light review)

Chapter 14.4 (disregard controlled foreign companies)

Cost of trading stock and VAT

Section 23C(1) (before the proviso)

Chapter 6.9

The sale of assets similar to regularly sold manufacturing trading stock

Section 1(1) paragraph (jA) of the definition of “gross income”

• Interpretation Note 11 (Issue 4) (Trading stock: Assets not used as trading stock)

Chapter 4.13 (“Proceeds from the disposal of certain assets”)

Trading stock acquired for no consideration

Section 22(4) and paragraph 12 of the Eighth Schedule.

Eveready (Pty)Ltd v C:SARS

Chapter 14.5

Element KT0503: Disposals of an Ordinary Nature (Trading Stock) – Special Considerations


Study Guide

28

Losses: Fire, theft and embezzlement

Section 11 (opening) and (a); Section 23(c)

Chapter 6.10.10 (focus solely on trading stock)

Allowance for outstanding debt: Credit arrangements and debtor’s allowance (suspensive sales)

Section 24 • Interpretation Note 48 (Issue 3) (Instalment credit agreement and debtors' allowance)

ITC 1900

Chapter 12.10

Anti-avoidance provisions

Section 23F Chapter 14.7

Contractor’s work in progress

Section 22(2A) and 22(3A)

14.8

Share dealers Section 22 (as above) See also section 9C(1) and (2)

14.11 See also Chapters 3.6.21 and 14.10

Element KT0504: Disposals of a Capital Nature – Capital Gains Tax Construct and Core Calculations


Study Guide

Capital Gains Tax: Overall Construct

Overview Section 26A Chapter 17.1

The scope of CGT

Chapter 17.2

Persons liable for CGT


Residents Paragraph 2(1) of the 8th Schedule (excluding subparagraph (b))

SARS Comprehensive CGT Guide – Paragraph 4.2

Chapter 17.3.1

Determination of taxable capital gain and assessed capital losses

Paragraph 3 (opening line and subparagraph (b)) of the 8th Schedule Paragraph 4 (opening line and subparagraph (b)) of the 8th Schedule Paragraph 5 of the 8th Schedule (annual exclusion) Paragraph 6 of the 8th Schedule

SARS Comprehensive CGT Guide – Paragraphs 3.5 – 3.6 and Paragraphs 5.7 - 5.9

Chapter 17.5 See also 17.13 Final step in the CGT calculation and changes to capital gains or losses in subsequent years (disregarding 17.13)

29

Paragraph 7 of the 8th Schedule Paragraph 8 of the 8th Schedule Paragraph 9 of the 8th Schedule (excluding subparagraph (b)) Paragraph 10 of the 8th Schedule (excluding subparagraph (b)) Section 26A

Capital Gains Tax: Core Calculations

The basic rules of CGT

Paragraphs 3(a) and 4(a)

Chapter 17.4

The definition of asset

Paragraph 1 (definition of an “asset”)

Chapter 17.6

Disposals Chapter 17.7 (opening)

Disposal events

Paragraph 11(1) of the 8th Schedule (excluding subparagraphs (d) through (g))

SARS Comprehensive CGT Guide – Paragraph 6.1.1 and 6.1.2

Chapter 17.7.1

Non-disposals Paragraph 11(2)(subparagraph (a)) of the 8th Schedule

SARS Comprehensive CGT Guide – paragraph 6.1.2

Chapter 17.7.2

Time of disposal Paragraph 13 of the 8th Schedule (excluding subparagraph (1)(a)(iiA), (1)(a)(iiB), (1)(a)(iii), (1)(a)(vi), (1)(a)(vii), (1)(a)(viii), (1)(e), (1)(f) and (1)(g))


Chapter 17.7.4

Base cost Paragraph 20(1) (light review only)


Qualifying expenditure included in base cost

Paragraph 20(1) (opening), (1)(a), (1)(b), (1)(c) (but not (vii) through (ix)), (1)(d) and (1)(e) of the 8th Schedule

SARS Comprehensive CGT Guide – Paragraphs 8.1 – 8.5 and 8.7 – 8.12

Chapter 17.8.1

30

Qualifying expenditure excluded from base cost

Paragraph 20(2) of the 8th Schedule (excluding (c)) See also section 23C (VAT adjustment)


Chapter 17.8.2

Reduction of base cost

Paragraph 20(3) of the 8th Schedule (excluding subparagraphs (a)(ii), (b)(ii), (b)(iii) and (c))

SARS Comprehensive CGT Guide – Paragraphs 8.17, 8.18 and 8.19

Chapter 17.8.3

Cancellation of contracts

Paragraphs 11(2)(o) and 20(4) of the 8th Schedule


Chapter 17.8.5

Limitation of expenditure

Paragraph 21 of the 8th Schedule


Chapter 17.8.6

Identical assets Paragraph 32(1), (4)(b) and (6) Note: Only apply these rules in respect of shares (not any other assets)

Chapter 17.8.14

Part-disposals Paragraph 33 (disregarding any pre-2001 effective date assets and (3)(c))

SARS Comprehensive CGT guide – paragraph 8.37

Chapter 17.8.15

Proceeds (opening)

Paragraph 35(1) and (4)


Amounts excluded from the definition of ‘proceeds’

Paragraph 35(3) of the 8th Schedule

SARS Comprehensive CGT Guide – Paragraphs 9.1.3 and 9.1.4

Chapter 17.9.1

Element KT0505: Capital Gains Tax: Special Rules


Study Guide

Deeming Disposals, Values and Trapped Losses

Deemed disposals

Paragraph 12(2)(c) and (3) of the 8th Schedule See also section 22(8) (skim)

SARS Comprehensive CGT guide – paragraph 6.2.2

Chapter 17.7.3 (but only with reference to switches between trading stock, a capital-use asset and a personal use asset

31

(i.e. items (8), (9), (10) and (11)) See also Chapter 14.6 (i.e. trading stock applied for another purpose)

Disposals and donations not at arm’s length or to a connected person

Paragraph 38(1) of the 8th Schedule See also paragraph 11(1)(a) of the 8th Schedule See also section 22(8) (skim)

SARS Comprehensive CGT guide – Paragraphs 9.4.1 – 9.4.3

Chapter 17.9.5 See also Chapter 14.6 (i.e. donated trading stock)

Exclusions

Exclusion for personal compensation


Chapter 17.10.2 (Other exclusions) (focus only on compensation for personal injury, illness of defamation)

Exclusion for gambling


Chapter 17.10.2 (Other exclusions) (focus only on gambling, games and competitions)

Exclusion for donations to public benefit organisations

Paragraph 62 (opening) and (b) of the 8th Schedule See also section 18A(3) and (3A)

SARS Comprehensive CGT guide – Paragraph 12.11

Chapter 17.10.2 (Other exclusions) (focus only on donations to public benefit organisations) See also Chapter 7.4.2 (Other exclusions) (limited solely to donations in kind)

Exclusions for exempt persons


SARS Comprehensive CGT guide – Paragraph 12.12

Chapter 17.10.2 (Other exclusions) (focus only on exempt persons)

Exclusions for assets producing exempt income

Paragraph 64 of the 8th Schedule (disregarding (b))

Chapter 17.10.2 (Other exclusions) (focus only on assets used to produce exempt income)

Topic KT06: Allowance / Depreciable Assets: Impairments

Elements Tax Act Sections Authoritative Interpretations

Study Guide

KT0601: General depreciation concepts

32

Overview Chapter 13.1 (Overview) and 13.2 (Core Concepts)

Connected person (anti-avoidance rules)

Section 1 “connected person definition Sections and 11(e) and 12C(1) (light review) Section 12C(1) (light review) Paragraph 1 “depreciable asset

SIR v Safrenmark (Pty) Ltd

Chapter 13.2.1 Chapter 13.2.2 Chapter 13.2.3 Chapter 13.2.4

Repairs Section 11(d) SARS Interpretation Note 74 (Issue 2)

Chapter 12.4 (see also – Element KT0404)

Qualifying expenditure included in base cost

See also paragraph 20(1)(e) of the 8th Schedule

Chapter 17.8.1

KT0602: Depreciation of movable assets

Wear-and-tear allowance

Section 11(e) (excluding subparagraph (iA) and (iiiA))

SARS Interpretation Note 47 (also Binding General Ruling 7)

Chapter 13.3.1 Appendix E (Write-off periods acceptable to SARS)

Movable assets used by manufacturers, for research and development or by hotelkeepers, and ships, aircraft and assets used for the storage and packing of agricultural products

Section 12C(1)(but not (1)(bA), (c), (d) through (g)) taking into account only assets acquired on or after 1 January 2017 Section 12C(2), (4A) and (6)

SARS Practice Note (also Binding General Ruling 7)

Chapter 13.3.3 (focus only on plant or machinery used by the taxpayer, excluding leased assets and reductions for periods in which trade was not included in income)

KT0603: Depreciation of immovable assets

Allowances on immovable assets

SARS guide to building allowances

Chapter 13.4

Buildings and improvements: Annual allowance

Section 13(1) (opening), (a), (d), (dA), (f) and (proviso (b)), (9)(definition of “improvements”)

Chapter 13.4.1

33

Commercial buildings

Section 13quin(1) and (7)

Chapter 13.4.5

Residential units Section 1 (definition of “residential unit”) Section 13sex(1) (excluding the proviso) and (8)

Chapter 13.4.3

KT0604: Amortisation of intangible property

Intellectual property

Sections 11(gB) and (gC)

Chapter 13.8 (disregard research and development)

Topic KT0507: Allowance / Depreciable Assets: Recoupments


Study Guide

KT0701: Recoupments (General recoupment provision)

NT Section 8(4)(a) Omnia Fertilizer Limited v CSARS CSARS v Pinestone Properties CC

Chapter 13.10.1 (focus solely on section 8(4)(a) on disposal of section 11(e), 12C, 13 13quin and 13sex assets)

KT0702: Alienation, loss or destruction allowance

Section 11(o)

SARS Interpretation Note 60 (Issue 2)

Chapter 13.11

Topic KT08: Tax Reporting and Payments


Chapter No

KT0801: Conceptual

overview of income

tax registration

Section 22(1) and (2) of the Tax Administration Act; Section 23 of the Tax Administration Act Section 216 of the Tax Administration Act

Chapter 33.3.1 (“Registration and changes in particulars”)

KT0802: Submission of

final annual income

tax returns and

payments

Sections 25 ad 27 of the Tax Administration Act

Chapter 33.3.2.1 (“Form and timing of returns”)

KT0803: Record

retention Sections 29, 30(1), 31 and 32 of the Tax Administration Act

Chapter 33.3.3 (opening) (“Returns and Records”), 33.3.3.1 (“Retention

34

period”), 33.3.3.2 (“Form of records kept or retained”), 33.3.3.3 (“Access to records”) and 33.3.4 (“Positions taken when preparing returns”)

KT0804: Refunds Section 190(1) through (4) and (6) of the Tax Administration Act Section 191(1) and (3) of the Tax Administration Act

Chapter 33.3.7.5

Element KT0805: Provisional Taxpayers


Chapter No

Overview Chapter 11.1 See also Chapter 11.12 (“Summary of provisional tax”)

Important definitions The definition of provisional taxpayer (disregarding all the exclusions other than (dd)(B)) in paragraph 1 of the 4th Schedule

Chapter 11.2

Registering for provisional tax

• Section 22 of the Tax Administration Act

• Skim section 234 of the Tax Administration Act

Chapter 11.3

Element KT0806: First, Second and Top-Up Provisional Payments

35


Chapter No

Estimate of taxable income

Paragraphs 19(1), (2), (3), (5) and (6) of the 4th Schedule Skim paragraphs 24 and 25 of the 4th Schedule

SARS Interpretation Note 1

Chapter 11.5

Normal tax rate used to calculate provisional tax payments

Paragraph 17 of the 4th Schedule (review lightly)

Chapter 11.6

Provisional tax payments for persons other than companies


Chapter 11.7

Provisional tax payments for companies


Chapter 11.8

Element KT0807: Provisional tax penalties and interest


Chapter No

Late payment penalty


Chapter 11.9.1

Underpayment penalty

Paragraph 20(1) and (2) of the 4th Schedule See also sections 213 and 214 of the Tax Administration Act

Chapter 11.9.2

Interest in respect of the late payment of provisional tax

Section 89bis (interest on overdue 4th schedule taxes)

Chapter 11.10.1

Interest on the underpayment and overpayment of provisional tax

Section 89quat

Chapter 11.10.2

Additional provisional tax payments

Paragraph 23A(1) of the 4th Schedule

11.10.3

Advanced Tax Fundamentals – Knowledge Module #2

36

Topic KT01: Capital and Allowance Asset Rollovers and Deferrals


Chapter No

KT0101: Conceptual Overview

Chapters 17.10 (opening) (“Exclusions, roll-overs and attributions”) and 17.10.3 (opening) (“Roll-overs”)

KT0102: Transfer of assets between spouses


Chapter 17.10.3.3

KT0103: Involuntary Disposals


SARS CGT guide – Paragraph 13.1

Chapter 17.10.3.1

KT0104: Reinvestment in replacement assets


SARS CGT guide – Paragraph 13.2

Chapter 17.10.3.2

KT0105: Recoupment rollovers for involuntary disposals and reinvestment replacement

Section 8(4)(e), (eA) – (eE) Note: Recoupment analogue for paragraphs 65 and 66 of the 8th Schedule

Chapter 13.10.3 (“Recoupments: Deferred recoupment of allowances”)

KT0106: Reacquired financial instruments


Chapter 17.12.2

Topic KT02: Leases


Chapter No

KT0201: General lease income and expense

Section 1 “gross income” definition and section 11(a)

KT0202: Lease premiums (lessor income)

Paragraph (f) of the definition of gross income in section 1(1). See also section 1: Gross income definition before paragraph (a)

Chapter 4.9

37

KT0203: Lease premiums (lessee deductions)

Section 11(f)

Chapter 13.7.1

KT0204: Leasehold improvements (lessor income)

Paragraph (h) of the section 1 “gross income” definition

Chapter 4.11

KT0205: Leasehold improvements (lessee deductions)

Section 11(g) Chapter 13.7.2

KT0206: Relief for lessor (lessor’s special allowance)

Section 11(h) Chapter 13.7.3

KT0207: Leasehold improvements as a non-disposable event

Paragraphs 13(1)(b) and 33(3)(c)

Chapter 17.12.4 (Leasehold improvements)

KT0208: Recoupments: Acquisition of hired assets

Rent paid that is subsequently applied to reduce purchase price. Section 8(5) (a) and (b) Lessor acquires the asset after termination of the lease. Section 8(5)(bB)

Chapter 13.10.6

KT0209: Deductions in respect of improvements not owned by the taxpayer

Section 12N(1) (light review)

Chapter 13.7.4

Topic KT03: Debt / Loans (Initial Funding and Repayment)


Chapter No

KT0301: Debt instruments (Initial loan and full repayment)

Genn & Co. (Pty) Ltd v. CIR

Chapter 16.2 (overview)

KT0302: Common principles that apply


38

to lenders and borrowers

KT0303: Application of section 24J

Section 24J(1) (paragraphs (c) and (d) in terms of the definition of instrument) Section 24J(12); see also section 1 (gross income definition) and section 11(a)

Chapter 16.2.1.1

KT0304: Meaning of interest

Section 24J(1) (definition of interest (disregarding (c))

Chapter 16.2.1.2

KT0305:Timing provisions of section 24J: Yield to maturity method

Section 24J(1) (definitions of “term”, “accrual period”, “accrual amount”, “initial amount and adjusted initial amount”, “yield to maturity”

16.2.1.3 Chapter 16.2.1.3

KT0306: Lender perspective: Taxability of interest received or accrued

Section 24J(3) (disregarding (b))

Chapter 16.2.2

KT0307: Borrower perspective: Deductibility of interest incurred

Section 24J(2) (disregarding (b))

Chapter 16.2.3 (disregarding 16.2.3.4 interest incurred on loans to acquire shares in a controlled company)

KT0308: Timing provisions of section 24J: Alternative methods

Sections 24J(2)(b) and 24J(3)(b) Section 24J(1) (alternative method definition)

Chapter 16.2.1.4

Topic KT04: Foreign Currency


Chapter No


Chapter 15.1

KT0402: Translation of foreign currency amounts


39

KT0403: Definitions Section 1: Definitions of “average exchange rate” and “spot rate”


Chapter 15.2.1

KT0404: General translation rule

Section 25D(1) and (3)

4.12.1 Determination of taxable income in foreign currency

Chapter 15.2.2 (focus solely on section 25D(1) and (3) and Note 1)

KT0405: Specific translation rule: Exchange differences on exchange items

Charging provision: Section 24(2) Calculation: Section 24I(3) Subsection (1) definitions: Definitions of “exchange item” (Step 1), “ruling exchange rate” (step 2) “exchange difference” (step 3)

Comprehensive Guide to Capital Gains Tax (Issue 6): Paragraph 19.1, 19.3, 19.4 and 19.5 of the SARS Interpretation Note 101: Paragraph 4.12.2 (Assets disposed of or acquired in foreign currency)

Chapter 15.3 (Opening) (Focus only on foreign cash and foreign denominated loans)

KT0406: Potential application of the foreign currency mark-to-market rules

Chapter 15.3.1 (Step 1: Identify the exchange item and determine if section 24I applies)

KT0407: Timing rules for the foreign currency mark-to-market rules

Chapter 15.3.2 (Step 2: Determine the ruling exchange rate) See also Chapter 15.6.3 (“Commencement or cessation of application of provisions of section 24I”)

KT0408: Ordinary gain or loss calculation for the foreign currency mark-to-market rules

Chapter 15.3.3 (Step 3: Calculate the foreign exchange differences (ignore bad debts))

KT0409: The acquisition and

Paragraph 43(1), (1A) and (7) of the 8th Schedule

Chapter 15.7 (Specific transaction

40

disposal of assets in foreign currency

Note: Foreign currency itself is not an “asset” (see the “asset” definition in paragraph 1 of the 8th Schedule)

rule: Disposal and acquisition of assets)

Topic KT05: Government Grants

Elements Tax Act Sections Authoritative

Interpretations Chapter No

KT0501: Subsidies Section 1: Before paragraph (a) of the gross income definition

Chapter 3.6.22

KT0502: Government grants

Section 1: Paragraph (lC) of the gross income definition

Chapter 4.17

KT0503: Amounts received in respect of government grants

Section 12P (but not (2)(b), (2A) and (6)(b)) See also section 10(1)(y)

Chapter 5.8.3

Topic KT06: Basic Overview of Business Incentives (Diagnostic Awareness Only) Note: Trainees are expected to have an awareness of the taxation of farming and mining operations but are not expected to perform detailed calculations.

Elements Tax Act Sections (Light Review Only)

Chapter

KT0601: Intellectual property and research and development

Section 11D Chapter 13.8

KT0602: Urban development zones

Section 13quat Chapter 13.4.2

KT0603: Industrial policy project allowance

Section 12I Chapter 13.9.2

KT0604: Companies operating in special economic zones

Sections 12R and 12S Chapter 19.5.5

KT0605: Learnership agreements

Section 12H Chapter 12.2.8

41

KT0606: Employment Tax Incentive (Payroll Credits)

The Employment Tax Incentive Act, 2013

Chapter 10.12 (The Employment Tax Incentive Act, 2013)

Topic KT07: Small and Micro Business Relief

KT0701: Small Business Relief


Chapter No

Small business corporations and Appendix B (Rates of Tax and Other Information)

Section 12E(4)(excluding (ii)(bb) through (ii)(gg) and (iv) of the “small business corporation” definition) Paragraph 5 of the Rates and Monetary Amounts Amendment Bill (Act No. 14 of 2017 for the 2018 Assessment Year)

SARS Interpretation Note 9 (Issue 7) (Small business corporations)

Chapter 19.5.4

Small business corporations

Section 12E(1) and (1A)

SARS Interpretation Note 9 (Issue 7) (Small business corporations)

Chapter 13.3.4

Interaction of the 6th Schedule with other taxes

Skim sections 10(1)(zJ) and 64F(h) Skim paragraph 57A of the 8th Schedule

Chapter 23.9

KT0702: Micro Business Relief (Diagnostic Awareness Only)


Chapter No

Overview Sections 48A and 48B Chapter 23.1

Qualifying Turnover Paragraphs 1 through 4 of the 6th Schedule

Chapter 23.2

Micro Business Paragraphs 5 through 7 of the 6th Schedule

Chapter 23.3

Taxable turnover Chapter 23.4

Levying of turnover tax

Paragraph 8 of the Rates and Monetary Amounts and Amendment

Chapter 23.6

42

Revenue Laws Act (latest year)

Topic KT08: Basics of Farming and Mining Operations (Diagnostic Awareness Only) Note: Trainees are expected to have an awareness of the taxation of farming and mining operations but are not expected to perform detailed calculations.


Chapter No


Second and Final Report on Hard Rock Mining by the Davis Tax Committee (Chapter 2.2.1)

Chapter

KT0802: Gold Formula

• Skim section 1 definition of “mining for gold”

• Skim Paragraph 3(b) of the Rates and Monetary Amounts Amendment Act (latest year)


Chapter

KT0803: Operating expenses and CAPEX depreciation

Skim sections 15 and 36

Second and Final Report on Hard Rock Mining by the Davis Tax Committee (Chapters 2.3.1 through 2.3.4)

Chapter

KT0804: Recoupment of assets

Skim paragraph (j) of the “gross income” definition and section 37


Chapter

KT0805: Nature of Farming Income

Section 26 Chapters 22.1 (“Overview”), 22.2 (“Framework for the calculation of taxable income of a farmer”) and 22.3 (“Meaning of ‘farming operations’”)

KT0806: Basics of livestock and produce

Skim paragraphs 2 through 9 of the 1st Schedule

Chapter 22.5 (“Livestock and produce”)

43

KT0807: Basics of plantation farming

Skim paragraph 12(1)(g), 14, 15 and 16 of the 1st Schedule

Chapter 22.16 (“Plantation farmers”)

KT0808: Game Farming


Chapter 22.12 (“Game farmers”)

Topic KT09: Tax Avoidance

KT0901: Main Concepts


Chapter No

Overview: Distinction between tax evasion and avoidance

Chapter 32.1

Impermissible tax avoidance arrangements

Section 80A, 80B and 80L (disregard sections 80C through 80K) (light review only)

Chapter 32.2

Substance over form and simulated transactions

Commissioner SARS v Bosch (394/2013)[2014] ZASCA 171 (19 November 2014)

Chapter 32.7

Reportable arrangements

Sections 34 through 39 of the Tax Administration Act (light review only)

Chapter 32.3

KT0902: Isolated Provisions


Chapter No

Assessed losses Section 103(2) CSARS v Digicall Solutions (Pty) Ltd Conshu (Pty) Ltd v CIR

Chapter 32.4

Case law on section 103(2)

Chapter 32.5

Value-shifting arrangements

Paragraph 1 “Value shifting arrangement” Definition Paragraph 23 See also paragraphs 11(1)(g) and 35(2)

SARS Comprehensive CGT guide: Paragraphs 21.3; 4.1.9; 8.14; 8.25 and 9.1.2

Chapter 17.12.1

44

Accounting for Tax Fundamentals – Knowledge Module #3 This module is assumed to be satisfied by university students having graduated with a BCom or equivalent degree that includes accounting courses.

International Tax Fundamentals – Knowledge Module #4 Topic KT01: Basic framework of international taxation

Elements Tax Act Sections (and Treaty Provisions)

Authoritative Interpretations

Chapter No

KT0101: Principles of South African taxation of cross-border transactions

Chapter 21.1 (“Overview”) and 21.2

KT0102: Tax treaties OECD Model tax treaty


KT0103: Integration with domestic law

Skim section 108 Chapter 21.4.1

Topic KT02: South African versus Foreign Tax Residents



Chapter No

KT0201: Resident and non-resident


KT0202: Residence of natural persons

Paragraph (a) of the definition of resident in section 1

Chapter 3.2.1

KT0203: Residence of persons other than natural persons

Paragraph (b) of the definition of resident in section 1

Chapter 3.2.2

KT0203: Treaty residency

Article 4 of the OECD Model Tax Treaty

Chapter 21.4.2 (“Application and scope”) (focus solely on persons covered)

Topic KT03: South African versus Foreign Source



Chapter No

KT0301: Concept of Source

• CIR v Lever Brothers & Unilever Ltd

Chapter 21.3 (opening) (“Source”)

45

• CIR v Black

• CIR v Nell

KT0302: Source of dividend income

Section 9(2)(a) and (4)(a) See also section 64E(1), 64EA, 64G(1) and (3) – Dividends Tax

Chapter 21.3.1

KT0303: Source of interest income

Section 9(2)(b) and (4)(a)

Chapter 21.3.2

KT0304: Source of royalty income

Definition of “intellectual property” in section 23I(1) Section 9(c) and (d)

Chapter 21.3.3 (“Source of royalty income and know-how payments”) (focus solely on royalties and use of intellectual property)

KT0305: Source of amounts derived from the disposal of assets

Section 9(2)(j) and (k) and 9J

Chapter 21.3.5 (“Source of amounts derived from the disposal of assets and exchange differences”) (focus solely on the disposal of assets)

KT0306: Source of income from services rendered

COT v Shein Chapter 21.3.6

Topic KT04: South African Activities of Foreign Tax Residents (Inbound)



Chapter No

KT0401: General Tax Obligation of Foreign Tax Residents

Chapter 21.5.1 (“Tax liability and obligations”)

KT0402: General Withholding Obligations

Chapter 21.5.2.1 (“Common features of withholding taxes imposed in respect of payments”) (focus solely on interest and royalties) withholding tax)

KT0403: Withholding tax on royalties

• Section 49A Section 49B(1)(a)

Chapter 21.5.2.4

46

• Section 49C(1)

• Section 49D (disregard paragraph (c))

• Section 49E(1) and (2)

KT0404: Withholding Tax on Interest

• Definitions of “interest” and “listed debt” of section 50A

• Section 50B(1)(a)

• Section 50C(1)

• Section 50D(1)(a) (disregarding (cc)), (c) and (3)

• Section 50E(1) and skim (2) and (3)

Chapter 21.5.2.5

KT0405: Treaty Relief for Foreign Residents

Chapter 21.4.3 (“Allocation of taxing rights and elimination of double taxation”)

KT0406: Tax Treaty Relief for Cross-Border Royalties


Chapter 21.4.3.4 (“Royalties”)

KT0407: Tax Treaty Relief for Cross-Border Interest


Chapter 21.4.3.3 (“Interest”)

KT0408: Treaty Relief for Cross-Border Dividends

Article 10 of the OECD Model Tax Treaty See also section 64E(1) (note that the exemption of section 64F(1)(a) applies to domestic company shareholders, not to foreign company shareholders)

Chapter 21.4.3.2 (“Dividends”)

Topic KT05: Foreign Activities of South African Tax Residents (Outbound)



Chapter No

47

KT0501: South African income taxation of residents

Chapter 21.6.1

KT0502: Specific exemptions available to residents in respect of foreign sourced amounts


KT0503: Exemption of certain foreign dividends and capital gains

Section 10B(2) (opening) and (a)) Section 10B(3)(limited to natural person and company shareholders) Skim Paragraph 64B(1)

Chapter 21.6.2.1

KT0504: Exemption for foreign employment income

Section 10(1)(o)(ii) (disregarding provisos (A) and (B))

SARS Interpretation Note 16 (issue 2)

Chapter 21.6.2.2 Chapter 5.4.9 (employment -outside South Africa

KT0505: Rebates and deductions for foreign tax


KT0506: Rebate for foreign tax (disregard the overall limitation)

Section 6quat(1) (disregarding (b) and (f)) Section 6quat(1A) (disregarding (b), (f) and the provisos) Section 6quat(4)

Interpretation note 18

Chapter 21.6.3.1

Corporate / Shareholder Transactional Taxation – Knowledge Module #5 Topic KT01: Overview of Two-Tier Company Taxation


Chapter No

KT0101: Overview Chapters 19.1 and 19.2 (opening) (“Taxation of Companies”)

48

KT0102: Companies for income tax purposes

Paragraphs (a), (d) and (f) of the definition of company in section 1

Chapter 19.2.1 (focus solely on domestic for-profit private and public companies) Chapter 19.5.1

KT0103: Taxation of company profits

Chapter 19.2.2

Topic KT02: Company Formations


Chapter No

KT0201: Share issues (disregard changes in rights)

Paragraph 11(2)(b)(i) of the 8th Schedule

Chapter 20.2.1

KT0202: Person transferring assets to the company in exchange for shares

Paragraph 11(1)(a) of the 8th Schedule Paragraph 13(1)(a) of the 8th Schedule Paragraph 20(1)(a) of the 8th Schedule

SARS binding private ruling 288

Chapter 20.2.1

KT0203: Issuing of shares for consideration other than cash

Section 40CA (disregarding (b))

SARS v. Labat Africa Ltd SARS Paragraph 8.40 of SARS’s Capital Gains Tax guide

Chapter 20.2.1.1

KT0204: Domestic asset-for-share roll-over transaction (qualification)

Section 42(1) (paragraph (a) of the definition of an “asset-for-share transaction” without regard to the proviso) Section 42(1) (paragraph (a) and (c) within the definition of “qualifying interest”)

Chapter 20.5.1.1

49

KT0205: Exclusions from the scope of section 42 (focus on “election-out”

Section 42(8A) (disregarding (b)

Chapter 20.5.1.3

KT00206: Asset classification for purposes of the corporate rules

Definitions of allowance asset, asset, capital asset and trading stock in section 41(1)

Chapter 20.4.2

KT0207: Roll-over impact of an asset-for-share transaction

Section 42(2) (disregarding (bb) of section 42(2)(a)(i) and the closing proviso) Section 42(3) disregard (paragraph (c) and the references to REITs)

Chapter 20.5.2.1 (Person who transferred the asset and acquired equity shares in the company) Chapter 20.5.2.2

Topic KT03: Securities Transfer Tax


Chapter No

KT0301: Introduction Chapter 29.1

KT0302: Imposition of STT

Section s 2(1) and 3 (disregarding (b))

Chapter 29.2

KT0303: Important definitions

Definitions of “security” and “transfer” within section 1

Chapter 29.3

KT0304: Exemptions from STT (focus solely on company reorganisations)

Section 8(1)(a)(i) Chapter 29.6

KT0305: Securities Transfer Tax: Payment of tax

Section 3(1)(a) of the Securities Transfer Tax Administration Act

Chapter 29.7

Topic KT04: Taxation of Company Distributions to Shareholders (Dividends Versus Capital Distributions)


Chapter No

50

KT0401: Tax implications of distributions by companies

Chapter 19.2.3

KT0402: Definition of a dividend

Definition of dividend in section 1 (disregarding (ii) and (iii)) See also returns of capital below

Comprehensive Guide to Dividends Tax (Issue 2)

Chapter 19.3.1

KT0403: Taxation of dividends

Section 1 (paragraph (k) of the “gross income” definition) Section 10(1)(k)(i) (excluding all provisos)

Chapter 19.3.2

KT0404: Definition of contributed tax capital

Paragraph (b) and Reductions (other than (cc) in the definition of contributed tax capital in section 1

Chapter 19.4.1 (focus solely on domestic companies and post-2011 calculations)

KT0405: Returns of capital

Definition of return of capital in section 1 (disregarding (b) and the exclusions of (i) and (ii))

Comprehensive Guide to Dividends Tax (Issue 2) – paragraph 18.4.1

Chapter c19.4.2

Topic KT05: Dividends Tax


Chapter No

KT0501: Introduction Chapter 19.3.3

KT0502: Dividends subject to dividends tax

Section 64E(1)(a) (disregard (ii)) Section 64D (definitions of “beneficial owner” and “dividend” excluding paragraph (b))

Comprehensive Guide to Dividends Tax (Issue 2) Paragraph 2.2 (excluding 2.2.6) and 2.3.1 and 2.3.2. Paragraph 3.1, 3.1.1, 3.2 and 3.2.2.

Chapter 19.3.4

KT0503: Liability for dividends tax and withholding obligation

Section 64EA Section 64G(1) (disregarding (b))

Comprehensive Guide to Dividends Tax (Issue 2)

Chapter 19.3.5

51

See also section 64E(3)

Paragraph 5.1, 5.2 and 5.3 (all subparagraphs included.

KT0504: Exemptions from dividends tax

Section 64F(1)(opening), (a), (b) and (c) Section 64FA(1) (disregarding (b) through (d)) See also section 64G(2) (disregarding (b) and (c))

Comprehensive Guide to Dividends Tax (Issue 2) Paragraph 4.1

Chapter 19.3.6 (focus solely on dividends paid to domestic companies, government and PBOs)

KT0505: Timing Section 64E(2) Chapter 19.3.9

KT0506: Payments of dividends tax and returns

Section 64K Comprehensive Guide to Dividends Tax (Issue 2) Paragraph 7.1, (7.1.1 – 7.1.4)

Chapter 19.3.10

KT0507: Company in specie distributions (dividends): Company level consequences

Paragraph 75 and sections 8(4)(k)(ii) and 22(8)(b)(iii) Silke 13.10.2 and 14.6 (focus solely on dividends in specie in terms of both segments)

Chapter 17.11.1

Topic KT06: Return of Capital Distributions


Chapter No

KT0601: Company distributions: Shareholder level consequences

Paragraph 76B(2) and (3) of the 8th Schedule

Comprehensive Guide to Dividends Tax (Issue 2) – paragraph 18.8

Chapter 17.11.1 (focus solely on paragraph 76B distributions on or after 2012 without regard to pre-valuation shares)

KT0602: Company in specie distributions (return of capital): Company level consequences

Paragraph 75 and sections 8(4)(k)(ii) and 22(8)(b)(iii) Silke 13.10.2 and 14.6 (focus solely on dividends in specie in

Comprehensive Guide to Dividends Tax (Issue 2) – paragraph 18.2

Chapter 17.11.1

52

(Same rule as for in specie company dividends)

terms of both segments)

Topic KT07: Share buybacks and Liquidations


Chapter No

KT0701: Share buyback transactions

Paragraph (b) of the section 1 “dividend” definition

Chapter 20.2.3

KT0702: Liquidations: Definition and scope

Sections 47(1)(a) and 47(6) See also paragraph 77 of the 8th Schedule (for taxable liquidations)

Chapter 20.10.1.1 “Domestic liquidation distribution”) and 20.10.1.3 (“Exclusions from the scope of section 47”)

KT0703: Liquidations: Nature of Relief

Sections 47(2) (disregarding (a)(ii)(bb)) and (3)

Chapter 20.10.2 (“Relief”)

Topic KT08: Taxable Company Acquisitions


Chapter No

KT0801: Sale of Company Shares

Chapter 22.2.2 (“Disposal of shares”) See also 3.6.21 (judicial precedent on capital versus ordinary) and 14.10 (deemed capital gains under section 9C)

KT0802: Sale of Company Operations

Chapter 20.2 (“Acquisition or disposal of a business”)

Topic KT09: The Issue, Repayment and Cancellation of Debt Corpus


Chapter No

KT0901: The Initial Lending of Capital

Paragraph 11(2)(d) of the 8th Schedule

Chapter 17.7.2 (“Non-disposals”)

53

KT0902: Concession or compromise in respect of debt

Paragraph 12A(1) (definition of concession or compromise (disregarding (b)) of the 8th Schedule Paragraph 12A(1) (definition of debt) of the 8th Schedule

SARS Interpretation Note 91 (Reduction of debt)


KT0903: Is there a debt benefit?

Paragraph 12A(1) (definition of debt benefit disregarding subparagraphs (a)(ii) and (b)) of the 8th Schedule


Chapter 17.8.4.1

KT0904: What was the purpose of the debt (what was the debt used for)?

Paragraphs 12A(2), (3) and (4) of the 8th Schedule


Chapter 17.8.4.3

KT0905: The interaction between the provisions of paragraph 12A (reducing base cost when debt is reduced) and paragraph 20(3) (reducing base cost when the underlying expenditure is reduced)

Paragraph 20(3)(b) of the 8th Schedule


Chapter 17.8.4.4

KT0906: Recoupments: Concession or compromise regarding a debt

Section 19(1) (definitions of “allowance asset”, “capital asset”, “concession or compromise” (disregarding (a)(ii) and (b)) Section 19(2), (3), (4), (5) and (6) See also section 8(4)(a)


Chapter 13.10.7

Topic KT10: Shareholder Bonuses and Loans


Chapter No

54

KT1001: Shareholder / Key Employee Bonuses

Section 11(a) • ITC 792

• ITC 1518

• Practice Note 29 (withdrawn) (salaries and bonuses to service were deductible when paid to accounting firms existing in corporate form)

Chapter 6.8 (“Excessive expenditure”)

KT1002: Shareholder Loans Capital

CIR v Genn & Co. (Pty) Ltd (1955 AD)

Chapter 6.10.11

KT1003: General case law prohibition against borrowing to acquire shares

• CIR v Shapiro

• CIR v Drakensberg Harden Hotel Ltd

• ITC 678

• CIR v Brollo Properties (Pty) Ltd

Chapter 16.2.3.3 (“interest incurred on loans to acquire shares”) and 16.2.3.5 (“Interest incurred on loans to pay dividends”)

KT1004: Relief for interested incurred to acquire shares of operating companies

Skim section 24O (focus solely on target operating companies and disregard group rules)

Chapter 16.2.3.4 (“Interest incurred on loans to acquire shares in a controlled company”)

Indirect Taxation – Knowledge Module #6 Topic KT01: VAT Overview and Initial Formalities

Elements SARS VAT 404 (Guide for Vendors)

VAT Act Sections and authoritative interpretations

Chapter No

KT0101: General description of the VAT

Preface and Chapter 1 of the VAT 404 (Guide for Vendors)

Not applicable Chapter 31.1 (“Overview”)

KT0102: Registration as a VAT vendor

Chapter 2.1 (enterprise) (opening only), 2.2, 2.3.1, 2.3.7, 2.3.8, 2.3.10, 2.4 and 2.5.

• VAT Section 1(1) (definitions of “enterprise” (but not (ii), (iv) nor (vi) and (“vendor” (but not the proviso)).

Chapters 31.6 (“Vendor”), 31.7 (“Output tax: In the course or furtherance of an enterprise”), 31.7.1 (“Enterprise or activity carried on continuously or

55

VAT Section 23(1), (3)(but not (a)), and (4).

• VAT Section 24(1) through (4), and (7).

VAT Section 25 (but not I through (g)).

regularly”), 31.7.3 (“Specifically included in the definition of an ‘enterprise’) and 31.7.4 (“Specifically excluded from the definition of ‘enterprise’”)

KT0103: VAT Return Periods (i.e. Category of VAT vendors)

Chapter 3.1, 3.1.1, 3.1.2 and 3.2.1.

VAT Section 27(1) (Categories A, B and C), (2)(a) and (b), (3)(but not (b) and (c)), (4).

Chapter 31.4 (Focus solely on “Tax periods A, B and C”)

KT0104: Invoice or payments basis of accounting

Chapter 4.1, 4.2 and 4.3 and 4.5.3.

VAT Section 15(1), (2)(but not (a)), (2A).

Chapters 31.3 (“The accounting basis”), 31.3.1 (“Invoice basis”) and 31.3.2 (“Payments basis”)

Topic KT02: VAT Compliance in Terms of Common Taxable Supplies



Chapter No

KT0201: Basic VAT calculations

• Chapter 8.1, 8.2 and 8.3.1

• Chapter 10.2.

• VAT Section 1(1) (definitions of “consideration”, “goods” (but not (b) nor (c)), “input tax” (but not (c)), “output tax”, “services” and “supply”).

• VAT Section 7(1)(but not (b) nor (c)).

• VAT Section 16(1), (2)(a), (3)((a)(opening) and (i)), (b), (g), (the proviso to (3)), (4).

• VAT Section 17(1)(opening) and (proviso (i)).

• VAT Sections 64 and 65

Chapters 31.2 (“Calculation of VAT”), 31.5 (“Output tax: Supply of goods or services”), 31.7.2 (“Goods or services are supplied for a consideration”), 31.17 (“Basics of input tax”) and 31.20 (opening) (“The determination of input tax”)

56

South Atlantic Jazz Festival (Pty) Ltd v CSARS

KT0202: Imported goods

• Chapter 8.3.2

• Chapter 12.2.1, 12.2.2, 12.2.3 and 12.2.4.

• VAT Section 7(1)(b).

• VAT Section 13(1) and (2).

VAT Section 16(2)((opening) and (d)), 16(3)(opening), (a)(iii) and (b)(ii).

Chapter 31.8 (“VAT levied: Importation of goods”)

KT0203: General timing rules

Chapter 5.1, 5.2.1 and 5.2.8

VAT Section 9(1) and (2)(d)

Chapters 31.15 (opening) (“Time of supply”) and 31.15.1 (“Time of supply”)

KT0204: Value of supply

Chapter 5.3.1 and 5.3.5

Section 10(2) and (3) Chapters 31.16 (opening) (“Value of the supply”) and 31.16.1 (“Value of the supply”)

KT0205: Successive supplies (e.g. rentals of movable properties)

Chapter 5.2.3, 5.2.4 and 5.3.3

• VAT Section 9(3)(a) and (b).

• VAT Section 10(6)

VAT Section 16(3)(a)(iiA)

Chapters 31.15.3 (“Time if supply: Rental agreements”) and 31.15.4 (“Time of supply: Progressive supplies”)

KT0206: Connected Person Rules

Chapters 5.2.2 and 5.3.2

• VAT Section 9(2)(a)

VAT Section 10(4)

Chapter 31.15 (“Time of supply: Connected persons”) and 31.16.2 (“Value of the supply: Connected persons”)

Topic KT03: Common Zero-Rated and Exempt Supplies



Chapter No

KT0301: Zero rated goods for low-income household items

Chapter 6.3 (disregard exports), 6.3.1 and 6.3.2.

• Section 11(h), (j), (k), (l)) and sanitary towels.

• VAT Schedule 2. Regulations 316 (Gazette No. 37580)(2 May 2014) (Part One: Paragraphs 1, 2 and 3); Part Two

Chapter 31.10.4 (Zero-rated supply: Other”) (but limited to paragraphs (h), (j), (k), (l) and sanitary towels)

57

– Section A: Paragraphs 8 and 9)

Interpretation Note: No. 31 (issue 3) (2013) (documentation for general zero-rating)

KT0302: Export goods (direct)

Chapter 12.1 (opening) and 12.1.1

• VAT Section 1 (definition of “exported” (paragraph (a)).

• VAT Section 11(1)((opening) (a)(i) and (3)

SARS Interpretations Note: No. 30 (issue 3) (2014) (documentation for exports)

Chapter 31.10 (“Output tax: Zero-rated supplies”) and 31.10.1 “Zero-rated supply: Exported goods” other than indirect exports)

KT0303: Basic exempt supplies

Chapter 7.1, 7.3, 7.5 and 7.6

• VAT Section 2(1)((opening) up to (f)), (2)(iii) and (iv)).

VAT Section 12((opening), (a), (g) and (h).

Chapter 31.11.1 (“Exempt supplies: Financial services”) (focus solely on loans) and 31.11.4 (“Exempt supplies” limited to transport and education)

KT0304: Basic VAT Apportionment of inputs

Chapter 8.4.1, 8.4.2 and 8.4 (turnover example)

VAT Section 17(1)(but not the proviso (ii) and (iii))

Chapter 31.20.1 (“Turnover-based method”)

Topic KT04: Recurring Special Circumstances



Chapter No

KT0401: Simple discount vouchers

Chapter 9.4 Chapter 31.16.4.1 (“Discount vouchers issued and redeemed by the same supplier”)

KT0402: Promotional supplies

VAT Section 10(23) Chapter 31.16.7 (“Value of the supply: Supply for no consideration”)

KT0403: Machines and meters

Chapter 5.2.8 Section 9(2)(d) Chapter 31.15.1 (“Time of supply”)

58

(focus solely on coin operated machines)

KT0404: Cooling off period rights to cancel

• VAT Section 8(3) VAT Section 9(2)(b)

Chapter 31.13 (“Output tax: Non-Supplies”) (focus solely on cooling off cancellations)

KT0405: Lay-by agreements

Chapter 5.2.7 • VAT Section 8(4)

• VAT Section 9(2)(c)

VAT Section 10(11)

Chapter 31.13 (“Output tax: Non-Supplies”) (focus solely on lay-by agreements)

KT0406: Irrecoverable debts (reversal of prior invoices)

Chapter 9.2 VAT Section 22(1)(before the first proviso) and (3)(before the proviso).

Chapter 31.31 (“Adjustments: Irrecoverable debts”)

KT0407: Repossession for customer payment defaults


• VAT Section 1 (paragraph (c) of the “input” definition)

VAT Section 9(8)

Chapter 31.12.6 (“Deemed supplies”) (vendor repossession on credit only)

KT0408: Short-term insurance payouts

Chapter 6.2.1 (focus solely on insurance indemnity payments)

• C:SARS v British Airways PLC

VAT Section 8(8)

Chapter 31.12.2 (“Deemed supply: Indemnity payments”)

KT0409: Second-hand goods

Chapter 4.5.4 Chapter 8.3.4

• VAT Section 1(1) (definitions of “second-hand goods” (only paragraph (a)), and “goods” (but not (i) and (ii) of the goods not to include)).

VAT Section 20(8)

Chapter 31.22 (“Input tax: Deemed input tax on second-hand goods”) (but not 31.22.1)

Topic KT05: Employees



Chapter No

KT0501: Employee fringe benefits




VAT Section 18(3)

Chapter 31.12.4 (“Deemed supply: Fringe benefits”)

59

KT0502: Employee use of motor cars

Chapter 8.5.3 • VAT Section 1(1) (definition of “motor car”)

• 17(2)(c)(but not proviso (iii))

• SARS Interpretation Note 82

• ITC 1596 RTCC v CSARS (VAT Case 1345)

Chapter 31.21.3 (“Denial of input tax: Motor car”)

KT0503: Entertainment

Chapter 8.5.1 • VAT Section 1(1) (definition of “entertainment”)

• Section 10(21) VAT Section 17(2)(a)(but not proviso (iii), (v), (vi), (vii) and (ix)

Chapters 31.16.5 (“Value of the supply: Entertainment”) 31.21.1 (“Denial of input tax”: Entertainment”)

Topic KT06: Fixed property



Chapter No

KT0601: Fixed Property sales and rentals


• VAT Section 1(1) (definitions of “fixed property”)

• VAT Section 16(3)(a)(iiA), (a)(ii)(b) and (4)(a)(ii) and (b).

Transfer Duty Act 9(15).

Chapter 31.24.3

KT0602: Residential accommodation

Chapter 7.2 • VAT Section 1(1) (definition of “dwelling”)

VAT Section 12(c)

Chapter 31.11.2 (“Exempt supply: Residential accommodation”)

KT0603: Commercial accommodation

Chapter 5.3.4 • VAT Section 1(1) (definitions of “dwelling” and “domestic goods and services”)


C:SARS v Republica (Pty) Ltd

Chapter 31.11.3 (“Taxable supply: Commercial accommodation”)

60

Topic KT07: Farming (Diagnostic awareness only) Note: Trainees are expected to have an awareness of the taxation of farming operations but are not expected to perform detailed calculations.



Chapter No

KT0701: Six-Monthly Periods

Chapter 3.1.3 VAT Section 27(1) (“Category D”) and (4)(b)

Chapter 31.4 “Tax periods” – Category D)

KT0702: Zero-rating for farming

Chapter 6.3.14 • VAT Section 11(1)(g)

Paragraph 7 to Schedule 1

Topic KT08: VAT Administration



Chapter No

KT0801: Tax invoices

• Chapter 8.3.5 and 8.6

• Chapter 13.1, 13.2 and 13.3

• VAT Section 16(2)(a)

• VAT Section 20(1), (4) and(6)

SARS Interpretation Note 49 (Issue 2) (relating to input documentation)

Chapter 31.18 (“Tax invoices”)

KT0802: Debit / Credit notes

Chapter 9.3 Chapter 13.7

• VAT Section 20(1B)

• VAT Section 21(1), (2) and (3)

SARS VAT Practice Note: No. 2 (1991) (debit and credit notes)

Chapter 31.19 (“Debit notes, and errors on tax invoices”)

KT0803: Tax returns and payments

Chapter 10.1, 10.3 (only), and 10.4

VAT Section 28 Chapter 31.35 (“Tax returns and payments”)

KT0804: VAT penalties and interest

Chapter 11.1 and 11.3 (light review of interest only)

Section 213 of the Tax Administration Act (10% penalty only) Section 39(1)(a)(ii) (interest)

Section 31.36 (“Penalties and interest”)

61

KT0805: VAT refunds

Chapter 10.7 VAT Section 44(3)(but not the proviso), (7), and (10); see also VAT section 16(5)

Chapter 31.37 (“Refunds”)

KT0806: Special VAT Records Required

Chapter 16.5 (only) VAT Section 55

Topic KT09: Basics of Customs Duty (Diagnostic awareness only) Note: Trainees are expected only to have an awareness of Customs but are not expected to perform detailed calculations.

Elements Chapter No

KT0901: Overview Chapter 30.1

KT0902: Different types of customs and excise duties (skim) Chapter 30.2

KT0903: Basic concepts of customs duty Chapter 30.3

KT0904: The value of imported goods (customs valuation) Chapter 30.3.1

KT0905: The classification of imported goods (tariff classification) (skim)

Chapter 30.3.2

KT0906: The origin of imported goods (originating country) (skim agreements)

Chapter 30.3.3

KT0907: Customs duty calculations Chapter 30.4

KT0908: Rebates, drawbacks and refunds Chapter 30.5

KT0909: Anti-dumping and countervailing duties Chapter 30.6

Personal Taxation: Knowledge Module #7 Topic KT01: Net Calculations for Natural Persons

KT0101: Calculations and Normal Tax Payable

Sub-Elements

Tax Act Sections Authoritative Interpretations

Chapter No

Overview Paragraph 1 of Schedule I to Rates and Monetary Amounts and Amendment of Revenue Laws (Rates of normal tax) (latest)

Chapter 7.1

Calculation and normal tax payable


62

Personal rebates

Section 6(1) and (2) Chapter 7.2.1 (“The section 6(2) rebates”)

KT0102: Capital Gains as Applied to Natural Persons

Sub-Elements

Tax Act Sections Authoritative Interpretations

Chapter No

Annual Exclusion


Chapter 17.4 (“The basic rules of CGT (Annual exclusion)”)

Partial inclusion in normal income

• Section 26A

• Paragraph 10 of the 8th Schedule

Chapter 17.4 (“The basic rules of CGT (“Taxable capital gain”) and (“Inclusion in taxable income”))

Topic KT02: Deduction limitations for natural persons


Chapter No

KT0201: Private / non-trade expenditure

Sections 23(a) and (g)

CIR v Hickson Chapters 6.5.1 (“Private maintenance expenditure”) and 6.57 (“Non-trade expenditure”)

KT0202: Home Office

Section 23(b) SARS Interpretation note 28

Chapter 6.5.2 (“Domestic or private expenses”)

KT0203: Limitation on employment deductions

Section 23(m) Binding General Ruling 40 (Remuneration paid to non-executive directors)

Chapters 6.5.12 (“Expenditure relating to employment”) and 7.4 (opening) (“Deductions”)

KT0204: Education and continuing education


Chapter 6.10.4

KT0205: Contributions by members to retirement funds

Section 11F(1) through (3)

Chapter 7.4.1

KT0206: Donations to Public Benefit Organisations

Section 18A(1)(opening paragraph), (a)(i), not exceeding (B) (10% limit) and

SARS Basic Guide to Tax-Deductible Donations (Issue 2) Paragraphs 1, 2, 3, 4, 7 and 8

Chapter 7.4.2 (opening) (“Donations to public benefit organisations” (disregard the other qualifying beneficiaries and donations in-kind))

63

(2), (2A)(a) and (3) Part II of the 9th Schedule (light review only)

KT0207: Ring-fenced losses from suspect trades

Section 20A(1) Section 20A(2), (3) and (4) (light review of subsections only)

SARS Guide on the Ring-Fencing of Assessed Losses Arising from Certain Trades Conducted by Individuals

Chapter 7.1.1 (“Assessed losses – Ring-fencing of losses of natural persons from certain trades”)

Topic KT03: Recurring Special Rules for Natural Persons


Chapter No

KT0301: Medical Credits

Section 6A(1), (2) (excluding subsections (a)(ii)) and (4)) Section 6B(1) through (3)

SARS Guide on the Determination of Medical Tax Credits (Issue 9) Paragraphs 2.1, 2.2, 2.3 and 2.4, 3.2, 3.6.1 and 3.6.3

Chapter 7.2.2 (“Sections 6A and 6B medical credits”)

KT0302: Capital gains tax exclusion for personal-use asset

Paragraph 53 of the 8th Schedule (excluding (3)(f), (3)(g), (3)(h) and 4))

Paragraph 12.2 of the SARS Capital Gains Tax Guide

Chapter 17.10.2 (“Personal-use assets exclusion” of “Other exclusions”)

KT0303: Capital loss exclusion for aircraft, boats , etc…


Paragraph 7.1 of the SARS Capital Gains Tax Guide

Chapter 17.10.5.1 (“Certain personal-use aircraft, boats, rights and interests”)

KT0304: Primary residence exclusion

Paragraphs 44 through 50 of the 8th Schedule

Paragraph 11.2.2, 11.5, 11.6, 11.7, 11.8 and 11.9 of the SARS Capital Gains Tax Guide

Chapter 17.10.1 (other than 17.10.1.4)

KT0305: Disposal of


SARS CGT guide –and paragraph 12.6 of the

Chapter 17.10.2 (“Disposal of small business assets

64

small business interests

SARS Capital Gains Tax Guide

exclusion” of “Other exclusions”)

Topic KT04: Retirement Fund Savings

KT0401: Deductible contributions (Part 1 – entry into the retirement system)


Chapter No

Contributions by members to retirement funds

Section 11F(1) through (3)

Chapter 7.4.1

Fund contributions by employers

Section 11(l) Chapter 12.2.2

KT0402: Tax-free build-up within the fund (Part 2 – growth within the retirement system)


Chapter No

Chapter 5.2.8

Approved funds and associations

Section 10(1)(d) (opening and (i))

Chapter 5.2.8

KT0403: Retirement annuity and lump sum pay outs (Part 3 – retirement fund yield) Note: (1) Focus solely on private sector pension funds, provident funds and retirement annuity funds making cash pay outs to beneficiaries. (2) Focus solely on lifetime pay outs to former employees in respect of domestic sourced services. (3) Disregard discussions pertaining to other funds, fund switching and life policy pay outs.


Chapter No

Fund benefits Definitions of pension fund, provident fund and retirement annuity fund (light review) contained within section 1 and paragraph 1 of the 2nd Schedule See also section 1: Paragraph (e) of the definition of gross income


65

as well as paragraph 2(1) of the 2nd Schedule (light review) Paragraph 4(1) of the 2nd Schedule

Retirement fund lump sum benefits (focus solely on retirement, death and loss of office or employment)

Retire definition in Paragraph 1 of the 2nd Schedule Paragraph 2(1) (opening), (a) (but not (a)(iii)) of the 2nd Schedule Paragraph 5(1) (opening) and (a) of the 2nd Schedule

Chapter 9.3.1

Retirement fund lump sum withdrawal benefits (focus solely on “other cases”)

Paragraph 2(1)(b)(ii) of the 2nd Schedule Paragraph 6(1) opening and (a) of the 2nd Schedule

Chapter 9.3.2

Rates if tax and other information

Paragraph 9(a) and 9(b) of Schedule I to Rates and Monetary Amounts and Amendment of Revenue Laws (latest)

Appendix B

Capital gains exclusion for retirement lump sums


Chapter 17.10.2 (“Lump sum retirement benefits exclusion” of “Other exclusions”)

Retirement Annuities

Section 1: Paragraph (a) of the “gross income” definition See also section 10(2)(b)

Notice in Terms of Paragraph (b) of the Definition of 'Living Annuity' in Section 1 of the Act Published under GN 290 in GG 32005 of 11 March 2009

Chapter 4.2 (“Annuities”) (focus solely on living annuities)

Annuity Withholding

Paragraph 1 definition of

Chapter 10.2.4 (“Annuities and royalties”)

66

“employer” within the 4th Schedule (focus funds as employers)

Exemption of retirement annuities stemming from non-deductible contributions

Section 10C Chapter 5.2.5 (“Exemption of non-deductible element of compulsory annuities”) and 9.4 (“Exemption of compulsory annuities”)

KT0404: Non-Retirement Lump Sum Pay-Outs


Chapter No

Severance Benefits

Paragraph 9 of Schedule I to Rates and Monetary Amounts and Amendment of Revenue Laws (latest)

SARS Employer Guide (Chapter 17.5)

Chapter 9.2.1 (“Compensation for termination of employment or office”)

Commutation of employment benefits

Paragraphs (d) and (f) of the “gross income” definition of section

Chapter 9.2.2 (“Commutation of amounts due”) See also Chapter 4 (“Services: Commutation of amounts due”)

Topic KT05: Flexible Institutional Savings


Chapter No

KT0501: General exemption for interest

Section 10(1)(i) Chapter 5.2.1 (“Interest received by natural persons”)

KT0502: Tax-free savings accounts

Section 12T(1) through (5) and (7)

Chapter 5.2.3 (“Amounts received from tax-free investments”)

KT0503: Collective investment schemes

Section 25BA(1) (disregard (b)) Note: Focus solely on local on interest and

Chapter 5.2.6 (“Collective investment schemes”) and Chapter 17.10.2 (Item (9) “Collective investment scheme in securities” of “Other exclusions”)

67

dividends distributed within 12. See also the capital gains exclusion (paragraph 61 of the 8th Schedule)

KT0504: REIT distributions

Section 1 (definition of a REIT); Proviso (aa) of Section 10(1)(k)(i)

Chapter 5.3.2

KT0505: Purchased annuities

Section 10A(1) (definitions of “annuity amount”, “annuity contract”, “expected return” and paragraph (a) of the “purchaser” definition) Section 10A(2) Section 10A(3) (opening line) and (a)

Chapter 5.2.4

KT0506: Long-Term Insurance


Chapter No

Long-term insurance pay-outs

Section 10(1)(gI) See also the capital gains exclusion (paragraph 55 of the 8th Schedule)

Chapters 5.2.7 (“Proceeds from insurance policies (not employment related”) and 17.10.2(3) (Item (3) “Long-term assurance policies exclusion” of “Other exclusions”)

Long-term insurance contributions

Section 23(c) Chapter 6.5.17 (“Premiums in respect of insurance policies against illness, injury, disability, unemployment or death of that person”)

68

Topic KT06: Basics of Transfer Duty (Diagnostic awareness only) Note: Trainees are expected only to have an awareness of the Transfer Duty but are not expected to perform detailed calculations.

Elements Transfer Duty Sections Study Guide

KTO601: Conceptual Overview Chapter 28.1 (Overview)

KTO602: Imposition of transfer duty Skim section 2(1) Chapter 28.2

KTO603: General (property definition) Skim the property definition in section 1 (excluding paragraphs (e), (f) and (g)

Chapter 28.3.1

KTO604: Interest in a residential property company

Skim the residential property company definition in section 1 (excluding paragraph (b))

Chapter 28.3.2

KTO605: Value on which transfer duty is payable

Skim section 5(1) Chapter 28.6

KTO606: Exemptions from transfer duty Section 9(1)(paragraphs (e) through (l)) Section 9(15)

Chapter 28.5

Employment Taxation – Knowledge Module #8 Topic KT01 – Employment (PAYE) Withholding Tax Mechanics


Chapter No



SARS Employer Guide (Chapter 4)

Chapter 10.1

KT0102: Employee’s tax

Paragraphs (2)(1), (2) and (4 of the 4th Schedule Paragraph 9(6) of the 4th Schedule

SARS Employer Guide (Chapter7.2)

Chapter 10.5 (other than “variable remuneration”)

KT0103: Obligation to deduct and pay over tax

Paragraph 6(1) of the 4th Schedule Section 213(1) of the Tax Administration Act

SARS Employer Guide (Chapters 7.3.1 and 7.3.3)

Chapter 10.11.2

KT0104: Registration Paragraph 15 of the 4th Schedule

SARS Employer Guide (Chapters 5.1 and 5.3)

Chapter 10.11.1

69

KT0105: Records Paragraph 14(1) of the 4th Schedule

SARS Employer Guide (Chapters 6.1, 6.2 and 7.4)

Chapter 10.11.5

KT0106: Return obligations

Paragraph 14(3) and (6) of the 4th Schedule

Chapter 10.11.6 (Annual returns)

KT0107: Employees’ tax certificates


Chapter 10.11.7

Topic KT02 – Employer – Employee Versus Other Relationships


Chapter No

KT0201: Employees The definition of “employee” in terms of (a) in paragraph 1 of the 4th Schedule

Chapter 10.3 (“Employee (disregard non-resident employees”))

KT0202: Employers The definition of employer in paragraph 1 of the 4th Schedule

• SARS Employer Guide (Chapter 13.2)

Chapter 10.4 (“Employer”)

KT0203: Independent contractors

Definition of “remuneration” in terms of the exclusion in subparagraph (ii) in paragraph 1 of the 4th Schedule

• Income Tax Case No 1787 67 SATC 142 CSARS v Professional Contract Administration CC

• SARS Interpretation Note 17 (Issue 3) (Employees’ tax: Independent contractors)

Chapter 10.8.1

KT0204: Directors Note: Paragraphs (a) and (g) of the employee definition have been removed.

SARS Binding General Ruling 40 and see also SARS Binding General Ruling 41 (relating to the VAT)

Chapter 10.2.2 (“Director’s fees”) and 10.10 (“Directors of public companies”)

KT0205: Part-time, casual and temporary employees

Paragraph 13(2)(b) and (3) of the 4th Schedule

SARS Employer Guide (Chapters 13.4, 13.5 and 13.8

Chapter 10.7

KT0206: Personal service providers

Definition of employee in terms of (e) of the 4th Schedule

Chapter 10.8.3

70

KT0207: Labour brokers

Definition of labour broker in paragraph 1 of the 4th Schedule Definition of employee in terms of (b) and (c) of the 4th Schedule Paragraph 2(5) of the 4th Schedule

Chapter 10.8.2

Topic KT03: Basic forms of Employment Remuneration


Chapter No

KT0301: Overall Forms of Remuneration

The definition of “remuneration” (excluding (b), (c), (d), (e), (f) and (g) and the exclusion of (ii)) in paragraph 1 of the 4th Schedule

Chapter 10.2 (“Remuneration”) (lightly review the table)

KT0302: Variable Remuneration

Section 7B Paragraph 2(1B) of the 4th Schedule

SARS Employer Guide (Chapters 14.4, 14.7 and 14.8)

Chapter 10.5 (“Employees’ tax”) (focus on “variable remuneration”)

KT0303: Backdated Salary

Section 7A(1) and (2) (disregard pensions)

Chapter 7.8 (“Antedated salaries and pensions”)(disregard pensions)

KT0304: Irregular remuneration

Paragraph 9(3) of the Fourth Schedule

Chapter 10.11.3

KT0305: Overview of Benefits

Paragraph (i) of the section definition of “gross income” The definition of “remuneration” in terms of (b) in paragraph 1 of the 4th Schedule

Chapters 8.1 (“Overview”) and 10.2.1 (“Fringe benefits”)

Topic KT04: Employee Allowances


Chapter No

71

KTO401: Allowances, Advances and Reimbursements

Section 8(1)((a)(i) (before the exclusions) Section 8(1)(a)(ii) and (iii)

SARS Interpretation Note 14 (issue 3)

Chapter 8.2 (“Allowances”) (opening)

KTO402: Travel allowances

Section 8(1)(a)(i)(aa) Section 8(1)(b) (excluding (iiiA)(aa) and (iv)) See also definition of remuneration in terms of (cA) and (cC) of the 4th Schedule

GN 195 Government Gazette 40660 of 3 March 2017) SARS Binding General Ruling 23 (Travel allowance – fuel cost to an employee who receives a petrol or garage card)

Chapter 8.3.1 (excluding anti-avoidance rule) Appendix C

KTO403: Subsistence allowance

Section 8(1)(a)(i)(cc) Section 8(1)(c) See also definition of remuneration in terms of (bA) (excluding (i)) of the 4th Schedule

GN 194 Government Gazette 40660 (3 March 2017) SARS Binding General Ruling 22 (Subsistence allowance – amounts deemed to be expended for business purposes)

Chapter 8.3.2 Appendix F

Topic KT05: Overall Fringe Benefit Considerations


Chapter No

KT0501: Range of Fringe Benefits

Section 1 (paragraph (i) of the “gross income” definition) Paragraph 2 of the 7th Schedule (lightly review) See also definitions of employee and employer in paragraph 1 of the 7th Schedule

Chapter 8.4 (“Seventh Schedule benefits”)

KT0502: Benefits for Employee Relatives


SARS Employer Guide (Chapter 5)

Chapter 8.4.1 (“Benefits granted to relatives of employees and others”)

72

KT0503: Employee Purchase Discounts

Paragraph 2(a) of the 7th Schedule Paragraph 5(1) and (2) of the 7th Schedule

Chapter 8.4.4 (“Assets acquired at less than actual value”) See also 8.4.2 (“Consideration paid by employee”)

KT0504: Employer Reporting of Fringe Benefits

Paragraph 3(1) and (2) of the 7th Schedule Paragraph 17 of the 7th Schedule

Chapter 8.4.3 (“Employer’s duties”)

Topic KT06: Specific Fringe Benefits and Exemptions


Chapter No

KT0601: Employer-Provided Cars

Paragraph 2(b) of the 7th Schedule Paragraph 7(1) (excluding the provisos to (1)), (2), (4), (5), (7) and (8) of the 7th Schedule See also paragraph 1 (paragraph (cB) of the “remuneration” definition) of the 4th Schedule

SARS Interpretation Note 72 (Right of use of motor vehicles) SARS Employer Guide (Chapter 4.3)

Chapter 8.4.6 (“Right of use of motor vehicles”)

KT0602: Employer-Provided Food

Paragraph 2(c) and 8 of the 7th Schedule


Chapter 8.4.7 (“Meals, refreshments and meal and refreshment vouchers”)

KT0603: Employer-Provided Housing

Paragraphs (2) and 9 of the 7th Schedule


Chapter 8.4.8 (“Residential accommodation”) and 8.4.9 (“Holiday accommodation”)

KT0604: Employer-Provided Phones,

Paragraph 2(e) of the 7th Schedule

• SARS Binding General Ruling 42 (No-value

Chapter 8.4.10 (“Free or cheap services”)

73

Computers, Taxis and other services

Paragraph 10 (excluding (2)(a), (bA) and (d)) of the 7th Schedule

provision in respect of transport services)

• BMW South Africa (Pty) Ltd v C:SARS

• SARS Employer Guide (Chapter 4.6)

• SARS Interpretation Note 77 (Taxable benefit: Use of employer-provided telephone or computer equipment or employer-funded telecommunication services)

KT0605: Employer-Provided Zero / Discounted Interest Loans

Paragraph 2(f) of the 7th Schedule Paragraph 11 (other than (3) and (5))


Chapter 8.4.11 (“Low-interest debts”)

KT0606: Employer Cancellation of Employee Debts

Paragraph 2(h) of the 7th Schedule Paragraph 13


Chapter 8.4.13 (“Release from or payment of obligation”)

KT0607: Employer Medical Scheme Contributions

Paragraph 2(i) of the 7th Schedule Paragraph 12A (excluding (2) and (3)) of the 7th Schedule


Chapter 8.4.14 (“Contributions to medical schemes”)

KT0608: Employer Retirement Fund Contributions

Paragraph 2(l) of the 7th Schedule Paragraph 12D(1)(the definitions of “defined contribution component” and “fund member category”) and (2) of the 7th Schedule

Chapter 8.4.17 (“Contributions by an employer to retirement funds”) (focus solely on defined contribution plans)

74

Section 11F(4)

KTO609: Employee Exemptions


Chapter No

Employer-Provided Uniforms

Section 10(1)(nA) SARS Employer Guide (Chapter 16.1)

Chapter 5.4.3 (“Uniforms and uniform allowances”)

Employer-Provided Job Relocation Costs

Section 10(1)(nB) SARS Employer Guide (Chapter 16.2)

Chapter 5.4.4 (“Relocation benefits”)

Employer-Provided Bursaries and Scholarships

Section 10(1)(q) SARS Employer Guide (Chapter 16.4.1)

Chapter 5.5.1 (“Bursaries and scholarships”) (disregard bursaries and scholarships dedicated to disabled persons)

Topic KT07: Ancillary Employment Taxes


Chapter No

KT0701 Employer Payments

Chapter 10 of the Tax Administration Act

SARS Employer Guide – Payment of Employees’ Tax, SDL and UIF (Chapter 9.1)

KT0702 Skills Development Levy

Sections 3(1) and (4) of the SDL Act Paragraph 2(5) of the Fourth Schedule

SARS Employer Guide – SDL Liable Amount (Chapter 7.3)

KT0703 Unemployment Insurance Fund Contributions

Sections 5 and 6 of the UIC Act

SARS Employer Guide – UIF Liable Amount (Chapter 7.4)

Wealth Succession Planning (Lifetime and Death Transfers) – Knowledge Module #9

Topic KT01: Family Income Tax Allocations

Element KT0101: Marriages Outside Community of Property

75


Chapter No

Couples as Separate Taxpayers

Chapter 7.5 (“Taxation of married couples”)

Income from donations between spouses (and related deductions)

Section 7(2) See also section 7(2B)

Chapter 7.5.1 (“Deemed inclusion”) See also Chapter 7.5.4 (“Expenditure and allowances”)

Transfer of assets between spouses

Section 9HB(1), (3) and (4)

Chapter 17.10.3.3 (disregard divorce)

Capital gains from donations between spouses

Skim paragraph 68(1) and (2) of the 8th Schedule

SARS CGT guide paragraph 15.3

Chapter 17.10.4 (“Attribution of capital gains”) (focus solely on paragraph 68)

Element KT0102: Marriages in community of property


Chapter No

The joint estate of marriages in community of property

Section 7(2A) and (2C) See also section 7(2B)

Chapter 7.5.2 (“Marriages in community of property”) See also Chapter 7.5.4 (“Expenditure and allowances”)

Disposals to third parties by spouses married in community of property


SARS CGT guide Paragraphs 6.4 – 6.5

Chapter 17.5.5 (“Disposals by spouses married in community of property”)

Element KT0103: Separation and Divorce


Chapter No

Alimony and maintenance

Sections 21 and 10(1)(u)

Chapter 7.6 (other than discussions pertaining to section 7(11)

Impact of Separation on marriages in community of property

Section 25A Chapter (“Marriages in community of property”) (focus

76

solely on section 25A)

Disposals pursuant to divorce

Section 9HB(1), (2)(b), (3) and (4)

Chapter 17.10.3.3 (“Transfer of assets between spouses”) (focus solely on divorce)

Element KT0104: Minor Children


Chapter No

Minor Children as Separate Taxpayers

Chapter 7.7 (“Minor children”) (opening)

Income from direct donations to Minor Children

Section 7(3) Chapter 7.7 (“Minor children”) (focus solely on the discussion of section 7(3))

Income from indirect donations to Minor Children

Section 7(4) Chapter 7.7 (“Minor children”) (focus solely on the discussion of section 7(4))

Capital gains from donations to minor children

Skim paragraph 69 of the 8th Schedule

SARS CGT guide paragraph 15.4

Chapter 17.10.4 (“Attribution of capital gains”) (focus solely on paragraph 69)

Topic KT02: Income Tax Impact of Donations


Chapter No

KT0201: Donations as a Capital Gains Tax disposal event

Paragraph 11(1)(b) of the 8th Schedule

Chapter 17.7.1 (“Disposal events”) (focus solely on donations)

KT0202: Capital Gains Tax disposals are deemed to occur at market value


Chapter 17.9.5 (“Disposal and donations not at arm’s length or to a connected person”) (focus solely on donations)

KT0203: Capital gains tax relief for


Chapter 17.10.3.3 (“Transfers of assets between spouses”)

77

interspousal donations

KT0204: Donations as a trading stock event

Section 22(8)(b)(i) Chapter 14.6 (“Goods taken from stock or distributed as a dividend in specie (focus solely on donations)

KT0205: Donations of allowance assets as a recoupment

Section 8(4)(k)(i) Chapter 13.10.2 (“Recoupments: Donations, asset in specie distributions or the disposal of assets to connected persons”) (focus solely on donations)

Topic KT03: Donations Tax


Chapter No

KT0301: Donations Tax Overview


KT0302: Levying of donations tax

Sections 54 and 64(1) ’Welch’s Estate v CSARS Ogus v SIR

Chapter 26.2

KT0303: Property Definition of “property” in section 55(1)

Chapter 26.3.1

KT0304: Donation Definition of “donation” in section 55(1)

The Abraham Krok Trust v SARS

Chapter 26.3.2

KT0305: Donee Definition of “donee“ in section 55(1)

Chapter 26.3.3

KT0306: Deemed donations

Section 58(1) Chapter 26.5

KT0307: Donations by spouses married in community of property

Section 57A Chapter 26.7

KT0308: Exemption for donations by natural persons

Section 56(2)(b) Chapter 26.6.3 (“General exemption for a natural person”)

KT0309: Exemption for donations by entities

Section 56(2)(a) Chapter 26.6.2 (“General exemption for a donor other than a natural person”)

78

KT03010: Miscellaneous exemptions from Donations Tax

Paragraphs (a), (b), (e), (h), (l) and (n) in section 56(1)

The Abraham Krok Trust v SARS

Chapter 26.6.1 (“Exemptions”) (solely in respect of the paragraphs listed)

KT03011: Payment and assessment of tax

Section 59 Section 60(1)

Chapter 26.11

Topic KT04: Income Tax Impact of Death


Chapter No

KT0401: Non-Tax Consequences of death

Chapters 27.1 (“Overview”) and 27.2 (“Normal tax: Change in taxpayers upon death”)

KT0402: The deceased’s final year

Chapters 27.3 (“Normal tax: The deceased person”) (opening) and 27.3.1 (“Income received or accrued to the deceased person”)

KT0403: Nature of the deceased estate

Paragraph (b) of the section 1 definition of “person”

Chapter 27.4 (“Normal tax: The deceased estate”)

KT0404: Income taxation of the deceased estate

Section 25(1) , (2) and (5)

Chapters 27.4.1 (“Income of the deceased estate”) and 27.4.4.1 (“Capital gains tax: Deceased estate”)

KT0405: Impact of community-of-property marriages and the deceased estate

Section 25(1) and 25A

Chapter 27.4.2 (“In community-of-property marriages”)

KT0406: Death as a deemed disposal event for ordinary and capital gains purposes

Sections 9HA and 9HB(2)(a)

Chapter 27.4.4.1 (“Capital gains tax consequences of the deceased person” within “Capital gains tax”)

KT0407: Transfers by deceased estates to beneficiaries

Section 25(3) and (4) Chapters 27.4.4.1 (“Assets transferred to a surviving

79

spouse” and Assets transferred to other beneficiaries within “Capital gains tax”) and 27.4.4.2 (“Capital gains tax: Beneficiaries of the deceased person”)

Topic KT05: Basics of Estate Duty (Diagnostic awareness only) Note: Trainees are expected only to have an awareness of the Estate Duty but are not expected to perform detailed calculations.

Elements

Estate Duty Sections Study Guide

KT0501: Estate Duty Overview Skim sections 2 and 3(1) Skim First Schedule (Rate of Estate Duty) before the proviso

Chapter 27.1 (“Estate Duty: General”) (opening) and 27.5 (“Estate Duty: General”)

KT0502: Property: Core the Estate Duty Base

Skim section 3(2) Chapter 27.6 (“Estate duty: Property”)

KT0503: Property deemed to be property Skim section 3(3)(opening) Chapter 27.7(opening)

KT0504: Domestic policies of insurance on the life of the deceased

Skim section 3(3)(a) Chapter 27.7.1

KT0505: A claim against the surviving spouse in terms of section 3 of the Matrimony Property Act

Skim section 3(3)(cA) Chapter 27.7.3

KT0506: Allowable deductions Skim section 4 (opening) Chapter 27.9(opening)

KT0507: Funeral and death-bed expenses Skim section 4(a) Chapter 27.9.1

KT0508: Debts due within South Africa Skim section 4(b) Chapter 27.9.2

KT0509: Bequests to certain charitable bodies

Skim section 4(h) Chapter 27.9.8

KT0510: Amounts to accruing to the surviving spouse

Skim section 4(q) Chapter 27.9.15

KT0511: Abatement Skim section 4A(1) and (2) Chapter 27.9.16

KT0512: Marriage in community of property

Chapter 27.12

80

Topic KT06: Trusts – Background Considerations


Chapter No

KT0601: General Construct


KT0602: Creation of the trust

Chapter 24.2

KT0603: Different types of trusts


KT0604: Ordinary trust

Section 1(1) definition of trust Paragraph 2 of the Rates and Monetary Amounts Amendment Bill (Act No. 14 of 2017 for the 2018 Assessment Year) Paragraph 10(c) of the 8th Schedule (inclusion rate)

Chapter 24.3.1

KT0605: Special trust Section 1(1) definition of special trust Paragraph Paragraph 1 of the Rates and Monetary Amounts Amendment Bill (Act No. 14 of 2017 for the 2018 Assessment Year) Paragraph 10(a) of the 8th Schedule

Chapter 24.3.2

Topic KT07: Trust Income / Gain Allocations and Distributions


Chapter No

KT0701: The donor, trust and beneficiary triangle

Paragraph (c) of the section 1 “representative taxpayer” definition

81

Skim sections 7 and 25B

KT0702: Trusts as a selective conduit of income

Chapter 24.4 (“The nature of the income received and distributed by trusts”) (disregard the discussion relating to an annuity)

KT0703: Trusts as a selective conduct of losses

Sections 25B(1), (3) and (4)

Chapters 24.7 (“Deductions and allowances”) and 24.8 (“Limitation of losses”)

KT0704: Capital Gains of Trusts


Chapter No

Trust Disposals to Third Parties and Vesting to Beneficiaries

Chapter 24.9 (opening) (“Capital gains tax: Disposal by a trust for capital gains tax purposes”)

Trust Capital Gain Tax Calculations

Paragraphs 80(1) of the 8th Schedule See also paragraphs 11(1)(d) and 13(1)(a)(iiA)

SARS CGT guide – paragraph 14.11 and 14.11.1 See also SARS CGT guide – paragraph 14.7.1

Chapter 24.9.1 (“Capital gain in respect of a disposal by a trust”)

Trust Capital Loss Limitations

Review paragraph 80(1) of the 8th Schedule See also the section 1 “connected person” definition and paragraph 39 (ring-fenced losses for connected persons)

SARS CGT guide – paragraph 14.11 (opening) and 14.11.1

Chapter 24.9.4 (“Treatment of capital losses in respect of a disposal by a trust”)

82

Topic KT08: The Donor-Trust Relationship


Chapter No

KT0801: General concept of reallocation to the Donor

Chapter 24.6 (“Liability of the donor for tax on income”)

KT0802: Donor Donations to a Trust

Sections 7(9) and (10)

Chapter 24.6.1 (“Donation, settlement or other disposition”)

KT0803: Conditional vesting to beneficiaries

Section 7(5) Chapter 24.6.4 (“Retained income not vested due to stipulation”)

KT0804: Revocable trust interests

Section 7(6) Chapter 24.6.5 (“Amount vested that could have been revoked”)

KT0805: Comparable capital gain reallocations

Paragraphs 70, 71 and 73 of the 8th Schedule

SARS CGT guide – paragraphs 15.5 and 15.6

Chapter 17.10.4 (“Attribution of capital gains (focus solely on paragraphs 70, 71 and 73”)

KT0806: Trust purchases from donors supported by donor loans

Section 7C(1) (disregard (b)and (ii)) Section 7C(2) Section 7C(3) Skim Section 7D Section 7C(5)(d)

Chapter 26.10 (“Interest-free and low-interest loans to trusts or companies”) (focus solely on loans by a domestic individual made directly to a domestic trust)

Tax Administration and Practice Management – Knowledge Module #10

Topic KT01: Preliminary Concepts in Tax Administration Act

Elements Tax Administration

Act Sections

Authoritative

Interpretations

Chapter No

KT0101: Tax Administration Act Overview

SARS Short Guide to the Tax Administration Act – Part A (“Introduction”)


83

KT0102: Tax Administration Framework

SARS Short Guide to the Tax Administration Act – Chapter 2.4 (“The tax acts”)

Chapter 33.2

KT0103: Arrangements of Chapters & Sections of the TAA

SARS Short Guide to the Tax Administration Act – Part B (“Structure of the Act”)

Chapter 33.3 (“Application and scope of the Tax Administrative Act”)

KT0104: Tax Ombud Sections 16 and 17 SARS Short Guide to the Tax Administration Act – Chapter 2.11 (“The Tax Ombud”)

Chapter Chapter 33.2.3.3

Topic KT02: Tax Practitioners, tax representatives and tax clearance


Act Sections

Authoritative

Interpretations

Chapter No

KT0201:

Representative

taxpayer

Sections 154 and

155 and 158

SARS Short Guide to

the Tax

Administration Act –

Chapter 10.2

(“Taxpayers and

category of persons

liable to tax”) (lightly

review)

Chapter 33.3.8.1

KT0202: Withholding

agent

Section 156, 157 and

158

SARS Short Guide to

the Tax


Chapter 10.2

(“Taxpayers and

category of persons

liable to tax”) (lightly

review)

Chapter 33.3.8.2

KT0203: Reporting

Unprofessional

Conduct

Sections 240, 241

(skim) and 240A

(skim)

SARS Short Guide to

the Tax


Chapter 18

(“Reporting of

Chapter 33.2.3.4

(“Tax practitioners”)

84

unprofessional

conduct”)

Topic KT03: Tax clearance / taxpayer compliance status

KT0301: Tax clearance

Section 256(1) through (3) and (7)

SARS Short Guide to the Tax Administration Act –Chapter 19.5 (“Confirmation of tax compliance status”)

Chapter 33.3.11 (“Confirmation of tax compliance status”)

Topic KT04: Assessments

Elements Tax Administration Act Sections


Chapter No

KT0401 Original assessments

Section 1 (definition of assessment), 91(1) and (2); Section 96(1)

SARS Short Guide to the Tax Administration Act – Chapter 8.2.1 (“Original Assessments”)

Chapter 33.3.5 (opening) (“Assessments”) and 33.3.5.1 (“Original assessments”)

KT0402 Additional assessments

Section 92 SARS Short Guide to the Tax Administration Act – Chapter 8.2.2 (“Additional Assessments”)

Chapter 33.3.5.2

KT0403 Basics of Prescription

Section 99 SARS Short Guide to the Tax Administration Act – Chapter 8.6.1 (“SARS administered tax and self-assessment tax”) and 8.6.4 (“Non-application of the prescription rules”)

Chapter 33.3.5.6 (“Prescription”)

KT0404 Reduced Assessments

Section 93(1)(d) and (e), (2); see also 25(5)

SARS Short Guide to the Tax Administration Act – Chapter 8.2.3 (“Reduced Assessments”)

Chapter 33.3.5.3

KT0405 Withdrawal of assessments

Section 98 SARS Short Guide to the Tax Administration Act –

Chapter 33.3.5.7

85

Chapter 8.5 (“Withdrawal of assessments”)

KT0406 Finality of assessment or decision

Section 100 SARS Short Guide to the Tax Administration Act – Chapter 8.7 (“Finality of Assessment”)

Chapter 33.5.1 (“Overview of the process”) (focus solely on the finality of assessments)

Topic KT05: Penalties



Chapter No

KT0501: Penalty Overview

SARS Short Guide to the Tax Administration Act – Chapters 15.1 (“Introduction and purpose”) and 15.2 (“Penalty regime under the Act”)

Chapter 33.3.6 (“Penalties”) (opening)

KT0502: Administrative Non-Compliance Penalties (Option 1)

Section 208 and 214 SARS Short Guide to the Tax Administration Act – Chapter 15.3 (“What are administrative non-compliance penalties?”)

Chapter 33.3.6.1 (Opening) (“Administrative Non-Compliance Penalties”)

KT0503: Fixed Amount Penalties (Option 1A)

Sections 210 and 211(1) through (3)

SARS Short Guide to the Tax Administration Act – Chapters 15.4.1 (“When ill a fixed amount penalty be imposed?”), 15.4.2 (“How much is the fixed amount penalty?”) and 154.3 (“Examples of duties”)

Chapter 33.3.6.1 (“Fixed Amount Penalties” within “Administrative Non-Compliance Penalties”)

KT0504: Percentage-Based Penalty

Section 213 SARS Short Guide to the Tax Administration Act – Chapters 15.6 (“Percentage based penalties”), 15.7 (“How is a penalty imposed?”)

Chapter 33.3.6.1 (“Percentage-based Penalties” within “Administrative Non-Compliance Penalties”)

86

KT0505: Remittance of Administration Non-Compliance Penalties

Skim section 215 through 220

SARS Short Guide to the Tax Administration Act – Chapter 15.8 (whole) (“Remitting administrative non-compliance penalties”)

Chapter 33.3.6.1 (“Remittance of Administration Non-Compliance Penalties” within “Administrative Non-Compliance Penalties”)

KT0506: Understatement penalties

Sections 221 through 223

SARS Short Guide to the Tax Administration Act – Chapter 16 (whole) (“Understatement Penalty”)

Chapter 33.3.6.2

KT0507: Voluntary Disclosure Programme

Sections 226, 227, 229 and 230

SARS Short Guide to the Tax Administration Act – Chapter 17 (whole) (“Voluntary Disclosure Programme (VDP)”)

Chapter 33.3.6.3

Topic KT06: Dispute Process: Basic Considerations


Act Sections

Authoritative

Interpretations

Chapter No

KT0601: Overview

of the dispute

process

Chapter 9 (skim

sections 101 through

150)

Chapter 33.5

(opening) (“Dispute

resolution”) and

33.5.1 (“Overview of

the process”)

KT0602: Burden or onus of proof

Section 102 SARS Short Guide to the Tax Administration Act – Chapter 9.3 (“Burden of proof”) Commissioner for Inland Revenue v Goodrick, (1942 OPD) 12 SATC 279) (the taxpayer must provide affirmative evidence that satisfies a “preponderance of

Chapter 33.5.2 (“Burden of proof”)

87

probabilities standard”)

Topic KT07: SARS Information Gathering


Act Sections

Authoritative

Interpretations

Chapter No

KT0701: SARS

General Gathering

Information Powers

Sections 40, 42 and

42A

SARS Short Guide to

the Tax


Chapters 5.2.1

(“Selection basis for

inspection,

verification, audit

and criminal

investigation”), 5.2.2

(“Authority to

conduct an audit or

investigation”), 5.23

(“Keeping a taxpayer

informed of the

audit”) and 5.2.4

(“Procedure where

legal professional

privilege is asserted”)

Chapter 33.4

(“Information

gathering”)

KT0702: SARS

Authority to Inspect

Premises

Section 45 SARS Short Guide to

the Tax


Chapter 5.3.1

(“Inspections”)

Chapter 33.4.1

(“Inspection”)

KT0703: SARS Power

to Request Relevant

Information

Section 46(1), (3), (4),

(5), (6) and (9)

SARS Short Guide to

the Tax


Chapter 5.3.2

(“Request for

relevant material”)

Chapter 33.4.2

(“Request for

relevant material”)

KT0704: SARS Power

to Conduct

Interviews

Section 47 SARS Short Guide to

the Tax


Chapter 5.3.3

(“Production of

relevant material in

person”)

Chapter 33.4.3

(“Production of

relevant material in

person”)

88

Topic KT08: Objection against assessment


Act Sections

Authoritative

Interpretations

Chapter No

KT0801: Objection Sections 104 and

106(1) through (5)

Rule 7

SARS Short Guide to

the Tax


Chapter 9.4.1 (“What

assessments and

decisions may be

objected against?”),

9.4.2 (“SARS’s

decision on

objection”) and 9.4.3

(“Condonation of late

objection”)

Chapter 33.5.5

(“Objection against

the assessment”)

KT0802: Demand for

reasons for the

assessment

Rule 6 Minister of

Environmental

Affairs & Tourism v

Phambili Fisheries

Chapter 33.5.4

KT0803: Payment of

tax pending

objection or appeal

Section 164(1)

through (3)

SARS Short Guide to

the Tax


Chapter 10.6

(“Suspension of

payment if there is a

dispute”) (lightly

review)

Chapter 33.5.3

KT0804: Appeal Sections 106 (skim)

and 107 (skim)

Rule 10 (skim)

SARS Short Guide to

the Tax


Chapter 9.5.1

(“Requirements for a

valid appeal”)

Chapter 33.5.6

(“Appeal against the

assessment”)

Topic KT09: Overview of the Settlement Process (Diagnostic Awareness Only)

Note: Trainees are expected only to have an awareness of the Estate Duty but are not expected to perform detailed calculations.

89


Act Sections

Authoritative

Interpretations

Chapter No

KT0901: Alternative

dispute resolution

Sections 107(5) and

(6)

Skim Rules 13

through 25

SARS Short Guide to

the Tax


Chapter 9.7

(“Alternative Dispute

Resolution”)

Chapter 33.5.7

KT0902: Settlement Skim Part F of

Chapter 9 (sections

142 through 150)

SARS Short Guide to

the Tax


Chapter 9.11

(“Settlement of

disputes”)

Chapter 33.12

(“Settlement of

dispute”)

KT0903: Installment

payment

arrangements

Skim sections 167

and 168

SARS Short Guide to

the Tax


Chapter 10.8

(“Deferral of

payment”)

Chapter 33.10.1

KT0904: Write off or

compromise of a tax

debt

Skim sections 192

through 207

SARS Short Guide to

the Tax


Chapter 14 (“Write

Off or Compromise

of Tax Debts”)

Chapter 33.3.10.2

Topic KT010: Boards and Courts (Diagnostic awareness only) Note: Trainees are expected only to have an awareness of the Estate Duty but are not expected to perform detailed calculations.



Chapter No

KT01001: Tax Board Skim sections 108 and 109

SARS Short Guide to the Tax Administration Act – Chapter 9.8.1 (“Establishment, jurisdiction and constitution of tax board”) and 9.8.5 (“Decisions of tax board”)

Chapter 33.5.8

90

KT01002: Tax Court Skim sections 116, 117, 129 and 132

SARS Short Guide to the Tax Administration Act – Chapter 9.9.1 (“Establishment, jurisdiction and constitution of tax court”)

Chapter 33.5.9

KT01003: Appeals to the High Court

Skim sections 133 and 134

SARS Short Guide to the Tax Administration Act – Chapter 9.10 (“Appeals to higher courts”)

Chapter 33.5.10

Documents

Occupational Certificate Tax Professional Knowledge