UNIVERSITY EXAMINATIONS

Oct/Nov 2023

TAX3761

Taxation of Business Activities and Individuals

100 Marks
Duration 3 Hours

This paper consists of twelve (12) pages, plus a schedule (pp i - x)

IMPORTANT INSTRUCTIONS:

Assumptions:

1. All amounts exclude Value-Added Tax (VAT) unless specifically stated otherwise.
2. The VAT rate increased from 14% to 15% from 1 April 2018.
3. All persons mentioned are residents of the Republic of South Africa unless stated otherwise.
4. SARS = South African Revenue Service.
5. All transactions are conducted with registered VAT vendors, unless specifically stated other
wise.
6. Valid tax invoices and required documentation are obtained for all transactions.

The answering of this paper:

1. This is a closed-book exam.

2. This paper consists of two (2) questions with subsections.
3. All questions and sub-sections must be answered.
4. Each sub-section must be commenced on a new (separate) page.
5. All workings, where applicable, must be shown. Where an amount is subject to a limitation,
clearly indicate the application of the limitation. Where any item does not form part of gross income,
is exempt from tax or is not allowable as a deduction, this must specifically be indicated, and a short
reason should be provided.
6. All amounts must be rounded to the nearest Rand.

Honesty Declaration:
By submitting my solution to the exam, I declare that:
I know what plagiarism is, that plagiarism is wrong and that disciplinary steps can be taken against me
if I am found guilty of plagiarism.
This solution, submitted by myself, is my own work.
I have not assisted any other student in any manner, and I have not had the assistance of any other
person, in completing this exam.
I will not assist any other student in any manner, and I will not obtain the assistance of any other person,
in completing this exam.
I know that if I am found to be in violation of this declaration, I will have to face a disciplinary hearing.
Please note: You do not have to sign the declaration. By submitting your solution, you automatically
declare that you adhere to all the above with regards to this specific assessment.

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The Invigilator

Day of the assessment instructions:

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073 505 8273.

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Access and Submission instructions:

The exam paper will remain available throughout the examination session.

Commence the submission (uploading) of your script as soon as you have completed the assess-
ment, do not wait for the session to conclude.

Suggestion: Start uploading your script at 11:00 (3 hours after the start of the exam session) at the
latest, to allow enough time for any delays in the process.

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You MUST submit your answers in one pdf file. The file name of your pdf document must be in the
following format: Student number, space, TAX3761. For example: 33445566 TAX3761.

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• The myExams portal AND the link closes promptly at 11:30.

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Additional instructions:

1. Students must upload their answer scripts in a single PDF file on the official myExams platform
(answer scripts must not be password-protected or uploaded as “read-only” files). The university
only marks one submission received from a student. Priority is granted to scripts received via the
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messaging services with any other person (except when asking for technical assistance via official
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of academic integrity and students who plagiarise, copy from published work or use Artificial
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the Policy on Academic Integrity and the Student Disciplinary Code and may be referred to a
disciplinary hearing. Unisa has a zero tolerance for plagiarism and/or any other forms of academic
dishonesty.

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15. Students are provided 30 minutes to submit their answer scripts after the official examination time.
Students who experience technical challenges should report to the Student Communication Service
Centre (SCSC) on 080 000 1870 and choose option 4 for exams or email
TAX3761-23-Y1@unisa.ac.za or CASExams@unisa.ac.za) within 30 minutes. Queries received
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not be marked. Only communication received from your myLife account will be considered.
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e. Unlicensed software (e.g. license expires during exams)
18. Students experiencing the above challenges in their second examination opportunity will have to
reregister for the affected module.

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QUESTION 1 (50 marks, 90 minutes)

PART A (15 marks, 27 minutes)

Go Springboks (Pty) Ltd (“GS”) is a resident company that sells rugby gear and attire throughout South
Africa. GS has shops in all the major cities in the country.

GS is a small business corporation as defined in section 12E of the Income Tax Act (Act No. 58 of 1962)
as amended. GS is a registered VAT vendor. All amounts include VAT, unless stated otherwise.

GS’s financial year ends on the last day of March and always utilises any possible election(s) that would
legally minimise its overall tax liability during any given year of assessment (This election is not applicable
to Capital Gains Tax). GS applies IFRS 9 for financial reporting purposes.

Your VAT and income tax advice is sought in respect of the transactions listed below which GS entered
into during its 2023 year of assessment:

Transaction 1

On 1 July 2022, fixed property that had been used previously, was purchased from a VAT vendor for an
amount of R3 450 000. The transaction was not zero-rated, and the property consists of land and
buildings. The building was brought into use immediately and initially 35% was utilised for residential
purposes. The part of the building that was used for residential purposes was leased to outside tenants
for R25 000 per month. The remaining 65% of the building is used by GS as a warehouse to store the
rugby gear and attire (trading stock).

Transaction 2

On 30 April 2022, Siya Kolisi (the sole shareholder of GS) sold shop fittings to GS for R322 000. The open
market value on the date of sale was R240 000. The fittings had originally cost Siya Kolisi R345 000. The
fittings were brought into use by GS on 1 August 2022. Siya Kolisi is not a VAT vendor. According to
Binding General Ruling No 7, shop fittings are written off over a period of 6 years.

The shop fittings did not match the other fittings and were sold by GS on 31 January 2023 for R110 000
(excluding VAT) to Aussie (Pty) Ltd. Aussie (Pty) Ltd is a registered VAT vendor and is not a connected
person to GS.

REQUIRED: MARKS
a) Discuss and calculate the Value-added tax (VAT) implications of the above-mentioned
transactions in respect of GS for the 2023 year of assessment.
Transaction 1 (4)
Transaction 2 (2)

b) Briefly discuss and calculate the income tax implications of the above-mentioned
transactions in respect of GS for the 2023 year of assessment. (Ignore capital gains
tax).
Transaction 1 (3)
Transaction 2 (6)

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QUESTION 1 (continued)

PART B (25 marks, 45 minutes)

All the information in Part A also relates to Part B, except for the following:

All amounts exclude VAT unless stated otherwise and the company is NOT a small business cor-
poration as defined in the Income Tax Act (Act No. 58 of 1962), as amended. Ignore Transaction 1
and Transaction 2 for Part B.

The accountant calculated the accounting profit of Go Springboks (Pty) Ltd (“GS”) as R2 548 638 for the
2023 year of assessment. The following information has been taken into account in the calculation the
accounting profit:

Receipts and accruals Notes R

Sales 6 850 000
Gross dividends received from a local company 46 022
Expenditure and costs
Purchase of raw material (including VAT) 1 420 876
Doubtful debts 2 58 400
Design acquired 3 125 000
Interest paid 4 88 087
Depreciation 5 268 744
Rental paid 6 250 000

Notes and additional information:

1. Inventory

The accountant determined the following values for inventory for the 2023 year of assessment:

Inventory on 1 April 2022 Inventory on 31 March 2023

Cost price Market value Cost price Market value
R658 741 R765 236 R852 417 R842 965

2. Doubtful debts

At the end of the financial year the company’s IFRS 9 loss allowance relating to impairment (equal to its
lifetime expected credit loss) was R58 400. Lease receivables were excluded from the debt figures used
in calculating the loss allowance.

3. Design purchased

On 1 June 2022, GS purchased a new design for rugby jerseys from a big food supplier in South Africa,
Check, for an amount of R125 000.

4. Interest paid

The following interest was paid during the 2023 year of assessment:

R
Interest on a bank overdraft to fund the leasehold improvement (see note 6) 85 400
Interest on a SARS account that is in arrears 2 687
88 087

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QUESTION 1 (continued)

PART B (continued)

5. Depreciation

The accountant calculated the depreciation for the 2023 year of assessment as R268 744.

A second-hand machine (Machine A) was purchased at a total cost of R480 000 on 1 August 2021 and
brought into use on 2 September 2021. Due to a change in industry regulations, Machine A had to be sold
and was replaced with another new and unused manufacturing machine (Machine B). Machine A was
sold for R525 000 (excluding VAT) on 30 October 2022 and Machine B was purchased at a total cost of
R747 000 on 15 October 2022 and brought into use on 1 February 2023.

GS purchased a delivery vehicle on 30 August 2022 at a cost price of R256 000 and brought it into use on
the same date.

Binding general ruling No. 7 allows delivery vehicles to be written off over 4 years (where applicable):

6. Rent and leasehold improvement

GS signed a new lease agreement on 1 June 2022 with France (Pty) Ltd. The lease agreement is for a
period of five years with the option to extend the lease for another three years. The agreement included
a monthly rental of R25 000 payable on the first day of each month from 1 June 2022. The new lease
agreement stipulated that GS had to effect leasehold improvements of R458 000. The company
commenced with the leasehold improvements on 1 July 2022, and they were completed on
30 November 2022 at a total cost of R560 000 and brought into use on 1 January 2023. The value of the
improvements will be taxed as gross income in the hands of France (Pty) Ltd.

7. Assessed loss and provisional tax paid

GS has an assessed loss of R62 800 brought forward from the 2022 year of assessment. GS made
provisional tax payments of R356 800 for the 2023 year of assessment.

REQUIRED: MARKS

Calculate the normal tax liability of Go Springboks (Pty) Ltd for the 2023 year of
assessment. Start with the net profit before tax of R2 548 638. 25

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QUESTION 1 (continued)

PART C (10 marks, 18 minutes)

As the tax manager of Go Springboks (Pty) Ltd, you received the following email from Mr Siya Kolisi:

From: SKolisi@GS.co.za
Sent: 17 March 2023
To: Taxmanager@GS.co.za
Subject: Tax and ethical matters

Dear Tax Manager

I trust this email finds you well and I must ask you for your urgent assistance regarding the following
transactions. I am not sure what amounts should be included in our tax calculations for the following
three transactions, I have tried to capture the information as best as possible,

1. GS requires a deposit of 10% on orders that exceed R50 000. Should a customer cancel the
order, the deposit is forfeited. GS accepted deposits of R255 000 for the 2023 year of assess-
ment.
2. A collection of the newly designed springbok jerseys was sold on credit on 25 March 2023 to the
Stormers Rugby Union for R145 000. In terms of the contract of sale, GS undertook to deliver
the springbok jerseys to the Stormers Rugby Union in Cape Town. The jerseys were delivered
on 04 April 2023.
3. On 1 September 2022, GS sold caps with a value of R50 000 to a local small business owner.
The small business owner paid R40 000 in cash and GS accepted the business owner’s second-
hand generator (valued at R8 500) as a “trade-in” for the balance of the purchase price of
R10 000.

The following information relates to an ethical issue I need to deal with. One of my dearest friends
wants to place an order with the GS for World Cup rugby balls. The total value of the order amounts
to R212 750 (including VAT). He wants to donate these balls to underprivileged schools as part of
their rugby clinics to enhance these children's skills and abilities. He asked me if he could pay the
amount of R185 000 into my private bank account instead of the company’s account, to avoid paying
the VAT of R27 750. I know that he is doing a good deed by providing these rugby balls to
underprivileged children, but what advice can you give me in respect of the ethical considerations of
this request?

I hope you find the above in order. Please do not hesitate to contact me should you have any
questions.

Regards,
Siya Kolisi

REQUIRED: MARKS

Write an email to Mr. Siya Kolisi and discuss whether the amounts, for each of the three
transactions, will be included in the gross income of Go Springboks (Pty) Ltd for the 2023
year of assessment. Support your answer with relevant case law (where applicable). 5

Advise Mr Siya Kolisi on the ethical conundrum he finds himself in. 5

Communication, layout and presentation. 2
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QUESTION 2 (50 marks, 90 minutes)

Alex Nkwe (67 years old and married to Prudence out of community of property) was an employee of a
company that repairs domestic appliances, Domestic Appliance Repairs (Pty) Ltd (DAR). DAR also
performs emergency repairs on a 24-hour basis. Alex worked for DAR for 45 years.

Alex retired on 31 October 2022. Below, and in the notes and additional information, are details of Alex’s
total income, benefits, expenses and contributions for the year of assessment ended 28 February 2023:

Note R
Income/benefits
Salary 640 000
Retirement fund lump sum benefits 5 1 250 000
Pension annuity income after retirement 250 000
Retirement annuity income 120 000

Expenses/contributions

Medical expenses 6 144 000

Notes and additional information:

1. Acquisition of appliances
DAR has an agreement with customers that stipulates when repaired appliances are neither paid for
nor collected, within six months from the date that the repair was completed, DAR will sell the appliance
as its own trading stock. On 31 October 2022, Alex’s employer allowed him to purchase some of these
customers’ appliances that had been retained. Alex paid his employer R25 000. Alex, knowing that
he could make some money, sold these appliances for R55 000 within two weeks from when he
purchased them.

2. Insurance

Alex’s employer enters into insurance contracts in respect of all their employees against injury on duty.
The employer pays 80% of the premiums, and the employees pay the remaining 20% of the premiums.
The insurance covers instances where an employee is injured during working hours. Alex paid a
monthly insurance premium contribution of R250.

Alex was injured while repairing an appliance and lost the use of two fingers on his left hand. The
insurance company paid him R450 000 on 31 August 2022.

3. Use of employer-owned vehicle

Alex uses an employer-owned vehicle to attend to callouts at customers’ premises, when repairing
large appliances. Alex is on standby for emergency callouts four nights a week. After normal working
hours he is allowed to take the vehicle home. Alex only works a half-day shift when he is on standby
at night. He only travels between his home and places of work for private purposes, and sometimes
to the local supermarket on his way home from work. The employer purchased the vehicle on 1 March
2022 for R250 000 (VAT inclusive), subject to a maintenance plan. Alex’s logbook shows that he
travelled a total of 4 500 kilometres for private purposes out of a total of 30 000 kilometres travelled
during the period of his employment.

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QUESTION 2 (continued)

4. Investment income

Alex’s father, Jabulani, passed away on 31 July 2022. Alex inherited the following from Jabulani’s
estate: a portfolio of shares listed on various stock exchanges; a cash amount of R1 500 000, which
Alex invested in a fixed deposit. None of the investment income was derived from tax-free investments.

Alex received the following gross income from the listed shares and fixed deposit: R
- Gross SA dividends 34 000
- Foreign dividends [(not fully (100%) exempt)] 45 000
- Real Estate Investment Trust (REIT) dividends 87 000
- SA interest 89 000

5. Retirement fund lump sum benefits and current pension fund contributions

A gross amount of R1 250 000 accrued to Alex on 31 October 2022, in respect of a lump sum retire-
ment benefit from the employer’s pension fund that Alex belonged to. Alex received a taxable retire-
ment annuity fund lump sum benefit of R750 000 on 28 February 2022.

Alex and DAR contributed to the pension fund up to the date of his retirement. The total contributions
during Alex’s 2023 year of assessment amounted to R108 000, of which Alex contributed sixty percent
(60%). Assume Alex’s remuneration, as defined, from employment was R685 000, for purposes of
calculating any applicable deductions. On 28 February 2022, Alex has a balance of R35 000 that had
not been allowed as retirement contribution deductions in previous years of assessment.

6. Medical expenses

Alex contributed R144 000 to a medical scheme for the entire year of assessment. Alex’s employer
was aware that he is a member of a medical scheme and Alex provided the necessary proof. Alex,
Prudence and his father (Jabulani) are members of the medical scheme and none of them have a
disability, as defined in terms of section 6B (1) of the Income Tax Act (Act No. 58 of 1962), as amended.

7. Trust

Alex read that intervivos trusts are being used for several reasons, amongst others, the protection of
assets, provision for beneficiaries, estate planning and tax planning. He is considering registering an
intervivos trust and diverting (transferring) the share portfolio and cash (invested in a fixed deposit by
Alex), he inherited from Jabulani’s estate, to the trust (refer to notes 4 and 8).

Alex and Prudence have a son, Gift (28 years old), who lives and works in Canada and will remain
there permanently. Alex and Prudence are in the process of adopting a 14-year-old girl, Flower, who
will live with them and be taken care of by them.

Should an intervivos trust be registered, Alex, Prudence and their lawyer will be the trustees, and Gift
and Flower will be beneficiaries. The trust will be discretionary. Funds will be distributed to Gift and
Flower when necessary. No conditions will be stipulated in the trust deed.

8. Assets and liabilities in Jabulani’s estate

Jabulani passed away on 31 July 2022 and his wife had passed away 11 years before him. Jabulani
was the sole heir of her estate. Jabulani was 89 years old when he passed away.

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QUESTION 2 (continued)

The executor of Jabulani’s estate found the following:

R
1. A residential property in Johannesburg valued at fair market value as of 31 July
2022 (Alex’s sister inherits the property)…………………………………………….. 4 500 000

2. Jabulani was the usufruct holder over an apartment in Durban. The apartment
was valued at R1 500 000 on his death and the usufruct must go to Jabulani’s
younger brother, Abel (77 years old). Abel’s cousin Katherine (80 years old), is
the bare dominium holder.

3. Proceeds of a domestic policy taken out by Alex on Jabulani’s life. Alex paid all
the premiums and interest (compounded at 6%) on the policy, amounting to
R400 000 in total……………………………………………………………………….. 1 500 000

4. Listed share portfolio (market value)…………………………………………………. 5 500 000

Inherited by Alex.
The cost price of the listed share portfolio was R3 000 000.

4. Other assets in the estate………………………………………………………………. 2 500 000

Inherited by Alex and his sister equally.

5. Assume the ’Master’s fees and ’executor’s remuneration were correctly calculated
as…………………………………………………………………………………………… 1 050 000

REQUIRED: MARKS
a) Based on all the information provided in the question, calculate what Alex’s normal
tax payable after rebates and tax credits would be in respect of his actual taxable
income, excluding any taxable lump sum benefit(s) for the 2023 year of
assessment. 27

b) Calculate the tax payable on Alex’s taxable lump sum benefit(s) for the 2023 year
of assessment. 5

c) Advise Alex on how he could divert the share portfolio and cash (invested in a fixed
deposit by Alex) to an intervivos trust (refer to notes 4 and 7 in the question). Provide
the possible tax consequences for Alex of each of your proposals. Do not show
any calculations. List each proposal separately (numbered), with the possible
tax consequences for Alex, listed below it. Where a tax consequence is identical
under different proposals, it need not be repeated, simply refer back to your original
discussion. 10

d) Assuming there were no other assets or liabilities in Jabulani’s estate, other than
those listed above under note 8. Calculate the value of Jabulani’s dutiable estate
for estate duty purposes. Provide a reason, should an item not be subject to estate
duty. Ignore the effect of any income that may accrue to Jabulani’s estate after the
date of his death. 8

©
Unisa
2023
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SCHEDULES

A. 2023 – TAX TABLES

(i) Persons (other than companies and trusts)

Taxable income Rates of tax

Where the taxable income does not exceed R226 000 18% of each R1 of the taxable income;

exceeds R226 000 but does not exceed R353 100 R40 680 plus 26% of the amount by which
the taxable income exceeds R226 000;

exceeds R353 100 but does not exceed R488 700 R73 726 plus 31% of the amount by which
the taxable income exceeds R353 100;

exceeds R488 700 but does not exceed R641 400 R115 762 plus 36% of the amount by which
the taxable income exceeds R488 700;

exceeds R641 400 but does not exceed R817 600 R170 734 plus 39% of the amount by which
the taxable income exceeds R641 400;

exceeds R817 600 but does not exceed R1 731 600 R239 452 plus 41% of the amount by which
the taxable income exceeds R817 600;

exceed R1 731 600 R614 192 plus 45% of the amount by which
the taxable income exceeds R1 731 600.

B. FRINGE BENEFIT TABLES

(i) Employee-owned vehicles (section 8(1))

SCALE OF
VALUES

Fixed Fuel Maintenance

Where the value of the vehicle cost cost cost
R c c

does not exceed R95 000 .............................................. 29 836 131.7 40.9

exceeds R 95 000 but does not exceed R190 000 ......... 52 889 147.0 51.1
exceeds R190 000 but does not exceed R285 000 ........ 76 033 159.7 56.3
exceeds R285 000 but does not exceed R380 000 ........ 96 197 171.8 61.5
exceeds R380 000 but does not exceed R475 000 ........ 116 438 183.8 72.3
exceeds R475 000 but does not exceed R570 000 ........ 137 735 210.8 84.9
exceeds R570 000 but does not exceed R665 000 ........ 159 031 218.0 105.5
exceeds R665 000......................................................... 159 031 218.0 105.5

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 ii TAX3761
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(ii) Prescribed rate of reimbursive travel expenses – R4.18 per kilometre

(iii) Employer owned vehicles (Paragraph 7(4) of the Seventh Schedule)

Scale of values

Value of private use per month, vehicle not subject to maintenance plan = 3.5% x determined value

Value of private use per month, vehicle subject to maintenance plan = 3.25% x determined value

(iv) Subsistence allowance as per Government Gazette No. 39724

Daily allowance for incidental cost is R152 per day.

Daily allowance for food and incidental cost is R493 per day.

(v) Tax on retirement lump sum benefits (or death)

Taxable income from benefit Rate of Tax

R0 – R500 000.................................................... 0 per cent of taxable income
Exceeding R500 000 but not exceeding R0 plus 18% of taxable income exceeding
R700 000 ............................................................ R500 000
Exceeding R700 000 but not exceeding R36 000 plus 27% of taxable income exceeding
R1 050 000 ......................................................... R700 000
R130 500 plus 36% of taxable income exceeding
Exceeding R1 050 000........................................
R1 050 000

(vi) Tax on retirement lump sum withdrawal benefits (pre-retirement)

Taxable income from benefit Rate of Tax

R0 – R25 000.......................................................... 0 per cent of the taxable income
Exceeding R25 000 but not exceeding R660 000 ... 18% of taxable income exceeding R25 000
Exceeding R660 000 but not exceeding R990 000.. R114 300 plus 27% of taxable income exceed-
ing R660 000
Exceeding R990 000............................................... R203 400 plus 36% of taxable income exceed-
ing R990 000

(vii) Tax on small business corporations

Taxable income from benefit Rate of Tax

R0 – R83 100.......................................................... 0 per cent of the taxable income
Exceeding R83 101 but not exceeding R365 000 ... 7% of taxable income exceeding R83 100
Exceeding R365 001 but not exceeding R550 000. R19 733 plus 21% of taxable income exceeding
R365 000
Exceeding R550 001............................................... R58 583 plus 28% of taxable income exceeding
R550 000

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C. REBATES

Persons under 65..................................................................................................................... R16 425

Persons 65 and under 75 (R16 425 + R9 000)..................................................................... R25 425

Persons 75 and over (R16 425 + R9 000 + R2 997) .............................................................. R28 422

D. MEDICAL AID TAX CREDITS

Main member R347

Main member with one dependant (R347 + R347) R694

Main member with two dependants (R347 + R347 + R234) R928

Each additional dependent qualifies for a further rebate or credit of R234.

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E. INCOME TAX MONETARY THRESHOLDS SUBJECT TO PERIODIC LEGISLATIVE

CHANGE:

Description Reference to Income Tax Monetary

Act, 1962 amount
Exemption for interest and certain dividends:

In respect of persons 65 years or older, exemp- Section 10(1)(i)(i) R34 500

tion for interest from a source within the Republic
which are not otherwise exempt
In respect of persons younger than 65 years, Section 10(1)(i)(ii) R23 800
exemption for interest from a source within t he
Republic which are not otherwise exempt
Annual donations tax exemption:
Exemption for donations made by individuals Section 56(2)(b) R100 000

Capital gains exclusions:

Annual exclusion for individuals and special trusts Paragraph 5(1) of R40 000
Eighth schedule
Exclusion on death Paragraph 5(2) of R300 000
Eighth schedule
Paragraph 45(1)(a) of Eighth R2 million
Exclusion for the disposal of a primary residence
Schedule
Exclusion in respect of disposal of primary resi- Paragraph 45(1)(b) of Eighth R2 million
dence (based on amount of proceeds on dispo- Schedule
sal)
Maximum market value of all assets allowed with- Definition of “small R10 million
in the small business definition on disposal when business” in paragraph
person 55 years or older 57(1) of Eighth Schedule
Exclusion amount on disposal of small business Paragraph 57(3) of R1 800 000
when person 55 years or older Eighth schedule
Retirement savings thresholds:
Deductible retirement fund contributions:
Members of retirement funds may deduct their
contributions subject to certain percentage or
monetary ceilings
Monetary ceiling for total contributions to retire- Proviso to section 11F R350 000
ment funds
Deductible business expenses for individuals:
Car allowance:
Individuals receive an annual vehicle allowance
to defray business travel expenses, including
deemed depreciation on the vehicle.
Ceiling on vehicle cost Section 8(1)(b)(iiiA)(bb)(A) R665 000
Ceiling on debt relating to vehicle cost Section 8(1)(b)(iiiA)(bb)(B) R665 000

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Description Reference to Income Tax Monetary

Act, 1962 amount

Employment-related fringe benefits

Exempt scholarships and bursaries:
Employers can provide exempt scholarships and
bursaries to employees and their relatives, sub-
ject to annual monetary ceilings.
Annual ceiling for employees Paragraph (ii)(aa) of the R600 000
proviso to section 10(1)(q)
Annual ceiling for employee relatives Paragraph (ii)(bb) of the R60 000 &
proviso to section 10(1)(q) R20 000
Annual ceiling for employee relatives with R90 000 &
a disability R30 000
Awards for bravery and long service: Paragraphs (a) and (b) of R5 000
the further proviso to para-
graph 5(2) of Seventh Sche-
dule
Employee accommodation: Paragraph 9(3)(a)(ii) of R91 250
Seventh Schedule
Exemption for de minimus employee loans: Paragraph 11(4)(a) of R3 000
Seventh Schedule
Administration
Exemptions from provisional tax:

In the case of a natural person not carrying on Paragraph 18(1)(c)(i) of Taxable in-
a business Fourth Schedule come below
threshold
In the case of a natural person not carrying on Paragraph 18(1)(c)(i) of Taxable income
a business Fourth Schedule from interest, fo-
reign dividends,
rental income and
remuneration from
a foreign em-
ployer (not regis-
tered for PAYE)
does not exceed
R30 000

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F. EXTRACT FROM THE INCOME TAX ACT (ACT 58 OF 1962, AS AMENDED) –

EIGHTH SCHEDULE

25. Determination of base cost of pre -valuation date assets. – The base cost of a pre-valuation
date asset (other than an identical asset in respect of which paragraph 32 (3A) has been applied),
is the sum of the valuation date value of that asset, as determined in terms of paragraph 26, 27 or 28
and the expenditure allowable in terms of paragraph 20 incurred on or after the valuation date in
respect of that asset.

26. Valuation date value where proceeds exceed expenditure or where expenditure in
respect of an asset cannot be determined. – (1) Where the proceeds from the disposal of a
pre-valuation date asset (other than an asset contemplated in paragraph 28 or in respect of which
paragraph 32 (3A) has been applied) exceed the expenditure allowable in terms of paragraph 20
incurred before, on and after the valuation date in respect of that asset, the person who disposed of
that asset must, subject to sub- paragraph (3), adopt any of the following as the valuation date value
of that asset–

(a) the market value of the asset on the valuation date as contemplated in paragraph 29;
(b) 20 per cent of the proceeds from disposal of the asset, after deducting from those proceeds
an amount equal to the expenditure allowable in terms of paragraph 20 incurred on or after the valuation
date; or
(c) the time-apportionment base cost of the asset as contemplated in paragraph 30.

(2) Where the expenditure incurred before valuation date in respect of a pre-valuation date asset
cannot be determined by the person who disposed of that asset or the Commissioner, that person must
adopt any of the following as the valuation date value of that asset–

(a) the market value of the asset on the valuation date as contemplated in paragraph 29; or
(b) 20 per cent of the proceeds from disposal of the asset, after deducting from those proceeds
an amount equal to the expenditure allowable in terms of paragraph 20 incurred on or after the valuation
date.

(3) Where a person has adopted the market value as the valuation date value of an asset, as contem-
plated in subparagraph (1) (a), and the proceeds from the disposal of that asset do not exceed that
market value, that person must substitute as the valuation date value of that asset, those proceeds
less the expenditure allowable in terms of paragraph 20 incurred on or after the valuation date in
respect of that asset.

27. Valuation date value where proceeds do not exceed expenditure. – (1) Subject to sub-
paragraph (2), where the proceeds from the disposal of a pre-valuation date asset do not exceed
the expenditure allowable in terms of paragraph 20 incurred both before and after the valuation
date in respect of that asset, the valuation date value of that asset must be determined in terms of
this paragraph.

(2) This paragraph does not apply in respect of any asset contemplated in paragraph 28 or in
respect of which paragraph 32 (3A) has been applied.

(3) Where a person has determined the market value of an asset on the valuation date, as contem-
plated in paragraph 29, or the market value of an asset has been published in terms of that paragraph,
and–
(a) the expenditure allowable in terms of paragraph 20 incurred before the valuation date in
respect of that asset–
(i) is equal to or exceeds the proceeds from the disposal of that asset; and

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(ii) exceeds the market value of that asset on valuation date, is the valuation date value of
that asset must the higher of–

(aa) that market value; or

(bb) those proceeds less the expenditure allowable in terms of paragraph 20 incurred on or
after the valuation date in respect of that asset; or

(b) the provisions of item (a) do not apply, the valuation date value of that asset must be the lower
of–
(i) that market value;
or
(ii) the time-apportionment base cost of that asset as contemplated in paragraph 30.

(4) Where the provisions of subparagraph (3) do not apply, the valuation date value of that asset is
the time-apportionment base cost of that asset, as contemplated in paragraph 30.

G. DECEASED ESTATES

(i) RATE OF ESTATE DUTY

The rate of estate duty shall be 20 per cent on the first R30 million of the dutiable amount of the
estate and 25 per cent on the excess above R30 million.

Provided that where duty becomes payable upon the value of any movable or immovable property
or on a value determined by reference to the value of any movable or immovable property, and duty
has, upon the death of any person (hereinafter referred to as the first-dying person), who died within
ten years prior to the death of the deceased, become payable upon the value of that move-able or
immovable property or upon a value determined by reference to the value of that movable or
immovable property (or any movable or immovable property for which the Commissioner is satisfied
that that movable or immovable property has been substituted), the duty attributable to the value of
that movable or immovable property or, as the case may be, the value determined by reference to
the value of that movable or immovable property, but not exceeding (in either case) an amount equal
to the value on which duty has become payable on the death of the first-dying person, shall be
reduced by a percentage according to the following scale:

if the deceased dies within two years of the death of the first-dying person……. 100 per cent

if the deceased dies more than two years but not more than four years
after the death of the first-dying person 80 per cent

if the deceased dies more than four years but not more than six years
after the death of the first-dying person 60 per cent

if the deceased dies more than six years but not more than eight years
after the death of the first-dying person 40 per cent
if the deceased dies more than eight years but not more than ten years
after the death of the first-dying person 20 per cent
subject to a maximum reduction equal to so much of the duty previously payable upon the death of
the first-dying person as is attributable to the value of that movable or immovable property or to an
amount equal to the value determined by reference to the value of that movable or immovable
property, and as is proved to the satisfaction of the Commissioner to have been borne by the
deceased.
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TABLE A
(iv) THE EXPECTATION OF LIFE AND THE PRESENT VALUE OF R1 PER ANNUM FOR LIFE
CAPITALISED AT 12 PER CENT OVER THE EXPECTATION OF LIFE OF MALES AND FEMALES
OF VARIOUS AGES
Expectation of life Present value of R1 per annum for life
Age Male Female Male Female Age
0 64,75 72,36 8,237 91 8,331 05 0
1 65,37 72,74 8,328 28 8,331 14 1
2 64,50 71,87 8,327 76 8,330 91 2
3 63,57 70,93 8,327 14 8,330 64 3
4 62,63 69,98 8,326 44 8,330 33 4
5 61,69 69,02 8,325 67 8,329 99 5
6 60,74 68,06 8,324 80 8,329 61 6
7 59,78 67,09 8,323 81 8,329 81 7
8 58,81 66,11 8,322 71 8,328 69 8
9 57,83 65,14 8,321 46 8,328 15 9
10 56,85 64,15 8,320 07 8,327 53 10
11 55,86 63,16 8,318 49 8,326 84 11
12 54,87 62,18 8,316 73 8,326 08 12
13 53,90 61,19 8,314 80 8,325 22 13
14 52,93 60,21 8,312 65 8,324 27 14
15 51,98 59,23 8,310 29 8,323 20 15
16 51,04 58,26 8,307 70 8,322 03 16
17 50,12 57,29 8,304 89 8,320 71 17
18 49,21 56,33 8,301 80 8,319 26 18
19 48,31 55,37 8,298 41 8,317 64 19
20 47,42 54,41 8,294 71 8,315 84 20
21 46,53 53,45 8,290 61 8,313 83 21
22 45,65 52,50 8,286 13 8,311 61 22
23 44,77 51,54 8,281 17 8,309 12 23
24 43,88 50,58 8,275 64 8,306 33 24
25 43,00 49,63 8,269 59 8,303 26 25
26 42,10 48,67 8,262 74 8,299 81 26
27 41,20 47,71 8,255 16 8,295 95 27
28 40,30 46,76 8,246 77 8,291 71 28
29 39,39 45,81 8,237 37 8,286 97 29
30 38,48 44,86 8,226 94 8,281 70 30
31 37,57 43,91 8,215 38 8,275 83 31
32 36,66 42,96 8,202 57 8,269 30 32
33 35,75 42,02 8,188 36 8,262 10 33
34 34,84 41,07 8,172 62 8,254 00 34
35 33,94 40,13 8,155 36 8,245 09 35
36 33,05 39,19 8,136 47 8,235 17 36
37 32,16 38,26 8,115 58 8,224 26 37
38 31,28 37,32 8,092 74 8,211 99 38
39 30,41 36,40 8,067 81 8,198 66 39
40 29,54 35,48 8,040 30 8,183 86 40
41 28,69 34,57 8,010 67 8,167 62 41
42 27,85 33,67 7,978 44 8,149 83 42
43 27,02 32,77 7,943 44 8,130 12 43
44 26,20 31,89 7,905 47 8,108 81 44

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TABLE A (continued)
Expectation of life Present value of R1 per annum for life
Age Male Female Male Female Age
45 25,38 31,01 7,863 80 8,085 27 45
46 24,58 30,14 7,819 24 8,059 56 46
47 23,79 29,27 7,771 09 8,031 19 47
48 23,00 28,41 7,718 43 8,000 26 48
49 22,23 27,55 7,662 36 7,966 17 49
50 21,47 26,71 7,602 01 7,929 50 50
51 20,72 25,88 7,537 13 7,889 67 51
52 19,98 25,06 7,467 48 7,846 46 52
53 19,26 24,25 7,393 87 7,799 65 53
54 18,56 23,44 7,316 31 7,748 34 54
55 17,86 22,65 7,232 34 7,693 55 55
56 17,18 21,86 7,144 14 7,633 63 56
57 16,52 21,08 7,051 78 7,568 96 57
58 15,86 20,31 6,952 25 7,499 27 58
59 15,23 19,54 6,850 04 7,423 21 59
60 14,61 18,78 6,742 06 7,341 35 60
61 14,01 18,04 6,630 10 7,254 57 61
62 13,42 17,30 6,512 32 7,160 20 62
63 12,86 16,58 6,393 01 7,060 46 63
64 12,31 15,88 6,268 22 6,955 37 64
65 11,77 15,18 6,137 89 6,841 61 65
66 11,26 14,51 6,007 26 6,723 93 66
67 10,76 13,85 5,871 65 6,598 93 67
68 10,28 13,20 5,734 03 6,466 35 68
69 9,81 12,57 5,591 82 6,328 18 69
70 9,37 11,96 5,451 65 6,184 66 70
71 8,94 11,37 5,307 75 6,036 07 71
72 8,54 10,80 6,167 44 5,882 78 72
73 8,15 10,24 5,024 37 5,722 22 73
74 7,77 9,70 4,878 76 5,557 43 74
75 7,41 9,18 4,734 90 5,388 93 75
76 7,07 8,68 4,593 54 5,217 27 76
77 6,73 8,21 4,446 63 5,046 79 77
78 6,41 7,75 4,303 09 4,870 92 78
79 6,10 7,31 4,158 98 4,693 89 79
80 5,82 6,89 4,024 40 4,516 47 80
81 5,55 6,50 3,890 51 4,343 99 81
82 5,31 6,13 3,768 02 4,173 15 82
83 5,09 5,78 3,652 76 4,004 82 83
84 4,89 5,45 3,545 46 3,839 88 84
85 4,72 5,14 3,452 32 3,679 21 85
86 4,57 4,85 3,368 64 3,523 71 86
87 4,45 4,58 3,300 66 3,374 26 87
88 4,36 4,33 3,249 07 3,231 75 88
89 4,32 4,11 3,225 97 3,102 96 89
90 4,30 3,92 3,214 38 2,989 12 90
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 x TAX3761
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TABLE B

PRESENT VALUE OF R1 PER ANNUM CAPITALISED AT 12 PER CENT OVER FIXED PERIODS

Years Amount Years Amount Years Amount Years Amount

R R R R
1 0,892 9 26 7,895 7 51 8,307 6 76 8,331 8
2 1,690 0 27 7,942 6 52 8,310 4 77 8,332 0
3 2,401 8 28 7,984 4 53 8,312 8 78 8,332 1
4 3,037 4 29 8,021 8 54 8,315 0 79 8,332 3
5 3,604 8 30 8,055 2 55 8,317 0 80 8,332 4

6 4,111 4 31 8,085 0 56 8,318 7 81 8,332 5

7 4,563 8 32 8,111 6 57 8,320 3 82 8,332 6
8 4,967 6 33 8,135 4 58 8,321 7 83 8,332 6
9 5,328 2 34 8,156 6 59 8,322 9 84 8,332 7
10 5,650 2 35 8,175 5 60 8,324 0 85 8,332 8

11 5,937 7 36 8,192 4 61 8,325 0 86 8,332 8

12 6,194 4 37 8,207 5 62 8,325 9 87 8,332 9
13 6,423 6 38 8,221 0 63 8,326 7 88 8,333 0
14 6,628 2 39 8,233 0 64 8,327 4 89 8,333 0
15 6,810 9 40 8,243 8 65 8,328 1 90 8,333 0

16 6,974 0 41 8,253 4 66 8,328 6 91 8,333 1

17 7,119 6 42 8,261 9 67 8,329 1 92 8,333 1
18 7,249 7 43 8,269 6 68 8,329 6 93 8,333 1
19 7,365 8 44 8,276 4 69 8,330 0 94 8,333 1
20 7,469 4 45 8,282 5 70 8,330 3 95 8,333 2

21 7,562 0 46 8,288 0 71 8,330 7 96 8,333 2

22 7,644 6 47 8,292 8 72 8,331 0 97 8,333 2
23 7,718 4 48 8,297 2 73 8,331 2 98 8,333 2
24 7,784 3 49 8,301 0 74 8,331 4 99 8,333 2
25 7,843 1 50 8,304 5 75 8,331 6 100 8,333 2

---o0o---

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