COXTB3-B22.

T22
Taxation 3B

Eduvos (Pty) Ltd (formerly Pearson Institute of Higher Education) is registered with the Department of Higher Education and Training as a private higher education institution under the
Higher Education Act, 101, of 1997. Registration Certificate number: 2001/HE07/008
SOME PRELIMINARY THOUGHTS

Enter what is a company?

Enter Is a company and a CC the same for tax purposes?

Enter What is a Personal Service Provider

Enter What is a small business corporation?

Enter What is a micro business?

Enter How does a person get money out of a company?

Enter Should a person operated a business through a company or as an individual sole proprietorship?
Objectives:
1.Definition of a company in terms of the Income
Tax Act
2.Taxation of business entities
3.Capital Allowances and s11(a) deductions
 Entity created
under South
African Law

Entity created
Close
under another
Corporation
country’s law

Company Small Business Corporation

Defined in section 12E
• Close Corporation
• Co-op
• PTY(Ltd)
Portfolio of REIT Co-operation • Personal liability company
• Gross income not exceed R20 million

Portfolio if
collective Entity formed
investment for public
schemes outside benefit
Republic
Gross Income • Section 1

Less Exempt • Section 10 + others

Income
Less Allowable • Capital Allowances
Deductions • Section 11(a)

Equals Taxable
Income
• Years of Assessment ending 31 March
Tax Rate 27% 2023
Take Note

• A Company is not entitled to primary, secondary and/or tertiary rebates

• The basic interest exemption s10(1)(i) is not available to companies
• S10(1)(k) local dividend exemption is also available to companies
• S10B foreign dividend exemption is also available to companies
• Exemptions with regard to the capital portion of a purchased annuity (S10A) is not
available to companies
• Exemptions of amounts received or accrued in respect of tax free investment S12T
does not apply to companies
 Small Business Corporation
•S12E(4)
• Gross income not exceed R20 million
• Shareholders/members natural persons throughout yoa & do not
hold shares in any other company other than:
• JSE listed company
Small •
Republic
Portfolio collective investment schemed outside the

Business • A body corporate

• Share block company
Corporations • Nonprofit company
• company is not a personal service provider as defined in the
Fourth Schedule
• not more than 20% of all receipts and accruals consist of
investment income and income from rendering a personal service

• Investment income & personal service is defined in S12E(4) for

the purposes of Small Business Corporations
• Personal Service provider is defined in the Fourth Schedule
Years of assessment ending on or after 1 April 2023
Collection of tax due by a company (Provisional tax:
Fourth Schedule of the Act)
• Represents half of the tax of the basic amount
First
Provisio • Basic amount is the most recent assessed taxable income
nal Tax
Paymen
t

• Total amount of tax due

Second
Provisio • Less the first provisional tax payment
nal Tax
Paymen
t

• Normal tax due as assessed by SARS

Third • Less provisional tax payments
Provisio
nal Tax • Also known as a “top-up” payment
Paymen
t
 Capital
• affects all trading enterprises;
allowances • Especially applicable to companies
and
Recoupments
Capital
allowances
Capital Assets ( e.g. vehicles,
utensils, plant, machinery,
buildings ) are used in the
production of income and makes
sense for SARS to allow a
deduction linked to these assets
This also motivates businesses to
consider investing in capital
assets.
Overview
Allowances apply to assets used
for trade purposes
Tax value = Remaining tax
allowances
• Cost less capital allowances already
claimed
• Deferred tax – difference between
accounting depreciation and Tax
allowances
Important definitions (s1)
• Connected persons
• Depreciable assets
Accelerated allowances
incentivise taxpayers
Considerations:
• Does the asset qualify?
• What is the tax useful life?
• Is the allowance apportioned?
• When can the allowance be claimed?
 Section 11(e)

NB: wear & tear allowance on the value of machinery, plant, implements, utensils and articles;
Owned or acquired by instalment credit agreement defined in VAT definition para (a) (ownership);
Used for trade purposes
• Does not apply to manufacturing assets which qualify for any of the s12 allowances
• No allowance for buildings or other structures of a permanent nature –s11(e)(ii), however
• Foundations & supporting structures deductible on same basis as asset – s11(e)(iiA)
• regarded as integrated with the machinery, and
• Write-off period linked to the remaining useful life of the asset
• Small assets (<R7 000) – write-off in full in year 1
• Not available to lessors
• Moving costs – write off linked to the useful life of the asset.
Wear and tear allowance (section 11(e))

This deduction is available to movable assets that are not used in the process of
manufacture in which the value has been lost
The asset must be owned by taxpayer
The general formula is :
(Value/expected useful life *number of months in a year/12

Note: “value” is the cost unless the asset was acquired otherwise than by purchase
E.g. donation; inheritance (but consider the CGT aspects)
 Let's have a look at an example :
Example 1: Moatshe (Pty) Ltd acquired a motorcycle at a cost
of R40 000 (excluding VAT) on 1 March 2022 and immediately
brought it into use in its business, for the purpose of making
deliveries. It used the motorcycle for the rest of its year of
assessment ending 31 August 2022 and throughout it’s year
of assessment ending 31 August 2023.
Wear and tear
( section 11e ) Required :
Calculate the wear and tear allowances to be claimed in the
in the 2022 and 2023 year of assessment.
Binding General Ruling (income Tax) No.7 and interpretation
Note No.47 ( which is in line with the Commissioner’s public
notice ) allow a four-year write-off period on a motorcycle
 • 31 August 2022
Wear and tear allowance (s11(e))
40 000/4 years *6/12=(5 000)
• 31 August 2023
Wear and tear allowance (s11(e))
(40 000/4 years)=(10 000)

Solution to NB :
example 1 Take note section 11(e) apportions
for time period, you will see other
sections don’t apportion for time
Class Activity 1
On 1 September 2022, Jay Manufacturers (Pty) Ltd
purchased a delivery cycle for R14 950 (including
VAT) and brought it into use on the same date. In
terms of Interpretation Note No.47, the write –off
period for delivery vehicles is 4 years.

You are required to:

• calculate the wear –and –tear allowance for the current year of
assessment ended on 28 February 2023
 • Cost (14 950*100/115) =13 000
• Wear and tear allowance
Solution =13000/4*6/12=1 625
 Section 12C: 20% per annum on cost – no apportionment:
“Deduction in respect of assets • Asset owned by taxpayer or acquired in terms of
used by manufacturers or hotel instalment sale agreement
keepers and in respect of • The asset must be used for the above purposes.
aircraft and ships, and in • The cost of an asset is the lesser of actual cost or
respect of assets used for market value on date of acquisition – allowance
on cost
storage and packing of
• Cost incurred in moving the asset will be written
agricultural products.” over the remaining useful life, if incurred after
(& for R & D) brought into use

• new and unused assets used in process of

manufacture, the cost will be written off
over 4 years i.e (40%, 20%, 20%, 20% in year
1, 2, 3 & 4 respectively
• Other assets, aircraft and ships: over 5 years
(20,20,20,20,20% each year)
• new and unused R & D assets qualifying
under s11D: 50%, 30%, 20%
 • Mahlare (Pty) Ltd ( a registered VAT vendor) purchased a
new machine on 1 August 2022 for a cash consideration of
R1 092 500 (VAT inclusive). The machine was brought into
use on the same date in a manufacturing process by
Mahlare (Pty) Ltd.

Example 2 You are required to:

Calculate the capital allowance that can be claimed for the
2023 year of assessment ended on 28 February 2023.
Also calculate what will be allowed in 2024, 2025 year of
assessment
Solution

Section 12 C allowance

Cost (1 092 500*100/115)= 950 000 Year 1 2023: (950 000*40%)=380 000
Year 2 2024 :(950 000*20%)=190 000
Year 3 2025: :(950 000*20%)=190 000
• Machine XT was used by Modisa (Pty) Ltd ( a registered VAT vendor ) for the first time
during the current year of assessment to manufacture candles. It was previously used in
manufacturing activities overseas (by Modisa (Pty) Ltd) of which the income did not form
part of gross income. The machine was purchased on 1 January 2021 for R150 000
(excluding VAT)
• You are required to:
• Calculate the capital allowance that can be claimed for machine XT for the 2023 year
of assessment

Example 3
 • Cost 150 000

Solutio • Section 12 C allowance (2023 year of assessment )

=150 000*20%=30 000
• NB 40% (2021) and 20%(2022) are assumed
n
 • Allowances on movable assets
• 12E (Small business corporations)

Section 12E • Manufacturing assets

• 100% in the year an asset is brought into use
“Deduction in for the first time by that taxpayer
respect of small
business • Non-manufacturing assets (election either this
or s11(e))
corporations” • 50%/30%/20%

• Cost rules are same as 12C

Section 12E
“Deduction in respect of small business
corporations”
• CC, Co-op or private company;
• All shares through out the yoa owned by natural persons;
• Gross Income not > R20 million (apportioned for part of a year);
• Not > 20% of total R & A (other than capital) & all capital gains is investment
income or from personal service;
Small • Company is not a PSP;
• Shareholders did not hold any shares in any other company except:
Busines
• listed co,
s
• collective investment scheme
Corpora • < 5% in social or consumer co-op etc, or primary savings co-op bank
tion - • friendly society
s12E(4) • venture company
(a) • Cc, coy, co-op that not traded for yoa & not owned assets of MV > R50 000
 Example on 12 E

Naidoo CC, a small business corporation as defined, commenced trading on 1 September 2020. Its
year of assessment ends on the last day of February each year. Naidoo CC acquired non-
manufacturing machinery on 15 September 2020 for R1 000 000, which was immediately brought
into use for trade purposes. A new plant costing R 1 250 000 was purchased on 1 December 2020
and Naidoo CC immediately brought the plant into use in its manufacturing operations. On 29 May
2021, Naidoo CC moved to bigger premises and incurred moving cost amounting to R50 000 in
respect of the manufacturing machinery and R30 000 in respect of the non-manufacturing
machinery. All amounts exclude VAT
Required :
• Calculate the allowances that Naidoo CC can claim during the 2021, 2022 and 2023 year of
assessment
 • 28 February 2021
• Allowance : Non-manufacturing machinery (50%*1 000 000)=(500 000)
• Allowance : Manufacturing plant (100%*1 250 000)=(1 250 000)

• 28 February 2022
• Allowance : Non-manufacturing machinery (30%*1 000 000)=(300 000)
Deduction of moving cost:

Solution :S12 E • Manufacturing plant (in full)

• Non-manufacturing machinery (30 000/2years)
( 50 000)
( 15 000)

• 28 February 2023
• Allowance : Non-manufacturing machinery (20%*1 000 0000 ) (200 000)
• Deduction of moving cost (30 000/2) (15 000)
Allowances on Immovable assets
Section 13: Manufacturing building

• Applicable when the building is:

• Erected by the taxpayer; or
• purchased from another person who was allowed a s13 deduction; or
• purchased from a person where the building has not been used before; and
• Wholly or mainly (>50%) used for the purpose of manufacture or R & D
• Or let for that purpose
• 13(1)(b) & proviso (b) allowance is 5% (not apportioned) and is based on:
• Cost to the taxpayer of qualifying buildings; OR
• improvements
• excludes levelling / excavations / external fencing and paving
• excluding cost to which s11(g) applies (leasehold improvements)
Example: S13
• Nomatema (Pty) Ltd erected a factory building at a cost
of R1 800 000. The erection of the building
commenced on 1 March 1990, and it was brought into
use on 1 October 1991. Calculate the allowances on
the building for the year ended 28 February 2022
Solution • erection commenced on/after 1 Jan 1989:
• Cost 1 800
000
•would have been written off in 2021 year of assessment
since 5% allowance will have applied.
•Erected say in 2015: 5% x 1800 000 = R90 000 for 2022
Commercial Buildings (section 13 quin)

• Commercial buildings and improvements contracted for > 01/04/2007

• Applicable if a taxpayer owns a new/unused building:
• Used mainly for producing income in the course of trade
• Excluding residential accommodation

• Allowance is 5% pa on cost - not apportioned

• Cost
• Lower of actual cost versus market value excluding finance charges and VAT

• Where the taxpayer acquires a ‘part of a building’ without erecting or

constructing that part:
• If the part of the building is acquired the annual allowance is Cost x 55% x 5%
• If an improvement is acquired the annual allowance on the cost of the
improvements is Cost x 30% x 5%
Example : s13 Quin

• On 30 June 2020 Mountainview Properties Ltd concluded a contract with a developer to

build new office park, to be used for the purposes of trade. The work commenced on 15
July and was completed and on 31 May 2022 at a cost of R3 000 000. On the same day,
the building was brought into use. Mountainview properties Ltd has a December year
end. All amounts excluded VAT.

• You are required to:

• Calculate the amount allowed as a deduction from income the 2022 year of
assessment .
Solution

• 2022 year of assessment

Section 13 quin Allowance (3 000 000 * 5%)= 150 000
 • On 30 June 2022 Lavender Properties Ltd
purchased part of a new office block from
a developer at a cost of R1 000 000, to be
used for the purposes of trade. This offices
were brought into use 1 August 2022.
Lavender Properties Ltd has a December
year end. All amounts exclude VAT .
Example : S13 quin
• You are required to:
• Calculate the amount allowed as a
deduction from income for the 2022
year of assessment
 • Deemed cost :(1000 000 * 55%)
550 000

Solution • Section 13 quin allowance(550 000 * 5%)

27 500
Residential Units : S 13sex

Available to taxpayer who owns a 5% per annum on the cost of a

new and unused residential unit Taxpayer must own at least five new and unused residential units The cost is the lesser of the
and used solely for the purpose residential units in the Republic ( or improvement ), additional 5% actual cost or market value
of trade. if it’s a low-cost residential unit

If the taxpayer did not erect
( purchased) a part, then the cost
is deemed: 55% of acquisition
price or 30% of acquisition price
if improvement
Low-cost residential
accommodation, R300 000 or
less for stand alone and R350 000 The cost on which 1% applies to
or less for apartments. The should be increased by 10%
owner does not charge monthly annually
rental of more than 1% of that
cost
Example: S13sex

• On 1 February 2022 Contrusto (Pty) Ltd bought seven new apartments in a residential
building situated in the centre of Johannesburg at a cost of R750 000 each. All the
apartments were let from 1 March 2022.
• Also built another two stand-alone residential units for use by its employees – completed
building on 1 July 2022 at cost of R1 000 000 each . Employees moved in on that date.
• All amounts exclude VAT .
• Calculate the allowances on the apartments for the year of assessment ended 31
December 2022
 • Section 13sex allowance on purchased apartments
Solutions • 750 000 * 7 * 55% = 2 887 500 * 5% = R144 375

• Allowance on newly built houses:

• 1 000 000 * 2 * 5% = R100 000

• Assume owned four units previously acquired & now builds

new 2 units – allowances?
 Low-cost residential units
on loan account – S13sept
• Available to employers when they sell low-cost residential units to employees
via interest-free loan accounts.
• Requirements :
 The disposal has to be to an employee
 The disposal must be affected via an interest-free loan
 Disposal amount must not exceed the employer’s actual cost of that low-cost
unit
 No conditions except to sell it back to employer upon termination or upon
consistent failure to by employee to pay
 Allowance will be calculated as 10% of outstanding loan amount at end of
year. Maximum 10 years.
 Deemed recoupment when amount owing to employer is paid by employee.
Recoupment is lesser of amount repaid or amount claimed by employer as
deduction in current year or previous year of assessment
 • On 15 November 2018 Pombelo (Pty) Ltd commenced
with the erection of a low–cost residential unit. A total
cost of R200 000 was incurred for the erection of the Unit.
Example : Section On 1 January 2019, the Unit was sold to an employee for
R200 000 on an interest-free loan account from
13sept Pombelo(Pty) Ltd. The employee repays R30 000 in 2020
and R25 000 in 2021 and makes no payment in 2022.
• Calculate the section 13sept allowance and recoupments.
 • 2019 year of assessment
Section 13sept allowance : 200 000*10%=(20 000)
Deemed recoupment =0 ( no repayment from employee)

• 2020 year of assessment

Section 13sept allowance : (200 000 - 30 000) * 10%= 17 000
(deduction)

Solution Deemed recoupment : 30 000 (addition to taxable income )

Therefore: GI = 30 000; Allowance R17 000
lesser of :
Repayment 30 000 or
Previous deductions less previous recoupments (20 000 +
17 000 - 0)=37 000
Therefore, deemed recoupment is 30 000
 • 2021 year of assessment
S 13sept allowance : 200 000-30 000-25 000=145 000*10%
=(14 500) deduction
Recoupment :
21 500
Lesser of :
Solution 25 000 or (20 000+17 000+14 500-30 000)
( continued) =21 500
25 000-21 500
=3 500 carried to 2022 year of assessment

• 2022 year of assessment

S 13sept allowance (200 000 - 55 000) * 10%
= 14 500
Recoupment 3 500
 Leases
Section 11(f)
• A taxpayer does not always own the land or buildings from where he conduct his business activities
• Rental paid is subject to section 11(a) deduction in terms of the general deduction formula.
• In some cases, the lease agreement will make provision for initial lumpsum or premium
• Section 11(f) provides makes a provision for the deduction of:
 A lease premium or similar consideration
 Paid by the taxpayer for the right of use or occupation of land, buildings, plant or machinery
 Used or occupied to produce income
 Limitation : Limited to amount arrived at by dividing the total lease premium by number of years for
which the taxpayer is entitled to use or occupation but years limited to 25 years
 Right to renew or extend the period ( it shall be spread over that time the Commissioner considers
probable)
 NB : The taxpayer can only deduct if this premium is income in the hands of receiver or lessor)
 Example

• Calculate the lease premium allowance deductible in the following instance in terms of
section 11(f). ( Assume that all years of assessment end on the last day of February).
• For a lease over premises entered on 1 September 2021, Walter paid the lessor a premium
of R150 000. He is entitled to occupation for 15 years. The annual rental is R120 000.

• 28 Feb 2022 (150 000/15*6/12)=5 000

• 2023 to 2036 (150 000/15)=10 000 each year
• 2037 (150 000/15*6/12)=5 000
Leasehold improvements- S11(g)
• Lease agreement comes with obligation imposed on the lessee to
effect improvements to the property either by erecting building or
improvements to the existing.
• The expenditure must have been incurred in terms of such an
obligation and land or building used in the production of income
• S11(g) is over the period the taxpayer is entitled to use or occupy
from the date of improvements were completed – maximum 25 years
• No amount stipulated will mean consider reasonable value.
• Cost excludes any amount to which s13 applies.
Example
• On 1 May 2021 Mowbray Manufacturers entered into an agreement with
Stephen Moti for the lease of land owned by him. The lease agreement
provided the following :
 The term of the agreement was 20 years from 1 May 2021
 The lessees would erect a factory on the land at a cost of R1 000 000.
Building commenced on 1 October 2021 and the factory was completed and
brought into use on 1 October at a cost of R1 200 000.
You are required to calculate the amount Mowbray Manufacturers may claim
in respect of the leasehold improvements for the 2023 year of assessment
ended on the last day of February 2023
 Solution
• S 11(f)Leasehold improvements(R1 000 000/223 months*5 months) 22 422
(From 1 October 2022: 223 months left)

• S13 Annual building allowance (1 200 000- 100 0000)*5% 10 000

• Total deduction that can be claimed = 32 422

Example
On 1 May 2021 Mowbray Manufacturers entered into an agreement with Stephen Moti for the lease
of land owned by him. The lease agreement provided the following :

The term of the agreement was 30 years from 1 May 2021

The lessees would erect a factory on the land at a cost of R1 000 000.

Building commenced on 1 October 2021 and the factory was completed and brought into use on 1
October at a cost of R1 200 000.

You are required to calculate the amount Mowbray Manufacturers may claim in respect of the
leasehold improvements for the 2023 year of assessment ended on the last day of February 2023
Solution
S 11(f)Leasehold improvements(R1 000 000/25 *5/12 months) 16 667

(From 1 October 2022 more than 25 years left)

S13 Annual building allowance (1 200 000 - 100 0000)*5% 10 000

Total deduction that can be claimed =

27 667
OR

1 200 000 * 5% s13 allowance: R60 000 per annum for 20 years

S13 dependent on s11(g) and vice-versa

Leasehold improvements
s11(h)

• The improvements will be

included in the gross income of
the lessor (remember specific
inclusions)
• Section 11(h) provides a lessor
with a deduction from the value
of the improvements to the
leasehold property included in
income.
• Allowance is equal to Amount
stipulated or reasonable less the
amount capitalised at 6%
Example
• On 1 September 2020, Moti (Pty) Ltd
purchased a piece of Land for R400 000. On 1
May 2021, the company entered into an
agreement with Mowbray manufacturers for
the lease of the land. The lease agreement
provided the following:
 The term of the agreement was 20 years from
1 May 2021
 The lessees would erect a factory on the land
at a cost of R1 000 000.
Building commenced on 1 October 2021 and the
factory was completed and brought into use on
1 October at a cost of R1 200 000.
Solution

Value of leasehold improvements 1 000 000

Moti (Pty) can claim the following deduction : (688 000)
(1 000 000 – PV of 1 000 000 @ 6%)
Amount taxable or included in respect of leasehold improvements 312 000

Deduction s11(h) 1 000 000 discounted at 6% for a period of 18 years 7 months

Use Present value interest factor of 0.312, students should be able to use their financial
calculator to calculate Present value)
Intellectual Property
S11(gB) and (gC)
• Capital expenditure on patents, designs, trademark and copyright
• Cost incurred to acquired after 1 January 2004
• Not available to cost actually incurred on devising, developing or creating the qualifying
asset (this is deductible in terms of s11D), also not available to trademarks
• Available to intellectual property brought into use for the first time.
• S11(gC) provided full deduction to cost less than 5000
• Cost more than 5 000 s11(gC) provided 5% per year on cost incurred on invention,
patent, copyright. Cost incurred on design or similar property 10% per annum
• S11(gB) provides full deduction on cost incurred to extend terms of patent, registration
or extension of registration period for a design and registration of trademark
 Research and development: s11D

• Expenditure incurred after 1 January 2014 (Non-capital expenditure)

 150% deduction of R&D only if it meets definition of R&D, approved by Minister of
Science and Technology and research was conducted in South Africa
 100% deduction if requirements above are not met

 Expenditure incurred after 1 January 2014 (Capital expenditure)

 50%,30%,20% for R&D new and unused machinery and equipment (s12C(gA))
 5% over 20 years for R&D buildings (s13)
 Refer to page 311 for the detailed table
Example

• Alpha Ltd often carries out mining innovation activities

in South Africa. They subcontract with Beta Ltd to
perform research trials to create new and innovative
mining tools on their behalf. Alpha Ltd is solely
responsible for determining the research methodology
applied. The trials commenced on 1 April 2023 at a cost
of R300 000. Beta Ltd charged Alpha Ltd R360 000 (cost
plus mark-up). Beta incurred further cost of R80 000 on
16 July 2023, which they charged Alpha Ltd 96 000 for.
The required approval for the project was 1 May 2023.

• Required: calculate the research and development

deductions Alpha Ltd and Beta Ltd can claim for the year
of assessment ending 31 December 2023
Solution
• Alpha Ltd
 150% allowance
 360 000*150% 540 000
 96 000*150% 144 000

Beta ltd
150% not applicable, Beta not responsible for determining or
altering
100% deduction (300 000+80 000) 380 000
RECOUPMENTS
Disposal of assets
 SARS assumption at purchase date:
 Taxpayer will recover benefit of the asset through use
 Reality is that actual consumption can only be determined at disposal date
 If selling price > tax value,
 Allowances have overcompensated
 Excess allowances must be recouped (Recoupment –income s8(4)()
 If selling price < tax value, (depreciable asset allowance-deduction s11(o))
 Allowances have not adequately compensated
 Unclaimed allowances must be deducted
• Considerations
• Gross income vs capital gains
Recoupment
Recoupments
• s 8(4)(a)
• General recoupment provision
• Recovery of previous allowances granted
• Gross income (para (n))
• Special circumstances:
• Asset acquired for no consideration:
• Recoupment of allowances claimed.
• Proceeds less recoupment is subject to CGT
• Asset originally used for non-trade purposes and subsequently for trade
purposes:
• Any recoupments must be calculated with reference to original cost
 Recoupment and depreciable asset allowance
s 8(4)(e)
• A recoupment on the disposal of an asset will not all be included in income:
• Where a taxpayer has made an election in terms of Paragraph 65 and 66 of
the 8th Schedule to defer the Capital Gain
• Recoupment realised relative to the write-off period of the replacement asset

s 8(4)(k) – deemed disposal at market value

• Applicable to:
• Donations of assets; or
• Disposal to connected persons (deemed to be at MV)
 • s11(o) depreciable asset allowance - election
• available for qualifying
depreciable assets used for trade
purposes which have been
alienated, lost or destroyed
Recoupment and
depreciable asset • Applicable if:
• Useful life not more than 10 years
allowance • Not available where asset sold to a CP
• Not available if asset never used

• Allowance = tax base - proceeds

 Example

• A plant used in the process of manufacture was acquired for

R400 000 on 1 January 2020. It was new when it was
purchased. It was sold on 30 November 2022 for 100 000.
• Calculate recoupment or depreciable asset allowance and
clearly indicate if its recoupment or depreciable asset
allowance
Solution
• 2020 year of assessment
 400 000*40%=160 000(s12C)
2021 Year of assessment
 20%*400 000=80 000

2022 year of assessment

 20%*400 000=80 000
 On Disposal : Tax base (tax value)=400 000-160 000-80 000-80 000)
 =80 000
 Selling price ltd to cost less tax value =100 000-80 000=20 000 Recoupment (to be
added to taxable income
What next?
Online Test 1 (open 1 June 8am;
close 5 June 5pm) Week 4
40 marks • Sole Proprietors
2 Questions • Partnerships

Trading Stock

Dividends Tax

Open Book

Reference sections of the Income Tax Act