SPECIAL

INCLUSIONS
NQOBILE NZIMANDE
accountancy10@uj.ac.za
Where are we in tax framework?

R
Gross income (items that meet the xxx
definition)+ special inclusions (s1)
LESS Exemptions (s10) (xxx)
Income XXX
LESS Deductions(s11-s19, s21-s24)(including (xxx)
assessed losses(s20))
PLUS taxable capital gains xxx
LESS Qualifying donations(s18A) (xxx)
= Taxable income XXX
*27%
= Tax payable XXX
Remember Gross Income?

 During a year or period of assessment:

 the total amount
 in cash or otherwise
 received by or accrued to , or in favour, of a person
 excluding receipts or accruals of a capital nature

WHAT IF AN AMOUNT DOES NOT MEET THIS DEFINITION?

What are special inclusions?

“Excluding receipts or accruals of a capital nature”

• These are amounts which fall out of gross income definition
• However, special inclusion overrides the capital in nature element
of the gross income definition.
• What is the implication of this? Amounts included as gross income
What special inclusions are covered now?

• Special inclusions related to companies, CC’s and SBC’s

Paragraph Inclusion
(cA) Restraint of trade payments
(g) Lease premiums
(gA) Know-how payments
(h) Leasehold improvements
(jA) Disposal of assets similar to trading stock
(k) Local dividend / foreign dividends
(n) Recoupments and other inclusions
 Gross Income para(cA): Restraint of Trade
Person paying restraint may
receive a deduction in terms of
s11(cA) – dealt with in special
deductions lecture

Scope Implication
• Amount received or accrued to: Include the amount in gross income in
• Labour brokers/ personal service terms of paragraph cA.
companies/ personal service
providers/ personal service trusts
• As consideration for a restraint of
trade
 Gross Income para(g): Lease premiums
Link = Person (Lessee) paying
the lease premium may receive
a deduction in terms of s11(f)
and s11(h) – will be dealt with in
the special deductions lecture

Scope
• Amount received/ accrued as
consideration for
• a premium for the right of
use/occupation of land, buildings,
plant, machinery , patents, films, etc.
Implication
Lessor: Include the FULL amount in
gross income in terms of paragraph g, in
the year received/accrued.
 Gross Income para(gA): Imparting Knowledge

Scope Implication
• Amount received/ accrued as Include the amount in gross income in
consideration for terms of paragraph gA.
• Imparting scientific, technical ,
industrial or commercial knowledge
or rendering of a service by applying
such knowledge

Copyright =right of ownership of intellectual property

= NOT imparting knowledge
 Gross Income para(h): Lease improvements
Person (Lessee) effecting the
lease improvement may receive
a deduction in terms of s11(g)
and s11(h) – will be dealt with in
the special deductions lecture

Scope Implication
• Lessee obliged to effect  How much do we include into gross
improvements income
• as per an agreement  When do we include the amount into
• on land or buildings utilised under a gross income?
right of use/occupation
 Gross Income para(jA): Disposal of assets
similar to trading stock
The taxpayer will receive trading
stock deductions for the capital
asset that is similar to trading
stock

Scope
• Amount received or accrued on
disposal of capital asset
• That was manufactured, produced,
assembled or constructed by the
taxpayer
• And the capital asset is similar to the
taxpayer’s trading stock
Implication
Upon sale of the capital asset which is
similar to trading stock, the amount will
be included into the taxpayer’s gross
income in terms of paragraph jA.
 Gross Income para(k): local dividends or
foreign dividends
Scope Implication
• Amount received/ accrued for Include the amount in gross income in
• Dividends (local) or foreign dividends terms of paragraph k. The amount
included is the gross dividend amount
(amount declared) not the net amount
(amount received)

Links to exemptions and dividends withholding tax

 Gross Income para(n): other provisions in the
Act
 Examples: Recoupments
s8(4)(a)
 s7 (dealt with in second
semester in Trusts)

Scope Implication
• Amounts included into a taxpayer’s Include the amounts in gross income in
income through other provisions in terms of paragraph (n)
the act