Ring-fencing trading losses
Top-rate taxpayers need to watch out for Section 20A. Section 20 of the Income Tax Act 58 of 1962 deals with the set-off of losses from a trade against other income. In general, such set-off is allowed (see sub-paragraph (1)(b)), provided that the loss is incurred in the taxpayer’s own name (i.e. not in a […]
Don’t lose that assessed loss!
Assessed losses can be carried forward—provided that the company doesn’t cease trading If the amount of allowable deductions exceeds the taxable income in your business, you will end up with what is known as an ‘assessed loss’ for tax purposes. In terms of Section 20 of the Income Tax Act, you are entitled to carry […]
Section 42: Asset-for-share transactions
It is often the case that South African tax resident shareholders wish to reorganise their South African group of companies, for a multitude of commercial reasons, without the ultimate shareholders changing. One of these could potentially be to create a single holding company structure. Various group relief provisions are contained in the Income Tax Act […]
Home office expenditure
Taxpayers who are salaried employees have limited deductions available to them. However, home office expenditure can be claimed as an income tax deduction, but the onus is on the taxpayer to prove that the expenses are in fact deductible. For employment to constitute a “trade” and to qualify to deduct home office expenditure, the taxpayer […]
Wear-and-tear Allowance
Capital expenditure incurred in the production of income and in carrying on of a trade does not qualify for a deduction under the so-called general deduction formula in section 11(a) of the Income Tax Act No 58 of 1962 (the Act). The Act does, however, grant deductions or allowances for specific types of capital expenditure […]
Analysing tax exemption for dividends
Dividends are a valuable part of many shareholders’ income, but even though they are exempt from regular income tax, it does not mean that they are completely exempt from tax. A dividend can be defined as any local or foreign dividend paid by a resident company of South Africa or a foreign country, provided that the […]
Employee share incentive schemes
Employer companies generally implement employee share incentive schemes to retain and incentivise their employees by enabling the latter to receive indirect benefits from the appreciation in the growth of the company. This is an effective way to offer benefits to employees and encourage their participation and loyalty of employees. Even though these schemes are generally […]
Budget 2022: Details start to emerge
The annual National Budget Speech was delivered on 23 February 2022 by Finance Minister Enoch Godongwana. Practitioners are getting to grips with some of the more pertinent changes that will become a reality for taxpayers, particularly in the individuals, employment and savings areas. Reviewing the timing of accrual and incurral of variable remuneration Section 7B […]
Persons with disabilities may benefit from a special trust
Unlike “conventional trusts” that are taxed at a flat tax rate, a special trust is taxed on the same sliding scale applicable to natural persons. The Income Tax Act provides for two types of special trusts: a so-called type-A and type-B trust. In essence, a type-A trust is created for a person (or persons) having […]
Transfer of assets between spouses: What are the tax implications?
Section 9HB of the Income Tax Act provides for a roll-over of a capital gain or loss when an asset is transferred between spouses during their lifetimes. The roll-over is mandatory, and spouses do not have the option to elect out of it. The policy rationale for the roll-over is that the transferor spouse must benefit […]