Module 3 And 4 Flashcards
(67 cards)
What’s the formula for accounting profit?
Revenue - expenses
What is a debit adjustment to accounting profit?
An amount added BACK to your profit.
What is a credit adjustment to accounting profit?
An amount TAKEN OFF your profit.
The starting point for an ITR12 is…
Profit before tax
True or false: a business can only claim wear and tear in a motor vehicle OR the lease payments paid during the year.
True, it cannot claim both
What is the formula for deductible legal fees?
Legal expenses x amount included in gross income
_________________
Total claim amount
How long is the allowed period for deduction of restraint of trade payments?
Longer of:
. Period of restraint of trade or;
. 3 years
What must a lessor include in their gross income?
Any lease premiums received
This is in accordance with paragraph (g) of the gross income definition.
What is the lessee entitled to deduct according to section 11(f)?
The lease premium paid
This deduction is allowed provided the lease premium is income in the hands of the lessor.
How can lease premiums be deducted by the lessee?
In annual instalments over the period of the lease, limited to 25 years
The deduction starts in the year that the premium was first paid.
What happens if the lease terminates earlier than expected?
The balance of the lease premiums that have not been deducted will fall away
These are not deductible.
What can a lessee deduct according to section 11(g)?
Costs of leasehold improvements in annual instalments
This applies to improvements made to land and buildings occupied for trade.
When can the deduction for leasehold improvements begin?
In the year that the improvements are completed
The deduction must be reduced for part of the year.
What must be true for the deduction of leasehold improvements to be allowable?
The improvements must amount to income in the hands of the lessor
The lessor must not be a tax-exempt person.
What can a lessee do if they spend more on improvements than specified in the lease agreement?
Claim another building allowance under section 13 on the surplus amount
Section 13(1) provides for an annual allowance of 5% on manufacturing buildings or improvements.
What is the maximum period over which leasehold improvement deductions can be made?
Over the remaining initial period of the lease or 25 years, whichever is shorter
This is specified in the lease agreement.
What happens if the lease ends and there are undeducted lease improvement costs?
These may be deducted in full in the year that the lease ends
This applies to any balance of lease improvement costs.
What are some of the special deductions a business can claim?
. Pre trade expenditure
. Legal expenses
. Restraint of trade payments
. Lease premiums
. Leasehold improvements
. (Purchase of) patents, copyrights, and designs
. Bad debts
. Doubtful debt allowance
. Employer contributions to pension, provident or benefit funds
. Annuities paid to former employees
. Employer owned insurance policies
. Research and development expenditure
. Donations to PBO’s
“Interest” is defined as:
any finance charge, discount or premium payable or receivable in respect of an instrument.
When can bad debts be deducted by a business?
. Debt is due to the business
. Debt arose for amounts included in income for the year or previous years
. Debt has become bad during YOA
True or false: a provision is not usually tax deductible
True, except if the company has an unconditional legal liability.
What are the options for a Section 10B(2) dividend exemption?
. Participation exemption
. Country-to-country exemption
. Controlled foreign country exemption
. JSE listed shares
What is the participation dividend exemption under Section 10B(2)?
Beneficial owner holds 10% or more interest in foreign company
What is the country-to-country dividend exemption under Section 10B(2)?
Beneficial owner is based in same country as company declaring the dividend.
